Historical Timeline of the DPFP
DPFD fund established by city ordinance
Real Estate Investment Period
: DPFP's ill-advised real estate investments worth over $1 billion occurred during this period. Later in the period between 2008-2009, the real estate market decline exacerbated the pension system's challenges, leading to a substantial decline in the value of these assets, and forcing them to be written down in value by hundreds of millions of dollars. DPFP would eventually sell some of these assets at highly reduced values.
New Tier created for ad hoc COLA, no changes to existing employees or retirees, impacted new hires after 12-31-2006.
Pension benefits reduced for members hired after March 1, 2011.
Changes included reduced multiplier, longer vesting period, the extended period included in the average pay calculation, higher retirement age, no early retirement options, reduced maximum benefit percentage, reduced disability, and survivor benefits, higher contributions in DROP, no interest in DROP, no COLA.
Financial Challenges Report
: First indication of DPFP's financial struggles.
DPFP invested over $1 billion in direct real estate investments. These investments were later recognized as ill-advised, largely due to the selection of managers who lacked the appropriate skills for such significant and complex investments.
: The DROP allowed police and fire department personnel to retire on paper, but continue working while their retirement benefits were deposited into a separate account, earning a guaranteed interest rate. By 2016, the DROP balances had grown to more than $1.5 billion, constituting about 58% of the total assets of the DPFP. This disproportionate growth created significant financial strain on the pension system.
The situation reached a critical point when members, worried about the potential closing of access to their DROP accounts, rapidly withdrew funds.
This led to a "run-on-the-bank" scenario, with over $600 million being withdrawn before DROP was closed to withdrawals on December 8, 2016. The action was taken by the board following a court injunction initiated by Mayor Rawlings.
Passage of HB3158
: Legislative response to DPFP's challenges. Changes impacted existing employees, retirees, beneficiaries, and future employees.
Governance and Financial Changes
: Implementation of HB3158's directives.
The benefit multiplier was reduced and the retirement age increased (service after September 1, 2017)
Supplemental benefit eliminated
COLA eliminated until 70% funded
: Segal's 2020 Experience Study for DPFP.
Third-Party Actuarial Recommendations Presented:
Cheiron presented funding recommendations to Ad Hoc Committee on Pensions
Independent Actuary Report Due
: Cheiron to submit its report by 10/1/24.
FRSP Submission Deadline
: Both DPFP and ERF must submit their plans by 9/1/25.