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Old 12-09-2016, 08:43 AM
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DALLAS


The Dallas Police and Fire Pension System's Board of Trustees suspended lump-sum withdrawals from the pension fund Thursday, staving off a possible restraining order and stopping $154 million in withdrawal requests.

The system was set to pay out the weekly requests Friday. Pension officials said allowing the withdrawals would leave them without the liquid reserves required to sustain $2.1 billion fund.

"Our situation is currently critical, and we took action," Board chairman Sam Friar said.


Rawlings on Thursday afternoon told a crowd gathered at a Dallas Regional Chamber that "the bleeding has stopped. We can turn this ship around."

The crowd responded with cheers after the mayor's announcement of the board's decision.

At the pension board meeting, the mood was more somber.

Council member Scott Griggs said he couldn't let the $154 million "go out the door" on Friday.

His council colleague, Philip Kingston, a board trustee, said the mayor "unquestionably" forced the pension board's hand. He said Thursday was "the worst day I've had in public office."

"Unfortunately, financially, this had to happen," he said.

The fund has about $729 million in liquid assets. It needs to keep about $600 million on hand, meaning the restrictions could have been coming at some point even without the mayor's actions. The withdrawal requests this week alone would have meant the fund would dip below that level.

One retired police sergeant, Pete Bailey, suggested a lawsuit could be in the offing if the system didn't pay out the requests that were made Tuesday. Friar understood that they might deal with more litigation.

"We may just have to deal with that, but that's what the board decides," Friar said. "We acted in the best interest of the pension fund today."

Retired Dallas police officer Jerry Rhodes, a pension meeting fixture, said he believed the board did what it had to do. Then he sarcastically lauded Rawlings.

"Merry Christmas, mayor," he said. "Hopefully you have a good Christmas because you have successfully screwed over the retirees, the firefighters and the police officers."


In performing these ministerial duties, the Board has a duty to ensure that programs, such as the Pension System’s optional Deferred Retirement Option Plan (“DROP”), which is not a constitutionally protected benefit (or “benefit” at all), do not impair or reduce the Pension System’s core constitutionally protected benefits, e.g., service retirement benefits. The Board is willfully failing to perform these ministerial duties.

The Pension System, which the Board oversees, is in the midst of a financial crisis. In early 2016, the Board was warned by its own actuary that absent radical change,the Pension System would become insolvent within 15 years—irrevocably eradicating the constitutionally protected service retirement benefits (and other constitutionally protected benefits) of police and firefighter personnel of the City and their beneficiaries.

Critically, this 15-year projection of insolvency was based upon two overly optimistic assumptions that the Board has now known to be incorrect for several months. First, the actuary assumed that the Pension System’s $2.7 billion in assets would remain stable, even though approximately 56% of these assets were composed of optional DROP funds, which have historically been permitted to be withdrawn in lump-sums upon demand (even though this option was used infrequently before this year). Second, the actuary assumed that the Pension System would achieve its targeted 7.25% return or more on its investments for the next 15 years.

Publication of this looming insolvency scenario prompted some DROP Participants to withdraw their DROP funds in lump-sum, which created a “snowball”effect, leading a staggering number of other DROP Participants to withdraw nearly $500 million in optional lump-sum DROP funds from the Pension System from August 13, 2016 to present. Over $80 million of these lump-sum DROP withdrawals have occurred within the first two weeks of November 2016 alone. Over this three-month time period, the Board has knowingly allowed DROP funds to continue to be withdrawn at record levels even though it is aware that doing so is irreparably harming the Pension System’s solvency and liquidity.

Lump-sum DROP withdrawals for 2016 are now on pace to be over 15 times higher than their historical average. This mass exodus of DROP funds amounts to a “run on the bank” and is exacerbating the financial peril of the Pension System as a whole.
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Old 12-09-2016, 12:33 PM
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may want to take a look at Campbell's 2016 public pension thread. all kinds of gems in there.
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Old 12-09-2016, 01:56 PM
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I didn't know what it was called.
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Old 01-02-2017, 08:42 AM
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here's the thread for 2016:
http://www.actuarialoutpost.com/actu...d.php?t=303664


and thread for 2017:
http://www.actuarialoutpost.com/actu...d.php?t=317715
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