Actuarial pension funding

AN ACT Relating to actuarial funding of pension systems; amending 1
RCW 41.45.010, 41.45.060, and 41.45.070; creating a new section; 2
providing an effective date; and declaring an emergency.3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:4
Sec. 1. RCW 41.45.010 and 2009 c 561 s 1 are each amended to 5
read as follows: 6
It is the intent of the legislature to provide a dependable and 7
systematic process for funding the benefits provided to members and 8
retirees of the public employees' retirement system, chapter 41.40 9
RCW; the teachers' retirement system, chapter 41.32 RCW; the law 10
enforcement officers' and firefighters' retirement systems, chapter 11
41.26 RCW; the school employees' retirement system, chapter 41.35 12
RCW; the public safety employees' retirement system, chapter 41.37 13
RCW; and the Washington state patrol retirement system, chapter 43.43 14
RCW. 15
The funding process established by this chapter is intended to 16
achieve the following goals: 17
(1) To fully fund the public employees' retirement system plans 2 18
and 3, the teachers' retirement system plans 2 and 3, the school 19
employees' retirement system plans 2 and 3, the public safety 20
employees' retirement system plan 2, and the law enforcement 21
Z-0231.1
SENATE BILL 5357
State of Washington 69th Legislature 2025 Regular Session
By Senators Conway and Nobles; by request of Office of Financial
Management
Read first time 01/20/25. Referred to Committee on Ways & Means.
p. 1 SB 5357
officers' and firefighters' retirement system plan 2 as provided by 1
law; 2
(2) To fully amortize the total costs of the law enforcement 3
officers' and firefighters' retirement system plan 1, not later than 4
June 30, 2024; 5
(3) To fully amortize the unfunded actuarial accrued liability in 6
the public employees' retirement system plan 1 and the teachers' 7
retirement system plan 1 within a rolling ten-year period, using 8
methods and assumptions that balance needs for increased benefit 9
security, decreased contribution rate volatility, and affordability 10
of pension contribution rates; 11
(4) To amortize the costs of benefit improvements in the public 12
employees' retirement system plan 1 and the teachers' retirement 13
system plan 1 over a rolling 15-year period;14
(5) To establish long-term employer contribution rates which will 15
remain a relatively predictable proportion of the future state 16
budgets; and 17
(((5))) (6) To fund, to the extent feasible, all benefits for 18
plan 2 and 3 members over the working lives of those members so that 19
the cost of those benefits are paid by the taxpayers who receive the 20
benefit of those members' service. 21
Sec. 2. RCW 41.45.060 and 2020 c 103 s 4 are each amended to 22
read as follows: 23
(1) The state actuary shall provide preliminary actuarial 24
valuation results based on the economic assumptions and asset value 25
smoothing technique included in RCW 41.45.035 or adopted under RCW 26
41.45.030 or 41.45.035. 27
(2) Not later than July 31, 2008, and every two years thereafter, 28
consistent with the economic assumptions and asset value smoothing 29
technique included in RCW 41.45.035 or adopted under RCW 41.45.030 or 30
41.45.035, the council shall adopt and may make changes to:31
(a) A basic state contribution rate for the law enforcement 32
officers' and firefighters' retirement system plan 1;33
(b) Basic employer contribution rates for the public employees' 34
retirement system, the teachers' retirement system, and the 35
Washington state patrol retirement system; and 36
(c) Basic employer contribution rates for the school employees' 37
retirement system and the public safety employees' retirement system 38
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for funding both those systems and the public employees' retirement 1
system plan 1. 2
The council may adopt annual rate changes for any plan for any 3
rate-setting period. The contribution rates adopted by the council 4
shall be subject to revision by the legislature. 5
(3) The employer and state contribution rates adopted by the 6
council shall be the level percentages of pay that are needed:7
(a) To fully amortize the total costs of the law enforcement 8
officers' and firefighters' retirement system plan 1 not later than 9
June 30, 2024; 10
(b) To fully fund the public employees' retirement system plans 2 11
and 3, the teachers' retirement system plans 2 and 3, the public 12
safety employees' retirement system plan 2, and the school employees' 13
retirement system plans 2 and 3 in accordance with RCW 41.45.061, 14
41.45.067, and this section; and 15
(c) To fully fund the public employees' retirement system plan 1 16
and the teachers' retirement system plan 1 in accordance with RCW 17
41.45.070, 41.45.150, and this section. 18
(4) The aggregate actuarial cost method shall be used to 19
calculate a combined plan 2 and 3 normal cost, a Washington state 20
patrol retirement system normal cost, and a public safety employees' 21
retirement system normal cost. 22
(5) A modified entry age normal cost method, as set forth in this 23
chapter, shall be used to calculate employer contributions to the 24
public employees' retirement system plan 1 and the teachers' 25
retirement system plan 1. 26
(6) The employer contribution rate for the public employees' 27
retirement system and the school employees' retirement system shall 28
equal the sum of: 29
(a) The amount required to pay the combined plan 2 and plan 3 30
normal cost for the system, subject to any minimum rates applied 31
pursuant to RCW 41.45.155; plus 32
(b) The amount required to amortize the unfunded actuarial 33
accrued liability in plan 1 of the public employees' retirement 34
system over a rolling ten-year period using projected future salary 35
growth and growth in system membership, and subject to any minimum or 36
maximum rates applied pursuant to RCW 41.45.150; plus37
(c) ((The)) Except as described in (d) of this subsection, the 38
amounts required to amortize the costs of any benefit improvements in 39
plan 1 of the public employees' retirement system that become 40
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effective after June 30, 2009. The cost of each benefit improvement 1
shall be amortized over a fixed ((ten-year)) 15-year period using 2
projected future salary growth and growth in system membership. The 3
amounts required under this subsection are not subject to, and are 4
collected in addition to, any minimum or maximum rates applied 5
pursuant to RCW 41.45.150; plus6
(d) The amounts required to amortize the remaining costs of 7
benefit improvements in the public employees' retirement system plan 8
1 effective from July 1, 2018, through June 30, 2025. Contribution 9
rates collected under this subsection are effective on September 1, 10
2025. The amounts required under this subsection are not subject to, 11
and are collected in addition to, any minimum or maximum rates 12
applied pursuant to RCW 41.45.150. 13
(7) The employer contribution rate for the public safety 14
employees' retirement system shall equal the sum of:15
(a) The amount required to pay the normal cost for the system, 16
subject to any minimum rates applied pursuant to RCW 41.45.155; plus17
(b) The amount required to amortize the unfunded actuarial 18
accrued liability in plan 1 of the public employees' retirement 19
system over a rolling ((ten-year)) 15-year period using projected 20
future salary growth and growth in system membership, and subject to 21
any minimum or maximum rates applied pursuant to RCW 41.45.150; plus22
(c) ((The)) Except as described in (d) of this subsection, the 23
amounts required to amortize the costs of any benefit improvements in 24
plan 1 of the public employees' retirement system that become 25
effective after June 30, 2009. The cost of each benefit improvement 26
shall be amortized over a fixed ((ten-year)) 15-year period using 27
projected future salary growth and growth in system membership. The 28
amounts required under this subsection are not subject to, and are 29
collected in addition to, any minimum or maximum rates applied 30
pursuant to RCW 41.45.150; plus31
(d) The amounts required to amortize the remaining costs of 32
benefit improvements in the public employees' retirement system plan 33
1 effective from July 1, 2018, through June 30, 2025. Contribution 34
rates collected under this subsection are effective on September 1, 35
2025. The amounts required under this subsection are not subject to, 36
and are collected in addition to, any minimum or maximum rates 37
applied pursuant to RCW 41.45.150. 38
(8) The employer contribution rate for the teachers' retirement 39
system shall equal the sum of: 40
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(a) The amount required to pay the combined plan 2 and plan 3 1
normal cost for the system, subject to any minimum rates applied 2
pursuant to RCW 41.45.155; plus 3
(b) The amount required to amortize the unfunded actuarial 4
accrued liability in plan 1 of the teachers' retirement system over a 5
rolling ((ten-year)) 15-year period using projected future salary 6
growth and growth in system membership, and subject to any minimum or 7
maximum rates applied pursuant to RCW 41.45.150; plus8
(c) ((The)) Except as described in (d) of this subsection, the 9
amounts required to amortize the costs of any benefit improvements in 10
plan 1 of the teachers' retirement system that become effective after 11
June 30, 2009. The cost of each benefit improvement shall be 12
amortized over a fixed ((ten-year)) 15-year period using projected 13
future salary growth and growth in system membership. The amounts 14
required under this subsection are not subject to, and are collected 15
in addition to, any minimum or maximum rates applied pursuant to RCW 16
41.45.150; plus17
(d) The amounts required to amortize the remaining costs of 18
benefit improvements in the teachers' retirement system plan 1 19
effective from July 1, 2018, through June 30, 2025. Contribution 20
rates collected under this subsection are effective on September 1, 21
2025. The amounts required under this subsection are not subject to, 22
and are collected in addition to, any minimum or maximum rates 23
applied pursuant to RCW 41.45.150. 24
(9) The employer contribution rate for each of the institutions 25
of higher education for the higher education supplemental retirement 26
benefits must be sufficient to fund, as a level percentage of pay, a 27
portion of the projected cost of the supplemental retirement benefits 28
for the institution beginning in 2035, with the other portion 29
supported on a pay-as-you-go basis, either as direct payments by each 30
institution to retirees, or as contributions to the higher education 31
retirement plan supplemental benefit fund. Contributions must 32
continue until the council determines that the institution for higher 33
education supplemental retirement benefit liabilities are satisfied.34
(10) The council shall immediately notify the directors of the 35
office of financial management and department of retirement systems 36
of the state and employer contribution rates adopted. The rates shall 37
be effective for the ensuing biennial period, subject to any 38
legislative modifications. 39
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(11) The director shall collect those rates adopted by the 1
council. The rates established in RCW 41.45.062, or by the council, 2
shall be subject to revision by the legislature. 3
(12) The state actuary shall prepare final actuarial valuation 4
results based on the economic assumptions, asset value smoothing 5
technique, and contribution rates included in or adopted under RCW 6
41.45.030, 41.45.035, and this section. 7
Sec. 3. RCW 41.45.070 and 2009 c 561 s 4 are each amended to 8
read as follows: 9
(1) In addition to the basic employer contribution rate 10
established in RCW 41.45.060 or 41.45.054, the department shall also 11
charge employers of public employees' retirement system, teachers' 12
retirement system, school employees' retirement system, public safety 13
employees' retirement system, or Washington state patrol retirement 14
system members an additional supplemental rate to pay for the cost of 15
additional benefits, if any, granted to members of those systems. 16
Except as provided in subsections (6), (7), and (9) of this section, 17
the supplemental contribution rates required by this section shall be 18
calculated by the state actuary and shall be charged regardless of 19
language to the contrary contained in the statute which authorizes 20
additional benefits. 21
(2) In addition to the basic member, employer, and state 22
contribution rate established in RCW 41.45.0604 for the law 23
enforcement officers' and firefighters' retirement system plan 2, the 24
department shall also establish supplemental rates to pay for the 25
cost of additional benefits, if any, granted to members of the law 26
enforcement officers' and firefighters' retirement system plan 2. 27
Except as provided in subsection (6) of this section, these 28
supplemental rates shall be calculated by the actuary retained by the 29
law enforcement officers' and firefighters' board and the state 30
actuary through the process provided in RCW 41.26.720(1)(a) and the 31
state treasurer shall transfer the additional required contributions 32
regardless of language to the contrary contained in the statute which 33
authorizes the additional benefits. 34
(3) Beginning July 1, 2009, the supplemental rate charged under 35
this section to fund benefit increases provided to active members of 36
the public employees' retirement system plan 1 and the teachers' 37
retirement system plan 1 shall be calculated as the level percentage 38
of all system pay needed to fund the cost of the benefit over a fixed 39
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ten-year period, using projected future salary growth and growth in 1
system membership. The supplemental rate to fund benefit increases 2
provided to active members of the public employees' retirement system 3
plan 1 shall be charged to all system employers in the public 4
employees' retirement system, the school employees' retirement 5
system, and the public safety employees' retirement system. The 6
supplemental rate to fund benefit increases provided to active 7
members of the teachers' retirement system plan 1 shall be charged to 8
all system employers in the teachers' retirement system.9
(4) The supplemental rate charged under this section to fund 10
benefit increases provided to active and retired members of the 11
public employees' retirement system plan 2 and plan 3, the teachers' 12
retirement system plan 2 and plan 3, the public safety employees' 13
retirement system plan 2, the school employees' retirement system 14
plan 2 and plan 3, or the Washington state patrol retirement system 15
shall be calculated as the level percentage of all members' pay 16
needed to fund the cost of the benefit, as calculated under RCW 17
41.45.060, 41.45.061, 41.45.0631, or 41.45.067. 18
(5) The supplemental rate charged under this section to fund 19
postretirement adjustments which are provided on a nonautomatic basis 20
to current retirees shall be calculated as the percentage of pay 21
needed to fund the adjustments as they are paid to the retirees. 22
((Beginning July 1, 2009, the )) The supplemental rate charged under 23
this section to fund increases in the automatic postretirement 24
adjustments for active or retired members of the public employees' 25
retirement system plan 1 and the teachers' retirement system plan 1 26
shall be calculated as the level percentage of pay needed to fund the 27
cost of the automatic adjustments over a fixed ((ten-year)) 15-year 28
period, using projected future salary growth and growth in system 29
membership. The supplemental rate to fund increases in the automatic 30
postretirement adjustments for active members or retired members of 31
the public employees' retirement system plan 1 shall be charged to 32
all system employers in the public employees' retirement system, the 33
school employees' retirement system, and the public safety employees' 34
retirement system. The supplemental rate to fund increases in 35
automatic postretirement adjustments for active members or retired 36
members of the teachers' retirement system plan 1 shall be charged to 37
all system employers in the teachers' retirement system.38
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(6) A supplemental rate shall not be charged to pay for the cost 1
of additional benefits granted to members pursuant to chapter 340, 2
Laws of 1998. 3
(7) A supplemental rate shall not be charged to pay for the cost 4
of additional benefits granted to members pursuant to chapter 41.31A 5
RCW; section 309, chapter 341, Laws of 1998; or section 701, chapter 6
341, Laws of 1998. 7
(8) A supplemental rate shall not be charged to pay for the cost 8
of additional benefits granted to members and survivors pursuant to 9
chapter 94, Laws of 2006. 10
(9) A supplemental rate shall not be charged to pay for the cost 11
of the additional benefits granted to members of the teachers' 12
retirement system and the school employees' retirement system plans 2 13
and 3 in sections 2, 4, 6, and 8, chapter 491, Laws of 2007 until 14
September 1, 2008. A supplemental rate shall not be charged to pay 15
for the cost of the additional benefits granted to members of the 16
public employees' retirement system plans 2 and 3 under sections 9 17
and 10, chapter 491, Laws of 2007 until July 1, 2008.18
NEW SECTION. Sec. 4. A new section is added to chapter 41.45 19
RCW to read as follows, but because of its temporary nature is not 20
codified: 21
The legislature hereby revises the contribution rates adopted by 22
the council at its July 17, 2024, meeting to reflect updated 23
projections on the funded status of each plan, honoring the council's 24
intent to phase in the impact of changes in actuarial assumptions on 25
the long-term rate of return: 26
(1) Beginning July 1, 2025, and ending June 30, 2026, the 27
required basic employer contribution rate for the public employees' 28
retirement system shall be 7.91 percent, of which 2.05 percent shall 29
be used for the sole purpose of amortizing the unfunded actuarial 30
accrued liability in plan 1 of the public employees' retirement 31
system. 32
(2) Beginning July 1, 2025, and ending June 30, 2026, the 33
required basic employer contribution rate for the public safety 34
employees' retirement system shall be 9.16 percent, of which 2.05 35
percent shall be used for the sole purpose of amortizing the unfunded 36
actuarial accrued liability in plan 1 of the public employees' 37
retirement system. 38
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(3) Beginning September 1, 2025, and ending August 31, 2026, the 1
required basic employer contribution rate for the teachers' 2
retirement system shall be 9.05 percent, of which 1.1 percent shall 3
be used for the sole purpose of amortizing the unfunded actuarial 4
accrued liability in plan 1 of the teachers' retirement system.5
(4) Beginning September 1, 2025, and ending August 31, 2026, the 6
required basic employer contribution rate for the school employees' 7
retirement system shall be 9.29 percent, of which 2.05 percent shall 8
be used for the sole purpose of amortizing the unfunded actuarial 9
accrued liability in plan 1 of the public employees' retirement 10
system. 11
(5) Beginning July 1, 2025, and ending June 30, 2026, the 12
required basic employer contribution rate for the law enforcement 13
officers' and firefighters' retirement system plan 1 shall be zero 14
percent. 15
(6) Beginning July 1, 2025, and ending June 30, 2026, the 16
required basic employer contribution rate for the Washington state 17
patrol retirement system shall be 16.35 percent. 18
(7) Beginning July 1, 2025, and ending June 30, 2026, the 19
required member contribution rate for the public employees' 20
retirement system plan 2 shall be 5.86 percent. 21
(8) Beginning July 1, 2025, and ending June 30, 2026, the 22
required member contribution rate for the public safety employees' 23
retirement system plan 2 shall be 7.11 percent. 24
(9) Beginning September 1, 2025, and ending August 31, 2026, the 25
required member contribution rate for the teachers' retirement system 26
plan 2 shall be 7.95 percent. 27
(10) Beginning September 1, 2025, and ending August 31, 2026, the 28
required member contribution rate for the school employees' 29
retirement system plan 2 shall be 7.24 percent. 30
(11) Beginning July 1, 2025, and ending June 30, 2026, the 31
required member contribution rate for the law enforcement officers' 32
and firefighters' retirement system plan 1 shall be zero percent.33
(12) Beginning July 1, 2025, and ending June 30, 2026, the 34
required member contribution rate for the Washington state patrol 35
retirement system shall be 8.75 percent. 36
NEW SECTION. Sec. 5. This act is necessary for the immediate 37
preservation of the public peace, health, or safety, or support of 38
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the state government and its existing public institutions, and takes 1
effect July 1, 2025. 2
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