Police and firefighters lead rush to join DROP program

Posted: August 17, 2010

Police officers and firefighters have led the rush of employees looking to join the city's deferred retirement option plan as it faces possible extinction, data released by the city's Board of Pensions and Retirement show.

About 625 city workers - out of 3,100 eligible employees - have applied for the program, known as DROP, since Aug. 3. On that day Mayor Nutter released a study he commissioned that said DROP had cost the troubled pension fund an additional $258 million over the last 10 years.

Some big names on the list include Deputy Police Commissioners William Blackburn Jr. and John Gaittens; firefighters union vice president Tim McShea; the Free Library's second-in-command, Joseph McPeak; and Sarah Hart, deputy district attorney for performance and policy.

Hart, a 30-year veteran, said she was applying "just to keep my options open."

"I'm not sure I'm going to be able to go into it, but I want to be able to make an informed decision," said Hart, who has helped implement initiatives that have reduced the prison count and cut costs. "I'm being prudent."

McPeak, the Free Library's associate director, said the study did not enter into his plans, having maxed out on his pension this year after 35 years. "This is really something I'd been thinking about for a while," he said.

At The Inquirer's request, the pension board released a list of all those who had applied for DROP between Aug. 3 and Aug. 11 - 524 in all. The board last week reported 542; it was unclear on Monday why the two numbers differed.

An additional 100 or so have applied since last Thursday, Fran Bielli, executive director of the pension board, said Monday.

The applications are not binding. A DROP applicant cannot join the program for 90 days, to ensure that employees are making an informed decision. The board gives the employee an estimate of his or her eligible DROP payment and pension within 60 days, and the employee is directed to a seminar on the program before officially enrolling.

DROP is a benefit that allows an employee who has reached eligible retirement age and has least 10 years of service to choose a retirement date up to four years in the future. The employee's pension is then frozen at that point, but he or she can continue to work for a salary while amassing pension payments in a fund to be collected when he or she leaves. Those payments collect 4.5 interest until the employee leaves.

The program, introduced in 1999, has been held out as a way to encourage uniformed employees to work for the city longer, while encouraging other, long-term employees to leave. Observers complain that it can be used as a planning tool but never has been consistently.

With the pension fund only 45 percent funded and elected officials' use of the program inspiring public indignation, Nutter last year promised to study the program. The study, performed by economists specializing in pension issues at Boston College, reported that the program has cost the city at least $22.3 million annually since its inception.

Nutter on Aug. 3 called for elimination of DROP, and City Council promised to hold hearings on its fate.

That sparked a rush in DROP interest. Of the new applicants, 190 are employees of the Police Department and 88 are from the Fire Department. The vast majority of workers in each department are police officers or firefighters.

Police and firefighters, who make up about 37 percent of the city workforce of about 27,000, applied in numbers exceeding their proportion of the workforce. Together, they accounted for more than 53 percent of all those who applied for DROP.

"They're all scared," said Bill Gault, president of Local 22 of the International Association of Fire Fighters, which represents most of the city's more than 2,000 firefighters and paramedics.

John McNesby, president of Lodge 5 of the Fraternal Order of Police, leveled his ire at Nutter.

"This guy did put a panic in everybody, and then he left for vacation for two weeks, which is pretty ignorant," said McNesby.

Nutter is vacationing in Mexico. His spokesman, Doug Oliver, responded: "What could be more ignorant than being presented with a scientific study that clearly articulates the massive cost of a program, and still not understanding why it has to go away?"

Under city law, employees can join DROP at any time, and many are expected to wait for the outcome of City Council hearings this fall. Council members are already discussing the possibility of reducing DROP's cost - and not eliminating it - by cutting the interest rate below 4.5 percent. Also under consideration will be whether DROP is an entitlement for current employees or can be eliminated even for those who are eligible but have not applied.

Union officials have warned of an abrupt exodus of workers if DROP ends, opening up what they call a dangerous gap in the experience level of high-level supervisors.

"You're not going to replace those people in four years," McNesby said.

McNesby noted that police numbers would be higher for a number of reasons. First, police and firefighters do not contribute to Social Security and are not eligible to collect Social Security pensions, and police are eligible to retire at the age of 45, meaning a wider pool of police officers are eligible than other employees who can't retire until age 55 or 60.

Oliver said the administration was sticking by its original position.

"The long-term benefits associated with ending the DROP program far outweigh the inevitable short-term challenges that are created," Oliver said.

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

Inquirer staff writer Marcia Gelbart contributed to this article.

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