Plan for retention

DROP was established in 1996 to retain police officers who had achieved minimum eligibility for retirement, which is 20 years of service. At the time many were leaving because of an unpopular rotation policy.

Firefighters also benefited because they belong to the same nearly $2 billion pension system, the Fire and Police Employees Retirement System.

To date, the plan has paid $68 million to 774 police and fire employees. There are now 1,180 in the program.

Firefighters less eager

Firefighters have not indicated that they are as eager as police officers to take advantage of DROP.

In part, that's because of the way annual pension payouts are calculated. Police received record raises in each of the past three years, but no raises are expected soon. That means pension payouts, which are based on the average of an employee's highest-earning 18 months on the job, will not get much higher for police after January.

With their last pay raise, on July 1 last year, many officers are at or approaching the highest average salaries upon which their pensions will be calculated.

In contrast, firefighters did not receive similarly large raises and are not seeing the same spike in average annual compensation.

"It's beginning now," said police Detective Gary McDowell, a member of the pension system's board of trustees and a 34-year veteran who intends to retire next year. "But we anticipate a substantial amount of senior people retiring in January or soon thereafter."

Another consideration is that police officers who were in DROP from 1996 to 1999 will have spent four years as of this August regaining pension credits they lost during their participation.

Formulas for pensions

Pension payments are based on a percentage of an employee's salary - the final percentage is calculated using years of service. Police officers accrue 2 1/2 percent in credits each year for the first 20 years of service. For every year thereafter, they accumulate 2 percent. Therefore, officers who retire after 25 years would receive a pension equivalent to 60 percent of their salary (50 percent for the first 20 years and 10 percent for the additional five years).

While they participate in DROP, however, police officers do not accumulate their 2 percent annual pension credits. But if they remain on the force for four years after DROP participation, they accrue 3.5 percent in pension credits each year, recapturing the 6 percent they lost. And during that time, the money in their DROP account is continuing to earn 8 1/4 percent.

Chance to switch jobs

One incentive not to leave is that officers can accrue up to 100 percent of their salaries in pension credits - assuming they stay long enough. But most could retire now at their highest salaries ever and still be able to get another job, officials said.

Finding a job, however, might not be easy, which is why Gary McLhinney believes the Police Department will not be facing a crippling exodus.

"The economy could keep officers from fleeing in mass numbers," said McLhinney, a former Baltimore police union president and now chief of the Maryland Transportation Authority Police.

McDowell and others predicted that about half of the eligible 676 officers are likely to retire. Others might be hard-pressed to give up the 8 1/4 percent interest that the DROP account earns as well as the continuing accumulation of pension credit.

Other factors - such as overall department morale - will have an impact, McDowell said.

Recruiting considered

O'Malley said the city would consider recruiting more people. Positions cannot be filled, however, until they are vacated. But O'Malley is working around that Catch-22.

"We're asking the Finance Department to open positions temporarily to get ahead of the wave and to possibly run a couple of [police academy] classes between now and six to seven months from now when retirements start to happen," he said.

McDowell said the high turnover would be a one-time occurrence and that it provides younger officers with promotion opportunities. One opportunity they may not get is a DROP plan as generous as the existing one.

A clause in the law that established DROP requires a review of the system next year. If the pension board determines that the plan is too costly to the system, then it would recommend changes to the City Council. The interest rate is likely to be lowered, and the four-year period of regaining lost pension credits might not survive a review, said Stephen Fugate, the pension board's chairman.

"If DROP does not pass the test, then it could be amended or eliminated," Fugate said.