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- State Actuary Presents a LEOFF 1 Review
State Actuary Presents a LEOFF 1 Review
- By Jerry Taylor
- Published 09/8/2009
- Pension Watch
Obviously, the significant investment losses in the past year have seriously threatened the financial health of the system. The uncertain investment outlook does not promise a quick return to large surpluses. Combine that with fairly extreme budget pressures facing the state and we know it is important to keep a close watch on the system and to look for new ways to safeguard the plan.
We do know that LEOFF 1, even with all the losses, remains a health pension system. The state may need to contribute in the future but the treat is small compared to the challenges facing other systems.
Disclosure
The information in Matt Smith’s presentation was prepared for the LEOFF 1 Medical Benefits Committee in order to assist in the study and review. It was prepared during the 2009 interim and should not used beyond that period. All of the data, methods and assumptions match those used in the 2007 Actuarial Valuation Report. Actual investment returns through June 30, 2009 as reported by the Washington State Investment Board were used. The actuary reports he believes the data, methods and assumptions are reasonable and in conformity with generally accepted actuarial principles and standards of practice as of August 2009. Matt Smith does state that another set of assumptions and methods could also be reasonable and could produce materially different results.
Summary
As we have seen the values in the pension trust drop over this last year I have heard many doom and gloom stories. Obviously, it is an area of concern, but we are fortunate in that our pension system remain healthy. Anytime you start playing with these pension numbers there is a risk of misinterpretation. It is important to remember that the state is obligated under law to honor our pensions. The amount of money in the system is more a measurement of how difficult it will be for the state to meet its obligation than it is a threat that they will not make the pension payments.
A more interesting result of this review is a clearer understanding that the “surplus” is a moving number. The likelihood of LEOFF 1 members ever seeing a distribution or an increase in benefits from the surplus is severely diminished. Of course, the state has always asserted that the surplus was not available for such things anyway.
What we do know is that given the limited recovery time occasioned by the fact that our system is closed and mature there is not much time left for the system to return to a sizable surplus status. Only the most optimistic forecast would suggest that and by the time those large surpluses would materialize most of us will be gone.
On the positive side, this review makes it very clear to the various groups that have sought to raid our pension that that is no longer and can never be an option. There was a general agreement on the part of everyone on the Medical Benefits Committee that the pension fund is simply not available as a vehicle to fund medical benefit.
For myself, I remain optimistic. I keep looking at the long term history of the rate of return on pension fund investments. We came through the depression and recovered. I believe we will recover from our current recession. Our problem is not long-term recovery but the fact that the system is near its end and we don’t have the long-term needed to guarantee the full recovery. The near-term situation is a bit more iffy. Still, the system is healthy and the Actuary is comfortable with our status.
We do know that LEOFF 1, even with all the losses, remains a health pension system. The state may need to contribute in the future but the treat is small compared to the challenges facing other systems.
Disclosure
The information in Matt Smith’s presentation was prepared for the LEOFF 1 Medical Benefits Committee in order to assist in the study and review. It was prepared during the 2009 interim and should not used beyond that period. All of the data, methods and assumptions match those used in the 2007 Actuarial Valuation Report. Actual investment returns through June 30, 2009 as reported by the Washington State Investment Board were used. The actuary reports he believes the data, methods and assumptions are reasonable and in conformity with generally accepted actuarial principles and standards of practice as of August 2009. Matt Smith does state that another set of assumptions and methods could also be reasonable and could produce materially different results.
Summary
As we have seen the values in the pension trust drop over this last year I have heard many doom and gloom stories. Obviously, it is an area of concern, but we are fortunate in that our pension system remain healthy. Anytime you start playing with these pension numbers there is a risk of misinterpretation. It is important to remember that the state is obligated under law to honor our pensions. The amount of money in the system is more a measurement of how difficult it will be for the state to meet its obligation than it is a threat that they will not make the pension payments.
A more interesting result of this review is a clearer understanding that the “surplus” is a moving number. The likelihood of LEOFF 1 members ever seeing a distribution or an increase in benefits from the surplus is severely diminished. Of course, the state has always asserted that the surplus was not available for such things anyway.
What we do know is that given the limited recovery time occasioned by the fact that our system is closed and mature there is not much time left for the system to return to a sizable surplus status. Only the most optimistic forecast would suggest that and by the time those large surpluses would materialize most of us will be gone.
On the positive side, this review makes it very clear to the various groups that have sought to raid our pension that that is no longer and can never be an option. There was a general agreement on the part of everyone on the Medical Benefits Committee that the pension fund is simply not available as a vehicle to fund medical benefit.
For myself, I remain optimistic. I keep looking at the long term history of the rate of return on pension fund investments. We came through the depression and recovered. I believe we will recover from our current recession. Our problem is not long-term recovery but the fact that the system is near its end and we don’t have the long-term needed to guarantee the full recovery. The near-term situation is a bit more iffy. Still, the system is healthy and the Actuary is comfortable with our status.
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1 Response to "State Actuary Presents a LEOFF 1 Review" 
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said this on 16 Nov 2010 10:25:28 AM PST
I think all of Leoff 1 retirees should do their part in saving the pension’s money. For example, ask the Doctor for generic prescriptions when possible. Instead of going to the Doctor far a sniffle, pay four dollars of your own money for cold medicine. Heaven forbid. Do you really need a weekly massage for $150.00 out of the pension’s fund. I think not. Lets all do our part and insure the futures money in our pension.
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