The Texas Legislature passed a pension reform bill for the $2.1 billion Dallas Police & Fire Pension System.
The measure passed the House 142-0 on May 25, two days after it passed the Senate.
Among the bill's provisions are an increase in the retirement age to 58 from 55 (or 50 for those hired before March 1, 2011), a reduction in DROP benefits and the elimination of cost-of-living adjustments unless certain financial benchmarks are reached.
The pension fund was roughly 36% funded at the end of 2016. The bill is expected to bring the pension fund to full funding in 46 years.
Under the deferred retirement option plan changes, active workers eligible for retirement can participate in DROP for up to 10 years, and retirees cannot continue to defer payments. Previously, the participation period was unlimited. DROP payments will also be paid out as annuities upon retirement rather than lump sums, and the interest paid will be based on a Treasury-based rate determined by the pension fund board, opposed a guaranteed interest rate, currently 6%, and once as high as 10%.
The bill also raises employees' payroll contributions to 13.5% from 8.5% (or 4% for active workers eligible for retirement and enrolled in the deferred retirement option plan) and raises the city's contribution to 34.5% of pay annually, from 27.5% of total pay, plus $13 million per year until 2024 when an actuarial analysis will be conducted to ensure funding is sufficient to meet the guidelines set by the Texas Pension Review Board.
Additionally, the number of pension fund board trustees would be reduced to 11 from 12 and would include six trustees appointed by the mayor in consultation with the City Council. Previously, eight of the 12 trustees were pension fund participants and four were City Council members.
The pension fund board could also decide under the bill to take back interest earned by DROP participants. Two-thirds of the pension fund board would have to approve the clawback.
The bill was a compromise from an earlier version passed by the House on May 4. The previous version set the city's contribution at 34.5% of payroll annually plus $11 million annually and the number of mayor-appointed trustees at five, among a few other differences.