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What is BackDROP? |
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BackDROP is an option available at retirement to general state
employees in the MSEP and the MSEP 2000. If you work at least two
years beyond your eligibility for normal retirement, this option
provides a way for you to receive a one-time lump sum payment at
retirement in addition to your ongoing monthly benefit |
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Why would I elect the BackDROP? |
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When you retire and elect the BackDROP,
you will receive a
BackDROP distribution equal to 90% of the Life Income Annuity
amount you would have received during the BackDROP period. You may
select the BackDROP date used in calculating your retirement benefit.
Selecting the BackDROP date gives you the opportunity to maximize
your monthly benefit payment or lump sum amount. |
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Why would I NOT choose BackDROP? |
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The lump sum payment is based on 90% of the Life Income Annuity
amount you would have been entitled to for the period of time
between your
BackDROP
date and the date you actually retire. Any lump sum distribution
received in cash will be considered ordinary income for that year
and may change your tax bracket; you may actually receive less
than you expect after taxes (see MOSERS'
Special
Tax Notice). Also, by electing the BackDROP, your ongoing
monthly retirement benefit will be calculated using your final
average pay and creditable service as of the BackDROP date instead
of your actual retirement date.
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Am I eligible for BackDROP? |
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To be eligible, general state employees
must (1) be actively employed in a MOSERS covered position on the
date you were first eligible for normal (unreduced) retirement,
(2) continue working in a MOSERS covered position at least two years
beyond your normal retirement eligibility date (no break in service),
(3) retire on or after January 1, 2002, and (4) retire directly
from active employment. |
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When do I elect BackDROP? |
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You may elect the
BackDROP when you actually retire. At your retirement, you will
choose a plan (if you are eligible for both  MSEP
and
MSEP 2000), whether or not to BackDROP (if you are eligible),
and a benefit payment option. Even if you are eligible, you are
not required to elect the BackDROP. In addition, you are not required
to take any action related to the BackDROP until you actually retire.
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What determines the amount of
my BackDROP lump sum distribution? |
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First, you must select a
BackDROP date. Selecting this date gives you the opportunity
to maximize your monthly benefit payment or lump sum amount. Next,
you must select the BackDROP period. The BackDROP period is the
time between the BackDROP date and the date you actually retire.
You may select a BackDROP period (in one year increments) ranging
from one year to the toal amount of time worked after normal retirement
eligibility (maximum of five years). To arrive at the lump sum distribution
amount, the Life Income Annuity benefit is calculated for the BackDROP
period. This includes any temporary benefits, COLAs, and other benefit
increases for that period. You will receive 90% of that amount as
a one-time lump sum distribution (rollover or cash option) or as
three annual equal installments (cash option only). |
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Will I owe taxes on the BackDROP
distribution? |
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If you elect the rollover option, your payment will not be taxed
in the year of the rollover and no income tax will be withheld.
The payment will be taxed when you take it out of the traditional
IRA or the new eligible employer plan.
If the distribution is paid directly to you (cash option), MOSERS
is required to withhold 20% for federal income tax. If you receive
a cash payment prior to age 59 ½, you may have to pay an
additional 10% penalty in addition to the regular income tax.
For a detailed explanation of the payment methods and tax consequences,
please review our
Special
Tax Notice brochure.
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How is my regular monthly benefit
determined if I choose BackDROP? |
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If you choose
BackDROP, your monthly benefit is based on your salary and service
AS IF you had retired on your BackDROP date. Your monthly benefit
will not reflect the period of service or any salary increases beyond
your BackDROP date. |
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Will Cost-of-Living Adjustments
(COLAs) apply during the BackDROP period? |
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You will receive the advantage of
any COLAs that take effect during the
BackDROP period. If eligible, the lump sum distribution will
also include any temporary benefits or other benefit increases. |
