Senator’s proposal would move state employees to 401(k) plans

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OLYMPIA — After Boeing’s successful campaign to pressure Machinists into surrendering their pensions, some state lawmakers are renewing calls to phase out public-employee pensions, too.

Taking a page from Boeing’s playbook, state Sen. Doug Ericksen, R-Ferndale, plans to introduce legislation today that would offer a $10,000 incentive to state workers who agree to move from the state pension system into a 401(k)-style retirement package.

“If it’s good enough for Boeing, it should be good enough for the employees of Washington state,” Ericksen said. His plan would end pensions for new state hires in addition to offering the incentive to current workers.

Legislation to curtail public pensions is unlikely to pass in the 60-day legislative session that begins today. Top Democrats say the state pension system is in good shape and that they’ll oppose any move to end pensions.

But Ericksen and others argue that the Boeing deal — which prominent Democrats including Gov. Jay Inslee pushed Machinists to vote on — should stir a long-term debate on the state’s own benefit offerings.

Boeing is paying a $10,000 signing bonus to 31,000 Machinists in Washington this month as part of the controversial contract extension that guarantees assembly of the 777X in Washington but replaces the Machinists’ cherished pensions with a 401(k)-style defined-contribution plan.

Ericksen’s proposal for state employees is more a pilot project.

It would cap the state’s costs for the $10,000 incentive payments at $20 million — meaning only 2,000 employees could receive payments for moving off pensions in the next year.

The proposal also would apply only to workers in the state’s Public Employees Retirement System (PERS).

Other public employees, including teachers and State Patrol officers, have separate pension plans that would not be affected.

But state lawmakers would be affected. The proposal would move legislators off the state pension system and into 401(k) plans after each member’s next election, Ericksen said.

House Majority Leader Pat Sullivan, D-Covington, and Senate Democratic Leader Sharon Nelson, D-Maury Island, said the state has a healthy pension system, with unfunded liabilities in only a couple of long-closed pension plans.

They added that lawmakers have made several changes in recent years to reduce costs, such as eliminating automatic pension cost-of-living raises.

“I don’t think anybody can say with a straight face that we haven’t done a responsible job in funding our pension system, but also making changes to make sure it’s healthy,” Sullivan said.

Inslee also said he’d oppose efforts to go after public pensions.

Tim Welch, a spokesman for the Washington Federation of State Employees, said there is no financial need to end public pensions, calling efforts to do so “a mean and nasty effort to harm public employees.”

If anything, Welch said, pensions enjoyed by public employees should be restored to the private sector, because 401(k) plans were never meant to provide a secure retirement for average workers.

But state Senate Majority Leader Rodney Tom predicted it would be difficult for the state to sell tax increases for schools or roads if public employees continue to hold on to pensions unavailable to most workers.

“I think that’s where we’re at — that’s where the private sector is at,” said Tom, a Medina Democrat who joined Republicans and one other Democrat last year to form a majority coalition in the state Senate.

Tom proposed legislation last year that would have moved newly hired state workers, as well as current employees under the age of 45, to a 401(k) plan. The legislation didn’t go anywhere.

An alternative bill to make a 401(k) optional for all new state workers passed the state Senate but died without a hearing in the Democrat-controlled state House.

While public pension systems in some states are in bad shape, Washington’s is considered comparatively healthy.

A 2012 study by the Pew Center on the States ranked Washington’s pension system among the top four states nationally — with 95 percent of its pension liability funded.

While the state’s current pension-plan funds are considered secure by the state actuary’s office, two long-closed state pension plans have an unfunded liability of about $5.7 billion.

But some lawmakers and critics argue that the state’s actual debt could prove much higher if the pension systems’ investments don’t achieve their assumed 8 percent rate of return.

There are 144,000 retired state workers who receive annual pensions averaging about $21,000 a year, according to the actuary’s office.

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