Dallas Police & Fire Pension System filed a lawsuit against Buck Consultants, its longtime actuary and adviser, claiming the firm failed to provide proper counsel as the pension fund lost substantial sums of money due to a flawed DROP program.
The $2.1 billion pension fund faulted Buck for issues stemming from the pension fund's deferred retirement option plan, which it adopted in 1993 after consultation with Buck. The program allowed members to contribute retirement funds while remaining on active duty, with a guaranteed rate of return of no less than 8%.
"This would prove a fateful decision, but Buck gave no indication of the danger DROP would one day pose to the fund at the time it was adopted or for many years thereafter," claims the lawsuit, which was filed Oct. 30 in Texas Civil District Court in Dallas.
The pension fund names Buck Consultants and a related entity, Buck Global, along with three Buck actuaries — Richard A. Mackesey, David B. Kent and David L. Driscoll — in the suit.
"As a matter of policy, we do not comment on pending litigation," said Roderick Bernstein, Buck's general counsel, in a message via LinkedIn.
The pension fund alleges that the popularity of DROP, combined with its high guaranteed rate of return, led to an unsustainable increase in the plan's unfunded actuarial liability, which it claims increased by more than $2.8 billion from 1994 to 2016.
"Buck's actions caused the fund to suffer significant losses and write-downs," the lawsuit said.
In 2017, the pension fund reached an agreement with city officials, state lawmakers and others to implement measures that would help pull it back from the brink of insolvency.
The pension fund is seeking to recover losses caused by Buck's alleged breaches of contract as well as the firm's and the three actuaries' negligence, negligent misrepresentation and professional malpractice, according to the lawsuit.
Messrs. Mackesey, Kent and Driscoll did not respond to emails seeking comment.