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The board of the San Diego City Employees' Retirement System this morning (Feb. 20) lowered the interest rate on the Deferred Retirement Option Plan (DROP) to 3.54 percent, according to Councilmember Carl DeMaio. I was not able to get confirmation from SDCERS or other sources. SCDERS had held that DROP interest rate at 8 percent for five years and then edged it down to 7.75 percent as markets around the world crashed. Under DROP, an employee will announce intention to retire in five years. He or she then draws a regular salary, as well as a similar amount in the DROP account that compounded at 8 percent a year -- classic double-dipping. Now, that should be brought to 3.54 percent. As DeMaio recently reported, some employees built up $1 million-plus nesteggs from DROP alone. Last year, the Reader reported that a SDCERS board member said it was time to lower the rate substantially. More reforms have to be made, according to DeMaio. According to the municipal code, DROP is supposed to be cost-neutral. The City's actuary, Cheiron, says that it is not cost-neutral.
The board of the San Diego City Employees' Retirement System this morning (Feb. 20) lowered the interest rate on the Deferred Retirement Option Plan (DROP) to 3.54 percent, according to Councilmember Carl DeMaio. I was not able to get confirmation from SDCERS or other sources. SCDERS had held that DROP interest rate at 8 percent for five years and then edged it down to 7.75 percent as markets around the world crashed. Under DROP, an employee will announce intention to retire in five years. He or she then draws a regular salary, as well as a similar amount in the DROP account that compounded at 8 percent a year -- classic double-dipping. Now, that should be brought to 3.54 percent. As DeMaio recently reported, some employees built up $1 million-plus nesteggs from DROP alone. Last year, the Reader reported that a SDCERS board member said it was time to lower the rate substantially. More reforms have to be made, according to DeMaio. According to the municipal code, DROP is supposed to be cost-neutral. The City's actuary, Cheiron, says that it is not cost-neutral.