Deferred Retirement Option Plan

Atlantic Beach May Throw Support Behind State Investigation of Jacksonville Pension Fund

There is growing support for a state investigation into Jacksonville’s Police and Fire Pension Fund and its deferred retirement option plan (DROP).

At least one state representative and a handful of others, including city council members and a mayor, have called for a state investigation into whether the fund engaged in regulatory violations in its administration of the DROP.

Now the city of Atlantic Beach is considering joining the calls for an investigation.

From the Jacksonville Business Journal:

The Atlantic Beach City Commission may get behind calls for an investigation into the Police and Fire Pension Fund.

The commission, which meets Monday, could join Rep. Janet Adkins in requesting Gov. Rick Scott to order an investigation of the pension fund.

Atlantic Beach doesn’t contribute to the pension fund, but does contract with Jacksonville for its firefighting service, according to the Florida Times-Union.

In addition, the Atlantic Beach mayor, Carolyn Woods, has said that her constituents have a stake in the pension fund, as contributors to both Jacksonville and Atlantic Beach.

The city commission backing Adkins’ request would mark the first time a government agency has joined the pursuit.

Read more Pension360 coverage of the Jacksonville Police and Fire fund here.

Photo by pshab via Flickr CC License

Philadelphia Pension Debt “An Obstacle” to Long-Term Growth, Says City Oversight Board

The Pennsylvania Intergovernmental Cooperation Authority (PICA) has released a report stating that Philadelphia’s pension system will be “an obstacle” to the growth and prosperity of the city.

The report says that pension costs need to be lower and more predictable for the city to grow.

The recommendations provided in the report, as reported by Philly.com:

The report’s recommendations included:

Making all new employees join the city’s hybrid pension plan, called Plan 10, which is similar to a 401(k). Mayor Nutter tried doing this in the last round of negotiations with the municipal unions, but lost.

Abolishing the controversial Deferred Retirement Option Plan (DROP), which allows city employees to pick a retirement date up to four years in the future, then accumulate pension payments in an interest-bearing account while still earning their salary. They collect a lump sum upon retirement. Council would need to pass legislation to abolish DROP.

Increasing employee contributions to the pension fund. Civil employees contribute between 3.95 percent and 4.75 percent of their annual wages. The median employee contribution for the 10 largest American cities is 6 percent, according to the report.

Lowering expectations for the rate of future returns on investments from 7.85 percent to near 7 percent.

The city’s pension system is 47 percent funded.

Read the full report here.

Photo credit: “GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania” by Massimo Catarinella – Own work. Licensed under CC BY 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania.jpg#mediaviewer/File:GardenStreetBridgeSchuylkillRiverSkylinePhiladelphiaPennsylvania.jpg

Philly Broke Law With DROP Changes, Says Labor Board

Philadelphia acted illegally when it made changes to its Deferred Retirement Option Plan (DROP) in 2011 without first negotiation the changes with unions, according to a hearing examiner for the Pennsylvania Labor Relations Board.

The changes were meant to reduce the cost of the DROP, but unions quickly challenged the changes.

More from Philadelphia Magazine:

City Council voted unanimously in 2011 to reduce the cost of the retirement program by tweaking its eligibility requirements and changing the way the interest rate is calculated on workers’ DROP accounts. Nutter vetoed the legislation only because he didn’t think it went far enough: He wanted to nix DROP altogether.

District Council 33 and District Council 47, which represent the city’s blue- and white-collar workers, promptly filed challenges to the law, arguing that the city could not unilaterally make changes to DROP without bargaining with the unions.

A hearing examiner for the Pennsylvania Labor Relations Board agreed with both unions, writing in both initial decisions last month:

“Having considered the respective arguments of the Union and the City, I must conclude that the record in this case supports finding that the City violated its duty to bargain as set forth in Sections 1201(a)(1) and (5) when it enacted the 201l DROP ordinance amendment.”

Sam Spear, a lawyer for District Council 33, says the union is pleased with the orders.

“[Union president] Pete Matthew testified before the bill was passed at City Council and he told them if you do this, it would be illegal,” he says, “The hearing examiner agreed with us 100 percent, and I think the labor board will agree with us 100 percent.”

The DROP changes haven’t yet affected any city workers. That’s because the implementation of the changes were put on hold after challenges by unions.