- by Kerry Graber
It was a temperate September Saturday in SeaTac, and I was there for the WFSE Executive Committee meetings. I was looking forward to some Fall shopping at the Nordstrom Rack as soon as my last committee meeting wrapped up. Then I found out the Retirement Committee was meeting and I felt compelled to find out what this group is working on.
I looked around curiously at the dedicated few from the Executive Board that had asked to be assigned to this small committee while we waited for the guest speaker. Then Senator Conway, a democrat from the 29th legislative district, walked in and sat down like he was joining a group of friends to have coffee and a nice chat. Tall and distinguished, the Senator had a relaxed but serious demeanor as he launched into his purpose.
Senator Conway speaks
The Senator described the 1.5 to 2 billion deficit projected in the budget, and expressed both concern and determination that state employees and their retirement benefits should be provided for. He shared that the legislature was no longer interested in underfunding the system, “playing around with the pension funds” as he put it. Despite the press and the media focusing on problems with PERS 1 and TERS 1 plans, he assured us that Washington has a well-funded pension system.
While new legislators want to see new employees not provided a defined benefit plan, he assured us that our contractual right to a pension will not go away. Senator Conway noted that pensions will be provided, but admitted there will likely be no increase in benefits. As for a plan 4 “defined benefit plan” for new employees (think of it like a 401K that has no guarantee of return), he stated that Governor Gregoire did not appear to agree with this idea, and that there was not enough support in the legislature to pass a bill for it.
Since I was unaware the attempt had been made to propose or pass such a bill, this news brought me to the edge of my seat.
The Senator went on to explain that about 70% of the future value of our pension plans is funded by investment of both the employee’s and employer’s contribution, and 30% from current contributions. The co-mingled trust fund is assumed to have an average 8% return on investment, invested carefully by the State Investment Board (SIB). This varies over time based on the volatility of the stock market. The profit and losses are averaged over time. As most of us know, the legislature thought they could reduce contributions and start PERS 3 because of the great market returns. This resulted in an unfunded liability for employees in PERS 1 and TERS 1.
Senator Conway was asked about the possibility of early retirement options being added to the plans. The Senator was thoughtful, then shook his head and told us that all over the country early retirement options are being stripped from the plans that have it. The bottom line: “Be realistic,” he said.
Gain Sharing and Early Retirement
After the Senator said his good-byes, the committee took up the business that had been delegated to them by the Council 28 executive board, namely, a resolution that directed the WFSE to work diligently toward the adoption of the “rule of 85” into law. This rule would allow a person to retire without penalty or reduction of benefits if the sum of their age and years of service credit added up to 85.
Let me digress for a moment and update you on legal actions that relate to all of this. As reported in previous bulletins, Ecology board members (my predecessors) were instrumental in pushing WFSE to sue over the loss of gain sharing for PERS 1 and 3 that occurred a couple of sessions ago. Members felt that the promise of gain sharing was contractual, and had enticed many PERS 2 employees to switch to 3 when they otherwise would not have changed plans. A judge ruled on the suit in favor of WFSE last spring that indeed gain sharing had been promised and must be restored.
Inextricably linked to that lawsuit was a new early retirement provision for PERS 2, that was included by the legislature as a kind of consolation prize when they removed gain sharing. The early retirement provision allows employees with 30 years of service to retire before the age of 65 with less penalty, and at age 62 with no penalty. The judge delayed ruling on whether this provision had to stay in place after gain sharing was restored. The union wants the court to retain early retirement, but the state argued it was only granted as a replacement for the loss of gain sharing. The judge is scheduled to rule on this piece of the lawsuit in December.
Meanwhile, some who qualify under the early retirement provision have put in their papers, but others are faced with the dilemma that if they don’t retire now, the provision might go away after the judge rules and they would have to keep working until they are 65. The situation has been made more complex by mixed messages from Department of Retirement Systems and human resource departments on the timing and deadline for people to make up their minds. There is no way to know which way the judge will rule, or whether WFSE will appeal an unfavorable ruling to a higher court thereby extending the window for prospective retirees.
If nothing else, I can say as an Executive Board member I will continue to push for assertive action by union legal staff in the courts to retain any benefit or improvement to retirement that we can gain in these troubled times.
Next Steps for the Retirement Committee
Retirement Committee Chair Bill Copland, Department of Corrections member and president of the local in Richland, turned back to the group for input on how to proceed on pushing the rule of 85. Clearly this is an option the members want but may be impossible to achieve in a climate of benefit-stripping. Bill asked for input from the committee members to articulate where we are at, where we want to be, and what it is going to take to get there. We were asked to go back to our Locals and talk about this issue and share what we have learned, bringing back any input that would be helpful to the committee.
Want to know more?
I have posted some background documents on the health of the retirement system, the Senate Bill report on the attempt to establish a PERS 4 from last session, and a policy brief from Governor Gregoire. I will post more information as I receive it.
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In the interim I urge you to get educated about this issue and educate others – respond to media reports with letters to the editor - point out that the “impending disaster” in underfunded state pensions, touted in news stories, is not a complete and accurate picture. Lastly, be ready to provide your input as a citizen and state employee (on your own time of course!) when the issue comes up again for lawmakers
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