LEFT‑1 study continues; agencies provide mixed responses on merger and asset‑reversion bills

Committee staff summarized progress on the ongoing study of the Law Enforcement and Fire Fighters Plan 1 (LE F‑1). Staff said a working draft of the study is available to members but that the office is waiting for additional agency analysis before issuing a final draft.

Staff reported that the Department of Retirement Systems (DRS) said both bills under consideration could be administered but that the merger bill (Senate Bill 50‑85) presents the largest operational challenge, especially the COLA “banking” provision and legacy data requiring programming changes. DRS requested flexibility—one‑time COLAs administered until a new computer release in 2027 would allow full programming of ongoing COLA rules.

The State Treasurer’s office advised caution on both major bills but said it preferred the merger bill (SB 50‑85) to the restatement bill (HB 20‑34). The Treasurer’s office’s chief concern with HB 20‑34 was that it would remove assets from the common trust fund (CTF) and use one‑time funds to address long‑term liabilities, producing potential reversion and transaction costs. The State Investment Board (SIB) said removing assets from the CTF (as in the restatement proposal) would require advanced planning and would incur transaction costs; SIB said the proportional impact would likely be small because LEFT‑1 assets are a small share of the CTF. SIB noted no expected investment or operational impacts from the merger bill because the funds would stay in the CTF.

Staff said they have received final responses from DRS, OST and SIB. The Office of the Attorney General’s formal response and an updated memorandum from Ice Miller (special tax counsel) were outstanding but expected; staff said Ice Miller had agreed to participate in the committee’s October meeting by Zoom. Staff also reported they had submitted follow‑up questions to Ice Miller because the firm’s initial memo echoed a 2016 opinion and did not address several committee questions.

Committee members noted the interaction with recent legislation (SB 53‑57) that altered the timing of state UAL (unfunded actuarial liability) payments and warned that enacted funding changes could affect any fiscal analysis of LEFT‑1 legislation. Staff confirmed they will publish the remaining agency responses and a near-final study draft for the committee’s October meeting and that Ice Miller will be available to answer questions.

Public commenters and several committee members raised legal and tax concerns about proposals that would transfer or repurpose LEFT‑1 assets. A private-letter ruling (PLR) submitted by a stakeholder to committee staff was mentioned; staff confirmed the PLR had been submitted to Ice Miller for consideration and that the committee had requested Ice Miller appear in October.