Dallas City Council members are considering an option that could increase cost of living benefits for retirees who rely on the city's massively underfunded police and fire pension system. Under the current plan, they wouldn't see any increase in benefits for almost two decades.
That also means the city's annual contribution would increase 鈥� at a time when officials have warned about municipal overspending.
Members of the city鈥檚 Ad Hoc Committee on Pensions heard from a panel of Cheiron actuaries, who present three possible scenarios the city could adopt. Cheiron officials say they used last years鈥� actuarial valuation and that the specific contribution numbers were likely to change.
All three proposed plans recommend the city pays what鈥檚 called an actuarially determined contribution. That means the city鈥檚 annual contribution into the pension system would likely change and increase as time goes on until the system is funded.
鈥淭he first two scenarios do not change benefits at all,鈥� Cheiron actuary Bill Hallmark said during the meeting. 鈥淭he third scenario has the partial [cost-of-living adjustment] change.鈥�
The actuaries said the first cost-of-living adjustment (COLA) 鈥� which partially protects against market inflation 鈥� for police and fire personnel would be around 2047, 鈥渋f all assumptions are met.鈥�
鈥淭he current COLA is not payable until you鈥檙e 70 percent funded,鈥� Hallmark said. 鈥淕iven the issue of not having any COLA for more than two-decades鈥e are suggesting you consider the partial COLA.鈥�
City officials and the panel of actuaries say benefit increases are information because city employees do not pay into Social Security 鈥� another system that shields retirees from inflation.
Right now, the expected COLA rate is 1.5% increase in benefits. But under the scenario that would allow city officials to approve that adjustment almost immediately 鈥� the new expected rate would be around 0.75%.
But that means the city鈥檚 annual contribution would also go up.
鈥淭here is a cost in the near term,鈥� Hallmark said. 鈥淚n the long term鈥lans have remained in that 70 to 100 percent funded status for a long pension, so you would have a lower cost at that point.鈥�
Hallmark says that would be much further in the future.
And all three plans involve a 鈥済raded鈥� contribution 鈥� determined by a team of actuaries. That means the annual contributions go up significantly each year.
Under the plan that would allow for an increase in city fire and police personnel benefits immediately, at the top of the scale 鈥� the city may have to be over $400 million as part of one annual contribution.
Some council members wondered how a lump sum paid upfront into the pension system might offset their annual contribution. Recently, council members instructed city staff to complete an analysis of the city鈥檚 real estate portfolio to see what could be leveraged to fix the pension system.
But officials at Thursday鈥檚 briefing say that the city would need to come up with around $1.3 billion to keep their current contribution rate the same next year. Under the scenarios presented by the actuaries the annual contribution rate could jump more than 10% 鈥� that means millions more the city will need to shore up to pay into the system.
City officials are under a deadline to present a plan of action to the state鈥檚 pension board before the end of 2024.
鈥淭his is a conversation between two entities that want to get this right,鈥� District 9 Council Member Paula Blackmon said. 鈥淭he horse is out of the barn. We have to wrangle this in.鈥�
The Cheiron actuaries say they will complete a new valuation based on the city-retained actuaries鈥� numbers once they are released. A final report of the recommendations is expected in early 2024.
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