By Wendy Giroux
Benefits for members of an old state retirement system for firefighters and police could cost the city as much $803,000 per year by 2023.
Finance Director Joanne Sylvis presented the City Council last week with that figure and other results of an actuarial study about the firefighter’s pension fund and LEOFF 1 plan.
The LEOFF 1 system, which stands for Law Enforcement Officers and Firefighters plan 1, states that cities are responsible for paying for medical costs and benefits for life for employees hired between 1970 and 1977. The city has 36 retirees in the system and four employees still working who will qualify upon retirement.
“We do not have to fund immediately, but we do have to list it on our books as a liability,” Sylvis said of the $829,000.
So far, the city has been paying for the benefits on an as-needed basis. But as more members have retired, the costs have become a larger portion of the city’s total benefits fund.
Medical costs for retirees totaled about $300,000 in 2003, or about 11 percent of the total $2.5 million spent on benefits, Sylvis said.
According to the actuarial by Milliman USA, the present value of future medical benefits for the retirees is estimated at $7.3 million, with long-term care costs estimated at an additional $1.1 million.
The grand total of pension, medical and long-term care costs is estimated at $430,000 for 2004, and climbs to $803,000 by 2023.
The city has several options for financing the expected costs, Sylvis said. Officials can opt to continue on a “pay-as-you-go” basis; or fund pension costs from surplus cash but pay medical costs on a “pay-as-you-go” basis; or determine some sort of long-term funding strategy.
“I think it’s irresponsible of us not to start dealing with it now and leave it for future councils,” Councilman Jim Pearman said.
Council members indicated last week they would like to study the issue in further detail at their next City Council retreat, which will occur in the next few months.
“My initial thought is we set a priority that at the end of the year any surplus funds go into a new LEOFF1 account,” Councilman Steve Litzow said.
The issue affects cities and counties statewide. The Association of Washington Cities has approached the Legislature for assistance and continues to lobby for some sort of legislative fix. City Manager Rich Conrad said that there is also a strong contingent lobbying the Legislature against any changes.
According to the AWC, a study in 2000 estimated local governments’ liability at well over $800 million.
