Appellate Court Says DROP Not Vested Benefit
The federal Ninth Circuit Court of Appeals posted today (June 10) its decision that the City's Deferred Retirement Option Plan (DROP) is not a vested benefit protected by the federal constitutional contracts clause. The appellate court was ruling on a suit filed against the City by the San Diego Police Officers' Association in August of 2005. The City argued that DROP was a matter of active employment rather than a constitutional right. The appellate court said, "We hold that the DROP salary is not a vested right subject to the Contracts Clause." The police association's claim to the contrary "fails as a matter of law." Under the controversial DROP program, City employees at the average age of 55 say they will retire in five years. They continue drawing their salaries, while 90% of their highest one-year salary goes into their personal retirement account. It grows at 3.54% annually (formerly 8%) and is eligible for a cost-of-living adjustment. Then the employee retires with both a lump sum and the regular annuity payment. DROP is classic double-dipping. However, efforts to get rid of it have failed.
More like this:
- Judges Form Group to Sue State — March 15, 2012
- Goldsmith Quietly Drops DROP Appeal — Aug. 30, 2011
- The City, Its employees, their associations. — Feb. 27, 2010
- Aguirre Says State Regulation of Municipal Pension Plans Almost Non-Existent; Calls for Federal Regulation — Feb. 23, 2008
- City Pension Funds in Red — Sept. 25, 2003