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Board briefed on overtime trends and excess-compensation limits; motion to take no further action adopted
Summary
An educational briefing found limited statewide overtime data, signs of increased hours among some LEOFF Plan 2 members, and data and administrative limits on enforcing excess-compensation rules. The board moved to take no further action on the issue.
The LEOFF Plan 2 board received an educational briefing on Sept. 24 about overtime use and the risk that sustained overtime could raise members'average final compensation and pension costs. Staff concluded statewide data are limited; DRS receives monthly hours and earnable compensation but not hourly rates, and the board voted to take no further action on the item.
Jacob White, staff to the board, told trustees there is no comprehensive statewide data feed of overtime paid to employers. "DRS does not receive overtime data from employers," White said. "There's no available data source for statewide data on overtime. What DRS does receive is the total number of hours worked and the earnable compensation."
Why it matters: If overtime or other pay items cause a member's final-average compensation (AFC) to be substantially higher in the AFC period than before, the plan could face greater-than-expected liability. State statute and policy create disincentives for such manipulation through excess-compensation rules, but administration and enforcement are data-limited.
What the briefing covered
White reviewed the 2012 Washington State Institute for Public Policy study and noted labor-market changes since then. The 2012 study found a small fraction (about 3%) of employees showed substantially higher hours late in career, but White said recent staffing shortages in law enforcement and fire departments nationwide may be changing overtime patterns.
White showed DRS raw data and described how mean hours worked by age rose during early- and mid-career and then leveled off near about age 40. He also said the share of members working more than 3,000 hours per year (roughly 58 hours per week) rose in recent reporting, and the share of members working more than 4,000 hours (about 77 hours per week) ticked up in 2024.
Data and enforcement limits
White emphasized data limitations: DRS receives total hours and earnable compensation sent by employers for service-credit calculations, but not hourly pay rates or consistent detail about overtime categories. That limits DRS' ability to identify excess compensation quickly and requires case-by-case employer follow-up and review of bargaining agreements when DRS pursues excess-compensation billings.
White noted the federal qualified-plan compensation cap for 2025 is $350,000 and that Washington law provides an excess-compensation mechanism that can require employers to pay the pension liability increase when a retiree's pensionable income exceeds statutory thresholds.
Board action
After discussion and member comments that highlighted staffing shortages, collective-bargaining practices and structural drivers of overtime, a board member moved and another seconded a motion that no further action was required on the item. The board adopted the motion by voice vote.
