H.B. No. 3988 amends provisions related to the Deferred Retirement Option Plan (DROP) benefits for police and firefighters in certain municipalities in Texas. The bill modifies several subsections of Article 6243a-1, specifically addressing the distribution of DROP account balances. Notably, it allows DROP participants to elect to receive their account balance, including interest, as a full lump-sum distribution at a time of their choosing, which is a new provision. Additionally, the bill clarifies that the annuitization of DROP accounts must reflect interest accrual and allows for the assignment of annuity distributions to third parties under certain conditions.

The bill also includes changes to beneficiary designations for DROP accounts, ensuring that a member's spouse is automatically considered the beneficiary unless otherwise designated. It repeals certain sections that previously governed the assignment of DROP account distributions and the conditions under which a pensioner could continue to participate in DROP. The act is set to take effect on September 1, 2025.