TALLAHASSEE — Hundreds of state and local employees are rushing to enter a popular retirement program to beat a July 1 deadline that will substantially reduce lump-sum payments some receive when they retire.
Employees who enter the DROP, or Deferred Retirement Option Program, by the end of June will continue collecting 6.5 percent interest on all retirement funds instead of being forced to accept the 1.3 percent rate recently approved by legislators and Gov. Rick Scott.
State retirement officials at a press conference Wednesday said the difference will probably be about 12 percent of the money that accrues in retirement accounts opened for each employee.
Sarabeth Snuggs, director of the division of retirement, said about 3,000 public employees have filed the paperwork to enter DROP at the end of this month. Retirement officials expect the number of DROP participants to increase by 300 to 400 percent. There are currently about 32,000 employees in the DROP program.
Created in 1998 to encourage veteran public employees to retire and make way for younger, lesser-paid staffers, the program allows an employee who is 62 with 30 years of service to continue working and receiving a salary for up to five years while monthly retirement benefits are deposited in a special account.
The program became controversial a few years ago when lawmakers trying to help one of their own collect a salary and a pension created a loophole that has allowed many elected officials and highly paid officials to become double-dippers. Those who enrolled in DROP not only collected their pensions but also a lump-sum payment that has frequently amounted to hundreds of thousands of dollars. Then the employee was allowed to return to work within 30 days and also collect a salary.
All retirees could become double-dippers if supervisors approved, but the DROP participants got the extra payment.
In 2009, legislators added a requirement that forces all employees to spend six months off the public payroll before they can return to work and collect a salary and a pension. That provision, which makes it impossible for elected officials to retire and return to the same job without waiting for another election, remains in effect.
Scott and some lawmakers wanted to abolish DROP altogether, but the new law leaves the program in place, allowing those already in it to continue collecting the higher interest rate.
Snuggs said the biggest change for state and local employees who belong to the state pension system will be a requirement that they pay 3 percent of their incomes toward retirement costs. The state also has increased the age of retirement for new employees and will calculate retirement benefits based on the highest eight years of salary instead of the current five years. Starting July 1, employees enrolled in the pension plan will have vested rights after eight years instead of the current six. Employees who choose an investment plan similar to a 401(k) instead of a pension will be vested after one year.
Since 1975, members of the system have not been required to pay any of the costs of their pension or dividend programs.