April 24th 2024
09/21/2010 Report on the Joint Committee On Pension
Policy meeting in Olympia
The Committee expressed some awareness of the need to do better on pension funding and discussed reasons why some pensions were in trouble. It was mostly about the PERS 1 pension system.
LEOFF 1 was also mentioned. We do have a pension surplus. Actuary Matt Smith said that pension systems were never intended to be overfunded, because that money is needed for future funding needs for LEOFF 1. Asset growth for all plans may be unsustainable.
It was suggested that employers would need to adjust to being “spiked” to put more contributions into systems and that would include for LEOFF 1. While LEOFF 1 has a Contribution Holiday, the law is silent on a change in the future. A pay-as-you-go system will probably be attached to LEOFF 1. Our investment successes have been paying the continued costs of the plan.
One legislator has been working on a proposed Bond protection idea for all pensions to protect the beneficiaries. This is something the State Investment Board pondered for about five years, but discarded when they realized the Commingled Trust Fund would suffer from the loss of the LEOFF 1 investment impact that helps other pensions grow as well. Further more, resentment may pressure legislators because the bond buyer could get the entire LEOFF 1 pension fund, which may be a financial loss for us.
One legislator wanted to pre-fund pension systems, but that would cause a new law change. Another legislator thought they could do better to fund the pension plans to keep them going. PERS was the plan mentioned.
Actuary Matt Smith was recognized for trying to continually be kind and clear with his annual effort to better fund pensions instead of not doing so and adjusting the Assumption rate. They see their legislative policies were their undoing by dropping employer rates when the legislators gave more benefits to employees. This was in the context of PERS 1; very few higher education employees that retired were rehired and double dipped with big benefits. No one in any pension plan should expect to see added benefits in the near future.
Plan maturity is important to funding strategies, and asset streams will be needed. It was said that full funding is beyond assurances. The legislators threw money at benefits, which hurt all pension plans. Policy making needs to be more substantive. It was also said that a poorly funded plan may have little time to recover. Pension systems can not control market risks and available assets, given that investments have been volatile.
Bobby Monize
President LEOFF 1 Coalition