December 30th 2024
LEOFF I Pension Notice – 1/4/2010
By Dave Peery, Seattle Fire Local #27
It was a simple chart!
Barely half a page, printed in shades of blue.
LEOFF 1 Coalition Board members Bob Monize, Mark Curtis, Andy Wilson, Jerry Birt and Dave Peery traveled to Olympia on December 15th, 2009, a very rainy and windy day, to get a taste of what the coming legislative session may hold in store for our member’s pension benefits.
With the State budget rumored to be desperately short of funds for the coming biennium there was great concern about the safety of our pension benefits.
Four retired war-horses from a collection of Washington municipal police and fire departments, plus one active fire fighter (myself), met in the O’Brien building conference room. We were a bit edgy about the state of the economy and constant news reports of looming budget cuts across the state to try to stem the flood of red ink caused by the current national/worldwide recession.
And within those pale blue lines lay the future of LEOFF 1 benefits.
We spent an hour with a Legislative House staffer and when the hour was over we left, greatly assured that our system was about as well funded as possible in spite of the hits taken last year when the economy took a nose-dive due to the near collapse of Wall Street.
The chart that we were presented with showed the projected LEOFF 1 contribution rates that might be necessary to implement under three potential scenarios. Those potential contributions would be borne not by the few remaining active members, far too few in number to make a dent in possible pension shortfalls, but by either employing municipalities, the State of Washington, or a combination of contributions from those entities from available funding sources.
Excerpted from a report of over 100 pages, this single page was chosen by the staffer as a snapshot of the best estimates of our pension system’s future.
Washington State Laws plainly dictate that the State is the final guarantor of the LEOFF 1 pension system benefits. Should shortages occur, the State has the responsibility to provide the funds necessary to maintain our benefits as contractually guaranteed.
Fortunately for both our members and the State coffers, our system is nearly fully funded, leaving pension shortfalls not seriously likely.
The actuarial projections show three possible scenarios. Each was based upon current funding levels, assumptions of no more than 3% annual inflation rates, and State Investment Board rates of return on pension investments of 10% per year (optimistic), 8% (expected) or 5.5% (pessimistic). Obviously, each of those assumptions is based upon figures subject to future fluctuating market and economic condition and in the final analysis will likely vary a bit from year to year.
The legislative staffer explained the likelihood of the need for renewed contributions to the LEOFF 1 fund under each assumption and when we responded with concerns regarding the potential for the State to try to decrease benefit levels in some fashion he further assured us that the State well recognizes the status of the LEOFF 1 pension system as a defined benefit plan that is a legally binding agreement that has been upheld by the courts on repeated occasions.
With that overview and with the clear recognition by the courts that ours is a binding contractual obligation that the State must honor we must presume that that obligation will be met. We sincerely hope that the need for additional contributions is not required as we recognize the pain any additional required contributions would inflict upon the agencies required to make them.
Having reviewed the simple chart provided by the staff representative we better understand the current status of our pension system and the potentials for renewed contributions in case the investment returns on the State’s investment portfolio fail to meet expected returns in the future or if inflation assumptions prove to be greatly in error.
The legislative representative assured our board members that there was no longer any question about the legal obligation of the state to guarantee pension benefits as contractually agreed. Rather than dwell on potential worst-case scenarios we feel it would be more prudent to simply continue to monitor legislative activities relating to our pension system and report concerns to our members as needed.
With that as a backdrop, we believe that asking for additional benefits in our pensions would be both unwise and unrealistic. Absent a desperate need for pensions adjustments due to unforeseeable circumstances at this time we believe that our best course of action is to remain vigilant (as always) regarding legislative intent and action regarding pension law and continue to keep close contact with member organizations to ensure that our members benefits are appropriately provided.
In the meantime, we wish the best to all our brothers and sisters in labor and their pension concerns as well as the very legitimate concerns of the general public regarding our economic future.