Deferred Retirement Option Program

Florida Lawmaker Turns to Legislature for Pension Audit

Florida Gov. Rick Scott recently shot down calls by state Rep. Janet Adkins and others for an investigation into Jacksonville’s Police and Fire Pension Fund.

Scott said the issue was a local matter and should be handled locally.

But Rep. Adkins is now asking her colleagues in the state legislature to help her investigate the pension fund and its deferred retirement option program.

From News 4 Jax:

Ongoing problems with the Jacksonville Police and Fire Pension Fund is the subject of a meeting of state lawmakers Monday.

The Joint Legislative Auditing Committee will consider a request by Rep. Janet Adkins, R-Fernandina Beach, for an audit of the pension fund.

Two weeks ago, Gov. Rick Scott’s chief inspector general turn downed Adkins’ request to investigate the pension. That request was joined by City Council President Clay Yarborough and the mayors of Atlantic and Neptune Beach.

Melinda Miguel, chief inspector general, wrote Adkins saying, “It appears that your concerns would be more appropriately handled at the local level.”

[…]

“Clearly, the public trust is broken as it relates to how the Jacksonville Police and Fire Pension Fund has handled its responsibilities,” Adkins said. “While I am disappointed that the Chief Inspector General has decided not to investigate the concerns I raised regarding the Jacksonville Fire and Police Pension Fund, I am committed to seeking a review of the pension fund and the questions that have surfaced over the last year.”

Specifically, Rep. Adkins wants an investigation into whether regulations were broken in the administration of the pension fund’s DROP.

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Jacksonville Mayor Submits New, Updated Reform Bill

Jacksonville Mayor Alvin Brown has submitted a reworked version of the city’s pension reform proposal, which was previously passed by City Council but wasn’t approved by the city’s Police and Fire Pension Fund.

The bill needs to be approved by both entities before it passes into law. The City Council may vote on the new bill next month, according to the Jacksonville Business Journal.

More details from the Jacksonville Business Journal:

Brown’s bill comes in the wake of a City Council version of pension reform legislation, which was approved by a 16-3 margin in December, being sent back by the Police and Fire Pension Fund.

City Council worked with Brown to come up with changes that will, hopefully, appease the board. City Council still expects to make some changes, though, President Clay Yarborough told the Florida Times-Union.

Some of the sticking points of the council-approved bill were the interest rate that firefighters and police officers get on Deferred Retirement Option Program accounts, cost-of-living adjustments and City Council’s power to change benefits.

The council’s agreement with the Police and Fire Pension Fund will go until 2030. After 2030, the city and unions will have to settle all disputes through collective bargaining.

Additionally, City Council will be able to make changes to benefits if the groups are not able to reach an agreement.

The city’s Police and Fire Pension Fund was 43 percent funded at the end of 2013.

Photo by pshab via Flickr CC License

Jacksonville Council President Latest to Support State Investigation of Public Safety Pension System

Florida Rep. Janet Adkins last month sent a letter to Gov. Rick Scott calling for an investigation into “impropriety…questionable practices and possible mismanagement” of Jacksonville’s Police and Fire Pension fund.

Specifically, Adkins wanted an investigation into how the fund administered its DROP accounts, and whether they ignored regulations and city auditors.

Shortly thereafter, city Councilman Bill Gulliford sent a letter supporting the idea of an investigation.

On Tuesday, council President Clay Yarborough threw his support behind the investigation.

From the Florida Times-Union:

Jacksonville City Council President Clay Yarborough sent a letter on Tuesday to Gov. Rick Scott supporting a state investigation into the Jacksonville Police and Fire Pension Fund.

In his letter, Yarborough said he stands with state Rep. Janet Adkins, who asked Scott in December for the state’s chief inspector general and the Florida Department of Law Enforcement to conduct a “review and investigation” of the pension fund.

“The Jacksonville City Council recognizes and appreciates the sacrifice and dedication of all public safety personnel,” Yarborough said. “That withstanding, Representative Adkins prudently identified … that restoration of public confidence in the management of the pensions is imperative. This is in the best interest of taxpayers and employees alike.”

The focus of the potential investigation:

The city’s attorneys and the pension fund have disagreed in recent years over several issues, including the creation of a special pension plan for senior staff members, including its longtime executive director, John Keane.

Despite city attorneys saying the pension fund lacked the authority to create the special pension plan, the fund’s own attorneys said they disagreed. As of now, Keane’s special pension plan is fully funded and is set to pay him benefits when he retires.

Adkins, R-Fernandina Beach, has asked Scott to investigate the special pension plan, as well as determine whether state rules and laws were followed in regard to the creation, management and regulation of Deferred Retirement Option Program accounts.

In October, the Times-Union reported how the pension fund ignored findings by the City Council Auditor’s Office and city lawyers that the pension fund incorrectly applied regulations for participation in DROP. The paper found that three individuals who entered DROP will collectively receive about $1.8 million more than they would have under strict interpretation of the code.

The Governor’s Office has remained mum on whether it will begin an investigation.

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Florida Fund Seeks Audit After Newspaper Reports On Officials Skirting DROP Payout Rules

Over the past few weeks, the Florida Times-Union has run a series of articles detailing how high-ranking public safety workers, and top pension officials, were able to rack up benefits by staying in the Jacksonville Police and Fire Pension Fund’s (JPFPF) DROP program for longer than rules allowed.

The articles have now gotten the attention of the JPFPF – the fund says it will hire an auditor to look into the allegations.

From the Florida Times-Union:

The head of Jacksonville Police and Fire Pension Fund said he will ask his board to hire an independent firm to review the fund’s practices and determine if the fund has been too lenient when it comes to senior members’ participation in the lucrative Deferred Retirement Option Program.

Pension executive director John Keane announced his decision in a four-page statement sent to City Council that takes issue with a Florida Times-Union investigation, “Too Much of a Good Thing.”

The Oct. 19 story exposed how, under strict interpretation of city code, at least three high-ranking police officers and firefighters with strong ties to Keane were able to skirt the rules and participate in the DROP program for too long, or even altogether, piling up excess pension benefits totaling $1.8 million.

The pension fund’s desire for an audit of its own comes as some city leaders are suggesting the fund be subjected to a forensic audit, which typically investigates whether there are grounds for criminal charges.

Details of the DROP program and the city code that employees may have breached:

The DROP allows police officers and firefighters to continue drawing a regular salary while at the same time having a pension placed into a special account for up to five years.

DROP calculations are based on math.

The number of years one works for either the police department of fire department determines the value of one’s first year of pension payments into DROP. Years of service also determine how long one may participate in DROP.

The code says once a member of the pension fund has worked 30 years, he or she is able to participate in the DROP for three years. Those falling into that category are entitled to 80 percent of the average salary they earned over the previous two years. Those with less than 30 years of service may participate for the full five years, but the percentage of their first year’s pension would be less. For instance, someone with 20 years would get a first-year pension that is 60 percent. That percent grows by two percentage points per work year. So someone with 29 years of service would get 78 percent.

The system is set up so one doesn’t get the best of both perks.

But some people did.

Bobby Deal, a retired police officer and long-time chairman of the pension fund’s board of trustees, and Richard Lundy, a retired firefighter and business partner of Keane and Deal, started their DROP participation after they hit the 30-year mark. And instead of participating for three years, they were allowed to remain in the DROP for the full five years.

Because the city does not currently require that a retiree cash out his or her DROP earnings upon retiring, the norm in states that offer DROP, including the Florida Retirement System, these DROP accounts are being re-invested in the pension fund and are guaranteed to grow 8.4 percent regardless of the true market value of the stock market.

Deal and Lundy now stand to make $1.3 million in questionable benefits on top of their regular pensions.

Read the previous Florida-Times Union investigations here.

Auditors: Jacksonville Pension Officials May Be Skirting Payout Rules

Auditors and watchdog groups are asking questions about the “questionable benefits” of some members of the Jacksonville Police and Fire Pension Fund.

This comes in the wake of a Florida Times-Union investigation that claimed some of the system’s top officials, and active members, were breaking city rules by participating in the Deferred Retirement Option Program (DROP) even if they weren’t eligible.

From the Florida Times-Union:

The long-time chairman [Bobby Deal] of the troubled Jacksonville Police and Fire Pension Fund will collect $610,000 more in retirement funds than a strict interpretation of the law says he is entitled to, a Florida Times-Union investigation found.

Even more alarming to City Council members, city auditors and independent analysts is that Deal is not alone.

There is also former fire chief Richard Barrett, who was allowed into DROP even though he had passed the point of eligibility. And there is Richard Lundy, a former fire captain and business partner of Deal’s. Together they stand to receive more than $1.8 million in questionable benefits.

They are among what is expected to be potentially more than 1,000 former police officers and firefighters who were allowed to skirt the rules and participate in the DROP either too early or — like Deal — for longer periods than city law allows.

Most of the special arrangements allow employees into DROP prematurely, which has a negligible impact on the troubled pension fund. But others like Deal who participate longer than the city law states will end up costing taxpayers hundreds of thousands of dollars each in DROP payouts.

DROP payments are secondary pensions on top of regular pensions that sometimes stretch out for four to five decades.

Pension officials and city officials seem to disagree on what the rules have to say about DROP eligibility. From the Times-Union:

The police and fire pension fund’s executive administrator denies any favoritism or improper application of the law.

“It’s absolutely done properly,” John Keane said.

[…]

Under rules set up by the police and fire pension fund — and agreed to by the city in the late 1990s — an employee who already has worked 30 years is allowed to be in DROP for only three years. Workers with 20 years of service but fewer than 30 years are able to participate in DROP for the full five years. Those with 32 years of service may not participate in DROP at all.

Not so, says Keane.

Keane said it takes time to process paperwork and emphatically denies that rules were skirted for Deal or any other member.

“It’s like going out and catching an airplane; you have to go out and get a ticket before you can board the plane,” Keane said. “When you have 40 to 50 people signing up for the DROP, [all that paperwork] cannot be cleared in just a few days.”

[Jacksonville City Council auditor] Kirk Sherman said there is no quarrel about paperwork deadlines, only about eligibility and following the rules.

The Jacksonville Police and Fire Pension Fund is 43 percent funded.

Read the entire Florida Times-Union investigation here.