HB2350/SB6563 is unneeded legislation that threatens the guarantees and promises made to all firefighters and police officers (both active and retired) by the State of Washington. It defers payment of up to $80 million in State pension contributions over the remainder of this biennium, and creates a merged system with increased risks of future underfunding and large increases in contribution rates.
LEOFF Benefit Protections – The bill claims to protect benefits as they existed in July 2003 but does not speak to a significant portion of LEOFF 1 benefits, nor does it guarantee local disability boards.
State Savings - State contributions to LEOFF 2 are suspended immediately upon passage of the bill for the remainder of the 2011-13 biennium shorting the funds by as much as $80 million with no plan for restoring the withheld money. There is no reduction in employer or member rates.
Future LEOFF Funding – The assets in the LEOFF 1 retirement fund are projected to be more than sufficient to meet the future liabilities of the plan. Only a set of pessimistic assumptions could put LEOFF 1 into pay-as-you-go (“pay-go”) status. The possibility of such an occurrence is unlikely.
“Pay-go” risk placed on LEOFF 2 member and employers - An increase in LEOFF 1 costs would become the shared responsibility of LEOFF members, LEOFF employers and the State according to the 50-30-20 ratio currently in place for LEOFF 2 (Section 10). Significant increases in pension contributions would occur.
Below are several facts of what HB 2350 would do:
Merges LEOFF 2 assets and liabilities with LEOFF 1 assets and liabilities. Both LEOFF Plans have very similar assets, liabilities, smoothed market losses and fund balances.
Create a risk of a significant rise in pension contributions by working LEOFF member, employers and the state.
Deny LEOFF 1 members effective participation in the governance of the pension..
LEOFF Board members would be unchanged from the current LEOFF 2 Board with seven of the eleven members being LEOFF 2 members. No procedure to insure proportional LEOFF 1 representation is created.
Denies the Legislature of the right to approve or alter changes in rates and assumptions for the LEOFF pension system.
Any future benefit enhancements for LEOFF 2 could use money from the LEOFF 1 fund.
Violate IRS rules.
Create Unconstitutionality.
Change the structure or existence of local disability boards or those benefits.
Grant the potential of LEOFF 1 benefits to LEOFF 2 members as a property right.
Require future contributions by active LEOFF 1 members at LEOFF 2 rates.
Below are several things that HB 2350 does not do...
Provide for any legislative oversight.