(The Center Square) – More than 26,000 Washington state public school teachers finally won a decades long class action lawsuit last week, in a fight over their retirement accounts.
Thurston County Superior Court entered a final order last Thursday, June 25, siding in favor of the teachers in their case against the Washington State Department of Retirement Systems.
The order requires DRS to return about $120 million of skimmed interest and investment returns into the retirement accounts of current and former teachers enrolled in the state retirement plan called TRS Plan 3.
“The Department of Retirement Systems promised these people when they were in Plan 2, five-and-a-half percent interest calculated annually,” said Steve Strong of Stobaugh & Strong, P.C., attorney for the plaintiffs who originally filed the case back in 2003.
He explained when most teachers in Plan 2 transferred to Plan 3, they did not receive the earned interest they were promised.
“When the teachers transferred to TRS Plan 3 DRS was supposed to transfer the teachers’ employee contributions and accrued interest at the promised rate, but DRS did not transfer all the interest,” read the court filing provided to The Center Square.
In 2018, the federal Ninth Circuit Court of Appeals ruled in the class’s favor, saying that the Department had skimmed earned interest from the teachers’ retirement accounts going back to 1996 and kept all the earnings on the withheld interest ever since.
But DRS has continued to fight the ruling and delay the conclusion of the case, until last week’s final order from Thurston County Superior Court Judge Christine Schaller, who ordered that the Department must put all the skimmed interest and earnings into the teachers’ TRS Plan 3 retirement accounts within 30 days.
“The amount of money that was originally withheld was over $13 million. But the interest on that compounded for many years and built up to a much larger amount. It was all done secretly,” said Strong in a June 26 interview with The Center Square.
He explained that after the interest skimming was exposed, DRS maintained they had the discretion to do so.
“They said the promise didn’t mean anything.”
As the case dragged on for more than 23 years, many of the teachers’ owed payments in the class action suit have passed away, or have moved and can’t be located.
“We received information from [DRS] a few days ago saying that 61% of the people in this class have already retired, and so they need that money now. 7% are actually dead. They died because this case took so long,” Strong said.
“Another 20% or so have been lost and need to be found. They’re going to have to do a lot of work to find those people and give them the money they deserve,” he added, noting the onus is on DRS to do that legwork.
The Center Square reached out to the Department of Retirement Systems for comment on the ruling and received a response via email.
“We haven’t yet had the opportunity to review and consider next steps. However we ultimately decide to proceed, I can share some information to put this in perspective,” wrote Adam Torgerson, DRS communications director.
“In any case, this decision wouldn’t affect retiree pensions or system health overall. Washington’s pension system is among the healthiest in the country. With a funded ratio of 96%, it ranks among the top nationwide. A judgment of that size might have a minor effect on employer contribution rates and represents about 0.4% of the approximately $27 billion TRS trust fund. It would be about 0.06% of total trust fund assets.”
Torgerson was noncommittal on a possible appeal.
“It will take some time for our team and our assistant attorney general to review, so I can’t provide a timeline or share more information about the order or case at this point.”
If they do appeal, the court ruling made clear that those delays could be costly.
“The actual amount owed will continue to increase until DRS actually transfers the teachers’ funds….it will continue to accrue daily earnings at the 8.65% average annualized return rate until the transfer occurs,” read the ruling.