The City Paper has a really interesting story this week on the city's controversial DROP (Deferred Retirement Option Plan) retirement perk. The program, which provides retirees who lock in a departure date with a lump sum exit payment, has been the subject of intense debate. A key issue is whether the program costs or saves the city money.
According to the City Paper report -- entitled "The Billion Dollar Boondoggle -- DROP costs. They asked an acturary to review the program. Here's an excerpt:
To gauge the financial impact of DROP, City Paper asked Joe Boyle, a Philadelphia-area actuary — a financial expert who specializes in pension plans and risk management — to do an independent analysis of DROP. The program was originally billed as "cost-neutral" when it was unanimously passed by City Council and signed into law that same day, June 28, 1999, by former Mayor Ed Rendell. This newspaper made the request because the city's actuarial consultants have either avoided the issue of the cost of DROP, or given contradictory data in their reports.
Boyle analyzed more than 1,000 pages of documents, representing a dozen years of annual reports on the city's pension system, as well as three reports on DROP. His conclusion: DROP is "a runaway freight train."