In Unprecedented Move, Dallas Pension System Suspends Withdrawals

Tyler Durden's picture

Two days after the Mayor of Dallas, Mike Rawlings, filed a lawsuit against the Dallas Police and Fire Pension system to block withdrawals, which he referred to as a "run on the bank" of an "insolvent" pension system in "financial crisis, the Pension's board has finally taken steps to halt further withdrawals.  Of course, this delayed action has come only after $500 million in deposits have been withdrawn since just August. 

According to the Dallas Daily News, an incremental $154mm in withdrawal requests were pending at the time the decision was made earlier today.

The Dallas Police and Fire Pension System's Board of Trustees suspended lump-sum withdrawals from the pension fund Thursday, staving off a possible restraining order and stopping $154 million in withdrawal requests.

 

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 $2.1 billion fund.

 

"Our situation is currently critical, and we took action," Board chairman Sam Friar said.

Rawlings

While Dallas citizens cheered the decision, even opponents of the Mayor's admitted that the redemptions had to be halted if the city had any chance of saving the pension system from insolvency.

Rawlings on Thursday afternoon told a crowd gathered at a Dallas Regional Chamber that "the bleeding has stopped. We can turn this ship around."

 

The crowd responded with cheers after the mayor's announcement of the board's decision.

 

At the pension board meeting, the mood was more somber.

 

Council member Scott Griggs said he couldn't let the $154 million "go out the door" on Friday.

 

His council colleague, 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.

 

The fund has about $729 million in liquid assets. It needs to keep about $600 million on hand, meaning the restrictions could have been coming at some point even without the mayor's actions. The withdrawal requests this week alone would have meant the fund would dip below that level.

Rawlings

Of course, not everyone was happy with the decision as at least one retired police officer threatened a lawsuit to force the fund to honor redemption requests while another declared that Mayor Rawlings had "successfully screwed over the retirees, the firefighters and the police officers."

One retired police sergeant, Pete Bailey, suggested a lawsuit could be in the offing if the system didn't pay out the requests that were made Tuesday. Friar understood that they might deal with more litigation.

 

"We may just have to deal with that, but that's what the board decides," Friar said. "We acted in the best interest of the pension fund today."

 

Retired Dallas police officer Jerry Rhodes, a pension meeting fixture, said he believed the board did what it had to do. Then he sarcastically lauded Rawlings.

 

"Merry Christmas, mayor," he said. "Hopefully you have a good Christmas because you have successfully screwed over the retirees, the firefighters and the police officers."

Perhaps future ponzi schemes pension systems will take note of Dallas' current situation prior to guaranteeing 8% returns on retirees' pension balances.  Who could have ever guessed that a decision like that could have backfired so badly?

 

* * *

For those who missed it, here is what we recently posted after Mayor Rawlings sued to halt pension withdrawals.

Last week, Dallas Mayor Michael Rawlings sent a scathing letter to the Dallas Police and Fire Pension (DPFP) Board demanded that withdrawals be halted immediately until the "solvency and actuarial soundness of the Pension System is restored."  That said, the Mayor's request was seemingly ignored as he has now filed a lawsuit with the Dallas District Court to force the pension board to halt withdrawals amid a "run on the bank."

Within the suit, Rawlings notes that $500 million in lump-sum withdrawals have been made from the DPFP since August 2016 with $80 million of that amount being withdrawn in the first 2 weeks of November alone.  The suit continues on to allege that "this mass exodus of DROP funds amounts to a “run on the bank” and is exacerbating the financial peril of the Pension System as a whole."

In performing these ministerial duties, the Board has a duty to ensure that programs, such as the Pension System’s optional Deferred Retirement Option Plan (“DROP”), which is not a constitutionally protected benefit (or “benefit” at all), do not impair or reduce the Pension System’s core constitutionally protected benefits, e.g., service retirement benefits. The Board is willfully failing to perform these ministerial duties.

 

The Pension System, which the Board oversees, is in the midst of a financial crisis. In early 2016, the Board was warned by its own actuary that absent radical change,the Pension System would become insolvent within 15 years—irrevocably eradicating the constitutionally protected service retirement benefits (and other constitutionally protected benefits) of police and firefighter personnel of the City and their beneficiaries.

 

Critically, this 15-year projection of insolvency was based upon two overly optimistic assumptions that the Board has now known to be incorrect for several months. First, the actuary assumed that the Pension System’s $2.7 billion in assets would remain stable, even though approximately 56% of these assets were composed of optional DROP funds, which have historically been permitted to be withdrawn in lump-sums upon demand (even though this option was used infrequently before this year). Second, the actuary assumed that the Pension System would achieve its targeted 7.25% return or more on itsinvestments for the next 15 years.

 

Publication of this looming insolvency scenario prompted some DROP Participants to withdraw their DROP funds in lump-sum, which created a “snowball”effect, leading a staggering number of other DROP Participants to withdraw nearly $500 million in optional lump-sum DROP funds from the Pension System from August 13, 2016 to present. Over $80 million of these lump-sum DROP withdrawals have occurred within the first two weeks of November 2016 alone. Over this three-month time period, the Board has knowingly allowed DROP funds to continue to be withdrawn at record levels even though it is aware that doing so is irreparably harming the Pension System’s solvency and liquidity.

 

Lump-sum DROP withdrawals for 2016 are now on pace to be over 15 times higher than their historical average. This mass exodus of DROP funds amounts to a “run on the bank” and is exacerbating the financial peril of the Pension System as a whole.

 

The DPFP contreversy comes as hundreds of police and firefighters have poured millions into "DROP" accounts in which they were guaranteed exorbitant returns of 8% while the pension board has proposed a $1 billion bailout from the city of Dallas. 

The city estimates that, as of November, 517 police and firefighters have DROP accounts containing more than $1 million. One, belonging to an unnamed first responder, has $4.3 million in it, city figures show. On average, the city estimates that the average DROP account contains nearly $600,000.

 

The controversy all comes at a time when the board has asked the cash-strapped city for a bailout over $1 billion. The board's position is that they legally can't stop the withdrawals, but the mayor disagrees.

Of course, this all begs the question of whether the Dallas Police and Fire Pension will be the first pension ponzi to burst?

Here is the full lawsuit filed by Dallas Mayor Michael Rawlings:

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bwh1214's picture

Dallas pension isn't all that's going to fail. This video series is what we should have learned in high school about our flawed system.

http://www.themonetaryreset.com/search/label/How%20We%20Got%20Here?m=1

eatthebanksters's picture

Does anyone remember the name 'Meredtih Whitney'?

pliny the longer's picture

meredith whitney?  fuk that nigga

auricle's picture

Next thing you know, they'll be going bankrupt and won't be paying out anybody. If I were a retiree I'd get on the hard shit and party my ass off and hope I go before my pension goes. 

Life of Illusion's picture

 

City board approved all these pension increases need to get fired.

sell off assets and fire staff

  

P LAINTIFF S  O RIGINAL P ETITION   P AGE  53 c. At the current rate of withdrawal, the Pension System will be depleted of allcash reserves and liquid assets by as early as February 10, 2017, which wouldforce it to then begin to sell its remaining illiquid assets at distressed prices inorder to make monthly—constitutionally protected—pension payments to itsPensioners.d. In doing so, the Board is depleting the Pension System of all of its cash andliquidating its hard assets for the benefit of a select few, at the expense of constitutionally protected benefits for all.e. If a fund is depleting all of its cash, turning all of its liquid assets into cash,and liquidating its hard assets for the benefit of a few, the fund is not beingmanaged according to sound actuarial principles.f. As such, the Board has failed to manage the Pension System according toactuarially sound principles.163. Separately, the Board has committed a clear abuse of discretion in theexercise of its aforementioned ministerial duties.
Whoa Dammit's picture

I know I'd be really pised off if I didn't get my pension. Oh wait...I don't have one.

Sucks to be a city worker who has to now live like the rest of us.

NoDebt's picture

If you're a Dallas cop who didn't get his money out of that fund by now, so sorry.  You lose.  Money's gone, sucker.

To the one "first responder" who got his $4.3MM lump sump payout before they slammed the gates shut, congratulations.  You win.  Though I wouldn't be expecting an invitation to the Dallas FOP Christas Party this year.  You might want to move to another state under a different name.

 

El Oregonian's picture

Hmmm, now who's going to put out this pension fire?... Taxpayers! uh, there are no viable "Taxpayers" left...

Luc X. Ifer's picture

" ... and when there will be nothing to steal anymore - they will come after your retirement money." Looks like very few people on 0hedge ever listened to George Carlin

stacking12321's picture

why is the mayor being blamed for responding to the shitty mess set up by his predecessors?

i don't like mayors, nor cops, but blame should go to where it belongs, those that initiated and perpetuated the ponzi scheme.

this scene will be replaying a lot all over the ussa, in theaters near you.

AVmaster's picture
"AVmaster  Mr Pink Dec 8, 2016 10:25 AM

Unions are as obsolete as the horse and buggy and should be abolished, especially government service ones(police/firefighter), they create nice little ponzi schemes in their fancy little retirement funds that will never be able to be paid from the leeches' host... Doomed to fail anyways..."

Haus-Targaryen's picture

I wish the Pension had actually failed.  Too damn bad they cut off redemptions.  It would have been good to see one of these go bust. 

Evan Wilson's picture

In effect the plan HAS failed. They do NOT have enough to meet future liabilties, and can't let people out of the plan or else they would have nothing in the plan.

I expect there will have to be some sort of 'adjusment' where balances are 'recalulated' (can anyone say bail in?) and/or the rate of return reduced.

FringeImaginigs's picture

And those remaining in the plan have significant complaints against the Board and against those who did get their redemptions. There must be a legal action against the Board for failure of fiduciary duty. And there must be an action against those who got out first. The only question is which law firm is going to file first and get a class action started. The terms of the plan will be adjusted to reality.

ErostheDog's picture

I was in local and state government for many years and was a member of a union for only a year when I first started. This was because I was lucky enough to work for agencies that had fair leadership and executives, e.g. county and state leaders, that were competent and fair. If I worked in Dallas, however, I would have been in the union. Looking at how this s*** show is unfolding, it is clear the leaders there are incompetent and untrustworthy. They will be lucky to not be tarred and feathered. 

Evan Wilson's picture

The mayor is being blamed because he did not even try to do anything to prevent what is happening, until there was a 'run on the plan'. He would have been just fine letting the problem get larger, until he left office and then pass it onto the next administration.

ejmoosa's picture

"Rawlings decided in early 2011 to run for Dallas mayor on a platform that highlighted southern Dallas as the city's greatest untapped resource. Following his June 2011 election, he launched GrowSouth, his signature initiative to spur economic development south of the Trinity River."

 

He's been there for a while.  How long should he have before he addresses an issue?

Yog Soggoth's picture

Comes with the job? Seriously though, if a city had a 10 mill pension plan and a board of people did some unwise things with the money invested, it really boils down to ["were the board members elected by the majority of the pensioneers?"]. If someone who had a pension that had paid into it and did not agree with any of the board members or their decision making, then it would be his obligation to collect, if within timeframe to do so, or stop paying. I had a friend that worked at 5 different airports. After 5 years able to collect, so he did it every job change thus taking less risk in one particular scheme.

PT's picture

Yeah, that's right you oldies.  No way can we afford to let you retire.  Now go back to work.  You have to keep working so you can pay enuff taxes to pay for all the young, unemployed people on the dole.

Signed

PTthefuckwit.

greenskeeper carl's picture

I know a few guys who are in a DROP thing with the sheriffs office in FL. It's nuts. They apparently get to draw retirement pensions while still working for the department. It's nuts. They 'retire' and have their pensions put into this drop account while they are still working. This goes on for several years, then they actually retire with several hundred thousand in their accounts, plus draw their pension of course. I'll let you guess how I voted during the proposed property and sales tax increase during the last election .... It's fucking nuts. This county is in pretty good shape as far as I can tell, but it depends a lot on tourism and high property values. As soon as those tank, and snowbirds have their second homes foreclosed on, those finances go to shit, along with these ridiculous pensions.

Déjà view's picture

Dallas has competition in Tejas...

Billions in pension shortfalls threatening Texas cities' budgets

A recent report identified Dallas and Houston as having among the highest pension shortfalls among local governments in the country

https://www.texastribune.org/2016/12/02/billions-pension-shortfalls-thre...

What has neoCON controlled Tejas Bond Review Board been doing all these years?

techpriest's picture

They were probably too busy kissing up to the billionaires living in The Crescent.

tmosley's picture

Sic ego semper elit urbes imperium.

Turns out there is no word in Latin for "freeloaders". No wonder they collapsed.

Freddie's picture

Dallas is  a sanctuary city. Let them eat cake.  The givt should take all of that oension money to help out little dreamers, other undocumented workers, MS 13 gang members trying to get their lives together and islamics who need more msoques in Tejas.

F Texans anyway.  Domb white Texans worship their Trayvon pro, college and high school ball playin thugs and rapists.

OregonGrown's picture

F THE POLICE and their union pensions!  

When you (unions) and your minions resort to thievery / bribery / thuggery making the "average everyday american" an "average everyday criminal"  ONLY to justify you AND your union "brother's" 6 figure salaries as well as early retirement / being taken care of for the rest of your life.... WHILE CREATING NOTHING in GDP, suckling off the titty of the american taxpayers..... the same people your terrorize for a paycheck......

 

...... you get absolutely NO sympathy from me!  REAP WHAT YOU SOW BITCHZ

 

P.S.....  Never trust the government......    to bad you were so late to the party....... but we all choose our professions!   You went the easy route..... Remember that!  Man to Man.... stop being whiny little bitches because you were the suckers that believed their lies.... and that goes to the rest of you fucking morons BUYING THE MARKET AT THE ALL TIME FUCKING HIGHS......dont be shocked when it all evaporates away (not like that has never happened before.) smh

 

/end rant

Okienomics's picture

It always amazes me.  My brother in law draws teacher retirement and moved to a new school district to draw a salary.  His father is a retired NYC cop.  Guess what?  Republican and always complaining about overreaching government sector.  WTF????

That said, I have to downvote "F the police."  I say, god bless them.  I wouldn't want that job, but I'm glad there are people who do try their best, day in and day out, to keep the peace.  Sure, there's bad ones, but I've known enough to tell you they're just people like everyone else and they actually do put it all on the line, everyday, for you and me.  That counts in my book.

OregonGrown's picture

Fail.... and a downvote as well... for you fell for "IT" hook line and sinker!   LEMMING!  

On average the police show up 5 minutes AFTER a crime has been committed.  I dont know about you, but I am my OWN MAN who only relies on ONESELF to protect me and mine....that 5 minutes is about 4.75 minutes too long..... and in my world, the police only show up to clean up the mess and take statements......

 

Dont think for a SECOND police do anything "for you and me".......    for they have shown time and time again, that they only do it for themselves..... aka retiring at 52, full benies for the rest of their lived..... adding to the over all national debt and government (UN)funded liabilities that the common folk whom ACTUALLY HAS TO WORK FOR A LIVING ( aka making shit) have to pay for, for the rest of THEIR life.....   Question, who in the F are they and why in the F should I have to pay them after the age of 52 (average age of union retiree's) until they die, long after they stopped working?  

I stand by my statement F THE POLICE.... and their pension... we all choose our professions... 

 

Bottom line, the police RUIN families instead of help........... all for the dollar as well as the lifetime benefits...not because they are"good guys" or better than you or I...  but because they are the "front lines" of the BIG COG called the "american justice system" PERIOD..... "crime" is BIG BUSINESS in the government world.... for one "criminal" pays for the UNION policeman, police dispatcher, jailer, court clerk, judge AND ALL the outlier business that makes crime (and the 12000 new laws written on the books every year to either fine or jail you) big business in the BIG UNION world!

If you are not one of those teet suckling "government employee's" that is on the union dole..... you need to wake up out of your utopian bubble, rub the cum out of your eyes and realize where in history we are... and where the fuck you stand! 

Tiwin's picture

Murderous American police have killed 1079 Americans this year so far without benefit of trial
http://www.killedbypolice.net/
Every time a cop gets shot an angel gets her wings.
Fuck the police.

nc551's picture

Rights violator, I mean cop, is one of the safest jobs in the country.  They have no duty to protect anyone or keep the peace.  The courts have ruled their only job is to investigate crimes AFTER the fact.  'To protect and serve' is a bald faced lie, as the courts have ruled.

UmbilicalMosqueSweeper's picture

Damed revenuers! All of them!

Offthebeach's picture

I don't wan peace.
I want no police, and the usually criminals.
And me and mine will gun them down in our homes, businesses and in the streets and follow them home and kill them there, with their associates.

It will be a busy 6 months.

A few can run to the courts for trial and imprisonment to save themselves.

Cops are to protect criminals and grow the size and wealth of the no-security beurocracy.

If you are cowardly, make friends with those that are not.

SubjectivObject's picture

Tell your good ones to rat on the bad ones.

Help clean the ranks of state backed power.

police the po lice, as it wer...should be

UmbilicalMosqueSweeper's picture

...and STOP enforcing unconstitutional "laws" that fill the coffers of the corporate entities they work for!

Lorca's Novena's picture

The Volunteer taxpayer department...

I live in a pretty small "town" now, yet we have a gigantic POWLICE station, and 2 fire stations.... in a town of around 6000.... some of the firepersons are volunterr, but not the pigs. Everything is brand new of course.. We need to get back to more volunteer and less double dipping.

Okienomics's picture

It's not just your town Lorca.  It seems like many, if not most small towns in poorer rural counties have shitty homes, shitty streets, shitty parks and glorious shiny new city hall, police HQs and jails.  Let's start a list.  I'll go first.

Vinita OK, town is pretty run down, but has a wonderful new city hall.

Coolidge AZ, town is half boarded up, but has a very spiffy police HQ.

tarsubil's picture

The reason city halls are always so nice is because they represent America's number one god, the State.

Radioactive Ideas's picture

I live in a suurb of a large-ish mountain west city. Our town has a 120 person SWAT team. Bearcats/MRAPs, the whole 9 yards. When I first heard that number I assumed it was for the whole metro area. No, no, no. Its just for my town of 111,000 people. I even asked the head of the SWAT team about those numbers because it didn't make sense for our idealic little hamelt. He confirmed the numbers and added "we need to be as well armed as the bad guys". This isn't Fallujah, hell its against the law to discharge a firearm anywhere in our town, for any reason (including self-protection). But we need 120 SWAT members with tanks.

 

Small side note, my buddy the Chief of the SWAT team says the MRAPs are so heavy that they can't drive them on our roads because they tear them up. Plus, maintaining them costs more than they paid for the them.

SubjectivObject's picture

Well that's great; a reasonably mobile secure storage locker.

Maybe they deliver the ammo to the [large] altercation in them.

InflammatoryResponse's picture

To be a part of the SWAT team you get extra pay.  as it is an "extra" duty.

 

 

FreedomGuy's picture

No taxpayer bailout with one exception. IF government workers are forced to bail out every private pension fund failure with their money then we can bail out their pension with ours. Otherwise it is "Ooops! Bad management, not to mention bad promises, bad financial assumptions (7.25% forever!?! Hahahaha!) and bad luck."

My state is in the exact same position. All this stuff is crap. They can take a 25% pension cut which generally means they will simply retire at an astounding 75% of pay or have to wait to age 58 or something horrible like that.

Handful of Dust's picture

The blame lies partially on Obama's shoulders.

Obama permitted this insanity of zero interest to continue durin ghis 8 years of administration.

Americans are unhappy with Obama for many reasons. This is another one.

Debt-Is-Not-Money's picture

Hire Greenspan, he surely will know what to do!

Delphi_Addiction's picture

I'm not sure this article says Mr. EMT got it out in time, only that he had the highest account balance (on paper) still in the plan, one in which he could a.) annuitize (the "guaranteed withdrawal base") or b.) take a reduced lump sum, which btw is usually quite a haircut. If he had taken it out as a lump sum, a.) he would have gotten a percentage ~ 70-80% (obviously done to incentive leaving it in the ponzi scheme) and b.) he would no longer have that balance in the DROP. It would be in an IRA somewhere else.

Like a bank and all ponzi schemes, even after the bankers and other parasites get their *small* cut, everything is fine as long as enough people leave the vast majority of their money in the plan. Now these 517 first responders are going to get a percentage of something for a while, then a little less, etc.- death by a thousand more 'cuts' until the music stops, and there are no chairs left at all. And they're going to be pissed when Dallas residents won't bail them out. It will make BLM look like a little league t-ball game.

BTW... like police/fire, EMT is a fairly labor intensive occupation, one that can only be done for so maybe 30 years? How the fuck does one amass that much wealth, even with six figures and *guaranteed* 8% returns? Even Mitt Romney would be proud. Mr. EMT just went from being the smartest to the dumbest guy in the room in one year. 

Welcome to the real world bitchez. I got my popcorn ready. 

FreedomGuy's picture

I find it kind of humorous.

You have to leave your money IN the fund so there is enough money to pay OUT. If you do not leave your money in you cannot get money out.

Wile-E-Coyote's picture

"I'm not sure this article says Mr. EMT got it out in time"

 

That was my take then I thought that guy must have put every spare penny he had into that pension fund over his working life, wow what a sucker punch. I know a youngster in his late twenties who has no fucking idea, married with a couple of kids instead of giving them the life they need he is putting as much money he can into his pension. He didn't take it well when I told him all pensions are going to zero.

shovelhead's picture

Haha.

Exactly what I was thinking. That last guy out the door should probably avoid "The Brotherhood" Pancake Breakfasts for a while.

Maybe best to not post pictures of his new Caribbean villa on FB cuz some of his buddies are going to be very upset.

Shemp 4 Victory's picture

Damn Putin reached? Over 900 US government intelligence agencies named him "likely" to have "capabilities" which could "feasibly suggest" alleged responsibility of having "some role" in the Dallas pension system calamity.