Early report: DROP costly

In exchange, employees commit themselves to retire on a certain date and freeze pension benefits at the time they enter the program. That means eventual pension payments will be smaller, and the city will save money if the employee lives long enough.

The most recent actuarial study, in May 2008, gave estimates ranging from a $141 million cost to a $125 million savings, depending on DROP's effect on people's retirement decisions. Nutter promised in early 2009 that he would commission a study to provide real answers.

DROP was introduced in Philadelphia in 1999 by the Rendell administration, with seemingly contradictory intentions. Some say it was meant to retain long-term, valuable employees who would otherwise retire. Others said it offered less valuable employees who would work to the grave incentive to leave.

It was also supposed to help the city plan for turnover by making DROP participants choose an exact date for their retirement, four years ahead of time. The city has not used DROP effectively for that purpose, and the study is also supposed to investigate whether DROP encourages high-quality employees to delay retirement by looking at absenteeism and performance measures.

Contact staff writer Jeff Shields at 215-854-4565 or jshields@phillynews.com.