Wednesday, February 10, 2016

DROP Report Says Program Costs City Money

A long awaited report on the city's controversial Deferred Retirement Option Plan says that the program has cost the city about $258 million since its inception in 1999

DROP Report Says Program Costs City Money


A long awaited report on the city's controversial Deferred Retirement Option Plan says that the program has cost the city about $258 million since its inception in 1999

DROP "imposes a significant cost to the pension plan and the city," according to the study by researchers at Boston College. And the study says that DROP doesn't necessarily encourage highly valued employees to delay retirement -- one of the program's original stated goals.

You can read the report here. The research excluded the 44 elected officials who have participated or are currently enrolled in DROP. Professor Anthony Webb, one of the authors, said the group was not easily subject this type of academic review.

Finance Director Rob Dubow said the research, which cost the city about $80,000, was not that surprising, although he stressed that DROP alone was not the only reason for the city's budget woes. The city's ailing pension fund only has 45 percent of the funds needed to meet obligations. The fund would still be underfunded without DROP, Dubow said.

City union leaders yesterday slammed the report.

"I don’t think it’s a fair assessment," said Bill Gault, president of the fire fighters union. "I don’t think [DROP is] hurting the pension fund. I think the pension fund is being hurt by its investments."

Introduced by then-Mayor Rendell in 1999, DROP lets city workers set a retirement date up to four years in advance. At that point, their pension benefit is frozen and they start accruing pension payments in an interest-bearing account. Workers then receive those payments in a lump sum when they retire. The original goal of the program was to keep valuable employees on the job longer and to allow the city to better plan for retirement.

Former Mayor Street tried to kill the program in 2003 when the pilot program expired, saying it was too expensive, but the Pension Board voted to maintain it. Street later signed up himself and left office with $450,000 in DROP cash. He's not the only elected official who has signed up. Six council members are currently enrolled -- and a loophole allows them to run for re-election and resign for a day to get their payout and then return to office, a practise that has drawn public scorn.

The state legislature has passed legislation banning future elected officials from deferred retirement programs.



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About this blog
William Bender, a Drexel graduate who landed at the Daily News in 2007, has covered everything from South Philly mobsters to doomsday hucksters. He occasionally writes about local food trucks and always eats everything on his plate, whether it be a bloody rib eye or a corrupt politician. E-mail tips to
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David Gambacorta, has been a reporter with the Daily News since 2005, covering crime, police corruption and all of the other bizarre things that happen in Philadelphia. Now he’s covering the 2015 mayor’s race, because he enjoys a good circus just as much as the next guy. He’s always looking to get a cup of coffee. Send news tips and other musings on life to
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