November SCPP Meeting Report

November SCPP Meeting Report

SCPP Meeting 11/15/2016

The SCPP met on Tuesday November 15, 2016 to consider the final draft report on the LEOFF 1/TRS 1 Merger Study. This was a long meeting and included presentations from the State Actuary, the Attorney General’s Office, the law firm of Ice Miller and Steve Nelson of the LEOFF 2 Board. Additionally there was a review of some of the presentations made earlier in this process.

The meeting was broadcast on TVW, so if you want to see it you can view the video at http://www.tvw.org/watch/?eventID=2016111042. The Merger Study portion begins at about 36 minutes and 30 seconds into the video.

The documents presented at this meeting are available at https://app.leg.wa.gov/CMD/document.aspx?agency=6&year=2016&cid=-4&mid=26503&hid=195806 and at links on our links page and in the articles.

It appears that the study is almost complete. We have provided links to all of the major documents on which this study will be based.

We anticipate that the final study which will be presented for approval by the SCPP will be simply a compilation of those documents with some additional comments and analysis but will not be significantly different from what is already available.

You can view those documents at http://www.leoff1.net/articles/449/1/Merger-Study-Links/Page1.html. (Note that there are two pages of links and that we will shortly be placing the most important documents under one heading.)

The final report will be approved at the SCPP meeting of December 13, 2016. The committee promises the final report will be available before that date, but no date has been set. You can check the SCPP website at http://leg.wa.gov/SCPP. LEOFF1.Net will be publishing that document as soon as it becomes available.

In the meantime we believe you can build a pretty good draft version from the material presented at the last meeting.

Our Take

The overall impression we get from attending this meeting and reviewing all the important documents is that each attempt to review the study simply produces more complications. This merger concept is manifestly more complicated that ever envisioned by those who put it forward. They should have known – they have been working on it for over three years. As you review the documents you will note that they fail to deal with the “exclusive benefit” rule. The analysis of Ice Miller only looks at that rule for the plan after the merger. More about this later but it is important to remember that Ice Miller’s review and analysis deals only with the IRS legality of the merged plan and does not address the legal issues around moving a healthy fund into a fund already in deficit.

All in all, this meeting was informative.  It demonstrated the complexity of the proposal with even new issues.  Senator Steve Conway did an excellent job of chairing the meeting.  He asked some interesting and telling questions that in my judgement further demonstrated the problems with the merger.

How to Update Yourself

I would strongly suggest you carefully read the document produced by Steve Nelson of the LEOFF 2 Board. We disagree with him on some points and the reader needs to remember that the point of his document is a review of a possible LEOFF 1/LEOFF 2 merger.

That said, he does the best job of explaining how these pension systems are organized and how they came about. It is a good way to educate yourself to the subject and the terms used.

The next step would be to read the latest merger document at  http://leg.wa.gov/SCPP/Publications/Documents/11-16DraftReport.pdf . This is a large document but it includes everything presented at the meeting and is the latest available information from the SCPP.  Some duplications here as the Steve Nelson report is a part of this document.

Then read the latest Ice Miller report at http://leoff1.net/pdf/2016_1115_IceMiller.pdf. It is important to remember that Ice Miller is not addressing the greater legal issues, but rather is just trying to determine the likelihood that a merged LEOFF1/TRS1 system would be tax qualified. And, yes it probably would be but that does not mean the merger is legal.

Finally, read our blog about the meeting and merger. This is where we discuss the meaning of this information. Since a lot of the information in this discussion represents our understanding of the issues and how the legal and political issues impact the merger we have decided to keep this analysis in the blog format. See the blog at http://www.leoff1.net/blogs/66/Pandoras-Box-and-the-Merger.html. (The blog is currently being written and should be up sometime Thursday)

What you should do

Of course you should educate yourself by reading the material listed above. Be sure to look at the blog posts from time to time as we will update the information with any new developments.

Most importantly, make a personal contact with your senators and representatives and ask them to oppose any merger of LEOFF 1 with any other system. The more personal the contact the better chance of getting a commitment. This will prove very important if we have to fight this bill in the next legislative session.

The next meeting of the SCPP
Pension Policy, Select Committee – 12/13/2016 10:00 a.m.
Full Committee
House Hearing Rm A
John L. O’Brien Building
Olympia, WA REVISED ON 11/29/2016 AT 4:22 PM

1.    Approval of Minutes.
2.    Risk Assessment Update.
3.    Plans 1 COLA (Work Session).
4.    PSERS Membership: Definition of “Full Time” (Public Hearing with Possible Executive Session).
5.    Merger Study: Final Report (Public Hearing with Possible Executive Session).
6.    PSERS Membership: Nursing, Custody, and Safety (Public Hearing with Possible Executive Session).
7.    WSPRS Proposal (Public Hearing with Possible Executive Session).
8.    Plan Membership Default (Public Hearing with Possible Executive Session).
9.    Age-Based Plan Opt-Out (Public Hearing with Possible Executive Session).
10.    Interim Review and Session Prep (Work Session).

For further details, please visit the SCPP web site. Meeting start time subject to change depending on the needs of the committee.