San Diego County Proposes Deferred Retirement Option Program

News Summary

San Diego County is advancing a Deferred Retirement Option Program (DROP) for veteran public safety employees, allowing them to collect salaries and pensions at the same time. This initiative addresses staffing shortages and aims to retain experienced personnel amid rising pension costs. While proponents argue for its benefits, critics warn of potential misuse and increased payroll expenses. The proposal awaits approval from the county’s Board of Supervisors and SDCERA to ensure cost neutrality in the pension system.

San Diego – San Diego County is moving forward with plans to introduce a Deferred Retirement Option Program (DROP) aimed at allowing veteran sheriff’s deputies and other public safety employees to collect both their salary and pension simultaneously. This initiative comes in response to staffing shortages and concerns regarding the county’s pension system, driven by advocacy from the Deputy Sheriffs’ Association of San Diego County.

If approved, this will mark the first occurrence of a DROP for a county in California that falls under state retirement laws for county employees. Participation in DROP will be voluntary, allowing eligible employees to officially retire while continuing to work for up to five years. During this time, their pension will be deposited into a special DROP account. Upon leaving the payroll, participants will receive a lump sum from their DROP account in addition to their regular pension benefits.

Proponents of the program argue that DROP will aid in retaining experienced staff and will help mitigate the costs associated with recruiting and training new personnel. The county has faced chronic vacancies within the Sheriff’s Office, leading to increased reliance on overtime, which averaged $65 million annually from 2019 to 2024, and a vacancy rate of 10% over the same period.

However, critics have raised concerns about DROP enabling public employees to “double-dip,” accessing taxpayer funds through both salaries and pensions concurrently. Similar initiatives in other areas, like the San Diego Police Department, have previously faced issues, including significant staffing losses linked to mandatory retirements after five years of participation.

A recent county analysis highlighted that while DROP could potentially reduce overall pension costs, it would incur substantial payroll expenses for DROP employees, amounting to $15.5 million over five years and $54.4 million over a decade. This analysis comes as San Diego County’s pension system, the San Diego County Employees Retirement Association (SDCERA), grapples with an unfunded liability that ballooned from $3.32 billion in 2016 to $5.1 billion last year.

State law requires that DROP programs must be “cost-neutral” for the pension system, prohibiting any increases in costs or significant reductions in retiree payouts of more than 3%. In light of this, the county’s proposed DROP includes several measures to keep costs in check, such as not allowing DROP accounts to accrue interest, depositing only 75% of retirement contributions into these accounts, and capping cost-of-living adjustments.

Agreements to finalize the DROP plan were reached in May involving deputy unions along with other safety officers and personnel from the District Attorney’s Office. The next steps include passing an ordinance through the county’s Board of Supervisors and securing SDCERA’s approval to confirm fiscal requirements have been met for cost neutrality.

Despite the potential benefits, caution remains due to historical precedents. A report costing $200,000 previously flagged risks of loopholes in DROP plans based on lessons learned from past implementations, including costs of $149 million incurred by the City of San Diego attributed to abuse and mismanagement of similar programs.

The initiative for DROP was initiated in late 2023 to address enduring staffing issues that have been heightened by a mandatory overtime policy within the Sheriff’s Office. The county sought the expertise of consulting firm Foster & Foster to draft the DROP plan, ensuring adherence to required cost-neutral conditions.

While Supervisor Terra Lawson-Remer supports the DROP initiative as a long-term cost-saving strategy, other members of the supervisory board have yet to publicly disclose their stances. The Board of Supervisors has unanimously approved the study of the DROP program, reflecting a commitment to addressing the county’s staffing challenges while navigating complex pension dynamics.

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Additional Resources

• Mercury News: County Moves Toward Controversial Double-Dipping DROP Pension Plan
• San Diego Union Tribune: Fix for Cops’ Pensions Takes Key Step
• Times of San Diego: California’s Public Employee Pension Funds Lost Billions
• San Francisco Chronicle: Endorsement of Prop F for SFPD Police
• Google Search: California pension plans