Thursday afternoon, the Dallas Police and Fire Pension System voted to allow members of the fund's controversial Deferred Retirement Option Program to make limited, monthly withdrawals from their accounts. Thus ended a moratorium on withdrawals that began earlier this month.
Members with DROP accounts will still not be allowed to make lump sum or incremental withdrawals from their accounts.
The DROP program is at the heart of the pension crisis that currently threatens more than just the retirement funds of Dallas uniform personnel. The solvency of the city as a whole is also at stake.
The program worked like this: Police officers and firefighters who served the 20 years necessary to get their full pensions were allowed to retire on paper, but continue to work and draw a salary. Their pension payments were placed into their DROP accounts, which were guaranteed by the fund to accrue between 8 and 10 percent interest. It's a good deal for retirees, but it's not sustainable. Current estimates put the fund's unfunded liability at somewhere between $3 and $4 billion.
DROP participants lost faith as the depth of the DPFP system's crisis became clear. They took $500 million out of their accounts out of fear that the overall system would fail.
The city has singled out DROP as something that needs to be handled in order to protect the city's financial health. Earlier this month, Dallas Mayor Mike Rawlings sued the pension fund in his capacity as a Dallas resident in hopes that a judge would stop DROP withdrawals. Before Judge Tonya Parker could rule on Rawlings' request, the pension board voted to stop all withdrawals, including monthly DROP payments to many retirees who had withdrawn for years.
Now, those payments will begin to flow again.
Michael Gruber, Rawlings attorney, argued that DROP payments threatened to bankrupt the pension system in 15 years. "There is a right that cannot be violated and it's the right to maintain the pension for all of these people who've worked all these years and have seen what should be a 40-year pension, that's a sound pension, down to 15 years," Gruber said. "They had 15 years of benefits left and what's happened, by paying out these discretionary DROP payments, that's gone to 10 years in 90 days."
At Thursday's board meeting, board members said that number could be closer to 10 years, if members were again allowed to make unfettered withdrawals.
Wednesday night, Rawlings publicly addressed pensioners and DROP participants in a YouTube video. "You did not create this mess and you should not be blamed for it," Rawlings said. "That is why I am genuinely, truly sorry for how you as individuals are being portrayed. Our goal now is to save this pension fund, not only for you, but for our younger officers."
Rawlings has pushed a plan that would claw back interest gained by DROP accounts by limiting and reducing future payments.
The board plans to address DROP withdrawals again at its meeting next month.
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