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BackDROP Lump-Sum Payment Explained

Apr 28, 2021, 16:08 PM by MOSERS
I am planning to retire in 2024 and at that time, I would receive my full backdrop. I need a better understanding of the "backdrop". After retiring, can I draw from my back drop as needed or is there a set amount of money that I will get monthly? 

With BackDROP, you will get a lump-sum payment at retirement in addition to your monthly pension payments from MOSERS. Choosing BackDROP will, most likely, reduce the amount of your ongoing monthly benefit payments. We will provide you with Benefit Estimates at the time of retirement to show your BackDROP options and the impact of taking BackDROP on your monthly benefit payments. You can get estimates at any time by logging in to myMOSERS or by contacting a MOSERS benefit counselor.

At retirement, we will ask you if you want to elect BackDROP or not and, if so, how you want to take your BackDROP lump-sum payment. Your choices are to take it as a cash payment, as a direct rollover to an individual retirement account or eligible employer plan such as MO Deferred Comp, or as a combination of cash and rollover

Along with your first monthly pension benefit payment, we will issue your BackDROP payment (as either cash, rollover, or a combination) on the last working day of the month in which you retire.

Your question about how much you can draw from your BackDROP is really about taxes and possible IRS penalties.

  • Cash Option: This is either one lump-sum payment at retirement or three annual installments. From any amounts paid in cash, we will deduct 20% for federal income tax (as required by the IRS) and any Missouri state income tax withholding you choose. You will be responsible for any IRS early withdrawal penalties that may apply.
  • Rollover Option: We will send your tax-deferred distribution directly to a qualified employer plan. See the MO Deferred Comp flyer, Thinking About the BackDROP?, for more information.
  • Combination Cash & Rollover Option: You can take a portion of the lump sum in cash (less 20% for federal income tax, as required by the IRS, and any Missouri state income tax you choose to have withheld) and roll the rest over to a qualified employer plan. You will be responsible for any IRS early withdrawal penalties that may apply.  

Visit the BackDROP page on our website for additional information.

Note: BackDROP is available only to general state employees in MSEP and MSEP 2000 who work at least two years beyond normal retirement eligibility.

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We strive to provide the most accurate information possible in our answers to Rumor Central questions. However, occasionally, laws, policies or provisions change and individual circumstances may vary. Please contact a MOSERS benefit counselor or see the handbooks in our website Library for more detailed information. If there is any difference between the information provided in this blog or on the MOSERS website and the law or policies that govern MOSERS, the law and policies will prevail. See our Privacy, Security & Legal Notices for more information.