FROM: Debby Cherney, Chief Executive Officer
SUBJECT: Deferred Retirement Option Plans (DROP)
RECOMMENDATION:
title
Training on Deferred Retirement Option Plans (DROP).
body
BACKGROUND:
Within the last six months, there has been increasing chatter amongst the California Employee Retirement Law (CERL) systems about the use of Deferred Retirement Option Plans, also commonly referred to as “DROP” plans. As of this date, no CERL system has adopted any of the CERL DROP provisions. At least one system is studying the potential to implement a DROP plan, while at least one other system has abandoned interest in a potential DROP plan.
Todd Tauzer of Segal, which is SBCERA’s actuarial firm, will provide a broad overview of the types of DROP plans, with considerations and potential constraints for each. His presentation is attached as Exhibit A. On March 11, 2024, the California Actuarial Advisory Panel (CAAP), which is a group of actuaries appointed by various constituents under California State Law, issued a memo entitled “Deferred Retirement Option Plans (DROP): An Actuarial Perspective” which is attached as Exhibit B. Mr. Tauzer is a member of CAAP and will incorporate CAAP’s observations and comments into his presentation.
Finally, Chief Counsel Barbara Hannah has prepared a confidential memo attached as Exhibit C which outlines the CERL provisions on DROP.
BUDGET IMPACT:
None. At this time, no SBCERA employer has requested that SBCERA proceed with a study or adoption of any of the DROP provisions in the County Employee Retirement Law.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Debby Cherney
Barbara Hannah
Amy McInerny
ATTACHMENTS:
Exhibit A: Segal Presentation - Todd Tauzer, Speaker
Exhibit B: California Actuarial Advisory Panel (CAAP) Memo dated March 11, 2024
Exhibit C: (Confidential) Memo from Chief Counsel