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A bill that would end the current pension system for state employees under age 45 and forces them into a costly 401-k type of plan is costly, risky – and mean.
SB 5856 “is a gratuitous attack on the workforce whose morale is already low,” Federation Executive Director Greg Devereux told the Senate Ways and Means Committee Monday (Feb. 25).
SB 5856 mandates the new 401-k plan for all state employees in PERS 2 and 3 and PSERS 2 who are under age 45 on July 1, 2014. All new hires after that date would be forced in, too.
The Department of Retirement Systems testified that a preliminary Attorney General’s review showed “significant concern” that SB 5856 couldn’t withstand a legal challenge.
“It shifts all risk to employees…,” said Jeff Johnson, president of the Washington State Labor Council.
Johnson said SB 5856 attacks the healthiest pension fund in the country.
“We would find it unconscionable if this bill were to pass at a time when workers are struggling to come out of the Great Recession….
“It’s seen as just another attack on the middle class. This plan is an austerity measure analogous to attempts in Congress to cut Social Security….
“And what we need to be focusing on is leveraging job growth and strengthening our safety net.”
No one testified for the bill, though the Association of Washington Business supported the concept.
No fiscal note was available, but a similar bill last year was extremely costly.
George Masten, retired Federation executive director and a 21-year member of the State Investment Board, said the bill would harm all plans and retirees by cutting funds available for the investment board to invest to keep the pension fund healthy.
“These changes will bring about an unfunded status for the Plans 2 and 3 and a substantial increase in employee contributions,” Masten said.
Several Federation members voiced frontline opposition.
“To make it short and sweet, I don’t know why the state (would invest) in a plan that will actually lose money instead of making it,” said Bing Bristol, a Department of Enterprise Services member of Local 443 in Olympia.
“If you value public employees, if you value the work of government, you want to encourage careers in state government, not discourage it,” said Steve Segal, a DSHS member of Local 443.