Sunday, February 25, 2024

Retiree Priorities Make Progress & Concessions

Retiree Priorities Make Progress & Concessions

On Thursday, January 25th, the House Appropriations Committee unanimously passed House Bill (HB) 1985, providing a one-time 3% cost-of-living adjustment (COLA) for Plan 1 retirees. However, citing a tight budget, the committee amended the bill to reduce the maximum monthly benefit from $125 to $110. Under the $110 cap, 84% of eligible Plan 1 retirees get a full 3% COLA, where 92% of eligible retirees would receive a full 3% under the $125 cap.

PERS 1 & and TRS 1 (referred to collectively as Plan 1) are the only pension plans managed by the Department of Retirement Systems (DRS) that do not receive automatic ongoing COLAs. RPEC has played a major role in passing four bills to provide one-time COLAs for Plan 1 retirees:

  • 2018: 1.5% COLA capped at $62.50 per month
  • 2020: 3% COLA capped at $62.50 per month
  • 2022: 3% COLA capped at $110 per month
  • 2023: 3% COLA capped at $110 per month. This bill also requires the Select Committee on Pension Policy (SCPP) to study and recommend an ongoing COLA proposal to the Legislature by the end of 2024.

HB 1985 was passed by the SCPP in November 2023, which acknowledged Plan 1 retirees’ need for relief from inflation by raising the monthly maximum benefit increase to $125. Governor Jay Inslee did not fund HB 1985 in his budget request to the Legislature, setting the stage for an uphill battle. The House of Representatives showed an eagerness to advance the bill by scheduling it for a hearing the second week of the Legislative Session and passing it out of the House Appropriations Committee well ahead of the February 5 deadline. The bill now advances to the House Rules Committee, where it must be pulled by a committee member, scheduled for a floor vote, and passed by the House by February 13. The bill will then progress to the Senate, where it may face a rockier path.

The House Appropriations Committee looked to cut additional costs by declining to act on HB 2013, which had been scheduled for a vote alongside HB 1985. The bill, which also came from the SCPP, would end month-of-death pension prorating. Committee Chair Timm Ormsby cited a preference for recently filed HB 2481 over HB 2013.

Under current policy, DRS prorates final pension payments to deceased retirees based on the day of the month of death. For example, if a retiree dies on the 15th day of a 30-day month, the final pension payment would be reduced by 50%.  Month-of-death pension prorating can create two issues:

  1. Many retirees get supplemental health insurance through the Public Employees Benefits Board (PEBB) and have their monthly health insurance premium automatically deducted from their pension. If the prorated pension payment is not enough to cover the monthly health insurance premium, the premium goes unpaid and the retiree risks losing their supplemental insurance in their final month of life. The cost of incredibly expensive end-of-life medical care is then passed on to the deceased retiree’s survivors, who are stuck paying for it without supplemental insurance.
  2. DRS processes pension payments on the final business day of the month. If a retiree dies and DRS is not notified before a full pension payment is initiated, DRS is required to “claw back” the overpayment from the deceased retiree’s bank account. This frequently impacts retirees who pass away near the end of the month and can cause unexpected financial headaches for survivors as they settle the affairs of the deceased.

HB 2013 addresses both issues by ending month-of-death pension prorating, meaning that retirees receive full pension payments regardless of the day of the month of death. HB 2481, which was filed on January 25th, address only “issue 1” and not “issue 2”. Instead of ending pension prorating, it requires the State to pay the month-of-death health insurance premiums for retirees who get their health insurance through PEBB. While it prevents retirees from losing their supplemental health insurance for their final month of life, it continues to require DRS to claw back pension overpayments. While fiscal information is not yet publicly available, HB 2481 will likely be less expensive than HB 2013. RPEC is monitoring the Legislature’s work on this issue.

Want to learn more?

  • Click here to follow other bills that RPEC is monitoring.
  • Attend RPEC’s weekly legislative update call for in-depth updates on RPEC’s priorities. Updates are every Friday at 2:00 on Zoom while the Legislature is in session. All members are welcome to attend and questions are welcome. Meeting login information:
Meeting ID: 890 4536 5250
Passcode: 320296
Dial-in: (253) 215-8782

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