March 16, 2007 

OLYMPIA - Public employees and teachers taking early retirement will benefit from a bill introduced in the House of Representatives today by Rep. Bill Fromhold (D-Vancouver) that will also save millions of dollars in funding for state pension plans.

Under House Bill 2391, co-sponsored by  Rep. Steve Conway (D-Tacoma),  the savings would come from eliminating the drain on the retirement plans caused by gain- sharing.

The state’s pension systems are funded by employer and employee contributions as well as investment income earned on those pension funds. When the gain in the average investment income is greater than 10 percent over a four-year period, half of the exceptional gain is used to increase pension benefits and the other half is used to more rapidly pay off unfunded liabilities in the Public Employees and Teachers retirement systems.

It was originally thought that gain-sharing would have no cost to the state pension system but the State Actuary has determined that  more money is needed to sustain the pension system. The retirement plans need the income from periods of high returns to balance periods of low returns. Under the Fromhold-Conway bill, public employees, teachers and current retirees will give up gain-sharing after a last  distribution in 2008 in exchange for increased cost-of-living adjustments and  improved early retirement benefits.

“We have been working for three years on constructing a viable package of trade-offs to replace gain share and reduce the long-term pension debt of the state,” Fromhold said. “This proposal treats employees fairly for the enhanced early retirement and at the same time reduces the state’s liability by $92 million this biennium and reduces the state’s long term Plans 1 unfunded debt by almost 20 percent.”

Changes in public employee retirement plans under HB 1765  include:

Gain-sharing

• Allows the 2008 gain-sharing distribution to occur (provides over $700 million in projected benefit increases)

• Eliminates gain-sharing for all employees after the 2008 distribution

 Current retirees

• Provides up to a 13 - cent increase in cost-of-living adjustments for current retirees beginning on July 1, 2009.

 Current public employees

• Improves early retirement benefits for those retiring after age 55 with at least 30 years of service.

Examples:

-- A public employee retiring at age 56 could collect 83 percent of his or her retirement benefits compared to 73 percent now.

-- A public employee retiring at age 60 could collect 95 percent of his or her retirement benefits compared to 85 percent now. 

• Provides a choice of  Retirement Plan 2 or Retirement Plan 3 at the time of hiring  for new members of the Teacher Retirement System and the School Employees Retirement System.

 # # #

Contact: Rep. Bill Fromhold (360) 786-7924

Media Staff Contact: Jennifer Zahn Spieler (360) 786-7201 

Link to Rep. Fromhold’s website and print-quality image:

http://www.housedemocrats.wa.gov/members/fromhold/

Radio and TV News Directors:  To obtain broadcast-quality audio on this issue, or to arrange for TV or radio interviews, please contact Caucus Broadcast Coordinator Dan Frizzell at frizzell_da@leg.wa.gov or (360) 786-7208.