April 10, 2013 in City

State looks at salary hikes

Pensions boosted by pay increases
Mike Baker Associated Press
 
For more information

Read the three-day series on public pensions in Washington state at www.spokesman.com.

OLYMPIA – Washington retirement officials said Tuesday they are examining a batch of pay raises that helped some government workers increase the values of their pensions.

Marcie Frost, the director of the Department of Retirement Systems, said the agency has started conducting reviews and collecting information on each of the cases identified in a recent Associated Press investigation. Frost said she was surprised by some of the details and wants to examine how local jurisdictions reported the pay to state officials.

“Some of the things you brought up may not have been reported to us,” Frost said in an interview Tuesday.

The old LEOFF-1 pension system for firefighters and police officers has unique provisions that largely base the value of retirement benefits on the worker’s final salary.

The AP identified late pay raises that impacted the pensions of more than a dozen workers from different parts of the state who retired into the system over the past five years, adding millions of dollars in future liabilities to the pension fund.

State rules are designed to prevent so-called “pension spiking” by prohibiting pay linked to retirement from being counted toward the pension benefit. In several of the cases identified by AP, local officials used the late pay raises to incentivize retirements.

Frost said agency staffers may eventually conduct an audit looking at the issue more broadly to see if there are other cases to examine.

In one of the examples identified in an AP investigation, fire official Greg Hull retired with a pension and later took a different fire chief position in DuPont, hired as a contractor in a way that doesn’t disrupt his pension payments. Hull now has a total annual income of more than $300,000. Frost said the department was also examining rules related to contractors.

Separately, Frost said the department is also exploring whether it makes sense to create a centralized board to handle medical claims for the system’s retirees.

That task is currently handled by dozens of local disability boards, and AP reported about how some of the local boards have approved payments for hot tubs, penile implants and hypnotic treatments for weight loss.

Boards are required to cover all “necessary medical services,” but that has expanded over the years to include eyeglasses, erectile dysfunction drugs, massage therapy, naturopathic medicine, substance abuse treatment and travel to medical facilities, including airfare.

Frost and other retirement system officials said the centralized model could be more objective, provide better medical expertise and provide uniformity.

“You have standards and consistency, not only for the employers, but also for the members,” Frost said. “They would understand what they’re eligible for.”

Frost said the department will be exploring that issue with policymakers and stakeholders, though she expected there might be some resistance to the idea. Gov. Jay Inslee has been briefed on the issues and is monitoring what the Department of Retirement Systems is doing, spokesman David Postman said.

Mark Curtis, a lobbyist with the LEOFF I Coalition, did not immediately return a call seeking comment.

The LEOFF-1 system, short for the Law Enforcement Officers’ and Fire Fighters’ Retirement System Plan 1, was closed in 1977 and replaced with a less-generous retirement plan. About 1,000 veteran public servants have retired into the LEOFF-1 system over the past decade, leaving about 200 active workers remaining.

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