“In its basic form…a DROP is structured as a delayed distribution from a qualified employer defined benefit plan, and it is adopted to encourage employees to remain in the workforce (with the same employer) beyond their earliest retirement date” (Willett, 2005, p. 34).
“DROP allows a participant who qualifies for normal retirement to continue working. The participant’s retirement benefit is deferred and deposited into a separate account. When the participant terminates (typically one to five years later), they are entitled to a lump sum payment of the pension benefits that haver accumulated in the separate account, and a pension annuity benefit begins” (Brainard, 2002, pp. 8 – 9).
Willett, M. (2005, April). Early retirement and phased retirement programs for the public sector. Benefits and Compensation Digest, 42(4), 31 - 35.
Brainard, K. (2002, October). Phased retirement overview: Summary of research and practices. Prepared for the NASRA Phased Retirement Committee. Retrieved July 26, 2005, from http://www.nasra.org/resources/Phased%20Retirement%20Overview.pdf