DROP Program Review – Update

Article

The ordinance amending the DROP Program was approved at its second reading by the City Council on January 15, 2019.  The adopted changes to the Program will affect all members entering DROP on or after February 1, 2019. 

 New DROP Requirements for Members Entering on or After February 1, 2019:

  • Any member who enters DROP on or after February 1, 2019, shall have his or her participation in DROP suspended for any calendar month in which he or she does not spend at least 112 hours on active duty status;
  • For any participant who sustains a serious injury on duty and is admitted to the hospital for a minimum of 3 consecutive days as a direct result of that injury, participation shall not be suspended during the first 12 calendar months following the date of injury;
  • Any member whose participation is suspended shall be eligible to participate in DROP for a maximum of 30 additional months beyond the original participation period. The participation period shall only be extended for as many months as the member’s participation was suspended;
  • No interest accrues on the DROP account following the initial 5-year/60-month participation period, including any periods of participation suspension.

Frequently Asked Questions:

Q:        When are these changes effective?

A:         Changes are effective February 1, 2019.

Q:        What if I am already in DROP, do these changes affect me?

A:         No. The changes only affect members who enter DROP on or after February 1, 2019.

Q:        Is the 112 hours calendar or work hours?

A:         Calendar.

Q:        What time counts as a working hour?

A:         You can use Hours worked (HW), vacation (VC), preventative medicine (PM) and time off (TO) as part of the 112 hours.

Q:       What time does not count as a working hour?

A:         Sick time (SK), family illness (FI) and Injury on Duty/Workers’ Comp time will not count towards your 112 working hours.  There is an exception, however, if you are hospitalized for 3+ days as a direct result of an on-duty injury      (see above).

Q:        Does overtime count toward my working hours?

A:         You cannot use overtime toward your working hours, but if you bank your hours and take them as TO, those hours will count.

Q:        If I don’t work the 112 hours will I be immediately terminated from the DROP Program?

A:         No.  A participant can work up to the full 5 years of DROP.  Within the 5 years, any month with less than 112 active duty hours is not eligible for DROP pension accrual (i.e., your participation is suspended for that month).  The months ineligible for pension accrual can be made up at the end of the 5-year standard DROP period, for up to a maximum of 30 additional months beyond the original participation period.

Q:        Where does my money go if I fail to meet the 112-hour active duty requirement?

A:         While it is common to refer to DROP credit being earned in the form of a payment or check, it is not in fact a payment or a check. While in DROP, you get credit in your individual DROP account once you have earned the credit; but the actual money stays in the LAFPP trust fund. If you fail to meet the 112-hour requirement during a calendar month, your DROP account will not receive a pension credit for that month. However, the funds remain in the LAFPP trust fund.

Q:        Will the months I make up be subject to the 5% interest?

A:         No.  The 5% interest is only for the first five years in DROP. Any extension beyond the five-year DROP period would not earn the 5% interest.  Extensions beyond the five-year DROP period would receive cost of living adjustments to your pension.

Q:        Will my DROP account from the initial 5-year period continue to accrue interest while I’m making up any months?

A:         No. Your DROP balance from the initial 5-year period will be frozen and not collect interest during your extended make-up time.

Q:        What if I enter DROP in the middle of the month or exit DROP in the middle of a month?

A:         You must be on “active duty status” for a minimum of 112 hours in a calendar month to be credited with a DROP deposit for that month, regardless if it is at the beginning or end of your DROP period. 

Q:        Will the timing of DROP payouts be impacted by these new provisions?

A:         Yes, under the new provisions LAFPP must confirm with the City’s payroll system (PAYSR) that you met the 112-hour active duty threshold in your final pay period.  Depending upon your DROP exit date, this may delay the payout of your DROP lump sum for a minimum of 1 month.

Q:        Will I earn interest on my DROP balance while the final pay period is being verified?

A:         No. The terms for crediting interest remain unchanged.  No interest accrues after a member’s DROP exit effective date.

Q:        How will my accumulated time payouts be affected by the February 1, 2019 effective date?

A:         Accumulated time is paid out after you exit the DROP Program.  Your vacation time is earned retrospectively, and you will earn and be paid hours on the previous year of employment. Sick leave is paid out prospectively and the City will not pay the extra 96 hours of sick time for 2019.  For example, if you have 896 hours on the books, you will be paid out for 800 hours. 

Q:        If I do not agree with the changes to the DROP Program, can I appeal?

A:         No.  The DROP Program is an optional, voluntary program that provides LAFPP sworn members with an additional way to save for their retirement years.  No member is required to participate.

 

For more information, please click on the following links to the City Clerk’s Office files:

Amendment to DROP - Correspondence

Amendment to DROP – Council File

For a history of the developments regarding the DROP Program Review, please click on the link below:

DROP Program Review – History