Dallas Police and Fire Pension System trustees Monday refused to impose new restrictions on withdrawals, even as fear grows among members over the fund's financial problems.
"They continued to tell us everything was sound and it wasn't," said Retired Police Lt. David Payne.
With a room full of worried employees and retirees waiting for the announcement, trustees spent nearly four hours behind closed doors with lawyers discussing possible limits to reduce the flow of money out of the system. They released a statement instead encouraging members to be patient.
"As more people withdraw funds from the System, our long term solvency will become much more challenging," the statement said.
A major issue for the Police and Fire Pension System is a very generous Deferred Retirement Option Program or "DROP." It was intended to encourage veteran police officers and firefighters to stay with the city longer. The program allows employees to continue working after their normal retirement date and transfer pension payments to the DROP account where they receive a guaranteed rate of return, tax deferred. Effective Oct. 1, the rate drops from 7 percent to 6 percent. It was 8 percent prior to Oct. 1.
The Pension Fund statement Monday said approximately $220 million in DROP payments have been distributed since Aug. 11 and another $82 million have been requested since Sept. 21.
"People are in fear, and they could be jeopardized, if the pension system will need to spend that money and they won't have the cash on hand," Payne said.
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DROP money was mixed with other pension funds in risky real estate investments that turned out to return far less than past fund administrators hoped.
"A lot of bad real estate investments were made 10, 12 years ago, and that's what we're feeling now," said Dan Wojcik, a former pension fund trustee. The former police sergeant recently retired, himself, and intends to withdraw his DROP money soon. But Wojcik said the fund can still be saved with better management.
"It's going to take approximately 10 years to turn this ship around. But they've got to be patient. I believe this board is being too drastic in their approach, in their strategies. They need to slow things down a little bit. They created this panic," Wojcik said.
A restriction was recently imposed on previously allowed DROP transfers to the city's 401(k) plan.
Police Chief David Brown and Dallas Police Association President Ron Pinkston have both announced they will retire from the force in October.
Over the past year, the fund was reported to have around $3 billion in liabilities and only $2 billion in assets with a possible crisis coming by 2030.
But last week, Councilman Scott Griggs, also a pension board member, said the fund may be as much as $5 billion in the hole.
"We retirees were quite appalled to see that number," Payne said. "You don't know who to believe any more. They tell us one number here and then you read another number in the newspaper from city hall. And that's why everybody wants to know what the game rules are."
Chairman Sam Friar said the Police and Fire Pension Board is committed to doing everything in its power to solve the problems.
"We will soon be voting on the proposed changes to our plan that include significant sacrifices for our current members as well as our retirees. These changes are not something we necessarily want to do. This is something that we have to do," Friar said.
It's not just about employees and their retirement money. Dallas taxpayers could be on the hook to solve the problem, too. One proposal would infuse $650 million from the city into the Police and Fire Pension fund. City Hall does not have that kind of spare change and a source for the money has not been identified.
