Larry Eddington, Vincent J. Aurentz, Roman Kilgore, and William J. Butler v. Dallas Police and Fire Pension System and George Tomasovic, in His Official Capacity as Board Chair, 508 S.W.3d 774

Background

Dallas Police and Fire Pension System (DPFP) operates a Combined Pension Plan that includes a Deferred Retirement Option Plan (DROP) allowing members who delay retirement to have their monthly pension credited to a DROP account earning interest.
Prior to 2014, DROP interest was effectively guaranteed at 8% (with historical language requiring interest approx. equal to actuary rate and a 1998 amendment setting a floor/ceiling).
In October 2014 DPFP members approved amendments that (1) phased DROP interest down to 5% by 2017 with annual review thereafter (potentially to 0%), and (2) required pensioners to begin accelerated distributions from DROP at age 70½ to fully withdraw over 10 years.
Four officers who had entered DROP sued, claiming the DROP interest rate and withdrawal change violate Article XVI, § 66 of the Texas Constitution (which protects certain retirement “benefits” from reduction or impairment).
After a bench trial and post-trial proceedings, the trial court upheld the amendments; the court of appeals affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Section 66’s "service retirement benefits" protection includes DROP	DROP is a service-retirement benefit; §66 was adopted to protect retirees from Trammell-like cuts and should cover DROP	§66 refers only to service retirement monthly pension annuities; DROP is distinct and not a monthly annuity	Held for DPFP — §66 protects monthly pension annuities, not DROP benefits
Whether the formula (including the DROP interest rate) is a protected "benefit" under §66	The calculation formula (including guaranteed DROP rate) is itself a protected benefit; changing the rate impairs granted benefits	"Benefits" means payments (dollars), not the formula; protecting formulas would undermine pension flexibility and conflict with Texas law	Held for DPFP — formula and DROP interest rate are not protected benefits under §66
Whether the trial court abused discretion by denying plaintiffs leave to present post-trial rebuttal evidence on a post-trial theory (new defensive theory raised by DPFP)	Plaintiffs should have been allowed to reopen to rebut new post-trial arguments about whether DROP is a protected benefit	DPFP contends the post-trial technical theory was proper and reopening was unnecessary; decision is discretionary	Not reached as dispositive issues resolved (court did not need to decide)
Whether the trial court abused discretion by denying plaintiffs' request for attorney’s fees after trial	Plaintiffs submitted post-trial fee evidence and argue award would be equitable and just	DPFP: plaintiffs lost on the merits; reopening for fees would be futile; fee award discretionary	Held for DPFP — trial court did not abuse discretion in denying fees (nonprevailing party)

Key Cases Cited

City of Dallas v. Trammell, 101 S.W.2d 1009 (Tex. 1937) (held pensioners had no vested constitutional right to keep a preexisting pension amount; legislature could reduce future installments)
Van Houten v. City of Fort Worth, 827 F.3d 530 (5th Cir. 2016) (interpreting Tex. Const. art. XVI, § 66: "benefits" means payments not the formula; §66 protects accrued payments but preserves pension flexibility)
Brown v. Meyer, 787 S.W.2d 42 (Tex. 1990) (decisions of other states are persuasive but Texas constitution governs interpretation)