LEOFF Merger Again

Another Merger Proposal!!! (date corrected)

Well, here we go again.  On February 21^st Dick Warbrouck of the RFFOW was in Olympia for a hearing on bills dealing with pension board membership.  He was advised that he should meet with Senator Kevin Van De Wege.  The meeting was also attended by Steve Nelson, the Executive Director of the LEOFF II Board.

(Senator Van De Wege is an active LEOFF 2 Firefighter and was just elected to the Senate after several terms as a Representative.  His email address is Kevin.VanDeWege@leg.wa.gov. His Olympia address is 212 John A. Cherberg Building, PO Box 40424, Olympia, WA 98504, and his phone number is (360) 786-7646 )

At the meeting a proposal was provided in draft format calling for a merger of LEOFF 1 and LEOFF 2.  The document reads as follows:

LEOFF MERGER DRAFT

MERGER:

• Merges LEOFF 1and LEOFF 2
• Delay until receive IRS approval (Does not delay State rate reduction)

STATE:

• 0% LEOFF 2 contribution rate for 2019-21 & 2021-23  (saves $295M GFS Local employer still pays 30% and employee still pays 50%)
• Beginning in 2023-25 state contributions restart but start phasing out and transitioning to employee/local employer by 2030 when employee share is 55% and local employer is 45%
• Repeal Public Safety Enhancement Account and Benefit Improvement Account saves $100M GFS In 2019-21 and 2021-23, and $50 million per biennium thereafter

LEOFF 1:

• $15,000/member payment Approximately $240M from LEOFF 1fund
• Include dental in retiree medical – $Unknown local government
• LEOFF 1 Governance unchanged (SCPP & PFC)

EMPLOYER:

• LEOFF 2 contributions for 2019-21 directed into LEOFF 1Retiree Medical Account $105M

LEOFF 2:

• $Transfer from LEOFF 2 into Benefit Improvement Account

GOVERNANCE:

• Rate-setting authority solely with LEOFF 2 Board beginning 2023 (OSA reasonable)
• LEOFF 2 Board protected – authority and budget

At the meeting the above was distributed but not much more in the way of information was provided. No explanation was given for the various proposals nor was any explanation given to explain the $15,000 per member payment provision.

Steve Nelson advised that he had not informed the LEOFF II Board of this proposal and that they had granted him blanket authority to do anything he wants–seems like a serious conflict of interest because of his position as the Executive Director.

What have we done?

After the meeting contact was made with Dennis Lawson who is the President of the Washington State Council of Firefighters and the Chair of the LEOFF II Board.  He stated that he was unaware of the proposal even though the WSCFF lobbyist appeared to be aware of the proposal.  In fairness to WSCFF, Dennis Lawson was out of town and the lobbyist did not attend the meeting.  Dick Warbrouck will be meeting with Dennis Lawson shortly, so we should soon discover the position of WSCFF relative to the proposal.

On Monday, February 25, representatives of the Retired Fire Fighters of Washington, the Retired Seattle Police Officers Association and the Washington State Retired Police Officers Association met with our attorney, Phil Talmadge.  It was decided that we should have Mr. Talmadge send a letter to Senator Van De Wege seeking clarification and details.  In addition to the Talmadge letter Dick Warbrouck also wrote directly to Senator Van De Wege asking a number of questions.

The Senator has delegated his answers to Steve Nelson.  Steve’s answers are as expected—everything is just fine and legal.  He cites legal positions taken during the previous rounds of merger proposals even though we have established that those opinions do not hold up under examination.

You can review some of the documents here:    http://leg.wa.gov/SCPP/Publications/Pages/SCPP2016MergerStudy.aspx

We have also been in contact with the Association of Washington Cities and the Association of Washington Counties.  Both have indicated they will not support the proposal.  WACOPS was not aware of the proposal but is now on board and opposes the proposal.  We have not yet spoken with COMPAS.

What happens next?

We are waiting to determine the position of the Council of Fire Fighters and will be reviewing the legal actions we may need to take if the bill goes forward.  We are advised by Steve Nelson that it is the Senator’s intent to draft a merger bill that will be approved by the IRS and will meet all Washington state legal requirements as laid out in Bakenhus and Weaver.  The Senator is currently working with stakeholders, including RFFOW, to finalize the merger proposal and will send draft legislation to them.  The Senator anticipates having a draft bill ready by March 18.

In our judgement the barriers presented by the IRS rules as well as Bakenhus and Weaver are insurmountable.  This is not new ground and they have tried this in one form or another three times in the past.

The issues here are complicated, so we will be addressing them in subsequent emails and web postings. You might want to take a look at what the proposed back in 2017. See our 2017 posting for more information

And, just to throw a little more oil on the fire, we have been advised that there is an effort going forward to transfer $321 million from the LEOFF II Benefit Trust to the LEOFF II Benefit Enhancement Fund.  I suspect that is why they want the LEOFF 1 money to back fill the hole that would create.

More to follow.  Be sure to stay in touch with your organization and that you inform everyone as to what is going on.  Also, make sure everyone signs up for emails at LEOFF1.Net.

Oh, you might want to let the Senator know what you think of the idea.  Kevin.VanDeWege@leg.wa.gov