CHANGE IN DROP

Thinking about going into the DROP?

During the Florida legislative session one issue concerns the change in DROP that reduced the guaranteed interest rate from 6.5% to 3%. This will not impact anyone currently enrolled DROP. But anyone enrolling after July 1, 2010 will receive the 3.5%.

If you are eligible to enter DROP at this time you may want to consider your options and still get in on the 6.5% rate. Some things to consider are: staying where you are and receiving any future but unlikely pay raises for the unforeseeable future and having your highest 5 years calculated accordingly; or enrolling in DROP before July 1st and locking in the 6.5% rate.

The Governor could veto the bill containing the DROP rate reduction but it is highly unlikely because it is attached to the State budget bill and there is no line item veto.

Let us know where you can get 6.5% risk free given that 10 year T-bills yield less then 4%. The US stock market's returns were zilch during the last 10 years, especially when adjusted for inflation. It's about time the FRS reduced the DROP interest to a more reasonable rate in line with real life so that future retirees will be able to enjoy their pensions. The FRS' COLA should match the CPI instead of the automatic 3% annual increase. The FRS needs to tighten its belt like everyone else.