CHEYENNE — The history of a state retirement fund called “Fire A” offers a lesson in how not to manage a pension plan.
The first mistake is to dictate by state statute how the fund will be run, specifying the size of the annual cost of living adjustment and the benefits.
A report from the Wyoming Retirement System on Fire A said the plan’s specifics were “encased” in state statute.
This means any changes required more action by the Legislature, which often can be a difficult undertaking.
Fire A is a closed pension plan for paid firefighters hired before July 1, 1981. Firemen hired after that date are covered by Fire B plan, which has less generous benefits than Fire A.
The plan cost the state from the beginning. To make up the underfunding of Fire A between 1981 and 1996 the Legislature allocated $46.8 million.
All was well with Fire A as long as the stock market behaved. The investment income allowed increased benefits including bumping the amount for surviving spouses up tot 100 percent of a fireman’s retirement check.
When the fund became more than fully funded in 1997, the Legislature acted to terminate all employee and employer contributions into the plan, according to the Wyoming Retirement System’s report.
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Yet the overfunding continued and several benefit increases were enacted, including a three percent “escalator” or annual cost of living raises.
Beginning after the recession of 2001, Fire A, like pension funds nationally, began having problems. The woes worsened with the 2008 crash.
Today the fund is consuming its investment corporate and will be broke in about five years.
A bill to fix the problem failed to get through the 2014 Legislature. It would have allocated some one-time money from the state, reduced the escalator and resumed contributions.
The Fire A problem does not involve a lot of people.
As of Jan 1, 2021 the fund was paying benefits to 266 retirees and surviving spouses.
They receive an average benefit of $60,764 a year for life. according to the report.
Although critics say that is an unusually rich pension, firefighters are not eligible for Social Security benefits.
Today, it would cost $148 million to make the system solvent from contributions alone.
A bill to pump about $75 million into the plan was introduced in the recent special legislative session on vaccine mandates but was never considered by the full Legislature.
It would have injected $55 million in the plan plus $20 million in loans for the five cities that were employers of the Fire A firemen. It also would have blocked the automatic cost of living increase.
The bill sponsors may try again in the budget session in February.
Pat Crank, a Cheyenne attorney and former attorney general representing the pensioners, told a legislative committee recently that it said it would be “morally and legally wrong to cut benefits.”
Doing so, he told the Joint Appropriations Committee, could bring a successful lawsuit. He blamed the situation on prior legislators and “horrible mismanagement” of the fund.
Crank and others said the mess could have been avoided in 2014 if the Legislature had passed a bill then to solve the problem, but it didn’t get through because key legislators thought the stock market would solve the plan’s problems.
The retirement system recently changed the investment strategy for Fire A to more conservative fixed income funds.
Guy Cameron, a former Cheyenne firefighter for more than 32 years said that, unlike other professions, firefighting is high risk.
They supported the original pension plan in good faith, he said.
Several beneficiaries of the plan, all widows of firemen, testified during the meeting about the need for the money.
The legislators for the most part reacted with some resentment over getting stuck with a problem they didn’t create and resignation that they were obligated to bail out the plan.
They warned the pensioners at the hearing that they will have to work to help pass the bailout or it will fail.
Sen. Vice President Larry Hicks, R-Baggs, said the bailout should be a one-time expenditure.
“This is a bitter pill we have to swallow,” he said.
Joan Barron is a former capitol bureau reporter. Contact her at 307-632-2534 or firstname.lastname@example.org