Plan 1 Pension Bills Pass Ways & Means
On Monday, February 20, the Washington State Senate Ways & Means Committee passed two important Plan 1 pension bills. Senate Bill 5350 will provide PERS 1 and TRS 1 retirees with a one-time 3% cost-of-living-adjustment (COLA) in July 2023, not to exceed $110 per month. It also includes language that RPEC helped craft to direct the Select Committee on Pension Policy to study and recommend an ongoing COLA for Plan 1 retirees. In executive session, Senator Lynda Wilson (R, Vancouver) offered an amendment to soften this language. Senator Steve Conway (D, Tacoma), the bill’s primary sponsor, spoke against the proposed amendment, and Democrats defeated it in a party-line voice vote.
The bill was passed out of committee almost unanimously, with Senate Republican Leader John Braun of Lewis County voting “without recommendation.” It now moves to the Senate Rules Committee where it will wait to be “pulled” and scheduled for a Senate floor vote. If it passes the Legislature, all Plan 1 retirees will receive COLAs in consecutive years for the first time since 2010. It will also set the stage for the Select Committee on Pension Policy to begin work on an ongoing COLA proposal after the Legislature adjourns on April 24.
On Monday, Senate Ways & Means also passed Senate Bill 5294, which impacts the paydowns of the Plans 1 unfunded liabilities. The bill, which was proposed by the Office of Financial Management, originally would have abruptly ended funding of the paydowns when the plans were anticipated to be fully funded in 2024 and 2025. On Monday, it was amended to gradually decrease funding over time. It also moves on to the Senate Rules Committee.
The unfunded liabilities in Plan 1 exist due to the Legislature making irresponsible pension funding decisions two decades ago. Since 2015, employers (the state, counties, cities, etc.), have been required to make substantial contributions to fully fund Plan 1. As the plans near full funding, RPEC is urging the Legislature to redirect some of the funds being used to pay down the unfunded liabilities to fund an ongoing COLA for Plan 1.
On Thursday, February 23, the House Appropriations Committee is voting on House Bill 1057 and House Bill 1201, the respective companion bills to Senate Bill 5350 and Senate Bill 5294. Check in tomorrow for an update.
Plan 1 are the only pension plans administered by the Department of Retirement Systems that do not receive automatic COLAs. Plans 2 and 3 members receive automatic COLAs of up to 3% every July based on inflation. If inflation exceeds 3%, the excess amount is “banked” and used the next year inflation is below 3%.