Public employees’ pensions to remain whole despite pandemic furloughs
Washington Gov. Jay Inslee signed a bill into law Wednesday aimed at ensuring public employees’ retirement benefits won’t be reduced due to pandemic-related furloughs or their participation in an unemployment insurance support program.
“Our state employees have gone through a lot, like the rest of us have, in the past year,” Sen. Sam Hunt of Olympia, the bill’s prime sponsor, said in floor debate.
“They’ve seen furloughs, they’ve seen job sharing, they’ve seen working remotely and trying to adjust their whole work schedule. This bill is a little effort to level the playing field in terms of retirement benefits, so that a state employee will not receive a reduction in payments into the retirement system or have a negative impact on his or her retirement when that occurs.”
The bill was requested by the Department of Retirement Systems. According to Senate Ways & Means staff, most public employees throughout the state are covered by a pension plan through the department, with exceptions such as pension systems operated by the cities of Seattle, Tacoma, and Spokane.
The Senate passed the bill on a 29-20 vote in February and the House approved it 65-32 last month. Those who spoke to their votes against the bill emphasized that people in the private sector wouldn’t be getting the same support.
“Many, many people in the private sector suffered this year,” said Sen. Mark Schoesler, R-Ritzville. “Nobody’s gonna move their retirement date forward or backwards for them.”
Most pensions in state plans are calculated using a person’s years of service multiplied by their average final salary over what typically totals two to five years, according to staff presentations.
If a person took a 4.5% pay cut due to 12 furlough days over the course of a year, staff said, that reduction in salary — without this new law — could’ve carried through to their retirement up to five years later. Depending on how much a person’s hours were reduced, they could also be dinged on the years-of-service side of the equation.
The bill signed into law Wednesday makes it so measures such as reduced hours, temporary layoffs, furloughs, and pay reductions through mid-2023 resulting from the COVID-19 budgetary crisis won’t impact most public employees’ retirement benefits. It applies to people covered by the Public Employees, Public Safety Employees, School Employees, Teachers, Law Enforcement Officers and Fire Fighters, and Washington State Patrol retirement systems.
This piece of the law is similar to actions taken in the wake of the 2009 recession, according to staff.
“Absent this bill’s important fixes, state employees retiring in the next few years could be harmed by experiencing reduced pensions for decades during retirement,” said Phil Ferester of the Association of Washington Assistant Attorneys General in public testimony.
It makes a similar change for members of systems administered by the Department of Retirement Systems who take part in the Employment Security Department’s Unemployment Insurance Shared Work Program.
That program lets employers temporarily cut employees’ hours by up to half while they collect partial unemployment benefits. The employer has to keep providing benefits such as health care, retirement, paid vacation, and sick leave as if they are working their normal hours, according to the bill report.
The program proved to be an important tool for school districts during the pandemic, according to Julie Salvi of the Washington Education Association, so they could maintain relationships with staff and, as schools began to reopen, there were bus drivers and other staff available to keep schools running.
“We appreciate that this fix is being made so that that will be another tool in the toolbox during both this pandemic and any future economic downturn,” Salvi said.
The Shared Work piece of the bill applies into the future and retroactively to 2013.
The Department of Retirement Systems has estimated ongoing costs related to calculating benefits for impacted employees at roughly $145,000 per year, and an actuarial fiscal note shows an expected $79.5 million cost across employers over the next 25 years.
This story was originally published April 9, 2021 at 5:45 AM.
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