Reforming controversial retirement program for L.A. police and firefighters would save millions of dollars

A proposal to limit the amount of paid time off that veteran Los Angeles police and firefighters can take while in a controversial retirement program would save nearly $13 million in the first year, according to a city report.

The Deferred Retirement Option Plan, or DROP, pays participants their salaries and pensions simultaneously for the last five years of their careers. Since the plan’s creation in 2001, police and firefighters have walked away with more than $1.7 billion in extra pension payments, city pension records show.

A Los Angeles Times investigation this year found that nearly half of the veteran officers and firefighters who joined DROP — they must be 50 with 25 years of experience — subsequently took injury leaves, typically for bad backs, sore knees and other ailments that afflict aging bodies regardless of profession.

Their average absence was about 10 months, but The Times found hundreds of cases in which employees had taken off more than a year at essentially twice their normal pay.

The list includes a married couple — a police captain and a detective — who joined DROP at around the same time and collected nearly $2 million while in the program. They both filed claims for carpal tunnel syndrome and other cumulative ailments about halfway through. She spent nearly two years on disability and sick leave; he missed more than two years, according to a Times analysis of city payroll data.

The couple spent at least some of their paid time off recovering at their condo in Cabo San Lucas, Mexico, and starting a family theater production company with their daughter, The Times found.

A former firefighter hurt a knee “misstepping off the fire truck” three weeks after entering DROP, according to city records. The injury kept him off the job for almost a full year. Less than two months after the knee injury, he crossed the finish line of a half-marathon in Portland, Ore., The Times found.

In response to the series of articles, Mayor Eric Garcetti and the unions representing police and firefighters proposed changing city ordinance so that the pension payments could be withheld from officers in DROP who do not work at least 112 hours on active duty in any given month — that’s about two weeks for a firefighter and nearly three weeks for a police officer.

The rule would be waived for anyone who sustains an injury in the line of duty that puts them in the hospital for three days or longer.

Under the plan, officers and firefighters would still collect their full salaries while they are off work recovering from their ailments.

In a statement released Wednesday, a spokesman for Garcetti said the mayor has “acknowledged repeatedly that DROP needs improvement. That’s exactly why he proposed these reforms, which will create more accountability across the program, and save L.A. taxpayers millions of dollars a year. The mayor looks forward to seeing these measures put into place as quickly as possible.”

Suspending pension payments for people out on extended injuries would save the pension plan $12.8 million in the first year, according to an actuarial report done by Segal Consulting. Because it’s unknown how the proposed changes might affect DROP enrollment and the length of time people choose to remain in the program, the actuaries said it would be safer to assume annual savings of nearly $7 million going forward.

One thing that could lower savings would be a flood of employees signing up before the proposed new rules would go into effect Jan. 1, the actuaries warned. Indeed, after The Times’ initial report on DROP on Feb. 3, 129 new people enrolled in the program. It was the first month in more than six years with more than 100 new enrollees and was the largest single-month class since the program began accepting applicants in May 2002, when 389 people signed up.

The actuaries determined that 42% of participants enrolled in the program as of June 30, 2017, would have had their monthly pension payment withheld at least once under the proposed rule.

About 30% would have had their payments withheld for more than one month.

In such cases, the officers would be allowed to extend their time in DROP beyond the current five-year limit to make up for the months in which their pension payments were withheld.

The proposed reform, which still requires approval by the City Council, affects only people in the program who take long or frequent injury leaves; it does not address the central question of whether DROP — which was sold to voters as a no-cost way to retain veteran officers — makes financial sense.

Other cities, including San Diego and San Francisco, experimented with DROP programs before abandoning them because of the expense. San Francisco suspended pension payments for people out on injury leaves and still decided the program was too expensive.

Two years ago, Garcetti and leaders of the Los Angeles City Council ignored a confidential report from then-City Administrative Officer Miguel Santana urging them to eliminate, or drastically amend, the program. Santana warned city leaders that DROP “is not and has never been cost neutral,” as was promised to voters.

Further, the original rationale for creating the program, a threatened mass departure of senior Los Angeles Police Department officers after a corruption scandal within the department in the late 1990s, was no longer a threat, Santana said.

And there had never been a reason to include firefighters in the program, because the city has no problem retaining them, Santana added. On the rare occasions when the city has job openings for firefighters, the department gets far more applicants than it can possibly hire.

Garcetti and leaders of the City Council committee that negotiates labor contracts — all of whom receive significant financial support from the police and fire unions — ignored Santana’s recommendations.

Former Los Angeles Mayor Richard Riordan, who established the city’s DROP program in the early 2000s to curry favor with the police union during a tumultuous period in city politics, told The Times last year that creating the program had been a mistake.

He called the widespread practice of taking long injury leaves after entering DROP “total fraud.”

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Twitter: @JackDolanLAT

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