The system was set to pay out the weekly requests Friday. Pension officials said allowing the withdrawals would leave them without the liquid reserves required to sustain the $2.1 billion fund.
“Our situation is currently critical, and we took action,” board chairman Sam Friar said.
Pension officials and many police and firefighters have blamed Dallas Mayor Mike Rawlings for forcing the latest run on the bank. Dozens of retirees rushed to request withdrawals after Rawlings filed a lawsuit Monday to stop the withdrawals.
By then, more than $500 million had already gushed from the fund since the board proposed benefit cuts in August.
Council member Philip Kingston, a board trustee, said the mayor “unquestionably” forced the pension board’s hand. He said Thursday was “the worst day I’ve had in public office.”
“Unfortunately, financially, this had to happen,” he said.
Kingston said the tough decision will be worth it if it means the pension, which is hurtling toward insolvency within the next decade or so, can be saved.
On Wednesday, the city officially unveiled its plan to save the fund. The biggest target was the lump-sum program officially called the Deferred Retirement Option Plan, or DROP.
For years, DROP guaranteed at least 8 percent interest on the money. That hurt the entire fund when the investment returns couldn’t keep up. The problem was made worse when the pension’s current administration revealed that their predecessors had significantly overvalued risky real estate investments.
The city proposal would wipe away the DROP interest over the years wiping it away from existing DROP accounts or adjusting future monthly benefits for those who already took their money out.
Kingston had declined to comment on the plan Wednesday. But on Thursday, he called the city’s plan “Draconian.” But so is the pension system’s request for a $1.1 billion taxpayer bailout, he said.
Both taxpayers and police and firefighters will have to share in the pain, he said.
But as the discussions about a fix continued, the pace of DROP withdrawals threatened to weaken the fund even further. While the money going out reduced future liabilities, the pace could have forced the system to sell off its assets.”
Public pensions facing day of reckoning?
– OC Register
“The California Supreme Court has agreed to hear a Northern California “pension spiking” case that has major implications for pension financing and reform efforts throughout the state, setting up a showdown over whether pensions may be reduced for existing government employees.
After the state passed the Public Employees’ Pension Reform Act of 2013, Marin County took advantage of one of the law’s provisions to exclude certain compensation enhancements — including in-kind benefits converted to cash, like cash payments for waiving health care, and payments for “additional services rendered outside of normal working hours,” such as standby pay, administrative response pay and call-back pay — from base pay for the purpose of calculating pensions. Public employees objected and sued.
In August, a three-judge panel of the 1st District Court of Appeal in San Francisco unanimously sided with the county. “While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating a pension,” Justice James A. Richman wrote for the court.”
….Continue reading @ OC Register