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Editorial: State must end abuses in pension system

Sat., April 13, 2013

In the final installment of Associated Press reporter Mike Baker’s excellent investigation into the abuses of the state’s oldest pension system, Marcie Frost, the director of the Department of Retirement Systems, says, “Some of the things you brought up may not have been reported to us.”

Now that her agency has been apprised, it needs to act – and swiftly.

Baker’s investigation found government workers gaming the LEOFF-1 system. LEOFF-1 was a lavish pension system for firefighters and law enforcement officers that was mercifully discontinued in 1977 and replaced with a more reasonable plan for newer workers. Along with monthly checks, pensioners under LEOFF-1 also get gold-plated health care coverage.

Under its peculiar rules, LEOFF-1 payouts are based on a worker’s final salary. Baker identified late raises of more than a dozen workers that will cost the system millions of dollars in the long run. For instance, two managers at a Lakewood fire department got $17,000 raises just four days before they retired; a third manager got a big raise 13 weeks before retirement. All three ended up with an annual salary of around $200,000. Some city councils offer raises as incentives for early retirement, which helps them with their budgets but saddles the pension system with huge additional costs.

But local governments don’t escape entirely, because actuarial studies show that the long-term health care costs of LEOFF-1 retirees are going to rise 250 percent in the next 20 years, leaving an unfunded liability of $1.8 billion. Under LEOFF-1, medical costs are borne by municipalities.

Another peculiar feature of the system is that local boards staffed in part by former firefighters and police officers determine who qualifies for medical services and disability status. Applicants need only prove that their requests are “medically necessary,” and the local boards are quite liberal in their interpretations. Retirees have been granted penile implants, massage therapy and substance abuse treatments. Somewhere along the way, dental care was added as a benefit.

Disability status is ridiculously easy to achieve, with more than 88 percent of Seattle Fire Department retirees under LEOFF-1 achieving that designation. One of them is a near-scratch golfer; another delivers refrigerators. Under the newer system, only 5 percent of Seattle firefighters are on disability.

Government officials long ago made these deals and would be sued if they tried to renege, so there isn’t much hope of clawing back this money. However, Frost, the pension system director, says she may call for an audit to unearth any wrongdoing. She should. “Pension-spiking” (granting late-career raises) is against the law. Also, the local boards need to be disbanded. There’s no reason health care and disability requests can’t be handled by the same independent panels that review the claims of other state workers.

Though the dollar savings may not be huge, it is critical that the state put an end to the manipulation of the retirement system. It’s not only wrong on its face, but it feeds the perception that honorable government functions are also being compromised.