WA State Legislature Trying To Clean Pension Mess

February 28, 2003 (PLANSPONSOR.com) - Washington state's legislature is taking on Initiative 790 (I-790) to correct a drastic increase in workers' contributions.

The Legislature is working on a two-thirds majority vote required by the state’s Constitution to amend an initiative earlier than two years since its passage.   The issues arose following voter approval of an initiative intended to help retirees receive a large pension check.   What resulted were much higher contributions from current employees, according to a report by the Seattle Times.

I-790 Comes Along

Washington had been paying 30-year employees 60% of their working pay upon retirement. During the stock market run-up in the late 1990s, participants in the plan became angry that their pockets were not going to be lined with the bounty of the investment feast.   Instead proceeds were used to dramatically lower employer-employee contributions and to feed the state general fund.

Along came I-790, approved by the electorate in November 2002, which captured the frustration in a vague but expensive sentence, regarding the Law Enforcement Officers and Fire Fighters Plan 2: “All earnings of the trust in excess of the actuarially assumed rate of investment return shall be used exclusively for additional benefits for members and beneficiaries.”

This cryptic message led to an entirely new benefit being created for retirees, despite the repeated denials made by supporters of the initiative prior to the vote. However, even more misunderstood were the sudden new obligations working members now had to face.

I-790 doled out a raise for retirees, but it never said if the increase would fatten annuities or be paid in a lump sum, or how often the gains would be disbursed. The expensive consequences for the membership apparently blew right by drafters leading to contribution rates that had to be increased to pay for the sudden retiree windfall, among them:

  • Police and firefighters an additional 26%
  • Local public employers an added 16%
  • The state more by 10%.