DALLAS – In the most recent development in the ongoing saga of the Dallas Police and Fire Pension System (DPFP), city officials have proposed a controversial plan that would not save the current system at all.
Instead, Chief Financial Officer Elizabeth Reich suggested to city council that it create a new system, the Public Safety Employees Retirement Fund. This option would see new employees, and current ones who opt to transfer over, receiving a traditional pension on top of a 401(k) plan.
Those employees who transfer would receive benefits at a lower rate, but would no longer be a part of the failing current system. It’s unclear what would happen to the 3,000 current members of the existing pension once the fund runs dry, as is expected to happen by 2027.
The troubles for the DPFP began in 2013 when media reports brought to light that some of the properties in which the fund had invested had not been appraised for some time, and instead their values were being determined primarily by their purchase prices.
Over the next few years, the fund took a major hit. In January 2011, the fund’s assets could cover 72 percent of its liabilities, but by January 2016 that figure had dropped to only 45 percent.
Alan Liebel, an attorney who specializes in private-sector pension funds, explained what he sees as one of the main causes.
“They didn’t diversify the portfolio as you normally would do in almost all private pensions. They can invest in major products that have good rates of return, but they also have higher rates of risk,” he told the Southeast Texas Record.
Liebel also believes that the city expected unreasonably high rates of return.
“I had a conversation back in the early 2000s with one of the city councilmen… where I told him I thought their rate of return expectation was too high… and that’s what’s got most governmental pension plans in problems, is the anticipation that they have the high rate of return. If they meet expectations that’s great, but if you lower your expected rate of return then they have to fund more money in order to fund the pension,” he said. “When, over the last decade interest rates are low, rates of return are not that high.”
In an attempt to dig into exactly what happened, Dallas Mayor Mike Rawlings has called for a criminal investigation into the fund’s administration.
In his announcement, which came in late December, Rawlings did not provide any specifics regarding what offenses he believes may have occurred or who he believes committed them.
“As I have learned more in recent years and months about how the [fund] reached its current crisis, I have come to believe the conduct in question may rise to the level of criminal offenses,” he said in a statement.
Rawlings said that he’d been working with the FBI, and the Texas Department of Public Safety has confirmed that the Texas Rangers will be conducting an investigation.
It is so far unclear which former officials will be considered as part of the lawsuit, though some speculation has surrounded former system administrator Richard Tettamant, who resigned in 2014 in response to the board’s request.
The pension board had previously voted to stop allowing pensioners to make lump sum withdrawals, and stopped making monthly pension payments, but in late December, the board voted to reinstate the payments. It has, however, maintained its moratorium on lump sum payments.
Pensioners are getting frustrated with their inability to access their own money, saying it feels like their money is being held hostage. When asked if we should expect to see litigation by the pensioners if the city doesn’t soon come to an acceptable solution, Liebel said not to rule it out.
“I think that would be a reasonable expectation,” he said. “I think [the pensioners] understand they may have to give somewhat and modify it. But if the city thinks they can just… reduce it without making some adjustments on the city’s end, litigation could certainly be a possibility.”