Dallas pension system suspends access to some cash amid run of withdrawals
Thursday the Dallas Police and Fire Pension system voted to halt all withdrawals and payments from its deferred retirement program, as a series of mass withdrawals has drained more than $500 million from the fund since August.
The vote stopped more than $154 million in requested withdrawals from being distributed Friday. Pension officials said the withdrawals would drop reserves below the level needed to keep the fund afloat.
Dallas Mayor Mike Rawlings filed a lawsuit Monday to stop the lump-sum withdrawals, which he said sped up the projected insolvency of the ailing fund to about 10 years.
Both the city and pension system proposed plans to lower benefits to stabilize the fund. System officials said they were working to convert illiquid assets to liquid assets to resume monthly payments in January.
“Because [deferred retirement] participants do not have any right to a lump-sum withdrawal of [deferred retirement] funds, this method of payment may only be used when the pension system is solvent, liquid, and actuarially sound,” the mayor’s lawsuit contends.
“It’s like watching your kids fight, and one is going to ask Mom and one is going to ask Dad. And you’re sitting there watching them make a mess of things,” Dallas Police Association President Frederick Frazier told Fox 4. “But the problem with this is people’s lives are at risk.”
The fund was undermined in recent years by overvalued investments and risky real estate deals, as well as the generous benefits for its deferred retirement program.
Rawlings issued a statement through a spokeswoman Monday. “As a 40-year resident and taxpayer of the City of Dallas, I have chosen to personally file suit in District Court not only to protect the retirement benefits of all our police and fire personnel, but also to protect the pocketbooks of all my fellow citizens and taxpayers. I am funding this suit, and at no time will any taxpayer dollars be expended in this effort,” he wrote.
The pension board’s president, Sam Friar, said in a letter to beneficiaries last week that the board did not believe it could restrict access to the deferred retirement funds under the Texas Constitution.
The city and the pension board have been at odds over how to fix the fund’s financial problems. City officials have noted that dozens of the retirees withdrawing their funds were retiring with as much as $1 million apiece because of hefty benefit changes to the deferred retirement program voted in by members over the past two decades.
Pension officials have said the city has failed to make a financial commitment to keeping the fund solvent. They have presented options to the city for increasing its financial contribution by as much as $1.1 billion.
“It is becoming painfully clear that the mayor’s reckless endgame is to bankrupt the retirement plans of first responders in hopes the state will seize control of the pension system so Dallas City Hall can rid itself of this crisis,” Dallas Police Association President wrote on Monday.
A state District Court judge cleared the way last week for beneficiaries of the plan to resume voting on proposed benefit changes as part of a fix. In order for those to pass, 65 percent of the membership must approve them. The lawsuit, which will go to trial in March, seeks to invalidate the pension board’s actions on the grounds that it has more members than is allowed under state law.
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