John Lawson Retires as Executive Director of Houston Police Officers' Pension System

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  • On: 05/31/2019 09:43:14
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John Lawson, who has helmed the Houston Police Officers' Pension System for the last 25 years, is retiring as the fund's executive director.
By Allen Jones, TEXPERS Communications Manager

John Lawson, second from right.

His last day with the retirement system is May 31, and a nationwide search is on for his replacement. Whoever steps into the role will inherit a fund with more than 9,000 members and $5.5 billion in assets. Under Lawson's leadership, it has grown to become the largest local government fund in Texas.

“When I first arrived here, there was something like $600 million or $800 million in assets,” he said. “We've been fortunate in the fact that we've made some good decisions.”

It helped that Lawson had a financial planning background. Before joining HPOPS, he worked for investment management company Merrill Lynch.

He became the fund's executive director on July 18, 1994. Since then, he witnessed one of the best and one of the worst times in the investment markets. The Great Recession occurred between December 2007 and June 2009. The economic slump is considered the most significant downturn since the Great Depression. Lawson remembers sitting at his desk at the HPOPS office on Sawyer Street in Houston at one point during that period and realizing there was no liquidity in the market.

“You couldn't even liquidate an index fund of S&P 500 stocks,” he said. “That was a very scary time."

Since then, markets have rebounded but it took several years for the economy to recover from pre-crisis levels of employment and outlook. Lawson's investment industry background certainly came in handy in guiding HPOPS through the recession. Despite having a hands-on approach to the investment process, Lawson says he cannot take all the credit for the good decisions that the plan has made. He has relied on a small staff of accountants, investment analysts, and strategists to help move the fund in the right direction.

TEXPERS members may know Lawson from the association's annual conferences and educational forums. He, along with TEXPERS' former executive director Max Patterson, Jack Gastler of Acadian Asset Management, and James Perry of Maples Fund Services, usually sings the National Anthem during the programs' opening ceremonies. Lawson also sits on TEXPERS' Legislative Committee, helping monitor the goings-on at the state Capitol.

TEXPERS conducted a phone interview with Lawson two weeks before his final day in office. TEXPERS edited some of the questions and answers for brevity and clarity.

Why did you decide this is the year you wanted to retire?
Because I'm 71 years old and I don't want to die sitting at my desk. It is time for 
new blood, new ideas, and that sort of thing.


Over your 25-year period with HPOPS, what are some significant events you've witnessed that have impacted pensions? 
Probably, one of the most significant things has been the advent of deferred retirement option plans, or DROP, for governmental plans. In hindsight, it was the bane of governmental pension systems. It put the systems in a situation where they are unsustainable because boards of trustees continued to enhance DROPs. We have DROP at HPOPS for people hired on to the police department before October of 2004. Right now, we've got about 500 people who are standing in the wings, waiting to enter DROP. Those people will all be in DROP by 2023. Once that is done, there will be no more entry into DROP. Of course, the people hired after October of 2004 did not have the same benefit as those employed before that period. 

Politically, how have you seen the defined benefit public pension atmosphere chance over the years?
Defined benefit pensions are a dirty word across the United States. I know that our members think this issue about DB plans is just a local issue, but that isn't true. If you go back in time under financial accounting, and the [Financial Accounting Standards Board] in 1986, they issued FAS 86, which was aimed at corporate plans. That announcement was the death nail in the coffin of corporate DB plans. Today, depending upon the statistics that you want to believe, there is probably about 12 percent of corporations that still have some sort of DB plan. In 1974, with the advent of ERISA [the Employee Retirement Income Security Act], that also was the advent of the 401(k), which wasn't meant to be the be-all, end-all of retirement programs. But it has made its way to where it is now. 

What do you think this dirty word that has become DBs will change over 
the years, or will it be something pension systems will have to work around?

It is a mixed bag. If you look at the trajectory of corporate plans, really it is only the 
largest of corporations that are willing to afford the cost of a DB plan today. You see them mainly in things like integrated oil companies. What's happened in corporate plans is that the risk has been shifted to the individual to plan for their retirement.

If you can believe all the numbers that are thrown about by different organizations that keep track of this sort of thing today, the average person has less than $100,000 for retirement. Then they have Social Security. That's not nearly enough and combined with that you have the Baby Boom generation coming along. They seem to be extending their working life, like me, and unfortunately, once they retire, they seem to be hunting part-time jobs to supplement. I was born in 1947, a year shy of the advent of the Baby Boom generation that resulted from World War II. It supposedly ended in 1964.

You have this huge boa constrictor eating a bowling ball and as the Baby Boom generation moves through, everything they've touched, they've distorted. They are now in or approaching retirement and they are distorting the retirement system in the U.S. and elsewhere in the world – this isn't just happening in the U.S. But as they move through, what we are going to learn or experience is this massive group of people are ill-prepared for retirement and probably, at some point, you've got a kind of a crisis on your hands. How does the U.S. support these people? Does it support them at all?

Also, if you look at the economics of that, the U.S. is a consumer-based economy. Roughly two-thirds of our economy is driven by what we are going to buy every day. What's going to happen with all of that?

The reason I say it is mixed bag is that I can't see the future real clear, but I can certainly see the standard of living if we are not careful in the U.S., will certainly decline and will be less competitive in world markets. So, does the government step in and supplement everybody's income?

I brought this up to a legislator in 2017 when Houston was restructuring its plan, and the comment was, “Well, we can't worry about that now. We'll have to wait and worry about that another day.” 

What various ways have you been involved at HPOPS?
I've been the administrator for the whole time. I do a little bit of everything. When I 
first got here, there were two ladies. One was the receptionist. The other was the benefits lady, for lack of a better word, at that time, and there was an accountant here. I'm kind of frugal in the way I run an operation. But today, we have 19 or 20 people and the investment staff, for example, is headed by a chief investment officer. We have an analyst and a part-time strategist.

That isn't a very big staff, so I spend, I don't know, about 40 percent of my time also involved in the investment process. Whenever I first got here, I spent almost all my time in the investment process because there was no one at that point. And then, you know, I've seen and been involved in the creation of everything in the plan from that time forward. I'm still intimately involved in benefits administration.

One of the things that I did early on, I was a financial planner by training, and I felt like that was necessary for our members. I still feel like that is extremely important. I want to think if I was not the first, I was one of the first plans that had a staff financial planner that was not trying to sell anything to anyone, just there to help people see their economic way clearer. Now, I think most plans provide for that aspect, as well as corporate America. They do that big time.

The other thing, whenever I first came here, there was no computer. Over the years, we've developed a very sophisticated computer system. We house our computers in a center away from here. We have two co-locations. 

At one time, we had what I like to describe as “sneakernet.” We had a bunch of paper files where all the records were kept. If you wanted to look at somebody's file to see where they were in the process of retirement, you had to walk down the hall to see whose desk has the manila folder with all the information.

Today, we do records management. We have an administrative system that we've put together ourselves that is unique to our organization. We tried to go out to third-party vendors to do that. They are trying to sell their products, so their products are always kind of a generalist approach. You must spend money besides buying the software to work with them continually updating. So, we just decided we might as well put together our own product that is unique to us. We have a programmer that works part-time for us and is constantly rewriting the software here.

Do you have any parting advice to your peers you'd like to give?

Let me say this to the TEXPERS members, don't get too damn greedy because you won't have a plan. That is the essence of the 1990s coming into 2000s. That's when all these things were built, like DROPs, and we've spent almost 20 years now taking it apart and getting it to where it is manageable. From my members' standpoint, they look at all of this and think, “The city promised us.” Well, the city has other things it wants to do besides pay pension benefits. That is any city, really. You  don't want to kill the goose that lays the golden egg. I think, at least, the larger local plans have run afoul of that over the years.

I've enjoyed a great career. I've worked for various boards of trustees during that time. Not all of them have been good, but the boards that I've worked for in the latter half of my career have been really stellar people, really consciences. I appreciate that. Any executive director will tell you that if you want to be miserable, have a board of trustees that are dysfunctional. You will be unhappy.

Editor's Note: The Houston Police Officer's Pension System is conducting a national search to replace Lawson. Visit TEXPERS' online job board to learn more.


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