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State pension contributions to rise; state cost $390 million

Post by Brad Shannon / The Olympian on July 25, 2012 at 3:38 pm with No Comments »
January 28, 2013 6:30 pm

UPDATED: Washington state’s Pension Funding Council voted Wednesday to recommend higher contribution rates for several state pension plans. The moves ultimately affect state and local government employers as well as workers, and the changes had mostly been assumed, according to Matt Smith, state actuary.

Smith had outlined options in an earlier report. You can see the many new rates here. Option B was selected, which means rates go up for most plans but remain the same for the Washington State Patrol Retirement System and Public Safety Employees Retirement System (which had faced a possible two-year rate cut).

That is assuming the recommendations go into the governor’s budget for 2013-15 and are not changed by the Legislature.

What it all means to the state budget is a $390 million increase in the state contribution to numerous pension plans in 2013-15, state budget director Marty Brown said. That is about $51 million more than the Office of Financial Management had been assuming.

Local governments are hit for another $460 million, he said.

But as Smith said, the rate adjustments have long been anticipated. Smith has cast the rate adjustments as a choice of paying some now or paying even more later.

Today’s decision affects employees in the following pension plans: the Public Employees Retirement System, the Teachers Retirement System, the School Employees Retirement System, the Public Safety Employees Retirement System and the Washington State Patrol Retirement System.

Brown summed it up the impacts for workers and governments, and I paraphrased his comments this way:

-PERS’ employee rates go up by 0.28 percent of pay; TRS’ employee rates go up 0.27 percent; SERS’ employee rates go up 0.55 percent.
-Employers’ rates (for the state, local school districts and local governments) go up more than for workers. That is to help pay the more than $5.4 billion in unfunded liability for the PERS 1 and TRS 1 plans (the only plans with liabilities).
-The upshot: employer rates rise 2.11 percent for PERS; 2.33 percent for TRS; 2.22 percent for SERS; 1.78 percent for PSERS; and the Washington State Patrol Retirement System rates stay the same.


State Retirement Systems director Steve Hill convened today’s council meeting which included Brown, House Ways and Means chairman Ross Hunter,D-Medina, newly appointed Republican state Sen. Dino Rossi of Issaquah, and Democratic Sen. Ed Murray, who chairs the Senate Ways and Means Committee.

In taking its unanimous action, the Pension Funding Council accepted a recommendation that the Select Committee on Pension Policy had reached during its meeting Tuesday in Olympia. A summary of the presentation to that pension committee, which is made up of several lawmakers, is here.

As noted above, going with Option B means there will be no temporary rate reduction for the Washington State Patrol Retirement System. Rick Jensen, a lobbyist speaking for the Washington State Patrol Troopers Association, had sent the Select Committee on Pension Policy a letter from the association’s president, Tom Pillow, urging Option B, or to “keep it as it is.’’

Their argument: the troopers’ retirement system is a small plan and stable rates are important; by keeping rates steady any increases needed in the future would be smaller and easier for workers to plan for.

Actuary Smith told the committee that selection of Option B added just $600,000 in costs to the general fund and $200,000 to the transportation budget.

Brown said rates – and budget impacts – for two other plans have not been finalized. Those are rates for the Law Enforcement Officers’ and Fire Fighters’ Plan 2 system, which has its own board to set its rates – under terms of a citizen initiative. The Legislature can overule that board’s recommendations.

UPDATES: It was Steve Hill and not Ross Hunter who chaired the meeting.

Rep. Hunter said after the meeting that it is significant that budget leaders for all four caucuses and the governor supported the actuary’s funding recommendations. He added, “We remain one of the top 3 states in the nation for funding our pension plans.”

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