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BackDROP & Social Security

Mar 21, 2018, 08:34 AM by MOSERS

In looking over my Social Security application, I see that they want to know what my earnings will be in 2018. I plan to roll over my MOSERS backdrop--will the amount of my backdrop be considered earnings by the Social Security Administration? Or do I only submit my projected salary earnings for 2018?

Your MOSERS benefit is a public pension and, therefore, is not considered a salary or wage. It does not count towards the annual earnings limit for social security. Your BackDROP payment, however, is considered taxable income for the year in which you receive the payment unless you roll it over to a traditional IRA or another eligible employer plan, such as MO Deferred Comp. Depending upon your age, there could also be an additional 10% IRS penalty if you choose the cash payment.

When you retire with MOSERS, you will be asked if you want to elect BackDROP* (if eligible), and, if so, how you want to receive that distribution: cash option, rollover option, or combination cash and rollover option. State employees eligible to receive a lump-sum BackDROP payment get this payment in addition to a lifetime monthly benefit payment and can choose to roll the lump sum into the MO Deferred Comp Plan at retirement. This option is available to all state of Missouri employees, even if they have never participated in the deferred compensation plan. A popular reason to roll the lump-sum payment into the deferred compensation plan is that it allows employees to defer taxes on the payment until those assets are distributed in retirement. There is a helpful publication on MO Deferred Comp’s website called Thinking About the BackDROP?

We suggest you speak to a tax professional or financial advisor for advice specific to your situation and to discuss all of your options at retirement.  For more information about Social Security, the Social Security Administration website is or call them toll-free at (800) 772-1213.

*BackDROP is available only to general state employees who are members of MSEP & MSEP 2000 and who work at least two years beyond normal retirement eligibility.

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