As an active T-DROP participant considering retirement, you are encouraged to view the pre-recorded workshop presentation on Age & Service Retirement - Exiting T-DROP, review your Annuity Options, and request a current Benefit Estimate which will assist you in considering how you will distribute your T-DROP Balance. You will have a variety of options available to you for your T-DROP Balance Distribution. You may choose one OR a combination of any of the following options as long as the total distribution equals 100% of the T-DROP Balance.
1. LUMP SUM DISTRIBUTION
- Send Me A Check – You may request to receive the T-DROP balance paid to you as a lump sum at retirement. This is a taxable distribution and mandatory tax withholdings are applied to the payment. An additional tax penalty may apply if you receive a distribution before the IRS age requirement, currently 59 1/2.
- Cash Balance Account (CBA) – The lump sum distribution may also continue to be held at ATRS in a Cash Balance Account (CBA). As a tax-deferred interest bearing account, the CBA allows a T-DROP retiree to leave all or a portion of his or her T-DROP balance with ATRS. ATRS offers competitive rates of return with CBAs that rise to four (4) percent over time plus the comfort of knowing ATRS completely protects your principal investment from losses in the stock market. Following the establishment of the Cash Balance Account on ATRS' membership system (typically 4-6 weeks into the new fiscal year), a CBA participant may request a withdrawal or rollover 6 times per quarter. There is a minimum requirement of $200 for any withdrawal or rollover. A withdrawal is a check directly paid to the member (subject to withholding taxes) and a rollover is a request to rollover funds to a financial institution.
The CBA pays very competitive monthly compound interest rates beginning the month after the account is established. Any withdrawal throughout the fiscal year will impact the accrued interest. (See CBA FAQS for more information)
- Roll Over – The LUMP SUM DISTRIBUTION is also rollover eligible. This means you may instruct ATRS to roll the T-DROP balance into another qualified plan such as an IRA. Rollovers are generally taxed upon withdrawal from the rollover institution and not at the time of the rollover from ATRS to the institution receiving the funds.
2. ANNUITIZED
- You may elect to have your T-DROP balance annuitized and added to your monthly retirement benefit. This increases the regular retirement benefit by the actuarially determined amount of your T-DROP account and the annuity is payable for your lifetime. The T-DROP annuity will receive a cost-of-living adjustment (COLA) after retirement, just like your regular retirement benefit.
3. COMBINATION OF LUMP SUM DISTRIBUTIONS OR LUMP SUM(S) AND ANNUITY DISTRIBUTION
- You may elect to divide your T-DROP balance by combining any of the above options to obtain a 100% distribution.
Contact ATRS at (501) 682-1517 or info@artrs.gov for more information.