PHILADELPHIA – On Thursday, Councilman At-Large Allan Domb introduced legislation to terminate the Deferred Retirement Option Plan (“DROP”) for future City of Philadelphia employees.
“The unfunded pension liability is the most serious fiscal challenge we must confront as a City,” said Councilman Domb. “As our largest financial obligation, we need reforms that will improve the overall pension system and this legislation is one of many incremental adjustments we should consider to add stability to our fiscal path.”
DROP was initially created as a pilot for succession planning with the intent to produce no material increase in normal cost to the City. Audits were scheduled to be conducted on the fourth anniversary of the DROP pilot and if any increase in normal cost was reported then the program should have automatically been terminated. However, DROP remains and, since 1999, the City has incurred an estimated cost of approximately $237 million from distributing these pension bonuses. Overall, the City has paid out more than $1.5 billion to municipal employees enrolled in the program. At present, the City has an unfunded pension liability of approximately $6.1 billion excluding the other post-employment benefits which would increase the total unfunded liability to more than $8 billion.
The new ordinance would amend the eligibility clause for enrollment in DROP. Accordingly, the City of Philadelphia would not allow future exempt and non-union represented employees either hired or appointed to participate in DROP. The legislation does not modify eligibility for any current employees and would not alter ratified collective bargaining agreements.
Today, the City has more than 66,000 active and non-active employees included in the general pension system. Since 2016, the City has hired 1,140 exempt or non-union represented employees.
Last week, Councilman Domb also introduced a resolution calling for City Council to hold hearings to examine the state of the pension system. Both the resolution and ordinance will be referred to the appropriate City Council Committee.
“The collective goal here is to protect everyone’s financial interests – pension earners, taxpayers, and Philadelphia’s future,” said Councilman Domb.
Watch his comments on the bill from Stated Meeting.
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