Key Takeaways
- • Retired Washington police officers and firefighters, including former Congressman Dave Reichert, filed a federal class-action lawsuit in Seattle on Thursday to block a state law that would sweep nearly $4 billion from the LEOFF 1 pension surplus.
- • The law, signed this month by Gov. Bob Ferguson, terminates the overfunded account at the end of June 2029 and reinstates the fund at 110% of expected liabilities, per the Washington State Standard.
- • The state intends to use $880 million from the fund to backfill rainy day reserves and help close an estimated $2 billion budget gap in the current cycle.
- • The lawsuit argues the move violates contract clauses of the state and U.S. constitutions and leaves the fund exposed to market downturns at 110% funding.
- • If implemented, the state would be the first to terminate a public employee pension plan, and the process requires IRS approval.
Summary
Retired police officers and firefighters in Washington, including former Congressman Dave Reichert, sued the state Thursday in federal court in Seattle to block an attempt to redirect surplus from their pension fund to address ongoing budget shortfalls. The complaint, a potential class action, argues the move violates the contract clauses of the state and U.S. constitutions and that the prevailing legal position has been that money in the account can only be used for its beneficiaries.
The law, signed this month by Gov. Bob Ferguson, terminates the overfunded Law Enforcement Officers' and Firefighters' System Plan 1 (LEOFF 1) account at the end of June 2029 and then reinstates the fund at 110% of what the state expects to owe members. According to the Washington State Standard, the fund was 160% funded as of June 2024 and is projected to exceed 200% by 2029. The actuarial office expects $3.9 billion to be swept in 2029 under current assumptions, while the surplus is placed in a separate pot that could cover general state expenses. The Legislature and governor plan to use $880 million from the fund to backfill the state's rainy day account, helping to fill an estimated $2 billion budget gap. A deficit remains for lawmakers to address when they return next year.
Backers note that about 80% of plan contributions came from the state, with the remaining 20% split between local governments and workers. Bill sponsor Rep. Timm Ormsby, D-Spokane, said he does not believe the law runs afoul of any court precedent, following consultation with outside pension legal experts, and argued that the benefits employees were promised are guaranteed. The law passed on narrow margins, with some Democrats joining Republicans in opposition. A spokesperson for the state attorney general said the office had not yet fully reviewed the suit.
Steve Berman of Seattle-based Hagens Berman, representing the plaintiffs, called using the money for purposes other than benefits a "gross miscarriage of justice." The suit also warns that a 110% funding level leaves the fund vulnerable in a market downturn, since pension assets are invested across stocks and other investments managed by the Washington State Investment Board. State actuaries cautioned that the law "increases the potential of future state contributions if adverse experience occurs."
The LEOFF 1 fund has fewer than 6,000 members, of whom only a few are still working; contributions were suspended in 2000 when the account became fully funded. Reichert, a former King County sheriff who served in Congress from 2005 to 2019 and lost the 2024 gubernatorial race to Ferguson, is a lead plaintiff and said the move "almost seems like elder abuse in a way." Other plaintiffs include a retired King County sheriff's deputy, a Seattle police officer, a Seattle fire official and a Lacey officer.
When the law takes effect June 11, beneficiaries may begin suing in state court, according to Kathryn Leathers, director of the Department of Retirement Systems. Participants have until Dec. 31, 2027 to file, and claims are subject to direct review by the state Supreme Court. The state also must get IRS approval to proceed, and the department must notify every active member, retiree and spousal survivor. The federal lawsuit has not been scheduled for a hearing.
The law, signed this month by Gov. Bob Ferguson, terminates the overfunded Law Enforcement Officers' and Firefighters' System Plan 1 (LEOFF 1) account at the end of June 2029 and then reinstates the fund at 110% of what the state expects to owe members. According to the Washington State Standard, the fund was 160% funded as of June 2024 and is projected to exceed 200% by 2029. The actuarial office expects $3.9 billion to be swept in 2029 under current assumptions, while the surplus is placed in a separate pot that could cover general state expenses. The Legislature and governor plan to use $880 million from the fund to backfill the state's rainy day account, helping to fill an estimated $2 billion budget gap. A deficit remains for lawmakers to address when they return next year.
Backers note that about 80% of plan contributions came from the state, with the remaining 20% split between local governments and workers. Bill sponsor Rep. Timm Ormsby, D-Spokane, said he does not believe the law runs afoul of any court precedent, following consultation with outside pension legal experts, and argued that the benefits employees were promised are guaranteed. The law passed on narrow margins, with some Democrats joining Republicans in opposition. A spokesperson for the state attorney general said the office had not yet fully reviewed the suit.
Steve Berman of Seattle-based Hagens Berman, representing the plaintiffs, called using the money for purposes other than benefits a "gross miscarriage of justice." The suit also warns that a 110% funding level leaves the fund vulnerable in a market downturn, since pension assets are invested across stocks and other investments managed by the Washington State Investment Board. State actuaries cautioned that the law "increases the potential of future state contributions if adverse experience occurs."
The LEOFF 1 fund has fewer than 6,000 members, of whom only a few are still working; contributions were suspended in 2000 when the account became fully funded. Reichert, a former King County sheriff who served in Congress from 2005 to 2019 and lost the 2024 gubernatorial race to Ferguson, is a lead plaintiff and said the move "almost seems like elder abuse in a way." Other plaintiffs include a retired King County sheriff's deputy, a Seattle police officer, a Seattle fire official and a Lacey officer.
When the law takes effect June 11, beneficiaries may begin suing in state court, according to Kathryn Leathers, director of the Department of Retirement Systems. Participants have until Dec. 31, 2027 to file, and claims are subject to direct review by the state Supreme Court. The state also must get IRS approval to proceed, and the department must notify every active member, retiree and spousal survivor. The federal lawsuit has not been scheduled for a hearing.
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