During the 2025 legislative session, AWC followed two bills related to state utilization of LEOFF 1 pension surplus, SB 5085 and HB 2034. While neither bill passed, the Legislature did pass a budget proviso for a study on the proposed methods to inform decision-making in the 2026 legislative session.
As a quick refresher on these bills, SB 5085 aimed to dissolve LEOFF Plan 1, PERS Plan 1, and the Teachers Retirement System (TRS) Plan 1, merging them into the “Legacy Retirement System” (LRS)—a single system. The intent of this approach was to tap into LEOFF 1’s substantial surplus of an estimated $3.3 billion and utilize it to bolster the underfunding present in PERS 1 and TRS 1 due to recent legislatively mandated cost-of-living adjustments (COLAs), which were not originally existing at the onset of these plans. You can read AWC’s coverage of SB 5085 to learn more.
In similar fashion, HB 2034 endeavored to utilize the LEOFF 1 surplus funds but with a different approach. HB 2034 would replace the existing LEOFF 1 plan and create a “Restated LEOFF” retirement system. The new system would then use funds from the original LEOFF 1 plan to fund the new system to 120% status and then allocate the remaining amount to the state’s Pension Funding Stabilization Account (PFSA). The PFSA account is how the state provides state employer contributions for PERS, PSERS, and TRS. The piece of this bill particularly important to cities is it would allow the Legislature to direct the State Treasurer to transfer money acquired from the LEOFF 1 surplus in PFSA to the state general fund—with the intent to help overcome the state’s general fund budget deficit. Learn more about HB 2034 on AWC’s website.
Fast-forwarding to the present day, the Select Committee on Pension Policy (SCPP) presented the study’s progress to the Senate Ways & Means Committee last week. The presentation outlined:
- Mandated study requirements;
- The effect of each bill should either pass as-is;
- SCPP actions and process; and
- Breakdowns of solicited analysis.
The following entities provided analysis to the study:
- Department of Retirement Systems
- Washington State Investment Board
- Office of the State Treasurer
- Office of the State Actuary
- Office of the Attorney General
- Ice Miller, LLC
The main takeaways of the work session were that both bills could be implemented should either pass, doing nothing with the surplus funds is an option, and all analyzing entities shared concerns that will need to be managed should either bill come forward again in the 2026 session.
The full SCPP report is now available. AWC will continue to monitor the progression of these bills.