Home  |   About us  |   Partner with AWC  |   Login      

Advocacy

Welcome to AWC’s online library of Legislative Bulletin and CityVoice news articles and other updates.

Published on Tuesday, July 5, 2016

Select Committee on Pension Policy conducts survey on LEOFF 1 merger

During the 2016 session, the Senate considered a bill to merge the LEOFF 1 (Law Enforcement Officers’ and Fire Fighters’) and TRS 1 (Teachers’ Retirement System) pensions systems. While the bill did not advance, the final budget directed the Select Committee on Pension Policy (SCPP) to study a possible LEOFF 1 and TRS 1 merger and to update a 2011 study on a potential LEOFF 1 and LEOFF 2 systems merger.

In preparing to study a potential LEOFF 1 and TRS 1 merger, the SCPP has developed a stakeholder survey. AWC has completed the survey, and you can see the responses provided by AWC below. AWC is encouraging cities with ties to LEOFF 1 to weigh in on the survey as well.

The possible merger is a complex issue, and it helps to know the history of the LEOFF 1 system. You can find more about that history here. The LEOFF 1 system is currently assumed to be funded at 127%, which means there is a potentially large surplus in the fund, while the TRS 1 plan is currently underfunded at only 65%. Merging the funds would potentially allow the Legislature to reduce their future TRS 1 payment obligations and help with their overall budget challenges.

AWC has not taken a position on a potential merger, but we have identified some key areas that we would like addressed in consideration of any merger. Those areas are reflected in our response to the survey below. Just a note, this survey is specific to a LEOFF 1 and TRS 1 merger, so our answers only address that potential merger and not a potential LEOFF 1 and LEOFF 2 merger. We anticipate having the opportunity to provide input on the updated LEOFF 1 and LEOFF 2 merger study in the future.

For cities with LEOFF 1 retirees, please consider taking this opportunity to complete the SCPP survey. The initial results will be presented at the SCPP meeting on July 19, so we encourage you to complete the survey as soon as possible. However, the final study will be presented in September so if you cannot meet the July 19 date, please still consider providing input.

SCPP Merger Study Stakeholder Survey with AWC responses

Question 2. If the Legislature proposed a merger of LEOFF 1 and TRS 1, then I would be….

  • In favor
  • Opposed
  • ✔ It depends on the provisions of the merger

Question 3. If the Legislature proposed plan merger, what QUESTIONS would you like answered?

  • Would a merger destabilize the fund in a manner that would require new contributions into the fund; and would cities be expected to fund those contributions?
  • What are the legal issues surrounding a merger and what would it take for a merger to be approved by the IRS?

Question 4. If the Legislature proposed a plan merger, what CONCERNS would you like to see addressed?

  • With a merger, a proportional amount of surplus funds that that represent the amount attributed to employer LEOFF 1 contributions (approximately 11%) should be returned to employers to help offset the costs of LEOFF 1 medical benefits.
  • What guarantee will there be that a merger will not include any new benefits that would increase the employer contribution rates?
  • What guarantee will there be that the State will not seek additional contributions to cover any costs of LEOFF 1 pensions in the future regardless of the state of the fund?

Question 5. If the Legislature proposed a plan merger, what general comments would you have?

There should be clear caveats that any payout of funds to retirees or employers be conditioned on the final legal approval of a merger by the IRS and that if the merger was overturned by legal action that the payouts would also be overturned. Additionally, no funds should be merged without full legal vetting and IRS approval.

Question 6. Additional Comments.

Cities as LEOFF 1 employers made significant contributions to the fund between 1970 and 2000. Approximately 11% of the total funds contributed are attributable to employers. Additionally, LEOFF 1 employers have retained significant unfunded liability for medical benefits for LEOFF 1 retirees, with no significant dedicated funding source to offset the costs. The Actuary’s most recent study estimates that liability at $3 billion. Any changes to the LEOFF 1 retirement plan should take into account the significant unfunded liability that cities have for medical benefit costs.

Categories: Personnel
  Search