DROP (Deferred Retirement Option Package) allows officers with 20 or more years on the force to retire, then work for a maximum of five more years.

If you ask me it sounds like a government welfare program for cops.

Source

Chandler police, fire seek retirement amid pension flap

by Laurie Merrill - Feb. 18, 2011 08:12 AM

The Arizona Republic

The possible loss of a popular pension plan has prompted 34 Chandler public safety officers to inquire about early retirement since Jan. 1, and nine have already opted to retire, officials said Thursday.

As the Arizona Legislature considers eliminating the program for public safety officers, many Chandler and Tempe police and fire officials are wondering the same thing: Should they retire now before new pension legislation is approved and goes into effect?

"Anybody who has 20 years or more in the department is considering (it)," said Chandler Sgt. Joe Favazzo, a police spokesman. "It is definitely something I am looking at."

In Chandler, 24 police officers and nine firefighters have looked into retiring, said Stacie Finkelstein, employee services supervisor. That is far more than usual, officials said.

Tempe hasn't had a large bump in requests from public safety employees yet, but "we have heard that we may see an influx of employees who elect the DROP (deferred retirement option package)," said Jon O'Connor, Tempe's human resources deputy director.

DROP allows officers with 20 or more years on the force to retire, then work for a maximum of five more years.

Instead of receiving a weekly pension check during that period, the pension dollars are invested and earn interest. The employee continues to receive regular paychecks.

When the employee leaves for good, he or she is awarded a sizeable lump sum of five-years' worth of pension dollars. In addition, retirees draw pension checks until death. Average DROP annual pension benefits have risen to $44,025.

Arizona legislators are taking aim at pension reform following an investigation by The Arizona Republic. The probe into six public pension plans in Arizona revealed that over the past 10 years, total costs soared 448 percent, to $1.39 billion in 2009.

In 2007, DROP benefits totaled $151.9 million, a 566 percent increase from the previous year, when $22.8 million was paid. Many of the first participants in the program collected payouts in 2007 after participating for the maximum five years.

The public safety pension trust is poorly funded at only 65.8 percent. Union leaders blame faulty stock investments, the federal government's refusal to bail out pension funds and mismanagement.

Others suggest the large lump sum payments gut the system. When an employee enters DROP, neither he nor the employer contribute any more to the pension fund.

The House bill discussed Thursday in committee would eliminate DROP, among other cost-cutting suggestions. It would also raise employee contributions to pensions from 7.65 percent of their wages to 15 percent over five years. And it would penalize public safety employees who retire before their 25th year on the job.

"Our pensions are being attacked," said Shawn Hancock, president of the Chandler Law Enforcement Association. "They want to get into the system before it is diminished. If they get in now, before the Legislature changes it, they keep their benefits."

Thirty Chandler firefighters, 35 Chandler police officers, 42 Tempe police officers and about 36 Tempe firefighters are eligible to retire now.

"They are deciding to DROP earlier rather than later. It could have a ripple effect on the availability of officers over the next five years." said Debra Stapleton of Chandler's human resources department

Chandler Fire Chief Jeff Clark said many firefighters are waiting to see how the Legislature acts.

"There are certainly a lot of people talking about it," Clark said. "If the DROP is eliminated, you will definitely see a spike in enrollment."

It is highly unlikely that all 30 eligible would decide to take the early retirement, Clark said. A worst-case scenario would give Chandler five years to make plans to recruit, train and hire new firefighters.

Across the state, union leaders say as many as 1,900 police and fire officials are eligible to retire now.

Tim Hill, president of the Professional Fire Fighters of Arizona, which has 6,500 members, said he has fielded many calls.

"Basically, hold on and don't do anything crazy," Hill said. "Have your affairs in order, but don't do anything prematurely."

DROP was designed to keep experienced police on the force longer and help offset the high costs of recruiting and training new officers. Police and fire leaders say DROP does not add to taxpayer costs.

"At the end of five years, you get a lump sum check," Hancock said. "It's all my money anyway. It keeps experienced officers and allows officers to build up a savings account."

The lump sums can go toward paying off a mortgage, buying a house or starting a new business.

Police and fire employees put 7.65 percent of their wages into their pensions, with employers paying a larger percent. Shortfalls in the funds are generally made up by tax dollars. The average age of public safety retirees is 50.

The longer a public safety employee waits to retire, the higher the pension checks will be.

officers said. Union members say this is one reason DROP doesn't cost more. If the police worked for 25 years or more, their weekly pension checks would be higher.

The public safety pension administrator, Jim Hacking, has acknowledged the program as "unsustainable" and said he would work with employees and employers to propose changes.

The 9,500-member Arizona Police Association has provided an alternative proposal for cutting pension costs. At Thursday's hearing, its president, Brian Livingston, argued vehemently against the cost-cutting bill but then suggested moving it along.