Board tables consideration of requiring employer 457 contributions for rehired retirees

The LEOFF Plan 2 Board discussed on July 23 whether employers should be required to pay deferred-compensation (457) contributions when hiring LEOFF Plan 2 retirees into non-LEOFF positions. After extended discussion about administrative complexity, IRS limits and potential hiring incentives, the board voted to table the item.

Board staff explained the issue: under the state'endorsed Career Choice legislation, a LEOFF Plan 2 retiree returning to work in a non-LEOFF position can either (1) continue receiving LEOFF retirement benefits and be prohibited from joining the new plan, or (2) enter the new plan, make contributions and have their LEOFF benefits suspended while employed. Representative Burnett had proposed studying a requirement that employers instead make contributions equivalent to what they would have paid into the new plan into the employee'controlled 457 deferred-compensation account.

Staff identified several complications, including IRS annual limits on employer contributions to 457 plans (IRS limits on employer contributions do not increase with catch-up provisions), variation in employer-offered deferred-compensation plans, and the possibility of unintended consequences for hireability and employer incentives. Staff also reported the Select Committee on Pension Policy (SCPP) was not taking up the concept at this time.

After discussion that included concerns about policing employer hiring incentives and the proper jurisdiction for such a policy, a motion to table the item was adopted by voice vote. The board directed staff to inform Representative Burnett of the board's action and continue communications as needed.