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2:18 PM / Monday November 11, 2019

17 Oct 2010

Don’t believe the hype! DROP actually has saved Philly money

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October 17, 2010 Category: Commentary Posted by:

As city council prepares to address the burning issues facing the city, number one on the hit parade seem to be the future of the Deferred Retirement Option Plan, otherwise known as DROP.

 

This program allows a member of the Retirement system to pick a date four years into the future and then continue to work until that date arrives.

 

While the member is working during those four years, the pension they are eligible to receive is being held aside and then released to them upon their official retirement. Mayor Nutter has sent legislation to Council asking for the DROP program to be ended.

 

DROP has come under fire recently in respect to the current elected officials who have chosen to enter the program then run for another term.

 

Last September the State Legislature passed Act 44 which prohibits future Elected Officials from joining any DROP program offered anywhere in the State, so this will not be an issue going forward.

 

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The purpose of the DROP program is to allow for succession planning, reduce the workforce by not replacing retired employees, provide an incentive for top administrators in police fire, and other skilled departments to stay in those positions a little longer as to provide training and institutional knowledge transfers, and better- cost analysis during the Budget process each year.

 

The form each individual fills out does say the decision to enter the program is irrevocable. That being said, City Solicitor, Romulo Diaz issued a legal opinion that was subsequently affirmed by current Solicitor Shelley Smith allowing any elected official who is reelected after joining the DROP Program to return to their position after leaving payroll for one day.

 

Many have questioned this process, in dispute has been whether the program was originally intended for elected individuals, this aside a review of the financial impact has shown the savings to be substantial when the return to work occurs.

 

Instead of paying the retired official a pension from the Pension Fund, plus paying their replacement a salary and benefits from the General Fund, the returning elected official’s pension is frozen and they simply receive the salary for the position they hold.

 

This saves over $115,000 per year per Official. In these tough economic times the City can certainly use those monies.

 

Further review has shown most elected officials are an actuarial benefit to the Pension plan due to their age upon retirement and the years they actually collect a pension before their death, as in the cases of David Cohen and Thatcher Longstreth who died in office and never collected a pension at all.

 

The final outcome on whether the DROP plan is ended or amended, should be known sometime before the end of October.

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