PENSIONS ‑- RETIREMENT ‑- CITIES AND TOWNS ‑- POLICE ‑- FIREMEN ‑- LEOFF ‑- USE OF MUNICIPAL FIREMEN'S PENSION FUND
(1) Monies in a prior municipal firemen's pension fund may now lawfully be used for the payment of service retirement, disability retirement and other pension benefits to qualified members of the former paid firemen's pension system and, as well, for the payment of hospitalization costs and other medical expenses incurred by firefighters covered by the Law Enforcement Officers' and Fire Fighters' System Plan I.
(2) Monies in a prior municipal firemen's pension fund may not, under existing law, be transferred to the city, town or district's current expense fund merely on the basis of an actuarial report that the pension fund contains monies in excess of the estimated needs of the applicable pension program; however, the legislature could amend the law to authorize such transfers.
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March 19, 1981
Honorable Eleanor Lee
State Sen., 33rd District
105 Institutions Building
Olympia, Washington 98504 Cite as: AGLO 1981 No. 7
Dear Senator Lee:
By recent letter you made reference to a municipal firemen's pension fund created some years ago by a certain King County fire protection district in connection with its establishment of a paid firemen's pension system under chapter 41.18 RCW. You then explained that because of the creation of the Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) in 1970, the amount of money in that fund now is estimated to be in excess of its potential liabilities. Accordingly, you asked for our opinion on the following questions:
1. For what purpose may monies held in a pension fund established under the provisions of RCW 41.18 be used.
[[Orig. Op. Page 2]]
2. At such time as there are no longer firefighters in the district, either active or retired, who are members of the firemen's pension fund, what disposition may be made of the balance of the pension fund?
3. If a qualified actuary establishes that the pension fund now contains an excess of funds, over and above those funds estimated to be needed to meet the requirements of the potential liability of the fund, may such excess funds be transferred to the expense of the district?
We respond in the manner set forth below.
Chapter 41.18 RCW covers what is commonly referred to as the 1955 "paid" municipal firemen's pension system. The term "municipality," as defined in RCW 41.18.010(13), includes any fire protection district ". . . having a regularly organized full time, paid, fire department employing firemen." And the term "fund," as defined by subsection (12) of the same statute,
". . . shall have the same meaning as in RCW 41.16.010 as now or hereafter amended. Such fund shall be created in the manner and be subject to the provisions specified in chapter 41.16 RCW as now or hereafter amended."
Chapter 41.16 RCW, in turn, codifies the laws governing an earlier, 1947, paid firemen's pension system. The "fund" provided for under that chapter is covered by RCW 41.16.050 which reads as follows:
"There is hereby created and established in the treasury of each municipality a fund which shall be known and designated as the firemen's pension fund, which shall consist of (1) all bequests, fees, gifts, emoluments or donations given or [[Orig. Op. Page 3]] paid thereto, (2) forty-five percent of all moneys received by the state from taxes on fire insurance premiums, (3) taxes paid pursuant to the provisions of RCW 41.16.060, (4) interest on the investments of the fund, (5) contributions by firemen as provided for herein. The forty-five percent of moneys received from the tax on fire insurance premiums under the provisions of this chapter shall be distributed in the proportion that the number of paid firemen in the city, town or fire protection district bears to the total number of paid firemen throughout the state to be ascertained in the following manner: The secretary of the firemen's pension board of each city, town and fire protection district now or hereafter coming under the provisions of this chapter shall within thirty days after the taking effect of this 1961 amendatory act and on or before the fifteenth day of January thereafter, certify to the state treasurer the number of paid firemen in the fire department in such city, town or fire protection district. The state treasurer shall on or before the first day of June of each year deliver to the treasurer of each city, town and fire protection district coming under the provisions of this chapter his warrant, payable to each city, town or fire protection district for the amount due such city, town or fire protection district ascertained as herein provided and the treasurer of each such city, town or fire protection district shall place the amount thereof to the credit of the firemen's pension fund of such city, town or fire protection district."
It is, therefore, this fund to which your questions refer.
Your first question is fully answered by previous opinions of this office. In both AGO 1971 No. 16 and AGO 1977 No. 7, copies enclosed, we explained that with the [[Orig. Op. Page 4]] creation, in 1970, of the Law Enforcement Officers' and Fire Fighters' Retirement System, monies in a prior municipal firemen's pension fund may now lawfully be used for the following two purposes:
(1) Payment of service retirement, disability retirement and other pension benefits to qualified members of the former paid firemen's pension system under chapter 41.16 or 41.18 RCW, as the case may be, including any excess benefits required by RCW 41.26.040(2); i.e., benefits in excess of those payable by the state to members of the former system who transferred to LEOFF in 1970 and then later retired for service or disability.
(2) Payment of hospitalization costs and other medical expenses incurred by firefighters covered by the Law Enforcement Officers' and Fire Fighters' Retirement System which are payable by their employers under RCW 41.26.150.
With the caveat that this latter proposition only applies to persons who established membership in the LEOFF System on or before September 30, 1977 (LEOFF Plan I1/), we reaffirm this time and answer your first question accordingly.
Your second question is also answerable on the basis of our prior opinions. To the extent that RCW 41.26.150 permits a fire protection district or other municipality to pay the costs of hospitalization and other medical expenses for its eligible firefighters from its previously established "paid" firemen's pension fund, it is not necessary that the particular firefighters have also been earlier covered by either chapter 41.16 or chapter 41.18 RCW. See, AGO 1971 No. 16 at pp. 6-7. Therefore, even though (as you have asked us to assume) all persons who were ever employed by the particular fire protection district (as paid firemen under chapter 41.18 RCW) may have both retired and died, there still may be a pension-related use to which the fund may be put; namely, the payment of such medical expenses under RCW 41.26.150 for those active or retired firefighters covered by LEOFF alone.
[[Orig. Op. Page 5]]
Nevertheless, it is apparent that under the circumstances contemplated, the total amount of money in the fund may well exceed any such anticipated remaining liabilities. Accordingly, your final question (repeated for ease of reference) asks:
If a qualified actuary establishes that the pension fund now contains an excess of funds, over and above those funds estimated to be needed to meet the requirements of the potential liability of the fund, may such excess funds be transferred to the expense of the district?
Although this problem is most certainly something which could be rectified through the passage of amendatory legislation, we must, for now, answer the question as thus posed in the negative.
One of the principal sources of revenue for a municipal "paid" firemen's pension fund (as noted in RCW 41.16.050, supra) is the ad valorem property tax which is to be levied under RCW 41.16.060. That statute reads, in full, as follows:
"It shall be the duty of the legislative authority of each municipality, each year as a part of its annual tax levy, to levy and place in the fund a tax of twenty-two and one‑half cents per thousand dollars of assessed value against all the taxable property of such municipality: PROVIDED,That if a report by a qualified actuary on the condition of the fund establishes that the whole or any part of said dollar rate is not necessary to maintain the actuarial soundness of the fund, the levy of said twenty-two and one‑half cents per thousand dollars of assessed value may be omitted, or the whole or any part of said dollar rate may be levied and used for any other municipal purpose.
"It shall be the duty of the legislative authority of each municipality, each year as a part of its annual tax levy and in [[Orig. Op. Page 6]] addition to the city levy limit set forth in RCW 84.52.050, as now or hereafter amended, to levy and place in the fund an additional tax of twenty-two and one‑half cents per thousand dollars of assessed value against all taxable property of such municipality: PROVIDED,That if a report by a qualified actuary establishes that all or any part of the additional twenty-two and one‑half cents per thousand dollars of assessed value levy is unnecessary to meet the estimated demands on the fund under this chapter for the ensuing budget year, the levy of said additional twenty-two and one‑half cents per thousand dollars of assessed value may be omitted, or the whole or any part of such dollar rate may be levied and used for any other municipal purpose."
The basic proposition to be noted, however, is that the purpose of such actuarial reports as are thus referred to is to afford the particular municipality a legal basis for levying and using the tax for other municipal purposes when it is not needed to fund pension benefits. Conversely, as the law now exists, such reports afford no authority for the transfer of monies already in the pension fund to the municipality's current expense fund. Or, as we put it in AGO 1977 No. 7,supra, at page 6, in distinguishing between the two circumstances:
"It is most certainly true that the revenues of this tax, once placed in a municipal firemen's pension fund, are not to be used for any purpose other than that of paying the pension benefits provided by chapters 41.16 and 41.18 RCW or for medical services as provided by RCW 41.26.150, supra. However there is nothing in any of those statutes which suggests that RCW 41.16.060 is in any way modified insofar as it allows the additional tax, under certain specified circumstances, also to be levied and used for other municipal purposes in which case (we assume) the revenues derived therefrom would not be placed in the pension funds in the first instance; instead, they would then immediately be placed in some other municipal fund as is appropriate in view of the other municipal purpose involved. . . ."
[[Orig. Op. Page 7]]
There have been no changes in the law since the issuance of AGO 1977 No. 7 that would require a different conclusion today.
We trust that the foregoing will be of assistance to you.
Very truly yours,
KENNETH O. EIKENBERRY
PHILIP H. AUSTIN
Deputy Attorney General
*** FOOTNOTES ***
1/Since, under RCW 41.26.005, the provisions of RCW 41.26.150, supra, only apply to those individuals.