We attended two meetings in Olympia in September. On the 19th was the Select Committee on Pension Policy (SCPP) and then on the 27th was the LEOFF 2 Board meeting. Neither of these meetings presented any dramatic information so we chose not to make an immediate report. Both of these meetings dealt with similar information and to a large extent the LEOFF 2 Board meeting was simply a repeat of the presentations from the SCPP meeting.
There were two major presentations at each meeting. One was what is called Benchmarking. Every year DRS contracts with a firm to review how well they do at managing the retirement system. Every year they get back a report saying DRS is one of the best managed systems in the country. I suppose this is a good way to get some outside appraisal of their management practices but it starts to seem redundant and possibly a waste of money. The presentation for that is not available on the SCPP website, however you can listen to the presentation from the LEOFF 2 Board. Click here for that presentation.
Of most interest was the report on the pension financial condition and recommendations on long-term economic assumptions. Basically the Actuary is recommending a change in economic assumptions. The principal change would lower the interest earning assumption from 7.7% to 7.4% (for LEOFF 2 from 7.5% to 7.4%). The changes in assumptions would decrease the funded status of all pension plans absent some legislation to increase contributions.
We do not expect the LEOFF 2 Board to adjust the 7.5% return assumption down to 7.4% in this legislative cycle as the impact of the change would be very small. In contrast the legislature would need to look at the economic impact of moving from 7.7% to 7.4% as it would greatly decrease the funded status of TRS 1 and PRS 1. Overall it would mean the legislature would need to come up with an additional $250 million to stay even.
What I found disturbing was the $250 million is really close to the amount that the legislature has tried to secure from LEOFF 1 in their various attempts to alter the plan. We will need to keep a close eye on this as we progress into the next legislative session.
The next SCPP meeting is scheduled for October 17th. (see agenda) Note item 7 on the agenda , “Media Alert: Seattle Police Off-Duty Employment”. We suspect this deals with the impact that Seattle moving to overtime for off-duty employment might have on pension contributions for LEOFF 2 officers and employers. More on this soon.
Update: Aaron Gutierrez reports from the Actuary’s Office reports: ” The chair asked us to add a quick informational update to the October meeting to make sure the committee members were informed in case they are contacted by the media, and to ask staff from DRS and the LEOFF 2 Board to be available for questions.”Follow us on Facebook