AL DROP RSA Benefit

How can you calculate your Retirement Systems of Alabama benefit?

The formula is: Average of the three highest salaries in the last 10 years x Years of Service x .020125 = Annual Retirement Income

What is the benefit calculation with DROP?

1. Determine your monthly retirement benefit at the DROP participation date.

Formula: Average Final Salary x years and months of service x .020125 divided by 12 = Monthly Retirement Benefit

The Average Final Salary is the average of the highest three annual salaries in the member’s last 10 years of creditable service for which the member made contributions. This formula will only compute the Maximum Monthly Retirement Benefit.

2. Multiply the monthly retirement benefit times the factor associated with the number of years you elect to participate in DROP to give you the DROP contributions value including interest.

o 1 year = 12.24

o 2 years = 24.97

o 3 years = 38.21

o 4 years = 51.98

o 5 years = 66.30

3. Determine the value of your contributions, plus interest, made during the DROP participation period.

Multiply the average salary (estimated) during the DROP participation period times the factor below for the number of years you elect to participate in DROP.

o 1 year = .0510

o 2 years = .1040

o 3 years = .1592

o 4 years = .2166

o 5 years = .2762

4. Add the two amounts together to give you the estimated value of your DROP benefit at the end of the DROP participation period.

DROP account example

At the DROP participation date, the member had an average final salary of $41,000, 31 years of service, and selects the maximum retirement benefit. The member elects a four-year DROP participation period and estimates that the salary for the next four years will average $43,500.

1. Monthly retirement benefit:

$41,000 x 31 x .020125 divided by 12 = $2,131.57

2. DROP contribution value including interest:

$2,131.57 x 51.98 = $110,799.01

3. Member contributions plus interest:

$43,500 x .2166 = $9,422.10

4. Total DROP Benefit:

$110,799.01 + $9,422.10 = $120,221.11

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