FAQs

The DROP is the Deferred Retirement Option Plan (DROP) that took effect September 1, 1995 as a retirement option available to firefighters.

The DROP allows you to accumulate a lump-sum cash amount for retirement to be paid in addition to your monthly retirement benefit. Under the DROP, you determine your future monthly pension benefit while continuing to work as an active firefighter.

Here’s how it works. Once you reach the service requirements for a service retirement, you are eligible to enroll in the DROP. When you enroll, you “lock in” your service and benefit levels as of the date your participation in the DROP takes effect. You continue to work as an active firefighter and earn your normal pay. While you work, the Fund credits the value of your monthly retirement benefit (based on your service as of the date you entered the DROP) into a notional DROP account.

If you are a member before July 1, 2017, you can participate in the DROP for up to 13 years. As long as you participate, the value of the retirement benefit calculated for you upon entry into the DROP and your account earns interest. When you leave the Fire Department, your DROP account balance will be distributed to you in a lump sum, or you can choose to leave the assets of your DROP account with the Fund to continue earning interest and make withdrawals in accordance with the policies and procedures of the Board. When you leave the department and retire, you will start to receive your monthly pension benefits.

No. You can participate from 1 month to 13 years.  You can decide to stop working (and end your DROP participation) at any time during the 13 years.

No.

No.  You continue to accrue sick leave if you are eligible to do so now, and you continue to accrue vacation.  Any other time or day accrual for which you are now eligible also continues.  Your insurance coverage also continues uninterrupted, unchanged, and at current active rates.

A participant in DROP is ineligible for on-duty occupational disability benefits.  In the case of on-duty death or on-duty general disability of a participant with a DROP account, the death benefit (100%) or disability benefit (75%) will be calculated as though the participant had not entered the DROP and will be paid to the eligible survivor(s) (in case of on-duty death) or participant (in the case of on-duty general disability). In addition, the DROP account that had accumulated to date will be available to the eligible survivor(s) (on-duty death) or participant (on-duty general disability).

No. As of July 1, 2017, Active DROP participants are not eligible for a COLA.

Yes, but you cannot receive any money from your DROP account as long as you are an active employee. As of July 1, if you decide to continue working, credits into your DROP account (for notional monthly benefits will end. Your account and it will earn continue to earn interest while you are an active employee. Also, you cannot receive monthly pension benefits from the Fund while you are an active firefighter. You will not be entitled to monthly pension payments until you leave active service with the Department. Similarly, if you decide to retire and not participate in the DROP, you cannot later decide to return to active service and begin participating in the DROP.

An important note: If you continue working beyond your 13th year of DROP participation, the 10.5% pension contribution continues to be deducted and goes to the Fund’s general account. It does not increase your monthly pension benefit and is not refundable.

Each year that you participant in the DROP, your account is adjusted based on 65% of the previous (5) year compounded (or geometrical) average of the annual return; (minimum 2.5% - with no maximum ceiling) (The annual DROP rate is from September 1st through August 31st).

For example: If you entered the DROP on September 1, 2017 , the rate used in determining your earnings credit will be the compounded average of the rates of return for the Fund’s fiscal years ending June 30, 2013, 2014, 2015, 2016, and 2017. The following September, it will be for fiscal years 2014 thru 2018 and so on.

Yes. The law requires that the Fund provide you with an annual accounting of the value of your DROP. However, the Fund will provide each DROP participant with a balance statement quarterly.
 
Although a separate accounting of its value is maintained, your DROP account is not separated from the assets of the Fund until a distribution payment is made.  As such, your DROP account has no loan value and it cannot be used as collateral or guarantee.

Back-DROP is a provision that gives a DROP participant an option to go back to an earlier DROP date for up to 3 years prior to his/her original DROP election date.  The date cannot be prior to September 1, 1995, and the participant must have at least 20 years of pension service on the effective Back-DROP date.  The minimum Back-DROP period is 1 month and the maximum is 3 years, but the effective Back-DROP date must be on the first of a month.  Under a Back-DROP election, the member’s account balance is equal to the amount that the account would have had if the member had elected to participate in the DROP on an earlier date.

You may Back-DROP immediately upon your DROP entrance date. This option can be exercised at any time while you are in active service.

A member may revoke the Back-DROP election by notifying the Fund in writing no later than the earlier of the date the member leaves active service or the 10th business day after the date the member signs an application form for a Back-DROP.

When you leave the Department, your money will be distributed as you choose in one of the following ways: 
 
A check for the entire amount (less applicable withholding) will be made payable to you, or (if you prefer) electronically transferred to a bank or credit union account in your name, or 
 
The contents of your account will be transferred, in whole or in part, by the Pension Fund to an Individual Retirement Account (IRA) in your name, or 
 
The contents of your account will be transferred, in whole or in part, by the Pension Fund to an IRS qualified retirement plan (such as an employer-sponsored 401(k) plan), or 
 
The contents of your account, in whole or in part, can be left with the Fund. The Fund will account for your assets and you will earn interest at the same rate as normally calculated under the DROP. If you choose to leave your money in the Fund, you can make four withdrawals during the calendar year (January to December). If you make a fifth withdrawal within a calendar year, you would be required to withdraw the entire balance of the account.

If you authorize the Fund to roll over your DROP proceeds directly to an IRA or another qualified retirement plan, or if you choose to leave your assets with the Fund, there are no immediate tax consequences.  You will pay taxes on these funds only when you receive a distribution from your IRA, qualified retirement plan, or from the Fund.
 
If you receive the DROP account proceeds, the distribution will be treated as ordinary income to you in the year you receive it.  The minimum federal income tax rate that must be withheld is 20%.
 
If you receive payment and are not at least age 50 by the end of the calendar year in which you leave active service, or if you withdraw money from a rollover account before you reach age 59½, you may be subject to a 10% early distribution tax penalty.
 
Keep in mind that tax laws can change, and they are complex.  We urge you to seek the advice of a tax professional to determine what is best for you and how you will be affected.

In accordance with Section 5(j) of Article 6243e.2(1), the following apply:

(1)If there is an eligible spouse who you were married to on your DROP effective date (and there are no eligible children), your entire DROP account balance is paid to the eligible spouse or, the eligible spouse may elect to keep the balance in the Fund.

(2)If you die and are survived by an eligible spouse (as described above) and one or more eligible children, one-half of your DROP account balance is paid to the eligible spouse (or the spouse may elect to keep the balance in the Fund), and the remaining one-half is divided equally among the eligible children. (Note: Only the eligible spouse’s portion may be kept in the Fund. An eligible spouse or eligible child may choose to rollover their portion of the DROP balance to an IRA or other qualified plan.)

(3)If there are one or more eligible children but no eligible spouse, your DROP account balance is divided equally among the eligible children, which, for this purpose, includes children who are less than 23 years of age, unmarried, and full-time students;

(4)If there is not an eligible spouse and there are not any eligible children, your DROP account balance can be paid to a dependent parent; and

(5)If there is not an eligible spouse, eligible children, or an eligible parent, your DROP account balance is distributed in accordance with your beneficiary designation as filed with the Board, or to your estate if there is no beneficiary.

Notes: You may elect to extend survivor benefit payments to children through age 22, unmarried, and full-time college students when there is an eligible spouse. You must complete the appropriate forms in order to notify the Fund of your desire to extend survivor benefits to a child that meets these criteria. Otherwise, survivor benefits would be extended as outlined in the Statute.

You may also elect to designate an adult child (or children) as an eligible child (or children) for the DROP proceeds. "Beneficiary adult child" is a child of a member by birth or adoption who is not an eligible child; and is designated as a beneficiary of a member's DROP account by valid designation under Section 5(j-1) of the Statute.

This is not true. In the event of your death, your DROP account will be distributed to your eligible survivors or beneficiaries in accordance with the Fund's statute { See Section 5(j) of the Fund's statute on page 89 of the SPD - click here}. You now have an OPTION to designate an adult child (or children) to be entitled to receive a portion of your DROP as an eligible child.

After the effective date of your participation in the DROP, any person that subsequently becomes your spouse will be eligible for a reduced portion of your DROP account, based on the percentage of time this spouse was married to you between the date of your DROP election and your last day of active service.  The remainder of your DROP account would be distributed to other eligible survivors, as provided for in the Statute.  After leaving active service, any person that subsequently becomes your spouse will not be considered an “eligible spouse”. You may designate such spouse on a “Beneficiary Designation Form”.  In the event of your death, your DROP account would be distributed to eligible survivors, if any.  If there are no eligible survivors, the DROP account would be distributed to the designated beneficiary or beneficiaries.

The fund will not distribute DROP benefits or monthly pension benefits to alternate payees without a QDRO.

The full value of your monthly benefit is credited to your DROP account.   If a QDRO is in place and is specifically attached to the proceeds of your pension either before or after you enter the DROP, payments to an alternate payee will not commence until you actually leave the Fire Department.

The timing of your departure is your responsibility, but when you start thinking about your retirement, and in order to maximize your retirement benefits, contact the Fund at (281) 372-5100 or (800) 666-9737 and ask for Member Services.

To ensure that all members considering retirement are fully informed regarding their pension options and retirement benefits, you are required (HFD Bulletin No. 26 - Revised) to attend a personal Pre-Retirement Counseling meeting with a Fund Member Services Representative to discuss your pension options prior to applying for retirement.

After completing your Pre-Retirement Counseling meeting, contact the HFD Human Resource Department to begin your retirement process with the City as classified member of HFD.

Once you have completed your retirement forms with the City of Houston, you should contact the Fund to schedule an appointment to complete the Fund’s retirement forms.

Firefighters wishing to retire have only one option regarding compensation for unused leave balances. As of July 1, 2017, unused leave pay will be sent from the City of Houston to the Fund at retirement and credited to your DROP balance.

Firefighters on the Old Sick Plan
Lump Sum Payment credited to DROP within 60 days of going off payroll includes:

All of your Sick Time pay, and up to 480 hours of Vacation Pay

Any Vacation time over 480 hours plus all of your Deferred Holiday Time will be paid over 4 years to the DROP account starting one year after you go off of payroll.

Firefighters on the New Sick Plan

Lump Sum Payment credited to DROP within 60 days of going off payroll includes:

Any of your Sick Time pay that is over 520 hours, and up to 480 hours of Vacation Pay

Any Vacation time remaining over 480 hours plus all of your Deferred Holiday Time will be paid over 4 years to the DROP account starting 1 year after you go off of payroll.

If you elect to withdraw any portion of your DROP account, the completed Distribution Election Form will be processed the later of the Fund receiving of the form or the date you leave active service.

PROP is the Post Retirement Option Plan. This program shall be credited with hypothetical earnings in the same manner as the Fund's DROP program. As of July 1, 2017 a PROP participant may not have any additional amounts credited to his or her PROP account, nor shall any member be allowed to elect to participate in the PROP if such member was not already a PROP participant on July 1, 2017.

As of July 1, 2017, members are no longer allowed to contribute.

You can take up to 4 distributions out of your PROP account each calendar year.

The retiree is the only individual that can withdraw funds from the PROP account, unless the retiree has a Statutory Durable Power of Attorney form on file with the Fund, naming another individual to act on their behalf for retirement plan transactions.

This is not true. In the event of your death, your PROP account will be distributed to your eligible survivors or beneficiaries in accordance with the Fund's statute { See Section 5(j) of the Fund's statute on page 89 of the SPD - click here}. You now have an OPTION to designate an adult child (or children) to be entitled to receive a portion of your PROP as an eligible child.

You cannot designate step-children or grandchildren as an adult child beneficiary for your DROP or PROP account unless you have legally adopted them.

Your beneficiaries for pension benefits are defined by state law. They are as follows:

• Eligible spouse who is the spouse to whom the member was married at the time of the member’s death. If a retiree marries after leaving HFD, the spouse is eligible to receive the full spouse’s portion of the monthly pension benefit after 5 years of marriage (the benefit is prorated for periods less than 5 years of marriage);
• Eligible child who is a child of a member by birth or adoption who is unmarried and under 18 years of age;
• Eligible child who is totally disabled (physically or mentally);
• Eligible child who is at least age 18 but less than 23, and is not married and a full-time student, but only if the member executes an election form permitting the child to be treated as an eligible child, or if the member does not have an eligible spouse;
• Eligible parent who is dependent on you on your date of death, if there is no eligible spouse or eligible child.

Article 6243e.2(1), the pension statute, considers the following to be eligible survivors:

Surviving spouse, who was married to you at the time of your death and at the time of your retirement. However, a surviving spouse who marries a firefighter after retirement can receive 20 percent of the firefighter’s death benefit for each year of marriage, or 100 percent after five years.

Child or children under age 18 (they must be unmarried and depend on you for support).

Child or children age 18 through 22 (they must be unmarried and going to school full time), if there is either no eligible spouse or you submit an election form to extend survivor benefits through age 22 even if there is an eligible spouse.

Child or children of any age who is totally disabled from a physical or mental illness, injury, or retardation at the time of your death.

Dependent parent who meets the guidelines for a dependent as established by the Board of Trustees.

If you have a child who you believe is permanently and totally disabled from a mental or physical illness, injury, or retardation, please notify the Fund office to certify your child's disabled status.

Stepchildren, grandchildren or children in your custody as a guardian are ineligible for survivor benefits unless you legally adopt them before you die.

Benefits for dependent child(ren) and/or parent(s) will be paid to the person with custody (i.e., legal guardian), unless you designate by notification to the board a testamentary trustee to receive the child(ren)'s and/or parent's benefit.

No benefit will be paid if you die from suicide or attempted suicide before you have participated in the Fund for two years.

Your estate will be eligible to receive a refund of your pension contributions or the balance of your account assets if you are in DROP.

Only your eligible surviving spouse can leave the DROP or PROP balances with the Fund.

Your HFRRF retirement benefits are calculated based upon set statutory formulas. This means your (or your eligible spouse’s) HFRRF retirement benefits will not be reduced because of any other retirement benefits you or your spouse receive from another source. Conversely, and as a general rule, any benefits you or your spouse are entitled to receive from another retirement fund, other than federal social security benefits, should not be reduced as a result of your participation in HFRRF.

We do not expect any exponential surge in retirements. HFRRF is well positioned with respect to its finances, staffing, and other necessary resources to handle any sort of increase in retirement applications.

While the federal government has set the RMD for specific ages and amounts, rarely would it require a complete cash-out of your DROP account. Before you jump to any conclusions about your DROP accounts, please call member services who can walk you through your options and the timing of taking distributions that makes most sense to you and follows the law.

While Section 7 of our governing statute can be confusing to read as there are all sorts of family situations that have been addressed over the years in law, fundamentally our pension has ensured that an eligible spouse receives a survivor benefit of 100% of their spouse’s pension, with certain exceptions based on the timing of the marriage. If you have any questions about your specific situation, you can read our Summary Plan Description (SPD) on our website and/or contact member services via email or phone call.

Section 7(j) of HFRRF’s governing statute says, “An eligible spouse is entitled to receive or continue to receive survivor benefits on remarriage, except that a person who is an eligible spouse of more than one member is entitled to receive survivor benefits as the eligible spouse of only the member whose survivor benefits provide the highest benefit to that eligible spouse.”

We have a professional staff who are available to you by phone, email, and personal appointments year-round. Rarely has anyone had to wait more than 48 hours for an appointment. Our team takes appointments to help our members during regular business hours. We are happy to meet with our members whether you are new to HFD, are ready to retire, or already in retirement. You are more than welcome to bring a spouse or trusted family member to help you work through your retirement questions.

We take the security of your pension very seriously and have put in place numerous measures to ensure your money and your data remains safe and secure. You can log into your online portal (MemberDirect), with multi-factor authentication, and conduct most of your business with the Fund; and our staff can help with certain changes to your data, but we have several security steps in place to ensure only you can change your vital information and some of that we require in writing. Anytime something changes in your life that may impact your pension, please call our member services staff and we are happy to help you through the process.

According to the American Bar Association, a power of attorney (POA) is an essential component of a complete estate plan. When you execute a power of attorney, it authorizes another person to manage financial matters on your behalf. These financial matters may embrace a broad range of activities, including, but not limited to banking transactions, managing stocks and bonds, real estate transactions, retirement plan transactions, and gift-giving authority. Choosing the right person to serve as attorney-in-fact under the power of attorney is an important decision. The power of attorney may become effective immediately or only if the member is disabled or incapacitated and is unable to manage his or her own affairs. Please consult with legal counsel to be ready for whatever life throws at you.

Indeed, when a survivor beneficiary passes on, the monthly retirement pension also ends; but, if there is money remaining in a DROP/PROP account, that money may be distributed according to HFRRF’s governing statute. In some cases, a member’s estate may be eligible for a pro-rated benefit and should contact our member services staff soon after a death occurs.

We hosted a coffee for our retirees in February of 2024 with an expert in Medicare selection and other health insurance related challenges. Click here to review her presentation.