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DROP PROGRAM

The DROP program (Deferred Retirement Option Plan) for Cape Coral is specifically for city employees such as firefighters, police officers, and municipal general employees.

CAPE CORAL POLITICS FLORIDA PALM TREESDROP Program Details

The DROP program (Deferred Retirement Option Plan) is a pension-related retirement option offered by the City of Cape Coral under its municipal pension systems. It allows eligible employees to begin accruing their retirement benefits while continuing to work rather than immediately retiring.

  • DROP is not a separate pension plan — instead, it’s a method of deferring receipt of pension benefits while remaining on the payroll.
  • Participation must be elected in writing and becomes effective at a specified later date.

The city has DROP provisions within several pension systems:

  • Firefighter Pension DROP (for City fire personnel)
  • Police Pension DROP (for sworn police officers)
  • General Employees’ Retirement Plan DROP (for other eligible city employees) — referenced in city council legislative proposals.

How DROP Works

1. Eligibility & Participation

  • Only members who are eligible for normal retirement under the respective pension system can elect DROP.
  • Participants elect to enter DROP in lieu of retiring, by filing the proper written election with the pension board.
  • Once elected, participation is irrevocable and generally can only be done once.

2. Participation Period

  • Typically a maximum of 60 months (5 years) of participation is allowed under the current ordinances.
  • Cape Coral has considered ordinances to extend this allowable participation period (e.g., from 5 to 8 years) for some employee groups, aligned with recent state legislation.

3. DROP Accounts & Benefit Credits

While participating in DROP:

  • The member’s accrued pension benefit (the monthly retirement amount they would receive if they retired) is credited monthly into a DROP account instead of being paid out.
  • The pension benefit credited to the DROP account continues to accrue for the duration of participation.
  • After the DROP entry date, no additional years of credited service or benefit increases (other than cost-of-living adjustments, if applicable) are added to the pension calculation while working.

4. Investment Earnings on DROP

Participants choose how earnings are credited to their DROP accounts:

  • Interest at a fixed rate (often around 6.5% per year, compounded monthly) or
  • Earnings tied to the net investment return on plan assets.

The city’s ordinances and recent proposals describe specific earnings crediting methods and election rules.

5. Ending DROP Participation & Retirement

Participation ends either when:

  • the allowed DROP period expires, or
  • the employee terminates employment with Cape Coral.

Once employment ends:

  • the DROP account balance is payable — typically as a lump sum or in installments/rollover — based on the retiree’s elections and plan rules.
  • the retiree also begins receiving their regular pension benefit at that time.

CAPE CORAL POLITICS FLORIDA PALM TREES Important Rules & Considerations

Irrevocability

  • Election to participate in DROP is irrevocable once effective, and the participant must retire by the end of the DROP term.

No Additional Service Accrual

  • While in DROP, the employee generally does not accrue additional pension service or benefits, except cost-of-living adjustments.

Distribution Rules

  • DROP account distributions are subject to plan and tax regulations, including federal tax code limits.

Plan Adjustments

  • The city council may amend DROP provisions via ordinance, but changes must not reduce vested DROP account balances of current participants.

CAPE CORAL POLITICS FLORIDA PALM TREES Practical Example

An eligible Cape Coral firefighter or police officer:

  1. Becomes eligible for normal retirement.
  2. Elects DROP and continues working another 3–5 years (or potentially longer if local rules change).
  3. Each month, the pension that would have been paid if they retired is credited to a DROP account.
  4. During this period, they keep working, earn a salary, and the DROP account earns interest or investment returns.
  5. When they actually leave city employment, they:
    • Receive their DROP account balance (lump sum or structured payout).
    • Begin collecting their regular retirement pension.

Why DROP Is Used

DROP benefits both employees and employers:

  • Employees can retire with a larger retirement account (DROP plus pension) while delaying actual retirement.
  • Employers retain experienced workers for longer and provide a flexible retirement transition.

However, as noted by watchdog groups in broader discussions, the program’s cost implications for public budgets can be a point of public policy debate.

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