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A Comeback for DROP Programs?

Posted On: June 6, 2014

In the depths of the economic recession, one concept that seemed pretty much buried was that of the Deferred Retirement Option Plan—a plan that typically allows police officers or firefighters to begin drawing their pension payments while continuing to work and draw a salary. But in January, the Los Angeles City Council began exploring the use of a DROP to help the Los Angeles Fire Department.

Staffing at the Department has dropped to critically low levels, and the only short-term scenario likely to reverse the trend is allowing veteran firefighters to postpone their retirement and continue to work and draw a salary. With many other police and fire departments statewide experiencing staffing crises, Los Angeles may not be the only entity that explores the DROP option until new academies can be recruited and trained. San Jose’s Police Department is almost 400 officers down from where it was in 2008, and the San Francisco Police Department is facing hundreds of retirements in the next three years (although San Francisco, which just finished a DROP program, is ahead of the curve in dramatically amping up the number of academies).

Pension critics will no doubt assail these moves; but with serious public safety issues in many jurisdictions, there are few alternative short term options. Additionally, complaints have always been more emotionally driven than rationally. Is it a “double-dip”? Perhaps. But recall that the retiree has earned his right to retire and collect a constitutionally protected pension. Like anyone else, why would officers or firefighters keep working when they have reached their retirement? Again, like for any employee, if there is an incentive to do so. And the incentive is the chance to enhance their retirement benefits (which they may or may not be able to access while continuing to work—San Francisco’s program paid the officers’ pension monies into a trust account, to be accessed only when the officer had completed the DROP). It is also a cheaper option for the public entity in that the retiree will likely be collecting benefits from the retirement system, reducing the cost of the retiree compared to a new employee.

And, of course, the whole point of the exercise is that there are not enough new employees in the first place.

We will see how this plays out.

If you have any questions, please contact Gregg Adam at gregg@majlabor.com.

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