§ 22-310. Deferred Retirement Option Plan (DROP). 97

   (1)   Test DROP. The DROP described in this Section is enacted as a test for a limited duration as provided below, and will not be continued unless the specified conditions are met. It is the intent of Council that the design of this test DROP is such that the impact of the plan will not result in more than an immaterial increase in the City's normal cost of annually funding the Retirement System. Accordingly, this test DROP is subject to the following conditions:

      (a)   This test DROP will be tested for a period of four years. Within 30 days of the fourth anniversary of the effective date of the ordinance that adds this subsection to provide for the test DROP, the Board shall seek an analysis from its actuary as to the experience of the test DROP for the preceding four years. If the Board, based on the report of its actuary, determines that the operation of the DROP, including any accrued liability, resulted in no, or an immaterial, increase in the City's normal cost during the test period, then the DROP will cease to be a "test" DROP, and will continue under the same terms (except those relating to the "test" aspects) indefinitely unless and until further amended by Council. If the Board, based on the report of its actuary, determines that the operation of the DROP, including any accrued liability, resulted in a material increase in the City's normal cost during the test period, then the DROP shall be automatically terminated, except that no member then currently enrolled in the DROP shall be divested of any rights under the DROP.

   (2)   Basic Concept of a DROP. 98 Eligible employees who elect to participate in the DROP make an irrevocable commitment to separate from City service and retire upon ceasing participation in the DROP, which they must do no later than four (4) years after entering the DROP. Such employees remain employees of the City for all other purposes (except that deductions for employee pension contributions cease and the employee no longer accrues additional service credit for City pension) and are not treated as separated from the City during their participation in the DROP. However, the determination of the retirement benefit amount is made and payment begun upon entry into the DROP, except that payments of that benefit are credited to a special DROP account subject to certain conditions, rather than to the employee directly.

      (a)   Extraordinary Extension. 99 The Mayor may determine that an extraordinary circumstance exists which threatens public health, safety and welfare, and where it would be in the City's best overall interests to extend participation, participants in the DROP who are in their fourth year in the program may remain employees of the City for up to one additional year beyond the four (4) year limit under the same terms and conditions of the DROP.

   (3)   Definitions. Definition of certain terms used in this Section can be found in Section 22-105 of this Code.

   (4)   Eligibility. 100 In order to be eligible to participate in this program, a member must be an active employee of the City and be otherwise eligible to retire under Section 22-301 and must have a minimum of ten (10) years of credited service, all as of the DROP entry date. In lieu of separating from employment and commencing receipt of service retirement benefits, any such member may enter into this program ("the DROP") (i) in the case of Police Employees, Fire Employees, members represented by AFSCME, District Council 33 or AFSCME, District Council 47, and members represented by Lodge 5 of the F.O.P. who are employees of the Sheriff's Office or the Register of Wills, on or after the date the member attains his or her "minimum retirement age", as that term is defined in subsection 22-105(25); or (ii) in the case of all other members, on or after the second anniversary of the date the member attains his or her "minimum retirement age", as that term is defined in subsection 22-105(25), provided in either case that the member's DROP entry date shall meet the requirements in subsection 22-310(5)(a) below. For participation in the DROP to be effective, the application must be approved by the Board pursuant to Section 22-309.

      (a)   Eligibility of Elected Officials. No elected official shall be eligible to participate in the DROP, except: (i) this provision shall not affect the DROP eligibility of an elected official who entered the DROP before this subsection became law; and (ii) an official elected to office before September 18, 2009 shall remain eligible to participate in the DROP during such term in office and during any successive term or terms of office to which such official is reelected. 101

   (5)   Benefit Requirements and Calculation.

      (a)   Except as otherwise provided by this Section, an election to participate in the DROP is irrevocable. The effective date of a member's participation in the DROP shall be the date provided on the member's application, provided that such date shall only be the beginning of a full pay period and shall not be earlier than ninety (90) days nor more than one hundred eighty (180) days after the date the application is filed with the Board nor earlier than the eligibility date set forth in subsection 22-310(4). 102

      (b)   Credits to a DROP participant's DROP account consist of:

         (.1)   a monthly amount equal to the member's normal accrued monthly service retirement benefit as of the effective date of the member's participation in the DROP; and

         (.2)   interest on the member's DROP account balance compounded monthly. Until January 1, 2012, interest shall be credited at the yield on one year United States Treasury bonds in effect on the date the ordinance adding this sentence to the Code took effect. On January 1, 2012 and each January 1 thereafter, the interest rate shall be recalculated to equal the lesser of: (i) the yield then in effect on one year United States Treasury bonds; or (ii) one-half of the then-effective interest rate used to calculate the earnings of the reserves of the Retirement System, as adopted by the Board under subsection 22-1002(2). 103

      (c)   Credits to a member's DROP account begin on the effective date of the member's participation in the DROP and continue until the DROP participant separates from active service with the City, provided that such separation must be no later than four (4) years after the DROP entry date. Credits may not be made to a member's DROP account for a period that occurs after the member separates from active service with the City. 104

      (d)   The DROP accounts shall not be segregated from other assets of the Retirement System.

      (e)   Employee contributions. Upon a member's entry into the DROP, member contributions made to the Retirement System under Section 22-902 on behalf of that member shall cease for duration of the DROP period.

      (f)   Separation and Payment of DROP benefit. A DROP participant who separates from active service with the City (including a layoff or furlough of fifteen or more consecutive days, but not including a layoff or furlough of fewer than fifteen consecutive days) is entitled to receive the member's DROP benefit in a lump sum. In addition, upon the effective date of such separation, the member shall be retired, and becomes eligible to receive a service retirement benefit, in the monthly amount calculated in subsection 22-310(5)(b)(.1) above. 105

      (g)   Re-hire. There is no return to regular employment from a DROP. Once entering the DROP, the employee is in the DROP until separation from City service, at which point the member is retired. A retiree may be re-hired by the City, subject to the provisions of this Title (see Section 22-204), but no former DROP participant who is rehired by the City may be eligible to again participate in the DROP. A rehired retiree who had not been a former DROP participant may be eligible to enter the DROP if the employee otherwise meets the eligibility requirements of subsection 22-310(4). In such a case, the retirement benefit for purposes of credits to the DROP account shall be determined by reference to Section 22-204 of this Title. 106

      (h)   Death of a DROP participant. Upon the death of a DROP participant while in the DROP, the member's total DROP account balance at the time of death shall be added to any benefit payable under Chapter 22-500 of this Title and payable to the beneficiary as determined under that Chapter.

      (i)   Ordinary Disability of a DROP participant. DROP participants are not eligible for an ordinary disability retirement under Section 22-402. If a DROP participant becomes disabled and does not meet the requirements for a service-connected disability retirement, that participant shall be terminated from the DROP and separated from the City to begin a service retirement and receive the DROP benefit, as provided in subsection 22-310(5)(f) above.

      (j)   Service-Connected Disability of a DROP participant. If a DROP participant applies for, and the Board grants, a service-connected disability retirement benefit under Section 22-401, the member shall be terminated from the DROP and separated from the City to begin a service-connected disability retirement and receive the DROP benefit, as provided in subsection 22-310(5)(f) above, under the following conditions:

         (.1)   The service-connected disability retirement benefit shall be based on the compensation and service levels as determined at the DROP entry date.

      (k)   Purchase of service. Upon entry into the DROP a member's service level is frozen. Therefore, a DROP participant is not eligible to purchase any service under Chapter 22-800, provided that a DROP participant may complete any installment purchase as provided in subsection 22-806(4).

   (6)   Regulations. The Board shall, by regulation, provide for additional details of implementation and interpretation of this Section.

 

Notes

97	Amended, Bill No. 990288-A (approved June 28, 1999).
98	Amended, Bill No. 990555 (approved December 9, 1999). Section 2 of Bill No. 990555 provides that the Ordinance shall take effect retroactively to the effective date of Bill No. 990288-A (approved June 28, 1999).
99	Added, Bill No. 060506 (approved September 28, 2006); amended, Bill No. 060695 (approved November 16, 2006).
100	Amended, Bill No. 110443 (became law September 15, 2011), effective December 14, 2011. Section 4 of Bill No. 110443, as amended by Bill No. 161013 (approved December 9, 2016), provides: "This Ordinance (Bill No. 110443) shall take effect ninety (90) days after it becomes law, provided that the amendments to § 22-310 of The Philadelphia Code, as set forth in Section 1 of this Bill No. 110443, shall not apply to any employee who attained eligibility to participate in the Deferred Retirement Option Program under the provisions of § 22-310 as it existed before such amendments took effect, and such employees shall continue to be governed by the provisions of § 22-310 as it existed prior to such amendments; provided, further, that the amendments to Section 22-310(5)(b)(.2), relating to interest on DROP accounts, shall not be effective with respect to members represented by AFSCME District Council 33 or AFSCME District Council 47 until the adoption of the ordinance adding this clause to this Section 4, and shall only apply to members who have not yet attained eligibility to participate in the DROP by such date." Section 4 of Bill No. 161013 provides that the amendments to Section 4 of Bill No. 110443 are effective "[r]etroactive to September 15, 2011, provided that this ordinance shall not in any way affect the benefits of any employee who has separated from employment on or before the date this ordinance is adopted." Amended, Bill No. 161013 (approved December 9, 2016). Section 4 of Bill No. 161013 provides that its amendments to Section 22-310 are effective "[r]etroactive to September 15, 2011, provided that this ordinance shall not establish the right of any member to enter DROP retroactively." Amended, Bill No. 180557-A (approved June 21, 2018). Section 3 of Bill No. 180557-A provides, in part, that the amendments to Section 22-310 are effective immediately, provided that "this Ordinance shall not establish the right of any member to enter DROP retroactively."
101	Added, Bill No. 100095 (approved March 24, 2010).
102	Amended, Bill No. 000342 (approved January 23, 2001). Section 2 of Bill No. 000342 reads as follows: "Effective Date. This Ordinance shall be effective retroactively to January 13, 1999, except for amendments to Code Section 22-310, which shall be effective retroactively to June 28, 1999, and except that, as to members of Plan L, any part of this Ordinance that represents an increase or diminishment in the benefit rights of such members shall not apply to an elected official during any term of office to which such official was elected prior to the effective date of this Ordinance, but shall only apply to an elected official during a term of office to which such official was elected after the effective date of this Ordinance."Amended, Bill No. 110443 (became law September 15, 2011), effective December 14, 2011. See note 100 for applicability provisions. Amended, Bill No. 161013 (approved December 9, 2016). See note 100 for effective date provisions.
103	Amended, Bill No. 110443 (became law September 15, 2011), effective December 14, 2011. See note 100 for applicability provisions.
104	Amended, Bill No. 990555 (approved December 9, 1999). Section 2 of Bill No. 990555 provides that the Ordinance shall take effect retroactively to the effective date of Bill No. 990288-A (approved June 28, 1999). Amended, Bill No. 000342 (approved January 23, 2001). Section 2 of Bill No. 000342 reads as follows: "Effective Date. This Ordinance shall be effective retroactively to January 13, 1999, except for amendments to Code Section 22-310, which shall be effective retroactively to June 28, 1999, and except that, as to members of Plan L, any part of this Ordinance that represents an increase or diminishment in the benefit rights of such members shall not apply to an elected official during any term of office to which such official was elected prior to the effective date of this Ordinance, but shall only apply to an elected official during a term of office to which such official was elected after the effective date of this Ordinance."
105	Amended, Bill No. 140206 (approved May 14, 2014).
106	Amended, Bill No. 000342 (approved January 23, 2001). Section 2 of Bill No. 000342 reads as follows: "Effective Date. This Ordinance shall be effective retroactively to January 13, 1999, except for amendments to Code Section 22-310, which shall be effective retroactively to June 28, 1999, and except that, as to members of Plan L, any part of this Ordinance that represents an increase or diminishment in the benefit rights of such members shall not apply to an elected official during any term of office to which such official was elected prior to the effective date of this Ordinance, but shall only apply to an elected official during a term of office to which such official was elected after the effective date of this Ordinance."