Summary
The Update on the City of Philadelphia’s DROP Program analyzes the fiscal impact of DROP, a program designed to retain employees by allowing them to collect pension payments in a separate account while continuing to work for up to four years. The study, conducted by the Center for Retirement Research at Boston College, estimates that DROP has cost the City between $236.9 million and $277.2 million, depending on the assumed investment return rate. While DROP has extended the retirement age of police and fire employees by an average of 4.8 and 5.9 years respectively, it has had little effect on other municipal workers. The report highlights that the pension system remains only 44.8% funded, with an unfunded liability of $6.1 billion. Given these financial pressures, the study recommends reconsidering DROP’s structure or eliminating it to mitigate further strain on the pension fund.