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Commission approves first reading of ordinance expanding DROP access and allowing disbursements while employees remain employed
Summary
The City Commission on May 7 gave unanimous first‑reading approval to an ordinance that broadens DROP participation to all pension fund members and allows participants to request their DROP account balances when the five‑year DROP period ends even if they remain employed by the city.
The City Commission approved on first reading an ordinance amending the pension code to (1) reopen eligibility for the Deferred Retirement Option Plan (DROP) to all members of the City of Hollywood Employees Retirement Fund and (2) permit distribution of DROP account balances to participants when the DROP period ends even if the participant continues in city employment.
City Manager David Keller, speaking at the May 7 meeting, described the two core elements of the proposal. First, the ordinance would restore DROP eligibility to all fund members who meet the underlying retirement age or service requirements; second, it would let DROP participants request a disbursement of the DROP account balance when the five‑year DROP term ends without the requirement that they separate from city employment.
Keller told commissioners the pension board and the pension actuary reviewed the change and said it would have a minimal fiscal impact. He said the actuary removes DROP balances when calculating the pension fund’s normal cost and therefore allowing a disbursement on completion of DROP would not materially alter actuarial calculations; the actuary also modeled smoothing rules and suggested any impact would likely be negligible. Keller added that as of the end of the most recent reporting period 77 employees were in DROP with aggregate DROP balances of $10,333,000; using conservative salary assumptions staff estimated the city’s current avoided normal‑cost contributions tied to those DROP participants at roughly $400,000 per year.
The ordinance is the result of impact bargaining with AFSCME. Baki Korcovic, president of AFSCME Local 2432, spoke in support of the negotiated agreement and thanked city bargaining staff and the city manager for reaching a tentative agreement on a package that will also present additional optional retirement plan choices for members in a later collective bargaining process.
Commissioner Jordan Schuham moved to approve the ordinance on first reading; Commissioner Hernandez seconded. The roll‑call vote on first reading was unanimous.
What remains: the ordinance (1) requires votes of the AFSCME membership and the pension‑fund membership (COHERF) before it becomes final for bargaining units and (2) will return to the commission for second reading with actuarial impact valuation results. Keller and the pension board expect the actuarial impact to be minimal; staff also said the city is negotiating a related package to offer current and new employees three plan choices (current defined benefit, defined contribution, or a hybrid) as part of a separate collective bargaining process.
Why it matters: the change removes a policy that in recent years left some long‑serving employees with money in DROP accounts that was not accessible while they continued working for the city. The amendment is intended as a retention tool and to resolve what staff called an inequity in the prior rule that prevented DROP balances from being distributed until separation from employment.
