In week two of session, we let you know about several pension policies under consideration by the Legislature, including polices that would provide a PERS 1 COLA and create benefit enhancements for LEOFF 2 members. Here, we give you an update on some of those bills ahead of the first set of mid-session committee cutoffs, beginning February 3.

PERS 1 COLA

HB 1721/SB 5676 are companion bills that provide a one-time 3% COLA (cost-of-living adjustment) to PERS plan 1 and TRS plan 1 retirees, capped at $110 per month. PERS 1 was not originally designed to include regular COLAs and so remains underfunded, in part because of one-time COLAs granted to PERS 1 retirees over the years. Public employers pay a surcharge on their current PERS 2/3 contributions to make up for this unfunded liability.

AWC opposes these bills only because they fund the COLA through increased employer contribution rates instead of using the state’s surplus revenues. The surcharge that cities now pay for the current unfunded PERS 1 liability was expected to expire in 2025, but these bills will likely extend that extra cost.

HB 1721 was passed out of the House Appropriations Committee and currently awaits scheduling for a floor vote in the House.

SB 5686 was passed out of the Senate Ways & Means Committee and currently awaits scheduling for a floor vote in the Senate.

LEOFF 2 benefit improvements

HB 1701/SB 5652 are companion bills that provide for new pension benefit enhancements for LEOFF 2 members using the Benefit Improvement Account (BIA), which has been unused since it was created in 2008. While in their committees, both bills were amended with identical amendments to adjust dates for actuarial evaluations and funds transfers to and from the BIA, add an additional minimum contribution policy, along with other minor clarifications.

The bills would create two types of benefit improvements funded by the BIA:

• Current retirees receive a one-time lump sum benefit equal to $100/month of service, with a minimum of $20,000 for catastrophic and duty disability retirees, and duty death beneficiaries.
• New and future members get a gradually increased retirement benefit multiplier depending on their years of service, increasing from 2% for 15 years of service up to 2.5% for 25 or more years of service.
• Current members in active service prior to February 1, 2021 will have a choice between the lump sum or the benefit multiplier.

The bills also adjust the LEOFF 2 Board’s minimum contribution rates policy to require employer contributions of 90% of the normal cost when the plan’s funded status is at or greater than 105%, and 100% of the normal cost when the plan’s funded status is less than 105%. The committee-adopted amendments added that if the LEOFF 2 plan’s funding status is greater than or equal to 110%, the minimum contributions drop again to 80% of the normal cost. The benefits improvements are ultimately funded by a one-time transfer from the LEOFF 2 account to the BIA.

AWC is currently neutral on these bills given there is no fiscal impact on cities. Since LEOFF 2 is fully funded above 110%, local government employers are expected to see a slight drop in their contribution rates, even with the benefits improvements.

SB 5791 is identical to the above bills except that it makes LEOFF plan 1 members or their beneficiaries eligible for a similar lump sum benefit offered to plan 2 members. The bill had a public hearing on January 17. It is scheduled for a committee vote in the Senate Ways & Means Committee on Monday, January 31 at 4 pm.

HB 1721 was passed out of the House Appropriations Committee and currently awaits scheduling for a floor vote in the House.

SB 5652 was passed out of the Senate Ways & Means Committee and currently awaits scheduling for a floor vote in the Senate.

Other pensions bills

ROTH options for deferred compensation plans

HB 1752 requires the Department of Retirement Systems to offer public employees post-tax ROTH investment options in addition to the traditional pre-tax deferred compensation plans. These savings plans are optional and in addition to the employee’s standard pension.

HB 1752 was passed out of the House Appropriations Committee and currently await scheduling for a floor vote in the House.

Interruptive military service credits

HB 1804/SB 5726 are companion bills that expand the interruptive military service credit to public employees who were awarded an expeditionary medal during a period of armed conflict in addition to those that received a campaign medal.

An interruptive military service credit allows public employees to get a subsidized retirement contribution for the period where they take a leave of absence for military service, if the employee returns to work after being honorably discharged. Current law only allows service credits for those awarded campaign medals, which are awarded for large scale or long duration participation in combat operations. Expeditionary medals are awarded for deployed participation in smaller scale or shorter duration operations with an imminent threat of hostilities or combat support roles that are high risk but not necessarily active combat.

HB 1804 passed out of the House Appropriations Committee and is currently waiting to be scheduled for a floor vote in the House.

SB 5726 was passed out of the Senate Ways & Means Committee and referred to the Senate Transportation Committee because of its potential impacts to the State Patrol budget. It is scheduled for a public hearing in the Senate Transportation Committee on Monday, January 31 at 4 pm.

Disability benefits

HB 1669/SB 5748 are companion bills that allow a PERS plan member that is totally disabled to receive a retirement allowance of 70% of their final average salary. The employee seeking the disability benefit may be subject to comprehensive medical exams to determine continued eligibility for the benefit.

HB 1669 was passed out of the House Appropriations Committee and is currently waiting to be scheduled for a floor vote in the House.

SB 5748 passed out of the Senate Ways & Means Committee and is currently waiting to be scheduled for a floor vote in the Senate.