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Thursday, April 18, 2013 - Page updated at 09:00 p.m.

Senators seek changes in pension, medical costs

The Associated Press

OLYMPIA — Washington state senators proposed changes Wednesday in how government handles retiree medical benefits and pension costs, responding to an Associated Press investigation that documented problems with pre-retirement pay spikes and post-retirement health costs.

Under a bill sponsored by six senators, lawmakers would develop a voluntary risk pool for local governments to help manage the medical costs of the retirees in an old pension system called LEOFF-1. Local jurisdictions are required to pay for all the medical expenses of their LEOFF-1 retirees, and The AP reported on how some government budgets were being overwhelmed by the unpredictable and dramatic costs of long-term care.

In one case identified by The AP earlier this month, the small city of McCleary, Grays Harbor County, was paying $90,000 a year for a single retiree who had in-home care. That is $129 for every household in the city.

“We know that there’s going to be more issues as people age,” said Republican Sen. Barbara Bailey, one of the bill’s sponsors.

The measure would have the state work to develop rules to allow local governments to buy into the insurance risk pool.

Separately, the bill would create more stringent rules to prevent government workers from boosting the values of their pensions with late changes in their compensation. The AP reported on cases in the LEOFF-1 system in which some fire and law-enforcement officials boosted their pension values with substantial raises just a few days before retirement.

LEOFF-1 has a unique set of rules unlike any of the other pension systems, and state retirement officials recently said they are working to review each of the pay raises that The AP investigation identified to see if any of the compensation changes were in violation of pension rules. Bailey’s bill would target ways that workers can boost retirement benefits in the other pension systems, such as by working a lot of overtime in the months close to retirement.

Under the bill, the state would focus on workers who have more than a 25 percent jump in special payments — such as overtime, bonuses or cash-outs — during the years that determine their pension value. If any workers have an increase beyond that threshold, their employer would have to pay the retirement system the projected value of the extra pension benefit.

Senators plan a hearing on the bill Thursday. The Legislature is supposed to complete its work before the end of the month and is already entering final budget negotiations, but Bailey said the bill would be a late priority for lawmakers.

“It’s good sound policy for the future,” Bailey said.

Democratic Sen. Mark Mullet, who previously served on the Issaquah City Council and as a board member at Eastside Fire & Rescue in King County, said he hadn’t seen the details of the legislation, but the effort sounded like a promising effort to fix problems in the system.

“I think both are good policy fixes,” Mullet said.

Since The AP investigation, the state Department of Retirement Systems has been working to review some of the late raises to assess whether they were valid for pension calculations. Retirement officials said they also want to explore whether it makes sense to have a statewide board to handle medical claims, responding to The AP’s findings that a network of local boards had approved payments for hot tubs, penile implants and hypnotic treatments for weight loss.

LEOFF-1 is short for the Law Enforcement Officers’ and Fire Fighters’ Retirement System Plan 1. The system was closed to new members in 1977. About 1,000 veteran firefighters and law-enforcement workers have retired into the system over the past decade.

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