Could the DROP program get dropped?

By: Jim Cook | Dothan Eagle
Published: November 05, 2010

With new management in Montgomery, a retirement program that gives education and state employees a lump sum for working beyond their normal retirement date may come under new scrutiny.

Michael Ciamarra, Alabama Policy Institute vice president, said the new Republican leadership in Montgomery will have to look at a number of programs to scale back or freeze because of difficult budget conditions, and the Deferred Retirement Option Program may be on their list.

“In our view it is an expensive program for taxpayers,” he said. “It will need review and discussion.”

DROP gives state and education employees who have completed 30 years of service and are age 55 or more the option of continuing to work while earning deferred retirement compensation for up to five years. The retirement benefits they would have earned if they had retired will be invested in an account and awarded to them when they retire later.

Retirement benefits are funded by employee contributions and taxpayer funds. About 5,755 educators and 2,616 state employees are participating in DROP. The state places nearly $21 million per month in DROP accounts.

For state and education employees working in administrative jobs, the payday at the end of employment can be lucrative. For example, Dothan City School Superintendent Sam Nichols will collect about $318,000 in DROP funds when he retires next July. Enterprise City School Superintendent Jim Reese will collect about $320,000 when he retires in December.

The Alabama Policy Institute, a right-leaning think tank, has criticized the program, saying that it’s too expensive. According to Ciamarra, the Retirement Systems of Alabama (RSA) has $13 to $15 billion in unfunded liabilities, and that continuing DROP only adds to the system’s costs.

However, calculating the true cost of the program is difficult, as there is no way of telling how many employees eligible for DROP would have continued to work anyway regardless of the extra incentive. And if the employees eligible for DROP had simply retired, they would have collected those benefits

“It’s money that’s owed in a sense, anyway,” said Bill Kelley, a spokesperson for the RSA.

Could the DROP program get dropped?

Share This:

More from this channel:

Reader Comments

Deal of the Day

Most Popular

Spot Crime

Things to Do