Your DROP end date is one of the few dates in your career you can’t move later. When it arrives you have to stop working for every FRS employer. You also have to tell the Division of Retirement what to do with your DROP balance, and some of those choices can’t be undone. This guide covers the exit process in order so nothing catches you off guard.
Quick refresher: what happens at the end of DROP
New to DROP? Start with What is DROP?
While you’re in the Deferred Retirement Option Program, you’re officially retired for benefit purposes. Your monthly FRS pension is credited to a DROP account instead of being paid to you, and that account earns interest. On the termination date you chose when you entered DROP, three things happen:
- You must stop all FRS employment.
- Your accumulated DROP balance is paid out the way you elect: lump sum, direct rollover, or a mix of the two.
- Your monthly pension starts being paid directly to you, plus any cost-of-living adjustment you’re eligible for.
Step 1: Confirm your DROP termination date (now)
Your maximum end date depends on when you entered DROP. The Division of Retirement publishes a DROP participation chart that shows the latest end date for each start month. Most members can stay up to 96 months, and some members, such as certain instructional personnel, may qualify for an extension. If you plan to leave before your scheduled date, contact the Division to report your new termination date; it must fall within your authorized DROP period, and if it is less than three months away the Division will send your exit packet then. K-12 instructional staff should see Retiring from a Florida public school for the extension rules. Look up your date in FRS Online and put it on your calendar.
Step 2: Watch for your exit packet (about three months out)
About three months before your scheduled termination date, the Division sends your DROP exit forms. They go to your mailing address on file, or to your FRS Online inbox if you chose electronic delivery. The packet includes:
- Form DP-TERM: you and your employer(s) complete it to verify that you have terminated all FRS employment.
- Form DP-PAYT: your DROP payout election. Check the form for signature and notary requirements. If you choose a full or partial rollover, a representative of the receiving custodian has to complete and sign page 2.
- Form DP-JOINT: included if you chose Option 4 (joint and survivor) when you retired.
If your address or email has changed, update it in FRS Online right away so the packet reaches you.
Step 3: Decide where your DROP money goes
This is the big decision. FRS offers three payout methods:
- Lump sum paid to you. FRS must withhold 20% for federal income tax, and the full amount counts as taxable income in the year you receive it.
- Direct rollover to an eligible plan, such as a traditional IRA, an eligible employer plan, or the FRS Investment Plan. Nothing is withheld on a pre-tax rollover.
- Partial lump sum with the rest rolled over.
Each choice has different tax, access, and fee consequences. Our guide to FRS DROP payout options compares them side by side. FRS also offers free, non-commission guidance through the MyFRS Financial Guidance Line (1-866-446-9377, Option 2), and it’s worth a call.
Step 4: Line up the receiving account early (if rolling over)
If you choose a rollover, the IRA or plan custodian has to sign page 2 of DP-PAYT. Open the account and get that signature well before your termination date. Waiting on a custodian is one of the most common reasons exits get delayed. If you’re rolling into the FRS Investment Plan, you’ll also need the DROP Accumulation Direct Rollover Form, and you should file an Investment Plan beneficiary form, because your Pension Plan beneficiary designation doesn’t carry over.
Step 5: Stop working on your termination date
You must stop all FRS employment by your scheduled DROP termination date. During the first six calendar months after that date, you can’t be in an employment relationship with or provide services to any FRS employer, not just your last one. Breaking this rule can void your retirement and require you to repay benefits, including your DROP payout. Talk to the Division before you accept any job, contract, or substitute role with a public employer. Volunteer service under the rules in section 121.091(15), Florida Statutes, isn’t considered employment. Police, fire and corrections members should also see FRS Special Risk retirement.
Step 6: Return your forms promptly and watch the 60-day deadline
Send in your notarized DP-TERM and DP-PAYT as early as you’re allowed. If FRS doesn’t receive your DP-PAYT within 60 days of your termination date, state law requires it to pay your DROP balance as a lump sum, minus 20% withholding. That could put a large taxable amount on your return that you never planned for. Once the payment has been processed and sent, the Division can’t change it or take funds back from a custodian.
Step 7: Confirm your first payments
Generally, your DROP payout is distributed starting the month after your termination month, and monthly benefits are paid on the last working day of each month, once your termination is verified and DP-PAYT is on file. Check that direct deposit is set up in FRS Online. Then review your first statements.
Don’t forget the Health Insurance Subsidy
The FRS Health Insurance Subsidy (HIS) isn’t paid while you’re in DROP. After you leave DROP, FRS sends a packet with Form HIS-1; complete and return it if you’re eligible (HIS is paid retroactive to the month after DROP ends once approved). It’s a monthly payment to help with health insurance costs, and you have to show proof of coverage.
Common mistakes when leaving DROP
- Missing the 60-day DP-PAYT deadline and getting an automatic lump sum
- Taking a lump sum without planning for the 20% withholding and any additional tax owed
- Working for any FRS employer within six months of termination
- Getting the custodian’s signature or a notary too late
- Not updating beneficiaries after a rollover
- Never applying for or confirming the Health Insurance Subsidy
Your DROP exit checklist
- ☐ Confirm your termination date in FRS Online
- ☐ Update your mailing address and email
- ☐ Choose your payout method and get the receiving custodian’s signature if you’re rolling over
- ☐ Line up a notary if your forms require one
- ☐ Have your employer sign DP-TERM
- ☐ Return DP-TERM and DP-PAYT well within 60 days
- ☐ Set up direct deposit and confirm HIS
- ☐ Update beneficiaries
- ☐ Don’t take any FRS employment for six months
Print this list, or book a review and we’ll go through it with you.
Get help with your DROP paperwork
Florida Pension Planners guides FRS members through the DROP process: your dates, your forms, and your deadlines. If you need investment, tax, or legal help, we connect you with an independent advisor or other licensed professional. We can’t promise any particular outcome, but we can help make sure nothing is missed.
Book a free 30-minute review · Call (850) 296-8828 · Email frshelp@floridapensionplanners.com · Office: 301 N Pine Meadow Dr, DeBary · Contact us
Related guides: What is DROP? · FRS Special Risk retirement · Retiring from a Florida public school · Official FRS DROP guide (PDF)
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Disclaimer: Florida Pension Planners is an independent educational service and is not affiliated with, endorsed by, or acting on behalf of the Florida Retirement System, the State Board of Administration, the Division of Retirement, or any employer. This page is general education, not individual tax, legal, or investment advice. FRS rules change; confirm your own benefits and deadlines with the Division of Retirement (frs.fl.gov) or MyFRS (myfrs.com). No outcome or return is promised. Any advisor or professional we connect you with is independent and solely responsible for their own advice and services.
