As the calendar rolled over into July, the new state biennial budget and several new state laws took effect, bringing in some new developments in the pension policy space. We’ve rounded up some pension-related news that cities should be aware of.
New pension rates go into effect
Dedicated Legislative Bulletin readers may remember AWC’s coverage of SB 5357, which passed during the 2025 legislative session. New economic conditions arose that justified the legislature adopting different rates than those recommended by the Pension Funding Council in 2024. SB 5357 resets employer contribution rates to take into account new actuarial circumstances. According to the fiscal note, the final version of the bill should improve pension costs for cities. You can find all the current pension rates on the Department of Retirement Systems (DRS) website.
The bill went into effect on July 1. The bill:
- Sets the unfunded liability surcharge (UAAL) paid by PERS and PSERS employers to 0% through FY 2029. After that, UAAL rates will be set based on a 15-year amortization period that started July 1, 2025.
- Employer contribution rates are adjusted to:
- The assumed investment rate of return was adjusted to 7.25% (up from 7%).
- Inflation, salary growth, and system membership growth are adjusted to reflect assumptions adopted by the PFC in 2023.
LEOFF 1 surplus study
Over the course of the 2025 legislative session, competing proposals were offered over how the legislature could use over $3 billion in surplus funds from LEOFF 1. One idea was to merge LEOFF 1, PERS 1, and TRS 1 into a single system and use the surplus to fund COLAs for PERS 1 and TRS 1 retirees. Another plan would reorganize LEOFF 1 and sweep the surplus into the general fund. Ultimately, the legislature included a budget proviso that requires the Select Committee on Pension Policy to study the issue and report back to the legislature next session.
In their June meeting, the SCPP outlined how they plan to proceed with the study, including looking back to prior studies, identifying some goals for the study, and assessing the tax and legal implications of the different proposals. At the July 15 meeting the Committee began the study with an educational briefing, at their September meeting will review an initial draft, approve a final draft in November, and submit the report in January.