Board Principles for Changes to DROP Policy ‘The Board of Trustees of the Dallas Police and Fire Pension System hereby adopts the following principles to be followed by DPFP staff in preparing definitive changes to the DROP Policy (the “Policy”) for consideration by the Board at the next Board meeting. 1. The Board has been presented with cash flow scenarios that indicate there isa strong possibility that DPFP will not be able to satisfy in the near term all monthly annuity payments, anticipated DROP requests, and ongoing cash needs, including a prudent level of cash reserves for operating expenses, indebtedness, investment-related expenditures as noted in Paragraph 3 below (the "Cash Requirements”), through existing liquid assets. 2. Consistent with Texas law and Sections 3.01(s) and 6.14{e) of the Plan, the Board has determined that a revised Policy for DROP withdrawals is needed to ensure efficient administration, including DPFP’s ability to satisfy in the near term all monthly annuity payments and ongoing cash needs, such as @ prudent level of cash reserves for operating expenses, indebtedness, and investment-related expenditures. 3. The Policy should provide that the Board will maintain a reserve of liquid assets consisting of all outstanding indebtedness, amounts to provide for unfunded capital commitments for investments and, initially, 12 months of ‘operating expenses and 12 months of monthly benefit payments in excess of monthly contributions. These reserve amounts may change over time as the Board determines how long it may take to sell assets in a prudent manner. 4, The Policy should provide for a fair and equitable manner (i) by which Retirees shall be given an opportunity to withdraw amounts from DROP and (ji) to allocate among Retirees amounts available for distribution, allconsistent with the interests identified in paragraphs 1 and 2, providing Retirees a fair amount of notice and details of the revised DROP Policy. ‘The Policy should provide that the Board and staff will work with its investment consultant to dispose of assets, if necessary, in a prudent and efficient manner, seeking to achieve sales in as short a time as possible to satisfy DROP distribution requests, while minimizing, to the greatest extent possible, discounts on such sales. . The Policy should provide that any distributions required to be made under federal tax law shall be made to any member by the end of any applicable year. The Policy should provide for similar hardship exceptions to those described in Section 457(4)(1)(A){ili) of the Internal Revenue Code and the ‘Treasury Regulations and guidance promulgated thereunder. . The Policy should provide that itis the intention of the Board to repeal the ‘changes at the earliest date upon which the Board determines that the policy changes are not necessary to ensure efficient administration and to protect the interests described in Paragraphs 1 and 2.