Philadelphia’s ‘Retire-for-a-Day’ Pension Perk!

How’s This for a Government Loophole? 

Talk about perks of government . . . I can not believe this loophole in Philadelphia’s local government. Ever heard of Philadelphia’s DROP program – that is the Deferred Retirement Option Program. DROP is a pension program that does not distinguish between Philadelphia city workers and elected officials. This means that there is nothing legally wrong with Philadelphia City Council members enrolling in the retirement program.

Elected officials who are in DROP benefit more than regular city employees because they can be re-elected. When a city worker retires, he or she does not return. But when a city council member wins re-election, he or she can count this as officially retiring from the City. If enrolled in DROP an elected official can collect a bonus payment (worth four years of pension payments) and then return to work. Now the councilperson will earn a salary and still get monthly pension checks as if they were retired. Allowing elected officials to retire for-a-day, collect a big pension check, and get “re-hired” for another term belies common sense!

In 2008, Councilwoman Joan Krajewski did just that. This 75-yr. old took her $297,466 DROP payment, and was re-elected to her current term. Now others are considering the same move. Philadelphia’s City Council has 17 legislative seats and 7 may come up in the 2011 elections. Six of those councilpersons are enrolled in DROP. But guess what . . . based on Ms. Krajewski’s experience, I would bet some of those people are going to resign for a day, take their lump-sum payout and then be back on the job. One of the people who is currently ‘weighing her options’ is 78-yr. old City Council president Anna Verna She has not decided if she will seek re-election (but is keeping her options open!). Councilwoman Verna is set to get a $572,679 DROP payment!

The DROP program lets workers set up a retirement date up to four years in advance. At that point, their pension benefit is frozen and they start accruing pension payments in an interest-bearing account. Workers then receive those payments in a lump sum when they retire, and start collecting their annual pension. For disclosure purposes, if a councilperson retires, takes the lump-sum, and is re-elected, they cannot apply for DROP again, their pension benefits do not increase and they cannot starting their annual pension until they permanently leave office. (This would be the case for Councilwoman Krajewski, she received her DROP payment in 2008). But that is a small caveat – the elected official would have already made a bundle at that point!

What do you think of this Philadelphia government pension perk? Do we see any correlation between the DROP pension program in Philadelphia and the Pennsylvania Public School Employees Retirement System (PSERS) teacher’s pension program?

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