The Deferred Retirement Option Plan (DROP) is a unique retirement planning benefit available to members of the following departments:

• Los Angeles Police Department

• Los Angeles Fire Department

• Los Angeles Harbor Department

• Los Angeles Airport Department

The DROP program allows members to significantly boost retirement savings in the last five years of active employment with their respective departments.

How DROP Works

There are a few requirements based on your tier level and years of service that determine your eligibility for entering the DROP program. According to LAFPP.com, the Los Angeles Fire and Police Pensions website, you are eligible to enter DROP if you meet the following requirements:

• Tier 2 or Tier 4 and have at least 25 years of service, or

• Tier 3, Tier 5, or Tier 6 and have at least 25 years of service and are at least age 50

When you enter the DROP program, you establish a retirement date that is a maximum of five years from when you enter the program. During those five years, you will continue to receive your employment income; however, you will not accrue any additional service time toward your pension calculation.

In lieu of receiving additional service credits for working, your pension benefit will begin to pay out as if you were fully retired. These payments are then held in an account that accrues interest at a rate of 5% until your five years are complete.

Once the five years are complete, you will separate service from your department, begin receiving your pension payment directly, and now have the option to roll over the accumulated balance of your DROP account into a retirement account of your choosing.

DROP and Your Retirement Savings

Practically speaking, this program allows pre-retirees to funnel hundreds of thousands of dollars into retirement savings accounts during the last five years of employment, giving them the opportunity to catch up for years in which savings might not have been a priority.

In retirement, the extra savings can supplement your ongoing pension check and allow flexibility to pay for large, one-time expenses instead of having to save up month to month using your ongoing cash flow.

Our Fullerton financial planning firm has a good amount of experience helping our police and fire clients navigate what is available to them through their retirement programs. If we can be of assistance to you or someone you know, please don’t hesitate to schedule an appointment with us here.

Schedule a 15-minute discovery call with a fee-only financial advisor to discuss your personal situation.

Editor's Note: This post was originally published on December 2017 and has been updated for accuracy and comprehensiveness.