Board weighs LEOFF 1 restatement, surplus transfer and studies as members press protections for Plan 2
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Summary
Board staff summarized legislation that restates LEOFF Plan 1 effective 2029, funds the restated system at 110% (retaining roughly $3.8 billion) and would deposit about $3.5 billion into a pension surplus holding account; the Select Committee on Pension Policy was directed to study governance and state assumption of administration, and the board was assigned a study on enrolling DNR wildland firefighters in LEOFF 2.
Board staff briefed trustees on several major legislative items arising from the recently concluded session, including a restatement and termination package for LEOFF Plan 1 that carries substantial fiscal and governance implications.
Jacob told the board the legislation (as read to the board) terminates LEOFF Plan 1 and creates a restated system effective June 2029 with identical pension benefits. "Looking at the fiscal note, the current value of LEOFF 1 is around $7,000,000,000," Jacob said, and under the bill the restated system would retain roughly 110 percent funding while depositing the remaining roughly $3.5 billion into a pension surplus holding account that could be transferred to the state general fund in the future. He added the bill was amended from earlier versions that would have placed about $0.5 billion into a climate fund.
The bill also directed the Select Committee on Pension Policy to complete two studies, Jacob said: one examining governance (including whether governance should be with the LEOFF 2 board or remain with the Select Committee) and a second evaluating options for the state to assume pension board administration and associated financial liability. The studies are due to the legislature by December 31, 2028; Jacob said the board will assist the Select Committee as requested and that DRS and the Office of the State Actuary (OSA) will provide data and support.
A board member raised strong objections, warning that the state's action on LEOFF 1 shows how surplus funds can be redirected and asking whether local employers would be reimbursed for historical employer/employee contributions. "I don't want them to think there's an open pocketbook that anytime they want, they can reach in and start grabbing money," the member said, arguing the board should act to protect Plan 2.
Jacob replied that committee hearings demonstrated more interest in examining employer contributions and local medical boards, and that the board's funding policy — including mechanisms to reduce contribution inflows as funding rises above targets — is one measure to reduce risk. He added a law firm has announced an intent to file suit challenging the legislation and staff will monitor that closely.
Separately, Jacob said the final budget included a direction for the LEOFF 2 board to study enrolling Department of Natural Resources (DNR) wildland firefighters in LEOFF 2. The study will seek data from DNR, DRS and OSA, consider definitions of full‑time firefighter status, solicit stakeholder input, and report back to the legislature with cost and implementation recommendations.
Board members asked about the board's practical role in the governance study; Jacob said the board will participate at the administrative level, provide data and assistance to Select Committee staff, attend Select Committee meetings and update the board as the Select Committee's work proceeds.
