Introduced by then-Mayor Rendell in 1999, the DROP program was supposed to keep top talent on the job longer, while helping the city better plan for retirements. Under DROP (which stands for Deferred Retirement Option Plan), 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 receive those payments in a lump sum when they retire, in addition to their full city pension.
City officials thought the program’s costs could be minimal because workers would lock in lower benefits. But a new report from Boston College says the program has cost the city $258 million because workers are timing their retirements to get the optimal pension payment and DROP payout. Adding to the controversy, elected officials have been allowed to enter -- six city 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.
Mayor Nutter has called on Council to eliminate DROP. Union officials are pushing to keep DROP alive, arguing in favor of more study.