Member Resources

FAQs

In order to assist you in researching your specific area of interest, the Board has provided this Frequently Asked Questions (FAQ) section. If you have a question that is not covered here, submit your own question. An email with your question will then be sent to APRS, and a detailed answer will be provided.

Do you have a question that we did not answer here? If so, please contact the Pension Office.

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Disability

: How do you qualify for a disability benefit?; The member (applicant) or designee must apply for Disability and show that the applicant is totally and permanently unable to perform employment duties due to mental or physical incapacitation in the performance of their employment duties.

An applicant who files for disability with less than 10 years of service must have sustained the injury subsequent to the member
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DROP

: Is DROP right for me?; Before you enroll in either DROP program, the Benefits Specialist will explain the rules to you in detail and point out the advantages and disadvantages of participating in the program.

This is a general overview of the APRS DROP programs. It is intended to increase your awareness of the options available to you, but it does not give legal or financial advice or provide enough details for you to make decisions.

For additional information, refer to your Employee Benefit Guide, the Plan Document, or attend the Pension System's educational programs. You also may contact the Benefits Specialist via e-mail, or call the Pension System office at 512.416.7672. You also should consider obtaining advice from a tax consultant or financial advisor of your choice before deciding when to retire and how to receive your pension benefit.
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What can I do with my DROP money?

A member prior to retirement selection is advised and strongly encouraged by APRS to consult with a tax advisor and financial planner as to how best invest these large lump sum amounts of money. By consulting with a financial planner and tax advisor each members' individual financial retirement plan can be tailored to their needs and their risk and reward tolerance can be measured. It is recommended by the APRS to always continue the tax deferment status of these funds until needed or required by law to make minimum distributions.

When you take a DROP, you must decide what to do with your lump-sum money at the time of retirement. You can:

Elect to rollover the DROP monies into the Austin Police Retirement System Post Retirement Option Plan (PROP) interest bearing account.
OR
Elect to rollover the DROP monies into an individual retirement account or tax qualified plan.
OR
If you are over age 50 at retirement, you may be able to receive your lump-sum payment paid directly to you without incurring any tax penalties (normal 20% withholding still applies).

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How does RETRO DROP work?

The DROP allows you to receive a one-time lump-sum amount upon retirement in addition to a reduced regular pension benefit. Here are the key features:

After you enroll in RETRO DROP, you cannot change your decision.
On the election of RETRO DROP and the selection of the RETRO DROP benefit computation date, the member's monthly retirement option is computed as if the member had retired on the RETRO DROP benefit computation date.
The RETRO DROP benefit balance will include the accumulated monthly benefits after 23 years with retiree COLA'S, multiplier increases, member contributions and a 5% simple interest calculation on December 31st for balances on deposit as of January 1st of the same calendar year.

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How does Forward DROP work?

The Forward DROP allows active police officers to choose to retire, continue working for and drawing a paycheck from APD, while their retirement annuity is deferred into a DROP account (earning 5% interest) on their behalf at the retirement system. Here are some of the key features:

A member’s election to participate in the Forward DROP is irrevocable.
The maximum period of time during which a member may participate in Forward DROP is sixty (60) months, beginning on the Forward DROP Participation Date.
The member’s Forward DROP benefit is computed based upon the member’s Forward DROP Participation Date and the survivor option the member selects.
During the period that a member participates in Forward DROP, retirement contributions shall be made to the member’s Forward DROP account.

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: What is a 72-T IRA and can it be used to draw monthly payments from one's IRA while retaining the original Investment in that IRA?; EXAMPLE: I leave APD with 3 years in DROP at age 48. The DROP balance is rolled into a 72-T IRA. I begin receiving a monthly payment from the 72-T IRA. This payment does not increase and continues until age 59 1/2 at which time I can withdraw from the 72-T IRA without penalty or interest.

IRAs can be opened with brokerage firms and other custodians such as a local Bank or Credit Union. Once the IRA has been opened, your choice of investments is only limited by the products available through the broker, bank, or credit union and by your personal tolerance for risk. All traditional IRA's are generally subject to the same IRS Rules. With so many APD personnel retiring prior to age 59 1/2 (an important mile stone in IRS regulations) the so called 72t rule is commonly used in order to access IRA funds without paying a 10% early withdrawal tax penalty. Based on IRS code section 72(t)(2)(a)(iv), you can take a series of "substantially equal periodic payments" beginning at any age, based on a lifetime payout calculation. See your broker, CPA, or other financial professional for help with this calculation. Once these payments start, they must continue for 5 years or until age 59 1/2, whichever is longer. As long as you maintain enough cash or money market balance in your account to cover your yearly payments, the remainder of your funds can be invested as you so choose. Those periodic payments or withdrawals can be done monthly, quarterly or annually.
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: Can I continue working after I stop the Forward DROP program?; If a member electing to participate in the Forward DROP decides to continue employment covered by the Act governing the System after he or she has participated in Forward DROP for sixty (60) months, no further annuity deferrals or member contributions shall be deposited to the members Forward DROP account after the expiration of that sixty (60) month period. In that event, the Member shall continue making all contributions required under the Act governing the System, however, these contributions will not be used in the pension benefit calculation and the member will not receive any further service credit for time worked.
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What goes in my Forward DROP account?

Your monthly pension benefit
The pension contribution you make from your APD paycheck for the 60 month Forward DROP participation period
Interest paid annually at 5% during the Forward DROP period
Plus enhancements such as:
- COLA’s given to retirees during the DROP period
- Multiplier pension benefit enhancements during the DROP period

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: What are the requirements for members to participate in RETRO DROP?; In order to be eligible to participate in the RETRO DROP, a member must qualify with a normal service retirement of at least one month over 23 years at any age, excluding pre-membership military service credit. The maximum amount of service to be used in computation of the RETRO DROP after normal service retirement over 23 years, excluding pre-membership service credit is 36 months.
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: Do you continue to make retirement contributions while participating in the Forward DROP program?; Yes, your normal pension contribution from your paycheck goes into your Forward DROP account.
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: What are the requirements for members to participate in Forward DROP?; In order to be elibible to elect Forward DROP, a member (regardless of age) must have completed at least 23 years of creditable service in the System, excluding pre-membership military service credit and permissive service credit, as of the date of his or her election to participate in the Forward DROP.
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Pension Benefits

: When can I start receiving benefits?; You are eligible to retire at the earliest of: (1) any age with 23 years of credible service, (2) age 55 with 20 years of credible service or (3) at age 62 with any credible service years.
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: How will I receive benefits?; You can choose to receive a monthly pension benefit payable to you or defer your monthly pension benefit into a Post Retirement Option Plan (PROP) account. If you have a DROP account at retirement, you may take part or all of your money (subject to IRS rules) or choose to leave your money in PROP.
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: When do my benefits start?; The Board of Trustees reviews and approves all retirements during its monthly meetings. Your first benefit payment will be paid on the last day of the month immediately proceeding the month in which you retire. Payments will be made at the end of each month thereafter.
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: Who can I leave my benefits to?; The Retirement System allows for members to select a spouse or beneficiary to receive their monthly retirement benefits. However, IRS rules for selection of a beneficiary to receive an annuity option must be followed.
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: What if I have time in one of the Proportionate Retirement Systems?; Participating systems recognize service from other participating systems. A member with service credit in more than one participating retirement system may be eligible to combine that service in order to satisfy the length of service requirements used to determine eligibility for service retirement. Retirement benefits will be paid separately from each system, based only on the service performed in that system.
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PROP

: What is a PROP account?; The PROP account is an investment vehicle that was established on September 1, 2001 to allow members to elect to roll their lump sum DROP monies into it and earn a rate of return to be established by APRS annually. It is a notional account that does not actually contain cash, stocks, bonds or other securities like a 457-plan account. The PROP account is a bookkeeping account only and a member's PROP balance is invested right along with the other assets of APRS.

Under the rules adopted by the Austin Police Retirement System Board of Trustees, retiring and retired members may elect to defer receipt of all or a portion of their monthly annuity in order to defer the taxation of the deferred payments and to have the deferred benefits accumulate for later disbursement and later taxation in a PROP account.
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: As a DROP member, I have chosen to retire before age 50. I need access to my DROP monies immediately to support my current needs. Can I roll my DROP account into PROP and then take periodic distributions from PROP as needed?; Yes, the PROP policy allows for a member to make two partial payments a year with a total withdrawal option after a 90 day inception period. You could suffer severe and adverse financial consequences as a result. If you retire before age 50 and take distributions from your PROP account prior to age 59 ½ the monies withdrawn will be subject to a ten percent (10%) early distribution tax penalty in addition to regular income taxes on any amounts withdrawn. The taxes will apply to all withdrawals whether from contributions or any accumulated earnings.
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: If I choose to defer my monthly annuity into the PROP, am I still eligible for retiree health insurance?; Yes, you can still receive health insurance from the City as a Retiree who is deferring their monthly annuities into the PROP however, you must self-pay the insurance premiums if your deferral amount exceeds the insurance premium.
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: Upon retirement, can I defer part of my monthly annuity into the PROP?; Yes, A person making an election under this policy and procedure may elect to defer all or a specified portion of his or her monthly annuity into PROP. In the event that the person elects to only defer a portion of each payment into PROP, the portion so deferred may not be less than $250.00 per month.
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: I am contemplating retirement, a QDRO has been filed on my retirement account with APRS and a part of my DROP balance and monthly retirement annuity has been assigned to my ex-spouse. If I allocate my DROP account to PROP can I delay the payment of any monies to my ex-spouse that are payable pursuant to the QDRO?; No. Acceptance of a QDRO by the APRS entitles your ex-spouse to receive any monies payable pursuant to the QDRO at the time the member actually terminates employment with the Police Department and is entitled to a distribution of funds from the APRS.
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QDRO

: I am about to get a divorce and I want to know if I can just pay my spouse his or her portion of my pension benefits by withdrawing that amount from my pension contributions?; No. The statute governing the pension system allows for the withdrawal of monies from the System only upon the member's termination of employment with APD.
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: I am divorced and a QDRO has been accepted by the APRS. The QDRO awards a portion of my monthly retirement benefit to my ex-spouse. I am now eligible to enter the DROP. Will my DROP benefit be reduced by the amount of the retirement benefit awarded to my ex-spouse?; Depending on the terms of the QDRO, the DROP amount may be affected by the divorce. Usually the ex-spouse is assigned a portion of the retirement amount from the time period of the marriage, unless otherwise noted in the QDRO, and that portion of your retirement benefit to your ex-spouse will begin when you actually retire from the Police Department.
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Refund

: Can I withdraw all or a part of my contributions in order to pay off debts, fund medical expenses or pay for my children's education?; No. The only way you can receive a distribution from APRS is to terminate your service with the Austin Police Department. You may have heard of other Police Officers taking a loan or a distribution from retirement funds, but they are most likely referring to a distribution from their 457 Plan or a loan or distribution from their spouse's 401(k) plan. These types of plans are quite different from APRS and have different sets of rules and regulations. If you are required to make payments pursuant to a divorce, QDRO or child-support agreement no funds can be withdrawn from APRS to satisfy these claims unless you terminate service with APD. Finally, you also cannot receive all or a portion of your contributions to pay for a medical emergency or for a college education without terminating service.
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: How do I know if I am a vested member?; When you have attained ten years of creditable service, you become a vested member of the retirement system.

This means that you have a right to receive a monthly annuity when you reach retirement eligibility. Even if you terminate employment before reaching eligibility, if you are vested, you can decide to leave your contributions in the system and begin drawing your annuity when you reach age 62, or when you meet other age and service requirements for retirement eligibility.

It is important to note that, although retirement contributions for inactive members draw interest, the inactive member's multiplier can increase during the years between the member's termination and retirement, but no cost of living increases are applied.
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I have terminated my employment with the Austin Police Department, how do I go about receiving a refund?

When you leave the City as a cadet or a commissioned officer, you will fill out a refund form telling the Pension Office which option you wish, when you want to receive your retirement contributions and where you want them to be sent. Your choices will be:

Have your contributions refunded as soon as you terminate employment. Your retirement contribution refund check will be issued two weeks after you receive your final check. It will be mailed to the address on the refund form. (Federal Income Tax will be withheld on all untaxed contributions and interest at 20% of the total taxable amount.)
You may decide to leave your contributions in the retirement system through the end of the calendar year. By doing this, you will receive interest on your contributions. Once the year has ended, your refund check will be issued to you in January. (Federal Income Tax will be withheld on all untaxed contributions and interest at 20% of the total taxable amount).
You may have your contributions transferred to an I.R.S. qualified retirement plan through a direct rollover by leaving a letter of transfer with the Pension Office. (Federal Income Tax will not be withheld but the monies will be made payable and moved to the qualified retirement plan on your behalf).
If you have ten or more credit service years, you can choose to take advantage of your vested right to an annuity when you reach retirement eligibility. If you indicate that you want to vest your benefits, your contributions will remain in the retirement system until you reach retirement eligibility and request that your monthly annuity begin. Your contributions will continue to earn interest until your monthly annuity begins. One thing to remember should you choose vesting is when you reach eligibility, your benefits will be based on the eligibility in effect at the time you terminated employment. You will receive the current multiplier but no cost of living increases will be applied to your benefits after you leave employment and before the date your annuity payments begin.

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: When will my retirement refund check be issued to me?; With your final paycheck, one final contribution will be made to the retirement fund. After that check is issued, the exact amount of your total refund can be determined. Retirement refund checks are issued every two weeks, at the same time regular payroll checks are issued. Therefore, a member's retirement refund check will be issued the payday following the issuance of that member's final paycheck. NOTE: Your final time sheet must be properly coded before your retirement refund check can be issued. If you have ten or more years of service at termination, contact the Pension Office regarding your option to receive a vested accrued retirement benefit.
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: When I receive a refund of contributions why I do not receive any of the City contributions that were contributed on my behalf?; The City of Austin does not contribute any money to APRS for specific individuals. This is true regardless of whether the member is an active member, non-active member. Instead, the City contributes to APRS to pay for the benefits of the "pool" of constantly changing active police officers. APRS is a Defined Benefit Pension plan which, by definition, does not maintain accounts for specific individuals, requires all members to contribute the same percentage of their pay and guarantees each member a specific benefit upon retirement. Defined Contribution Pension plans such as your 457 plan do have individual accounts and contrary to APRS, allow the member to determine how much they will contribute and do not guarantee any specific level of benefits to members upon retirement.
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Service Purchase

: Why would I want to purchase service credit?; Credible service is service that is used in computing retirement benefits. Your membership service is the eligible service during employment period where a member makes payroll contributions to the fund. In addition to your membership service, members may be able to purchase certain periods of time when the member did not make payroll contributions. Any additional amount of time purchased, would add on time to your credible service which would give the member a higher annuity when computing retirement benefits.
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: Can I rollover money from my Deferred Compensation 457 program to cover the cost of my service credit purchase?; Yes! Members can purchase service credit using the deferred compensation 457 program at Great-West Benefits Corp and even other tax qualified deferral plans. IRS rules allow the use of these direct fund rollovers from your tax deferred accounts to purchase service credit in your retirement program for eligible service credit.
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: Can I have bi-weekly payroll deductions made in order to purchase service credit?; No, all service purchase credits do not allow for payroll deductions. However, service credit can be purchased in monthly increments.
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