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Computing DROP

Your pension is based on the average of your two final years of total earnings before the Deferred Retirement Option Plan (DROP), called final average compensation, times 60%. This amount, divided by 12 is the monthly pension amount you will receive when your DROP period ends.

This pension amount is also used to calculate the value of your DROP account, based on your length of participation in the DROP. If your salary changes during your DROP period, the Michigan Office of Retirement Services will not recalculate your DROP benefit.

While you are participating in the DROP, a percentage of your monthly retirement pension is credited to your account. This percentage is based on the length of your participation, which you designate on your Retirement or DROP Application (R0732H) form.

Your DROP account will earn 3% interest each year, prorated for any fraction of a year, as long as there is money in the account. At the end of your DROP period, you will have full access to your accumulated DROP balance, including interest.

The corresponding percentages are below.

Less than 1 year 30%
1 year but less than 2 years 50%
2 years but less than 3 years 60%
3 years but less than 4 years 70%
4 years but less than 5 years 80%
5 years but less than 6 years 90%
6 years 100%