A DROP Valuation May Be Coming to a Divorce Case Near You

By Heather Deskins, CPA/ABV/CFF, CFE, CVA

You may not have heard of a DROP or had to have one valued in a divorce case, but that soon may change as more participants take advantage of its benefits. A Deferred Retirement Option Plan (DROP) is an optional benefit that allows eligible participants (some public sector employees) to accumulate a lump sum of money for retirement. The DROP requirements and benefits are different based upon the particular plan (i.e. state plan, police and fire plan, general employees plan or city plan). This article will focus on the DROP that is offered by the Ohio Police and Fire Pension Fund (OP&F).

A participant can enter the DROP program by delaying retirement and continue working as a police officer or firefighter. To be eligible for DROP, the participant must be at least 48 years old and with at least 25 years of service credit. Once the participant is enrolled in the DROP program, the participants current pension is calculated as if the DROP enrollment date is the participant’s retirement date. While the participant continues to work and draws a normal salary, the retirement benefits, an annual three percent COLA (cost-of-living allowance), and additional retirement contributions with interest, accumulate at OP&F.

The participant must be enrolled in the DROP program and work for at least three years, but not more than eight, to receive the full benefits of DROP. Here is an example calculation of a DROP value at the end of an eight year period:

Year in DROP Pension Benefit (w/COLA) Credited to DROP Employee Contributions Credited to DROP Interest Annual Credit to DROP Total DROP Value
1 $23,198 $2,070 $305 $25,573 $25,573
2 $23,893 $2,142 $885 $26,920 $52,493
3 $24,589 $3,326 $1,508 $29,423 $81,916
4 $25,285 $4,590 $2,188 $32,063 $113,979
5 $25,981 $4,751 $2,913 $33,645 $147,624
6 $26,677 $4,917 $3,674 $35,268 $182,892
7 $27,373 $5,089 $4,471 $36,933 $219,825
8 $28,069 $5,267 $5,302 $38,641 $258,466

Assumptions: Age-48, Salary-$40,000, Years of Service-25, Interest Rate-2.23%, COLA-3%

The value of the DROP is separate from the value of the participant’s pension. However, since the pension benefits are being used to fund the DROP, it is important to value both the DROP and pension on the same valuation date as to keep from double-counting the benefits of the pension.

For additional information on OP&F DROP, please visit:

If you need assistance in valuing pensions and/or DROPs, please contact P.D. Eye Forensics, LLC at 614.722-7914.

Heather Deskins, CPA/ABV/CFF, CFE, CVA

Heather Deskins,

Managing Member
P.D. Eye Forensics, LLC