Dallas Police and Fire Wins Court Ruling on Post-Retirement Income

The Texas Supreme Court handed the Dallas Police and Fire Pension System ($2 billion) a major victory in its struggle over a post-retirement work program, allowing the fund to pare its return to beneficiaries.

The program once guaranteed firefighter and cops a minimum 8% return if they continued to work past retirement. Called the Deferred Retirement Option Plan (DROP), it shunted the benefits they would have received into an account with a return so high that the pension plan’s sustainability suffered. The DROP rates were higher than what the retirement system’s investments were returning in the post-financial crisis years.

In 2014, the system lowered the return rate to 5%, which prompted DROP recipients to sue. Plaintiffs, who included Larry Eddington, a former pension trustee who helped create the Dallas DROP, argued that Texas’ constitution prevented any tampering with the return.

The case was thrown out by a federal judge last year, but it was appealed and went to the state high court.

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The Texas Supreme Court agreed with the pension plan’s reduction Friday, finding the rate change to be “prospective only” since it doesn’t impact “funds deposited before the amendments became effective.”

Kent Custer, the fund’s chief investment officer, recently told CIO of his plans to reduce its exposure to private markets in favor of its public counterpart.

The retirement system has been teetering on the edge of insolvency. It was 47.7% funded as of its 2017 comprehensive financial annual report.

Josh Mond, the Dallas Police and Fire Pension System’s general counsel, could not be reached for comment.

The Texas Supreme Court declined comment.

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Tags: Dallas Police & Fire Pension System, DROP, Lawsuits, Pension, Texas

For the second installment of CIO’s NextGen list, we’re inviting asset owners and managers to champion the brightest rising stars of the industry.

From your nominations, CIO will select 25 future leaders to be profiled in candid Q&As that highlight their skills and interest. NextGen replaced our Forty Under Forty list last year, which means candidates can be over age 40, but below 50. Additionally, nominees can be former Forty Under Forty achievers but cannot repeat from last year.

Asset owners and managers can make nominations, but those selected must work for asset owners.

This is not just an ego boost for these individuals. As with our previous Forties, NextGens have been able to break the glass ceilings and enter the upper echelons of the industry.

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When she was featured last June, Jenny Chan was the senior investment officer for the Doris Duke Charitable Foundation, an organization she worked at for 11 years. By August, she had been named CIO of the Children’s Hospital of Philadelphia. The same can be said for Mark Shulgan, the new growth equity managing director at OMERS, who was the senior portfolio manager for thematic investing at the Canada Pension Plan Investment Board (CPPIB) at the time of his profile.

Nominations, of course, will be kept anonymous to provide the best experience possible. To nominate, please answer this questionnaire about who you think is the next big investment rock star. If more than one candidate comes to mind, feel free to feature multiple nominations in your answers, and please incorporate as much detail as possible in your responses.

A few rules:

1. Nominees must be asset owners working in public and private pension plans, endowments and foundations, sovereign wealth funds, and/or single-family offices (they cannot be asset managers, outsourced-CIOs, or multi-family offices).

2. Nominees must be senior investment professionals working with or reporting to CIOs.

Nominations will close on April 5.

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Tags: CIO, CIO NextGen, Forty under Forty