With the passage of HB 2034, which restates the Law Enforcement Officers’ and Fire Fighters’ Retirement System Plan 1 (LEOFF 1), efforts will begin in the process of shifting existing LEOFF 1 retiree benefits to a new restated LEOFF 1 program funded at 110%. The estimated $3.9 billion in surplus funds will then move into a new account, with $880 million going to the budget stabilization account. However, a federal lawsuit filed by retirees is attempting to block the changes to the retirement plan before they go into effect. It's possible that a state lawsuit could also be filed once HB 2034 officially takes effect on June 11.

Regardless of the legal challenges, the Select Committee on Pension Policy (SCPP) has started its work on producing a study of LEOFF 1 medical costs incurred by cities. This work is being done as the Legislature explores transferring local retiree medical benefit obligations to the state.

AWC is also working to gather data on LEOFF 1 medical costs and has been reaching out to cities for assistance. We appreciate your city’s participation in this process. This data will help us inform the SCPP study and represent your city’s interest before the Legislature in 2027.

Senate puts its mark on planned LEOFF 1 pension fund sweep

March 9, 2026

HB 2034 transfers the $3.3 billion surplus from the LEOFF 1 account and creates a new LEOFF account at 110% funded. Amendments made by the Senate include:

• Creates a new account, the Pension Surplus Holding Account (PSHA), for funds to be moved to for implementation-related expenses and investment by the State Investment Board instead of transferring them into the Pension Funding Stabilization Account;
• Moves responsibility for oversight and policy recommendations from the Select Committee on Pension Policy (SCPP) to the Law Enforcement Officers’ and Fire Fighters’ (LEOFF) Plan 2 Retirement Board with reporting deadline of December 21, 2028; and
• Directs the SCPP to assess state options for assuming responsibility of local pension disability board administration and takeover of the associated financial liability of providing medical care with a reporting deadline of December 31, 2028.

The Senate also removed the transfer of some funds to the Climate Commitment Account that had been included by the House.

We are pleased to see the amendment directing a study of state assumption of retiree medical benefits. These changes still do not solidify the state assuming the medical liabilities and responsibilities for the existing LEOFF 1 active members and retirees, alleviating this cost burden from cities. We appreciate the Legislature’s consideration on the issue. The reporting date indicates that the earliest we are likely to see legislative action would be after the 2028 reporting deadline.

The bill passed the Senate and now returns to the House for concurrence with Senate amendments.

Plan to sweep $3.3 billion surplus from LEOFF 1 pensions moves to the Senate

February 20, 2026

The bill to transfer the $3.3 billion surplus from the LEOFF 1 account and create a new restated LEOFF account at 110% funded status passed the House and is now starting its journey through the Senate. The House made a technical amendment to HB 2034 prior to passing it off the floor. That amendment shifted responsibility for the new restated LEOFF 1 account from the Select Committee on Pensions to the LEOFF 2 Retirement Board. The restated account will still be able to fully fund existing LEOFF 1 pension obligations for retirees.

The LEOFF 1 surplus is based off returns that were in part originally funded by cities and city government employees to cover city retirement obligations. AWC has been advocating for city contributions to be acknowledged in any effort to remove the funds and use them for other purposes. It seems our concerns have been heard, and progress is being made in the conversations around the allocation of the surplus funding.

While we are encouraged by the possibility of the state taking over LEOFF 1’s medical liabilities and responsibilities for the existing active members and retirees, which would amount to over $1 billion, potentially relieving cities of those costs, that language has not yet been officially proposed.

The bill in its current form is scheduled for a hearing in the Senate Ways & Means Committee this week.

Check out our joint letter to legislative leadership in coalition with the Washington State Association of Counties.

Date to remember

HB 2034 is scheduled for a hearing in the Senate Ways & Means Committee on February 26 at 1:30 pm.

Plan to sweep $3.3 billion surplus from firefighter and police pensions revived

February 13, 2026

A plan to sweep up to $3.3 billion in surplus funds from the LEOFF 1 retirement system has been revived in the 2026 legislative session.

The LEOFF 1 retirement system was the first iteration of a state-managed pension fund for local firefighters and law enforcement officers. The LEOFF 1 plan closed to new entrants in 1970 and was followed by the LEOFF 2 retirement system—the plan still in use today. LEOFF 1 was funded by a combination of state contributions, local government employer contributions, and member contributions, which were then invested by the Washington State Investment Board and used to fund pensions for retired firefighters and law enforcement officers in the plan.

As of June 2025, LEOFF 1 has over 4,400 retirees and only four active members (i.e., current employees still contributing to the plan) and is about 150% fully funded. The Office of the State Actuary estimates that the plan will be 200% fully funded by 2029 due to investment returns and a reduction of liabilities over time, resulting in a $3.3 billion surplus by that time.

HB 2034, sponsored by House Appropriations Committee Chair Rep. Timm Ormsby (D–Spokane), seeks to shift those funds. The 173-page bill is fundamentally quite simple: It repeals the LEOFF 1 retirement system on June 30, 2029, and replaces it with a “Restated LEOFF” retirement system that takes on the former LEOFF 1 retirees, with all the same pension benefits as LEOFF 1. To fund the new plan, enough funds are transferred from the LEOFF 1 account to the new Restated LEOFF account to achieve a 110% funded status. In the legislative findings section of the bill, the proposal states: “While [LEOFF 1 firefighters and law enforcement officers] have a constitutionally protected right to the pension benefits that are provided as part of their contract of employment, there is no such right in surplus assets which are unnecessary to the actuarial soundness of the retirement plan.”

Approximately $569 million of the remaining surplus (projected at $3.3 billion) then moves to the Climate Commitment Account, with the remainder transferring to the state’s Pension Funding Stabilization Account (PFSA)—the account the state uses to provide state employer contributions for the Public Employees’ Retirement System (PERS), the Public Safety Employees’ Retirement System (PSERS), and the Teachers’ Retirement System (TRS).

The LEOFF 1 surplus is based off returns that were in part originally funded by cities and city government employees to cover city retirement obligations. AWC has been advocating for city contributions to be acknowledged in any effort to remove the funds and use them for other purposes. It appears our concerns have been heard, and we are making headway in the conversations around the allocation of the surplus funding.

Enter a new idea being considered by the Legislature. As part of the sweep of LEOFF 1 funds, the Legislature is looking at possible next steps, which could include the state taking over LEOFF 1’s medical liabilities and responsibilities for the existing active members and retirees. This would amount to over $1 billion dollars, potentially relieving cities of those costs. In taking this approach, the Legislature acknowledges the decades of contributions cities have made to the account. While AWC is excited by this new consideration, it is not currently included in HB 2034. It could possibly take a future legislative session to work out the details.

AWC is encouraged by this development and appreciates the Legislature’s consideration of the idea. Likewise, we will continue to closely follow these developments and advocate for funding solutions that acknowledge cities' contributions.