Four Dallas City Council members joined Dallas Mayor Mike Rawlings' lawsuit against the Dallas Police & Fire Pension System's board of trustees.
In a filing Wednesday in Dallas County District Court, the council members, who are also four of the 12 trustees of the $2.1 billion pension fund board, argued that the new DROP withdrawal policy unveiled on Jan. 12 “further endangers the service retirement, disability and death benefits by encouraging (the pension fund) to sell assets in order to pay DROP withdrawal requests, beginning at the end of March 2017.” The lawsuit calls for DROP payments be suspended until they are deemed actuarially sound and would not reduce or impair members' constitutionally protected benefits.
The council members also requested that a court appoint “a disinterested and expert receiver” to temporarily take charge of some of the pension fund's assets.
To protect its liquidity after a record $523 million in withdrawals from its deferred retirement option plan between early August and December, the pension fund board voted Dec. 8 to temporarily suspend DROP withdrawals. On Dec. 29, the fund board lifted the suspension on monthly withdrawals, but not lump-sum withdrawals, and on Jan. 12 unveiled a new withdrawal policy for those with outstanding DROP balances.
Under the new policy, retirees can withdraw up to $3,000 from their DROP accounts monthly, starting March 31. In any month, additional DROP funds may be distributed if the board determines that excess funds are available beyond what is required to meet its monthly benefit payments and other obligations.
Additionally, for those with outstanding lump-sum DROP requests as of Jan. 12, the new policy calls for $6.6 million total to be distributed on a pro-rata basis based on their requested amounts.
Pointing to a line in the new DROP policy that calls for the pension fund to work with its investment consultant NEPC to sell assets if necessary to satisfy DROP requests, the council members' filing adds: “Rather than comply with its fiduciary duty, the board and system participants trustees have instead adopted a completely wrongheaded approach to the current crisis that involves the anticipated sale of significant income-producing assets in order to fund large withdrawals of DROP benefits in the short term. Such payments must be stopped because they are constitutionally unprotected and must be subordinated to the protection of the monthly pensions that are constitutionally protected.”
The pension fund issued the following statement from board chairman Sam Friar: “Here they go again. Rather than work collaboratively with state legislators and the pension board to find a long-term solution based on the shared sacrifice, the mayor and city officials continue to push a confrontational litigation strategy to get their way.”
The pension fund board meets on Thursday.