Skip to content
CRR logo
Submit Search
Join E-mail List | Contact Us
  • Topics
  • Publications
  • Initiatives
  • Data
  • Sponsors
  • Opportunities
  • About Us
  • Search

The Impact of a DROP Program on the Age of Retirement and Employer Pension Costs

September 29, 2010
Share
Mobile Share Email Facebook Bluesky Twitter LinkedIn

Working Paper by Samson Alva, Norma B. Coe, and Anthony Webb

Abstract

This paper investigates the impact of a Deferred Retirement Option Plan (DROP) on the age of retirement of employees covered by defined benefit pension plans provided by the City of Philadelphia. We show that the program results in significant and substantial increases in the age of retirement: 1.25 years on average for municipal employees. Employees make use of the program in ways that maximize the expected present value of their pension benefits, with municipal employees entering the program an average 2.1 years before the age at which they would otherwise have retired. Consequently, the program results in a substantial increase in pension cost. We estimate that the program has cost the city around $258 million over the period to 31 December 2009. We construct an indicator of employee quality and find that some classes of high-quality employees are disproportionately likely to delay retirement as a result of the program.

Female crossing guard leads children safely across street
Female crossing guard leads children safely across street
Author(s)
Headshot of Samson Alva
Samson Alva
Headshot of Norma B. Coe
Norma B. Coe
Headshot of Anthony Webb
Anthony Webb
Downloads
PDF Version
Citation

Alva, Samson, Norma B. Coe, and Anthony Webb. 2010. "The Impact of a DROP Program on the Age of Retirement and Employer Pension Costs" Working Paper 2010-11. Chestnut Hill, MA: Center for Retirement Research at Boston College.

Copy citation to clipboard
Topics
State & Local Pensions
Publication Type
Working Paper
Publication Number
WP#2010-11
Sponsor
City of Philadelphia
Related Content

For related Report

Related Articles
Senior couple sitting on the floor of a family room with luggage packing for a trip

Will the Average Retirement Age Keep Rising?

Issue Brief by Alicia H. Munnell

April 15, 2025
Senior employer wearing face mask reading seeker employment application

How Might COVID-19 Affect Employment, Earnings, and OASI Claiming?

Working Paper by Gary V. Engelhardt

January 27, 2025
Multiple wooden blocks with people's silhouettes on them

Don’t Bring Back Traditional Private Sector Defined Benefit Plans

MarketWatch Blog by Alicia H. Munnell

October 16, 2024

Support timely research that informs real-world solutions.

About us
Contact
Join e-mail list
Facebook Bluesky Twitter LinkedIn Instagram YouTube RSS

© 2025 Trustees of Boston College, Center for Retirement Research|Terms of Use|Privacy Policy|Accessibility

This website uses cookies to improve your experience. We also use IP addresses, domain information and other access statistics to administer the site and analyze usage trends. If you prefer to opt out, you can select Update settings. Read our Privacy Policy. Accept
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT