We first want to extend our best wishes to you and your families for a very Merry Christmas and a healthy, safe and prosperous New Year. We are looking forward to seeing many of you at the Christmas Luncheon on December 8th at the Edmonds Yacht Club. I don't know if you will receive this Newsletter before December 8th. If you do and you have not made a reservation for the luncheon please call 425-775-9080 to see if we can take any additional reservations with time to give a final count to the caterers. Please don't plan to show up at the door unless you have a paid reservation or have called in to request to pay at the door. Wear you Sunday best as we will have a photographer present to take your photo if you desire for a minimal cost.

I am pleased to announce that the incumbent Directors who were up for reelection were elected by acclamation at the November meeting for a two-year term. I want to thank the Directors for their time and effort in our behalf. Their contribution and oversight is the catalyst that keeps the RFFOW a respected and progressive organization. We are fortunate to have members with the knowledge and ability who are willing to volunteer their services.

I also want to thank Ray Sanderson, our humble east side correspondent for his contribution to the Newsletter during the past year. Ray's informative up to date articles arrive each month like clockwork. He never has to be reminded. We are very fortunate to be able to benefit from Ray's long career in the fire service, his interest and knowledge of the pension systems and his years of experience as a member of the City of Yakima Pension Board.

I recently attended a meeting with Marcie Frost the Deputy Director of the Department of Retirement Systems in Olympia. Also present was Brian Berghoff the Deferred Compensation Administer at DRS. The meeting was requested by the RFFOW to discuss the possibility of establishing an option to allow retirees of one of the State's retirement plans to roll over or transfer existing IRA's , Roth IRA's or 401 K Plans for investment by the State Investment Board. My goal would be to also allow retirees who do not have the above plans to be eligible to open new accounts to be administered by the S.I.B. I addition I would like the retirees to have the option to have a payroll deduction from the monthly pension check to be deposited in their investment account, IRA, or other qualified accounts. This would not require any tax deferred status and would only have to meet the taxing requirements for the particular account. This would be different from the deferred compensation program the active employees have in where they can contribute a portion of their salary tax free each month into a retirement account.

You may ask why we are seeking this benefit. The answer is to assist our members in maintaining a retirement investment account to supplement their pension benefit to provide an adequate standard of living and quality of life in retirement. In the present economic environment most seniors don't know where to place their investments or how to select an investment agent or broker. It's difficult to evaluate the advice of a particular agent to determine when a recommended investment is best for you or for the agent. We have all heard horror stories of accounts being churned and of individuals being in an investment that they should not be in. Often the recommended solution is to get a money manager. Again, how do you select a money manager? Money manager's usually only take clients with accounts of $100,000 or more. They charge a minimum of one percent or more of the value of the account. If you open a $100,000 account and in the first year you lose $10,000 you still pay one percent on the $100,000 value of the account you opened. If your money is invested in a low risk investment at a one or two percent return and we have a four or five percent inflation rate plus the one percent management fee you are really at a loss. If due to the lack of knowing what to do, you bury the money in the backyard and we return to a high inflation rate, you really suffer a loss of purchasing power.

These investment decisions become more difficult as we grow older and particularly more difficult for a survivor of the person in the family who made all the investment decisions. Even if you are knowledgeable in this area you have to work long and hard to be on a par with an agent who works eight hours a day in front of a bank of computers, reading loads of material and conferring with colleagues and fund managers. The Executive Director of the State Investment Board (S.I.B.) Theresa Whitmarsh, reported in October that the State's investment return on the pension Comingled Trust Fund (CTF) is 13.2 percent for this year. I would love to have earned 13.2 percent on my retirement account. Each of you will have to assess your own ability and your recent investment returns before exercising this option if made available. We have reprinted Theresa Whitmarsh's article which appeared in the October Newsletter for your information.

Changes in the mortality rate for senior citizens, inadequate funding, mismanagement, and yes some abuses, has caused some pension systems across the United States to be in the unfunded position they are in. The recent PEW Study paints a bleak picture for the future of public pension financing. One of its key researchers said "The situation likely is worse than portrayed." Kil Huh, Director of Research for PEW said the study was based on fiscal 2008 data that did not capture potentially crippling financial losses that public pension systems absorbed during the stock market slide at the end of 2008 and into 2009. "Our numbers were very conservative", Huh said "we missed the Wall Street crisis that really hammered assets for major investment and pension plans. We know the picture has deteriorated and gotten worse". In 2000, Huh said more than half of the states had fully funded public pensions. When the report came out last February there were only four: New York, Washington, Florida and Wisconsin. Today, he said, it is down to one, Wisconsin. The State of Washington uses a fixed mortality table and changes it occasionally. If you only project mortality improvement, every five to six years, you become more current but you're still projecting into the future. Washington' s life expectancy grows by about two years every decade. Adam Wilson reported in the Olympian newspaper in 2008 that a fifty-two year old man can expect to live for twenty-eight years or to 80 years of age.

The retire-rehire provision in the PERS and TERS Retirement Plans has gone way beyond what was intended. There are several examples of how employers and employees have taken advantage of this provision indicating abuse or mismanagement. The State of California granted additional pension benefits in lieu of salary increases and never made the contributions to the pension fund to pay for these new benefits. Several states have consistently underfunded the state's pension funds. Underfunding coupled with the loss of investment returns made a bad situation even worse. As a result several states like New Jersey are reducing benefits for new employees by creating new plans like LEOFF II. Some states like Minnesota are attempting to reduce retirement benefits for current retirees and for future employees. These attacks will ultimately be resolved by the court. Some retirees are protected by state constitutions, some by collective bargaining agreements and some by contract.

The LEOFF I and LEOFF II funds are adequately funded at this time. The LEOFF I fund now has a 125 % funded status but it is protected to go into an unfunded liability prior to 2024. If an unfunded liability emerges prior to 2024, the entire unfunded liability must be amortized by 2024. The unfunded liability may come sooner because of the discontinued contributions, poor investment returns and (welcomed) improvement in the mortality table. It has been the general opinion that the state would have to make the needed contributions on a pay as you go basis or make a large contribution in 2024 if there is an unfunded liability. Now there is some discussion that the state and the employers would be responsible for any mandatory contributions as a percentage of LEOFF II payroll prior to 2024. Next month I will report on if and how our pension benefits are protected.