Raid on the Police and Fire Pensions?

Recently, Washington Republican leader Jim Walsh argued that Democrats conducted a "raid on the police and fire pension fund." (See 6:10)

I have also heard similar concerns from retired police officers and firefighters who believe money is being taken from the LEOFF 1 retirement system.

Naturally, I wanted to understand what was really happening.

My first question was simple: Are retirees seeing their monthly pension checks reduced?

The answer appears to be no. Retired LEOFF 1 members continue to receive their pensions, and they continue to receive annual cost-of-living adjustments.

So why are people upset?

The concern centers on HB 2034, signed into law this year. The bill restructures LEOFF Plan 1 and directs that, beginning in 2029, assets equal to 110 percent of the plan's projected liabilities be transferred into a restated retirement fund for retirees.

Any remaining assets would be transferred into a Pension Surplus Holding Account and continue to be invested until otherwise directed by law.

Critics argue that once surplus assets are separated from the retirement fund, future legislatures could use those funds for purposes other than supporting retired law enforcement officers and firefighters.

Supporters respond that retirees' benefits remain protected because the bill requires assets sufficient to cover all projected obligations, plus an additional 10 percent cushion.

Some observers have pointed to other retirement systems, such as TRS Plan 1, as examples of public pension plans that have faced different financial challenges. HB 2034 itself does not direct LEOFF surplus assets to TRS 1.

However, if future legislatures choose to use surplus assets held in the Pension Surplus Holding Account, retirement systems such as TRS Plan 1 are often cited as examples of public obligations that could potentially benefit from those resources.

To understand the controversy, it helps to look at the two retirement systems.

LEOFF Plan 1, which covers many retired law enforcement officers and firefighters, is widely viewed as being in a strong financial position. The number of retirees is steadily declining, and the fund has accumulated substantial assets over the years.

What makes LEOFF 1 unique is that it has been closed to new members since 1977. Today, there are roughly 6,154 retirees receiving benefits and only 7 active members remaining in the plan. Because the population is shrinking and future obligations are relatively predictable, the fund has accumulated assets well beyond what state actuaries project will be needed to pay promised benefits.  Legislative findings accompanying HB 2034 estimate the surplus at more than $3.3 billion and project the plan could exceed 200 percent funding by 2029.

TRS Plan 1, which covers many retired teachers, faces a different reality. Thousands of retired teachers receive pensions that have not kept pace with inflation. Many have spent years returning to the Legislature asking for cost-of-living adjustments. Some retired teachers receive monthly benefits that are lower than what many Social Security recipients receive.

How did that happen?

The history is complicated. During the 1970s and later reforms, teacher retirement systems evolved through multiple changes. Benefit structures, inflation adjustments, Social Security participation, and budget decisions made over several decades created a situation where many retirees found their purchasing power steadily eroding over time.

As a result, retired teachers and retired public safety workers often view the issue through very different lenses.

Retired teachers see a system that has left many elderly educators struggling to keep up with rising costs.

Retired police officers and firefighters see a retirement system they paid into and helped build, and they worry that promises made to them could be weakened in the future.

I have tremendous respect for law enforcement officers, firefighters, and teachers. All three professions dedicate their lives to serving our communities, often for salaries lower than they could earn elsewhere.

HB 2034 is now law. The discussion today is about whether Washingtonians are being given an accurate picture of what it does.

When politicians describe the bill as a "raid" on police and fire pensions, many retirees understandably assume their monthly benefits are being reduced or that promises made to them are being broken. That does not appear to be the case. Retirees continue to receive their pensions and annual cost-of-living adjustments.

The reality is more nuanced. One retirement system accumulated more assets than state actuaries currently project will be needed for its future obligations. HB 2034 establishes a mechanism to set aside 110 percent of projected liabilities for current and future retirees while placing any remaining surplus assets into a separate holding account. The debate is less about current pension checks, which continue unchanged, and more about who should ultimately control assets that exceed projected retirement obligations.

Washingtonians deserve honest explanations, not alarming sound bites. Retired teachers, police officers, and firefighters all spent their careers serving our communities. They deserve a retirement system that is sustainable, transparent, and fair to everyone involved.

(This blog has been updated to reflect final wording of the bill.)