Past the Main Exit
Not everyone is ready to stop working at retirement age. Some members traveling our road may pass by the main retirement exit and continue to work beyond the point they become eligible for unreduced benefits. This opens some additional options.
Since APERS has no mandatory retirement age, members can simply postpone retirement and continue working in the system. After becoming eligibile for full retirement, working members continue to accrue service as before, but the multiplier used to calculate their retirement benefit increases by 0.5% for each month they work beyond 28 years. As they earn more service credit and their multiplier grows larger, their retirement benefit will increase accordingly.
The DROP (Deferred Retirement Option Plan)
Members can also retire from the system but keep working while routing their benefits into a Deferred Retirement Option Plan or “DROP.” The system does not pay full benefits directly to DROP participants, but instead deposits a reduced portion into a tax-deferred interest-bearing account. When the member terminates employment and exits the DROP, he or she can take a distribution of the DROP funds.
The PAW (Partial Annuity Withdrawal)
Another option for those who keep working and stay in the system past their eligibility for unreduced benefits is to take a Partial Annuity Withdrawal or “PAW” payment when they finally call it quits. These members can choose to be paid a lump sum for any or all of the months they worked beyond their eligibility date (to a maximum of 60). PAW recipients can take direct payment of the whole amount, roll all of it into a qualified retirement account, or divide it both ways
Note that the PAW and DROP are two different, mutually-exclusive programs. If you enter one, you cannot also choose the other.
(This material first appeared in the fall 2013 active newsletter.)