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How much interest will my DROP account earn? Beginning July 1, 2023, your DROP accumulation earns interest at an effective annual rate of 4.00%, compounded monthly on the prior month's accumulated balance. If you participated in DROP before this date, your interest accrual rate for prior DROP months was different.
Employees may enter DROP any time after becoming fully vested and reaching their normal retirement date. The annual interest rate has tripled from 1.3% to 4%, compounded monthly, for the accrued monthly DROP benefit.
FRS Investment Plan If you leave before reaching normal retirement and elect to begin receiving your vested benefit, it will be subject to an early retirement reduction. Your benefit will be reduced 5% for each year your age at retirement is under your normal retirement age.
DROP Rollover to the Investment Plan FAQs. FRS Pension Plan members are permitted to roll over some or all of their DROP accumulation to the FRS Investment Plan. This option allows DROP participants to keep their money in the FRS and take advantage of the low-cost investment products offered in the Investment Plan.
DROP plans were initially promoted as cost-neutral programs that would keep experienced employees around longer. That optimistic outlook, however, is shifting. The Los Angeles Times recently reported that Los Angeles' DROP plan is distributing exorbitant payments to both retired and unretired public employees.