Governor Proposes Gain-Sharing Changes

The Select Committee on Pension Policy (SCPP) did not take action in December to recommend legislation to address the liability associated with future pension gain-sharing benefits, waiting instead to see what course of action Governor Gregoire would advance in her budget.

The Governor addressed the issue directly in her proposed budget for the 2007-09 biennium – providing for one final gain-sharing distribution, which would take place in 2008. Instead of further gain-sharing payments, Plan 1 members would receive an additional $0.05 increase in their Uniform COLA Amount, and Plan 3 members would be eligible to use their defined contributions to purchase a two percent benefit formula. The gain-sharing revisions would impact Plans 1 and 3 of the retirement systems for public employees, teachers, and school employees.

The impact of this proposal on employer contribution rates has not yet been released. We expect the Office of the State Actuary to prepare a fiscal note soon, and we will provide additional information in future issues of the Bulletin.

The Governor’s proposal is in line with AWC’s position on gain-sharing, which was adopted by the AWC Board in December. We appreciate her leadership on this very controversial issue and will work with her office and the Legislature to advance the proposal. Many legislators have already indicated the Governor’s proposal does not do enough for employees and significant changes will be advanced. This will be one of the hottest issues of the session and we will keep you posted.

LEOFF 1 Medical Costs

The Governor’s budget also includes $25,000 for the State Actuary to perform an actuarial study of local government liabilities for LEOFF 1 retiree medical and long-term care costs. The purpose of the study will be to help local governments estimate their individual future liability, both for GASB 45 reporting purposes and to adequately prepare for funding the liability.

Under GASB 45, cities, counties and fire districts will need to begin reporting this liability on their financial statements, starting this year for the largest jurisdictions.

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