Pension Board Approves New DROP Payment Plan

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DALLAS (CBS11) – In a narrow 6-5 vote, the Dallas Police and Fire Pension Board agreed to allow retirees to withdraw millions of dollars from their troubled retirement account.

The short-term proposal comes as state lawmakers are working with the pension board and administrators and the City of Dallas on a long-term plan to save the fund from running out of money in ten years.

The pension fund system is under criminal investigation by the FBI and the Texas Rangers to determine if previous actions by the board and staff broke any laws.

The proposal involves what’s called the Deferred Retirement Option Plan or DROP, that nearly 2,000 active and retired police officers and firefighters receive in addition to the base monthly pension.

In short, experts say the fund is in crisis because the DROP had been giving members more money than the fund took in.

They also question some of the pension fund’s investments.

To save DROP, a judge recently froze large sum payments that police officers and firefighters were allowed to receive.

Mayor Mike Rawlings filed suit against the pension board in December to stop members from withdrawing large sums of their money.

He also requested the Texas Rangers investigate.

On Thursday, the pension fund’s Executive Director, Kelly Gottschalk proposed giving retirees an option to start receiving in late March, $3,000 each month totaling $30,000 for 2017 and $36,000 for 2018.

Retirees could choose to receive the same total amount of money in two installments each year.

They would not receive any DROP payments in January or February.

But the proposal attracted angry responses from dozens of police officers and firefighters who attended the meeting.

David Elliston, who retired from the Dallas Police Department six years ago, told board members, “We invested our money in this pension plan. We trusted you to take care of us. If all we have is just our base pension between now and until we get to March, there’s going to be a lot of us who go under. Homes will have to go up for sale, cars will have to be sold. We built our lives around what we got out of the pension.”

Mike Gomez, who said he’s set to retire January 25 after 40 years at Dallas Fire-Rescue, asked board members to help him keep his job.

“You know you can give us something out of this. You’re asking a lot of us. Because a lot of us didn’t go out there and take our DROP out. We trusted you were going to do the right thing and now, we’re going to sit here and operate as paupers,” said Gomez.

Dale Herves, who was a Dallas police officer for more than 32 years, interrupted pension board chairman Sam Friar at one point saying, “I have to say sir, our families are really suffering, so take that into your consideration.”

So pension board member Brian Hass proposed the board spend an additional $10.6 million.

It would allow the 900 members who are currently receiving DROP on a monthly basis to still get payments for January and February.

That will cost $4 million.

About 1,000 members who requested, but were denied lump sum payments, will share $6.6 million covering December, January, and February.

Both of those provisions will go away once the set monthly DROP payments begin in late March.

A judge will still have to approve this at a hearing next Tuesday.

Herves said the money will help temporarily, but said he will have to take out a loan.

He said last  year he made improvements to his house and bought his wife a car.

“All of a sudden, a rug has been pulled out from underneath us,” said Herves. “And this is where we are now. You still have those high bills to pay.”

Hass’ proposal passed 6-5, with one board member abstaining from voting.

Four of the pension board’s 12 members are also city council members: Deputy Mayor Pro-Tem Erik Wilson, Jennifer Staubach Gates, Scott Griggs, and Philip Kingston.

All four voted against the plan.

During the meeting, Griggs announced he wanted to talk with the fund’s accountants first because he had recently received a letter from them saying, “The payments for our administrative overhead are affecting our ability to pay benefits. That says you can’t keep your lights on.”

Kingston said he opposed the proposal because he wants to be sure the fund can pay its base benefits for as long as possible.

“Every DROP dollar that goes out the door before the system has a chance to return to solvency is one less dollar that will ultimately be paid for a $1,500 a month beneficiary,” said Kingston. “That’s a violation of my fiduciary duties.”

Kingston said the city has to contribute money to the fund.

Herves said the city should stop spending money on a variety of projects and instead use the funds to help police officers and firefighters, who he called the main veins of the city. “Your main veins are popping, and when they explode, it’s hard to replace it.”

(©2017 CBS Local Media, a division of CBS Radio Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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