The expansion of the Deferred Retirement Option Program could prove lucrative for career government workers and educators, who will be able to draw pensions while continuing to work for eight to 10 years instead of the current limit of five years.
But it comes at a high cost to the state agencies, universities and colleges, school districts, counties, cities and other government agencies that participate in the state retirement system. They will pay an extra $350 million a year as employer contribution rates go up, bringing their total contributions for 2023-24 to $3.1 billion.
Expanding the program comes at a time when the Florida Pension Fund continues to struggle financially. Chronically underfunded for years, the pension fund reportedly has a $38 billion deficit and can only cover 82 percent of its outstanding benefits.
“This is a meaningful piece of legislation” that will affect nearly 630,000 active public employees, including 72,000 first responders that include police, firefighters and others in the Special Risk Category of the FRS, said Rep. Demi Busatta Cabrera, R- Coral Gables.
“First responders have much lower life expectancy than the average person. Their work is demanding and requires agility and acuity.” Busatta Cabrera said.
Rep. Joseph Casello, a Boynton Beach firefighter and Democrat, said by lowering the age and increasing the DROP program “increases the quality of life for many of our brothers and sisters on the front lines.”
Both the House and Senate voted unanimously to approve the conference bill on May 5, the last day of session after several similar bills introduced by legislators died in committee.
One of the dead bill sponsors, Sen. Victor Torres, D- Kissimmee, said he was glad to see the measure pass and hopes it will stem the tide of people leaving Florida, which has created shortages of teachers and other necessary workers.
“We are losing people going into the program, and getting their pensions before they leave,” Torres said. “By extending their DROP by three to five years, the state hopes it will get those people to stay.
“One of the House Sergeant at Arms men was planning to leave after this session but because of this three years added onto his DROP, he’s going to stay.”
Mark Jeffries, legislative liaison for Orange County, said the expansion could cost Orange as much as $8.8 million. He said he didn’t know if the county has determined how many people could take advantage of the expansion.
“It’s all new. Some people are neutral, some people are ready to go,” Jeffries said. “We’ll have to see how it all plays out.”
The program was originally created to stop a brain drain of younger talent by motivating veterans to retire early and clear a path for young professionals to move up the ladder.
People who enter DROP simultaneously earn a salary while accruing monthly retirement benefits in an interest-bearing account.
When the DROP period ends, workers were expected to retire. In return, they would get a lump sum payout of their DROP funds and begin receiving their regular monthly pension benefit.
But because of a loophole that allows employees to return to a government job after six months of retirement and still collect a pension, the program has had the unintended effect of enticing veterans to stay on longer.
Nearly 30,000 pensioners of the 448,000 beneficiaries are in the DROP program, according to a legislative analysis of the bill.
According to legislative staff analysis, the new law:
— Eliminates the “restrictive entry window” for eligible members to participate, allowing for entry at any age as long as years of service or age and vesting requirements are met.
— Extends the maximum time eligible members can participate five years to eight years for all employees, and from eight years to 10 years for teachers and other instructional personnel.
Increases the interest rate applied to a member’s accrued monthly benefit from 1.3 percent to 4 percent.
— Increases payouts for disability coverage and line-of-duty death benefits.
Busatta Cabrera said she would have liked to have seen the 3 percent cost of living adjustment for future pensioners restored. It was eliminated by the Legislature in 2011 in the wake of the Great Recession.
“I am disappointed that the conference report does not include a COLA,” she said. “We were not able to get the Senate on board this year, but … we hope to get it next year.”
©2023 Orlando Sentinel. Distributed by Tribune Content Agency, LLC.
