December 21st 2024

EVOLUTION OF A PENSION FUND ABUSE

By Mark Curtis
DATE: 2/24/06

The State of Washington Legislature has advanced SHB2688, called the cap removal Bill that would allow the 1974-77 people in the LEOFF 1 pension system to again earn service credits beyond 60%. However, the Bill would also create a task force to create one or more funding vehicles to cover the medical obligations of employers who otherwise have been responsible for those post retirement liabilities. The committee must come to a conclusion by years end. One of the vehicles is to use LEOFF 1 pension “excess” funds. The amount of surplus is said to be at least 108% and could be much more. We once had 136% and $700 million dollars of it was lost to smooth market losses. A recent news story reported the State saying they had a $1.6 Billion dollar surplus. No one said if or not that included the LEOFF 1 supposed surplus. Whatever the amount of surplus is could well attract the focus by the task force and adopted as the funding vehicle wanted by employers. This action is viewed as shifting key LEOFF 1 benefits of guaranteed full funding and local disability boards, to creating a bail out to employers. Access to pension funds to create a medical board or system to relieve the employer liabilities would be fertile ground to leave the disability boards without jurisdiction. Taking funds could render the pension plan at risk of future insolvency. LEOFF1 members do not consent to the changing of benefits. The Bill could change the contract pension law.

State Actuary Matt Smith has reported that the pension plan will be out of surplus by 2007. Thus, we see no existing excess. The fund should stay intact and be available for protecting the plan. The LEOFF 1 Coalition has opposed any legislation that would create a replacement medical board. We were told on 10/27/05 at the Select Committee on Pension Policy that the total unfunded liability of all pension plans was $4.2 Billion dollars. We are told that the LEOFF 1 employers see their unfunded liability as between $800 million to $1 Billion . The numbers wanted by employers has been consistant with what Plan 1 supposedly has or had in the fund.

The early effort at a cap removal this year was HB1873 and SB5901 , replaced by the SHB2688 Bill.

WACOPS ‘s Bill Hansen acknowledged the use of a pension plan fund was illegal. Also, a 2005 LEOFF Education seminar was where that employer financed group suggested a consolidated disability board. A civil suit in Snohomish County won by atty Joe Fischnaller, showed that the local disability boards decide what is necessary medical care which we have hoped would educate employers and employees.

An October, 2004 meeting showed that we would be out of surplus by 2013, a different figure than a later comment. On, 6/14/04 the SJCPP heard a suggestion to avoid politizing pension plans. Legislators appeared to show some agreement on that day. But, beliefs soon became subject to politics.

2004- We experienced the Asset Smoothing Corridor Bill that passed the Legislature. We opposed the Bill that will have a window of 8 years to cover market losses and other expenses. The Bill numbers were SB6249, HB2541.

2003- We saw HB1889, a Bill that would shift full funding responsibility to a separate LEOFF 1 board and did not pass. It could have caused us serious financial trouble.

2003- The Legislature passed an earlier emergency Asset Smoothing Bill. Other pension plans wanted it badly. It now seems that our surplus may have been used to be first to cover market losses in all pension plans. Thus, this was where we lost $700 million, as it has been suggested. The practice of smoothing may have been routine in the past, and the law passed to continue the practice.

2001- Was when the SB6166 Bill was introduced to terminate the LEOFF 1 pension plan and seize the funds, and offer to share 12% with us. No vote was taken, as Hagens-Berman, LTD served suit on the Legislature and won that battle for the time being.

2001- SB5191 and HB1072 also did not pass. It would have created a risk pool program for employers, funded from investment earnings of our pension plan. The effect would have been to eliminate local boards.

What started back here is similar to where we are at risk in 2006. Dejavu.