The Morning Report
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Some tidbits that didn’t make it into my story on today’s pension board vote, which is expected to lower the guaranteed return rate paid to participants in the Deferred Retirement Option Program, or DROP:
- A study by an actuary hired by the San Diego City Employees’ Retirement System had some interesting numbers on who chooses DROP. From mid-2004 to mid-2007, 85 percent of the 339 public safety employees who retired during that time did so through DROP instead of a normal retirement. (The actuary considers “retired” entering DROP, not exiting it, because that’s when retirement payments start to be banked.)
For non-public safety employees, there were 236 normal retirements and 469 DROP retirements. Public safety employees can retire at age 50 instead of age 55 for most city employees, and most of the police and fire workers who chose to enter DROP were 50-54 years old when they did so.
- The pension board’s vote may not have the same effect on police and fire as it does on other city workers. That’s because the city’s contracts with the police and fire unions state that the interest rate they receive on their DROP accounts is the same as the interest rate SDCERS assumes it will earn on its investments, currently 7.75 percent, the same as the current DROP rate.
The SDCERS board doesn’t have to follow that provision of the contract. They look to the Municipal Code (as well as the required state and federal laws) when making their decisions, and the labor agreements aren’t part of the city code.
However, if the pension board votes, as expected, to lower the interest rate, that will probably require the city to change the municipal code, allowing it to take control of setting the interest rate. Otherwise it would risk violating its contracts with police and fire, said Jay Goldstone, the city’s chief operating officer. The city could also try to renegotiate that part of the contract since all five unions are at the bargaining table this year.
I’ll post more after the meeting, which starts at 8:30 a.m. Here’s some more information from the SDCERS website.