May 28, 2020 3 min read

In the history of the Washington County pension fund, a post-World War II creation, there has never been a stock market slide as abrupt as that of the one occurring because of the novel coronavirus pandemic that hit the country in February.

It wasn’t just the pandemic, but a battle between oil titans Russia and Saudi Arabia that contributed to the precipitous drop in the value of investments, Washington County’s pension consultant explained last week via teleconference.

As businesses shuttered in the U.S. and joblessness mounted, the Gross National Product declined nearly 5%, and if this occurs in two consecutive quarters, it will meet the definition of a recession, ending years of growth that began in 2009 as the nation began recovering from what has been dubbed “the Great Recession.”

“The hope is to stave off any kind of depression,” Lee H. Martin of Marquette Associates, pension consultant, told the board. A depression is a longer-lasting deeper economic chasm.

As people watch their 401(k) plans shrink, what does this mean for the average Washington County taxpayer who funds a defined-benefit plan for county employees?

As 2019 drew to a close, Washington County’s pension investments were worth $178 million. As of April 30, they had dropped to $161.4 million.

The full wallop of the 2020 drop won’t be experienced until 2021.

For retirement fund purposes, the dollar figure for taxpayer contributions at all levels is calculated on the value of the investment portfolio as of Dec. 31, 2019.

In many a “normal” year, the county retirement board has a firm figure from its actuary by late May, but as everyone has noticed, this has not been a “normal” year.

Still, there’s an estimate that Washington County Controller Michael Namie was willing to share last week: taxpayers’ contribution will be between $4.7 million and $5 million. The exact figure should be known by autumn.

To even out losses, county pension funds have what’s known as a five-year “smoothing” period.

“We’re not going to know what the market does in year two, three, four, five, but we do have a feel for this year,” Namie said.

As to those who may see taxpayer funding of county employees’ pensions as a “bailout,” commission Chairman Diana Irey Vaughan had a brief answer: “It’s the law. What we do is defined by the County Code. It’s Pennsylvania law.”

The County Pension Law, Act 96 of 1971, governs the establishment and operation of a retirement system for employees in each of the state’s 67 counties and requires a defined benefit plan. In Washington County, workers contribute 7% of their earnings to their pension plans.

County taxpayer dollars cover approximately 52 % of the required contribution, with federal and state grants covering the remainder

“This county has been conservative,” Martin said, noting that the Washington County pension plan is 90% funded. Irey Vaughan said Washington is only one of two counties in the state that uses 6.75% as its assumed rate of return on investments.

The assumed rate of return is a prediction of what the county’s pension investments will earn over a long period of time.

The commissioners, county controller and treasurer comprise those officially known as the Washington County Retirement Board. Treasurer Tom Flickinger, absent from last Thursday’s meeting, was represented by Deputy Treasurer Lisa Carpenter.

Namie’s office calculated a few years ago that, generally speaking, the average employee retiring from Washington County government will receive about $9,800 a year from the pension fund.