by Brandon Larrabee
The News Service of Florida
Applications to the state’s Deferred Retirement Option Program, or DROP, are spiking before a law kicks in that would dramatically reduce the interest rates the program pays out, said officials with the state’s retirement system.
The changes to DROP, which allows public employees to work while “retired” for five years without accruing benefits, were part of a vast overhaul of the state’s Florida Retirement System approved by the Legislature this year.
Instead of receiving further retirement benefits, the state holds onto the benefits for DROP members and pays interest on them during the five-year period. That interest rate will fall from 6.5 percent to 1.3 percent for members who join the program on or after July 1.
“It’s safe to say that the number of applications is up significantly and will continue to climb,” Kristopher Purcell, communications director for the Department of Management Services, said in an email.
Purcell also wrote that “we would be talking about the number of new DROP participants increasing by 300, 400 percent” but a deputy later said he was speaking in hypothetical terms, and the percentage increase was not an estimate of how much the figures might climb.
The department said it would be impossible to calculate how many employees have entered DROP ahead of the June 30 deadline until it’s passed.
Whatever the case, officials with Department of Management Services say that the changes to DROP are one of the most common questions the agency is receiving as the law’s July 1 effective date draws near.
The most common question for the Division of Retirement, which has been deluged with calls from employees for information, is still about the law’s provisions requiring state employees to contribute 3 percent of their income toward retirement, said Sarabeth Snuggs, director of the division.
“The other questions center around DROP, people trying to make a decision whether to enter DROP with a June 1 effective date or wait,” she said. “They’re trying to determine what the drop in the interest rate actually does to their accrual.”
Snuggs said that the actual difference in how much money piles up for retirees on DROP works out to about 12 percent if the cost-of-living adjustment changes in the law aren’t included.
Both opponents of the pension overhaul and some supporters say they aren’t surprised by a spike in the number of employees opting for DROP.
“People are heading for the exits,” said Doug Martin, legislative director for the American Federal of State, County and Municipal Employees, which opposed the change.