1. (a)

   1. (1) A member who has a DROP account must be allowed to choose to receive his or her DROP account as either a lump sum or a true annuity, as described below.
   2. (2) At the option of the local pension board, other forms of distribution may also be offered.
2. (b) Lump sum. A lump sum amount equal to the accumulation of the DROP account as defined in 24 CAR § 20-1003, as of the date of the conclusion of the DROP period.

3. (c) True annuity.

   1. (1) A true annuity is payable monthly during the lifetime of the member only.

   2. (2)

      1. (A) If the true annuity is not purchased from an insurance company licensed to do business in the State of Arkansas, the monthly amount of the true annuity can be paid out of the local plan.
      2. (B) In this case, the monthly amount is the actuarial equivalent of the lump sum, as explained in subsection (b) of this section.
   3. (3) Actuarial equivalence is defined in 24 CAR § 20-1009.

4. (d) Other forms.

   1. (1) The local pension board may choose to distribute the DROP account in other forms of payment.

   2. (2) Any other forms that might be made available must meet the following rules:

      1. (A) If the form of payment involves the life expectancy of any individual or individuals, then either:

5. (i) An appropriate annuity must be purchased from an insurance company licensed to do business in the State of Arkansas; or

   1. (ii) The amount is paid out of the local plan, and the amount is the actuarial equivalent of the lump sum in subsection (b) of this section; and

      1. (B)

         1. (i) For all other forms of payment, the amount of payment must be the interest equivalent of the lump sum, as explained in subsection (b) of this section.
         2. (ii) Interest equivalence is defined in 24 CAR § 20-1009.

6. (e) Deferred receipt.

   1. (1) The local pension board, with the consent of the sponsoring municipality, may allow a participant to defer receipt of their DROP account after the conclusion of the DROP period.
   2. (2) This is a one-time deferral that should be made in writing to the local board.
   3. (3) The DROP account must be paid out as a lump sum or converted to an annuity before the participant reaches age seventy and one-half (70 1/2).

Codification Notes: “DROP” means deferred retirement option plan.