DROP in some extra cash
In October 2000, after 22 years with the city, Davis became eligible for retirement. But at 55, she wasn’t ready to retire, so she continued working and rolled the monthly pension payment she would have received into a Deferred Retirement Option Plan account. There, it was invested by HMEPS, earning Davis more retirement security.

Each month, Davis’ pension benefit and interest were credited to the DROP account, earning an annual return of between 2.5 percent and 7.5 percent. For the last several years, it’s been close to the maximum amount, Mason said.

To be eligible, a municipal employee must have been hired before Jan. 1, 2008, meet retirement requirements, and not be receiving their pension.

To apply for DROP, an employee should request an application from HMEPS no earlier than 60 days prior to eligibility date. For more information, contact HMEPS at 713-595-0100.

Enrollment in DROP freezes employees’ credited service time for purposes of calculating pension benefits. For instance, Davis worked full-time for the city for 24 years. The last two years she was in DROP, so when her pension benefits were calculated, she was credited with 22 years of service.

When employees leave city employment, they leave the DROP program. They can select to receive payments in a lump sum, in payments, or a combination. If an employee dies before the payout is complete, the surviving spouse or designated beneficiary receives the rest of the payout in a lump sum.

Classified firefighters can also enter DROP, as can classified police employees sworn in before Oct. 9, 2004. Each of those have their own rules, so check with your pension board for details.

Davis retired after just two years in the program. Nevertheless, she’s seen the benefits. It helped her bridge the financial gap until social security payments kicked in this October.

“It’s a wonderful program,” said Davis, who was administrative supervisor over payroll for Health & Human Services when she retired. Since, she’s worked in the same division part-time, helping employees file their retirement papers. “I recommend it. I wish I had been in it longer, because it’s a great benefit.”

Changing pension
Changes to the municipal pension plan Jan. 1, 2005, raised the magical retirement eligibility number from 70 to 75 and required employees to contribute 1 percent more of their paycheck to the plan while slowing the accrual rate.

Those changes helped secure the pension’s future and corrected a 2001 plan change by partially shoring up the amount in the pension fund and decreasing how much the fund would have to pay out.

The municipal pension plan is changing again under a deal reached between Mayor Bill White and HMEPS in June. Municipal employees who start after Dec. 31, 2007, will not contribute to the pension and will receive smaller benefits provided entirely by city contributions. (See box.)

“What we have now is very good, and it’s secure,” Mason said. The city’s and the pension system’s projections show HMEPS will be able to pay out what it will owe employees.

HMEPS’ spokeswoman declined to comment for this story.

Group D employees will still have the option of contributing to the 457 plan.

Sherry Mose, a member of HMEPS’ board of directors and the city’s deferred compensation plan administrator, said the new plan gives future employees more control over their retirement planning by allowing them to decide how much, if any, they want to contribute to a retirement savings account, such as the 457 plan. It also offers them the chance to invest aggressively and possibly make more money than they would through the pension.

“We’re hoping those employees will say, ‘Yea, I don’t have to contribute to the pension, so I can put that money into the deferred compensation plan!’” she said.

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