MD HB1388

Establishes a Deferred Retirement Option Program (DROP) allowing eligible members of the Employees' Pension System and Teachers' Pension System to defer retirement for up to 7 years while continuing to work

Eligible members must qualify for normal service retirement; during DROP participation, monthly retirement allowances are deposited into a DROP account earning 4% annual interest compounded annually

DROP participants continue receiving salary and employee benefits but do not accrue additional pension service credit, and their compensation cannot be used to increase their average final compensation

Upon termination of DROP participation, members receive their accumulated DROP balance as a lump sum (or direct rollover to an eligible retirement plan) and begin receiving regular monthly retirement payments

Requires the State Retirement Agency to obtain an IRS determination letter confirming the pension systems remain qualified plans; the program becomes void if a favorable letter is not received by July 1, 2027