Looking ahead: Contribution rate changes coming in mid-2019

Posted 21-Sep-2018

Member and employer contribution rates for Washington's retirement systems are established every two years. Rates for most of the retirement plans are approved by the Washington State Pension Funding Council (PFC); rates for Plan 2 of the Law Enforcement Officers' and Fire Fighters' (LEOFF) Retirement System are approved by the LEOFF Plan 2 Retirement Board.

Rates are reviewed and approved in even-numbered years so they can be incorporated into the state's next two-year budget cycle, which begins July 1 of odd-numbered years. The state Legislature has the authority to revise the PFC-approved rates as part of the budget adoption process, but is not required to do so. 

2019-2021 Contribution Rates 

Below is a list of rates as adopted by the PFC and the LEOFF 2 board in July 2018. Please note that PFC-approved rates are unofficial until the 2019-21 state general fund biennial budget has been approved by the 2019 Legislature and signed by the governor. 

MEMBER CONTRIBUTION RATES
  Current Effective July 1, 2019 Effective Sept. 1, 2019
Public Employees' Retirement System (PERS) Plan 2 7.41% 7.90% --
Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) Plan 1 0.00 0.00 --
Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) Plan 2 8.75% 8.59% --
Washington State Patrol Retirement System (WSPRS) Plans 1/2 7.69% 8.45% --
Public Safety Employees' Retirement System (PSERS) Plan 2 7.07% 7.20% --
Teachers' Retirement System (TRS) Plan 2 7.06% -- 7.77%
School Employees' Retirement System (SERS) Plan 2 7.27% -- 8.25%
TRS 1 and PERS 1 member contribution rates are fixed in statute at 6%      

 

EMPLOYER CONTRIBUTION RATES (Employer rates include 0.18% DRS administrative expense rate)
  Current Effective July 1, 2019 Effective Sept. 1, 2019
Public Employees' Retirement System (PERS) 12.83% 12.86% --
Law Enforcement Officers' and Fire Fighters' (LEOFF) Retirement System Plan 1 0.18% 0.18% --
Law Enforcement Officers' and Fire Fighters' (LEOFF) Retirement System Plan 2      
  • LEOFF 2 Cities, Counties, Fire Districts –
    Employer Contribution Rate
5.43% 5.33% --
  • LEOFF 2 Cities, Counties, Fire Districts –
    State Contribution Rate
3.50% 3.44% --
  • LEOFF 2 Ports and Universities –
    Employer Contribution Rate
8.93% 8.77% --
Washington State Patrol Retirement System (WSPRS) 13.34% 22.31% --
Public Safety Employees' Retirement System (PSERS) 12.38% 12.14% --
Teachers' Retirement System (TRS) 15.41% -- 15.51%
School Employees' Retirement System (SERS) 13.58% -- 13.19%

In Washington, both state and local governments and their employees contribute to the funding of the employee retirement benefits. The majority of benefit costs are covered by earnings generated by investments on those contributions. Investments are managed by the Washington State Investment Board.

Contribution rates for the defined benefit systems are set every two years based on analysis and recommendations from the State Actuary. The Actuary regularly recommends updates to assumptions so policymakers can adjust contribution rates as needed to fund the retirement benefits earned by members.

The PFC rate adoption motion attributes changes in contribution rates to updated economic assumptions, including salary growth, inflation adjustments and a reduction in the expected rate of return on investments. In addition, rates reflect the final step of a six-year phase-in of assumptions about longevity. People are living longer now and are expected to live even longer in the future. This leads to more retirement benefit payments over time, which in turn requires higher contribution rates now to maintain the health of the pension trust funds in the future. 

For more information, see the Pension Funding Council website. Also, the public affairs channel TVW provides archived video of the June 19 and July 26 PFC meetings.