State firefighter pension plan faces depletion in five years
SHERIDAN — A Wyoming Retirement System plan currently serving 273 retirees and their beneficiaries, including 25 from Sheridan, will likely be exhausted sometime in 2026, according to the Wyoming Retirement System.
A fix is still possible, according to the city of Sheridan’s Human Resources Manager Heather Doke, but it will require the state and contributing cities and counties to provide millions of dollars in funding over the next 15 to 20 years.
Doke said the city is willing to pay that price to keep its commitment to the city’s employees and their beneficiaries.
“To us, letting that fund go under is just not an option,” Doke said. “Again, these employees worked for this.”
The Wyoming Retirement System’s Fire A Pension Plan is a plan for paid firefighters hired before July 1, 1981. All subsequent hires have been placed in a Fire B Pension Plan, which has reduced benefits compared to the A plan.
Six cities, two counties and one county airport currently have employees covered by the A plan in the state. With 25 people covered by the plan, the city of Sheridan has 8.6 percent of the state’s retirees and beneficiaries. The cities of Casper, Cheyenne, Laramie and Rock Springs have 97, 67, 37 and 28 people covered by the plan, respectively.
On average, those covered by the plan — including 200 retirees and 72 beneficiaries statewide — receive an average benefit of $60,764, according to the Wyoming Retirement System. Retirees receive a monthly benefit for life, according to Doke, and that benefit is passed onto their beneficiaries after death. There is also a 3-percent cost of living adjustment to the benefits each year.
“This is a really rich benefit plan,” Doke said. “I don’t know of any retirement plan that remotely gets close to what the benefits are for this plan.”
The plan is currently 41-percent funded with $97.96 million. If the plan was 100-percent funded, it would sit around $236.90 million.
Back in 1997, the plan was deemed to be fully funded, and the Legislature terminated all employee and employer contributions into the plan. With the dollars invested in the stock market, it was expected the plan could sustain itself, Doke said.
However, the fund began to experience problems after the 2001 recession, when the plan dropped from being 147-percent funded to 95-percent funded in just one year. The account saw another sizable drop after the recession in 2008, when it dropped from being 106-percent funded to 84-percent funded from 2008 to 2009.
Since 2010, the pension plan has lost money every single year. In a Dec. 13, 2020 letter, Tom Chapman, board chairman for the Wyoming Retirement System, informed plan participants the remaining A plan assets would be invested in a more conservative fixed income strategy to avoid the effect of sudden crashes in the market, which could easily bankrupt the plan.
“The Board believes that such a conservative strategy is prudent because the Fire A assets continue to decline and are projected to be exhausted in approximately five years,” Chapman wrote. “The shortening time horizon means that Fire A is increasingly exposed to sudden failure in the event of a severe market decline. While the more conservative asset allocation will only produce modest investment gains, the action will protect the Fire A funds from such a decline and fairly accurately predict the failure date.”
With the impending failure of the plan in 2026, the state legislature will need to forward legislation addressing the plan’s funding, according to Chapman. The Wyoming Retirement System is unable to adjust benefits or require contributions themselves because these elements are set in state statute.
Potential legislation could make changes to the plan’s benefits and earmark contributions from the state and contributing cities and counties to make the plan whole, Doke said. The last legislative attempt to address the problem was House Bill 51 in the 2014 session. That bill featured some one-time money from the state, a reduction in the cost-of-living adjustment benefit escalator and resumed contributions to the plan from cities and towns. It passed the House, but failed in the Senate.
A fix for Pension Plan A is being recommended as a legislative interim topic by the Wyoming Association of Municipalities and the Wyoming Retirement System, Doke said. The hope is to prepare new legislation for consideration by the 2022 legislative session.
Doke told city councilors they should expect to pay into the program as part of a legislative fix.
“The reason I’m showing this to you is this is coming for us,” Doke said. ”We know it’s coming for us. So when we do the budget this year, we’re going to want to start putting money away so we’re able to pay what we know is coming…In our budget this year, we are going to start putting money away. We don’t know what that’s going to look like, but we know it’s going to happen, and we know it needs to happen.”
The amount required from the city of Sheridan will be dependent on a variety of factors to be determined in the legislation, including whether changes are made to the plan’s benefits and how much the state chooses to contribute to the plan, Doke said. But in three potential scenarios presented to Sheridan City Council last week, Doke said the city could pay anywhere from $149,000 to $725,000 per year, for a term of 15 to 20 years, into the plan.
In addition to putting money aside, Doke recommended city councilors be actively involved in the development of legislation this interim session, and let legislators know the plan, while important, can’t be funded entirely through the contributions of cities and counties.
“When these meetings come up… we are going to ask you to contact our legislators and say ‘Hey, we understand it’s in a bad situation, and we’re willing to be part of the solution, but we can’t be the whole solution,’” Doke said. “We just can’t afford it.”
City Councilor Steven Brantz said the city was on top of the issue and would fight for the benefits of those covered by the plan.
“Myself, I worked 35 years under the Wyoming Retirement System, and when you work (under that system), you work for your salary, but you also work for your retirement,” Brantz said. “That was one of the things that always kept me at the job: the retirement. The last thing we want is any of our employees stressing out about retirement.”
Doke said she looked forward to working with the state and the Wyoming Retirement System to find a solution to the issue.
“It’s going to take everybody working together to be able to do this, to make it happen so this fund doesn’t go under,” Doke said.