Board Shuts Down Enrollment in Lucrative Pension Plan for Dallas Cops, Firefighters
The DROP -- Deferred Retirement Option Plan -- program available to Dallas police and firefighters is a really good deal. When participants become vested in their pensions after 20 years of working for the city, they can elect to receive their pensions and continue working. The payments are placed into a DROP account that's guaranteed to receive 8 to 10 percent interest. Once they finally quit work, the pensioners collect. The program was created in 1993, ostensibly to give longtime officers who might otherwise leave the department a reason to stick around.
It's made millionaires out of many retirees -- 283, according to The Dallas Morning News -- but that wealth has come at a high cost to the city. With the massive losses the police and firefighters' suffered after the housing bubble burst in 2008, the plan became unsustainable. Wednesday, with a plan to lower DROP interest rates tied up in court, the pension plan's board elected to shut down new DROP enrollments indefinitely.
"{DROP costs} more than $300 million a year in accrued liability to pensioners in the DROP program. There's approximately $1.3 billion in the DROP plan against a total system size of $3.4 billion," says City Council member Philip Kingston, who sits on the pension's board. "This DROP program, until we're able to pay it down through attrition or are given some kind of relief by the courts or Legislature, it is going to absolutely hamstring our ability to hire."
Last year, Kingston and the rest of the board created a plan to lower interest rates gradually using a sliding scale. Pensioners sued and state District Judge Tonya Parker ruled against the rate changes, saying they violated the Texas Constitution. The pension board appealed the decision, but a final ruling in the case could take years.
Read more: http://blogs.dallasobserver.com/unfairpark/2015/01/board_shuts_down_enrollment_in_lucrative_pension_plan_for_cops_firefighters.php
