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What: The MERS Retirement Board has approved an amendment that allows an employer to design a DROP that balances both the level of the participant benefit with the cost to the plan.

Action Required: None

Key Dates: Effective immediately

Impacted Audiences: Employers with a Defined Benefit Plan

For More Information: Contact the MERS Service Center at 800.767.6377

Key Information:

To reduce the risk of additional projected liability and/or cost from adding a DROP and balancing it with the increasing need to retain employees of various skillsets and talent, these changes will:

  1. Allow employers to select a Credited Interest Rate under the DROP as a whole percentage between 0% and 3%;
  2. Allow employers to select whether the Cost-of-Living Adjustment (COLA), if applicable, is to be included during the DROP period or not to be included until the participant exits DROP; and
  3. Allow employers to select the DROP credit payment amount to be a percentage set between 10%- 100% (in 10% increments) of the participant’s calculated retirement benefit throughout the duration of the DROP period.

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