HB 1292
In CommitteeHouse
Plan 1 retiree COLAs
Concerning cost-of-living adjustments for plan 1 retirees of the teachers' retirement system and public employees' retirement system.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill creates a new, ongoing annual cost-of-living adjustment (COLA) for Plan 1 retirees of the Teachers’ and Public Employees’ Retirement Systems, starting in 2026, and pays for both past and future COLAs over a 15-year period instead of 10 to stabilize employer contribution rates. It also sets annual caps and rules for how the COLA is calculated using the Seattle-area CPI.
- Provides retroactive cost-of-living adjustments (COLAs) for Plan 1 retirees based on when they were receiving benefits as of specific July 1 dates (2017–2024), with increases of 1.5% or 3% of monthly benefit, capped at $62.50 or $110 depending on the year.
- Establishes a new ongoing annual COLA beginning July 1, 2026, tied to the Seattle-area Consumer Price Index for Urban Wage Earners and Clerical Workers, with a cap of 3% per year and a limit that annual changes cannot swing more than ±3 percentage points from the prior year.
- Changes the amortization period for COLA-related costs from 10 years to 15 years for both past COLAs (2018–2025) and the new ongoing COLA, to reduce annual cost spikes and support employer contribution rate stability.
- Applies to both the Teachers’ Retirement System (TRS) Plan 1 and Public Employees’ Retirement System (PERS) Plan 1, with identical COLA rules for each.
- Excludes certain benefit types (e.g., disability or survivor benefits under specific statutes) from the new COLA structure.
Who is affected
- Plan 1 retirees and beneficiaries of TRS and PERS — Retirees and beneficiaries of Plan 1 of the Teachers' Retirement System (TRS) and Public Employees' Retirement System (PERS) who retired before July 1, 2025 — they receive one-time retroactive COLAs in 2018–2025, and then an ongoing annual COLA starting in 2026.
- Public employers — State and local government employers (e.g., school districts, cities, counties, universities) — they pay higher contribution rates beginning September 1, 2025, to fund the new and past COLAs over 15 years instead of 10.
- Future Plan 1 retirees — Future retirees — they will receive the new ongoing annual COLA starting in 2026, but only if their retirement allowance has been in effect for at least one year by that date.
- State of Washington — The state budget — the bill changes how the cost of past and future COLAs is amortized, affecting long-term state fiscal planning and employer contribution rates.
Pro/Con Analysis
Potential Benefits (5)
The bill provides the first *ongoing* COLA for Plan 1 retirees since 1997, offering long-term inflation protection for the first time in nearly three decades. Combined with retroactive COLAs for retirees who were previously left out, this significantly improves real income stability for thousands of low- and middle-income retirees who rely heavily on their pension as their primary income source.
FinancialPeopleRef: Sec. 4–5 (ongoing COLA), Sec. 2–3 (retroactive COLAs)Spreading the cost of past and new COLAs over 15 years (instead of 10) reduces annual employer contribution spikes, helping avoid sudden, large rate hikes that could destabilize local government budgets. This improves fiscal predictability for public employers and reduces the risk of service cuts or tax increases triggered by pension cost volatility.
FinancialPeopleRef: Sec. 1, Sec. 6(6)(d)(i), Sec. 6(8)(d)(i), Sec. 7(10)Tying the COLA to the Seattle-area CPI (rather than national CPI) better reflects local cost-of-living changes, especially for housing and services in Western Washington where many retirees live. This targeted indexing improves relevance for retirees in high-cost urban areas compared to a national average.
FinancialPeopleRef: Sec. 4(1)(d), Sec. 5(1)(d)The floor provision—ensuring the COLA never reduces the retirement allowance below the original amount—protects retirees from deflationary shocks and prevents benefit erosion during economic downturns. This is especially valuable for retirees who cannot supplement income through work or whose pensions are already modest.
Public SafetyPeopleRef: Sec. 4(2)(a), Sec. 5(2)(a)Allowing cumulative application of the COLA to optional benefit riders (e.g., survivor benefits) ensures inflation protection compounds across benefit types, improving long-term security for beneficiaries who elected these options—often older spouses or dependents with no other income sources.
FinancialLean peopleRef: Sec. 4(5), Sec. 5(5)
Potential Concerns (5)
The bill caps the initial annual COLA at 3%, which—while modest—may fall short of actual inflation for many retirees, especially those with higher medical or housing costs. Since the cap is binding in years when CPI exceeds 3% (e.g., 2022–2023), retirees may experience *negative real income growth* over time, eroding purchasing power. This disproportionately affects low- and fixed-income retirees who lack alternative sources of inflation protection.
FinancialPeopleRef: Sec. 4(2)(b), Sec. 5(2)(b)The ±3 percentage-point cap on year-to-year COLA changes creates artificial volatility smoothing but can delay or blunt responses to sudden inflation spikes. For example, if inflation jumps from 2% to 7% in one year, the COLA is capped at 5% (2% + 3pp), not 7%. This mismatch reduces the effectiveness of the COLA as a true inflation hedge, especially for retirees relying solely on pension income.
FinancialPeopleRef: Sec. 4(2)(c), Sec. 5(2)(c)The bill explicitly reserves the legislature’s right to amend or repeal the COLA in the future and states that retirees have *no contractual right* to future adjustments. This undermines long-term benefit security and creates uncertainty for retirees planning decades ahead—particularly harmful for younger retirees who may face benefit reductions before they even begin receiving the COLA.
Rights & LibertiesPeopleRef: Sec. 4(6), Sec. 5(6)The exclusion of disability and survivor benefits from the COLA means vulnerable groups—people with disabilities and families of deceased retirees—receive no inflation protection. Since disability retirees often have higher medical expenses and survivor benefits support children or spouses with limited income, this exclusion increases economic insecurity for these groups relative to other retirees.
FinancialLean peopleRef: Sec. 4(4), Sec. 5(4), Sec. 2(7), Sec. 3(7)The 15-year amortization of COLA costs increases employer contribution rates starting September 1, 2025. While this stabilizes rates over time, it imposes a near-term fiscal burden on public employers (e.g., school districts, cities, counties), which may respond by cutting services, freezing hiring, or raising local levies—ultimately affecting everyday Washingtonians through reduced public services or higher local taxes.
FinancialLean peopleRef: Sec. 6(2)(c), Sec. 6(6)(d)(ii), Sec. 6(8)(d)(ii), Sec. 7(5), Sec. 7(10)
Who Is Most Affected
Plan 1 retirees (especially those retired before 2025) benefit significantly from retroactive and ongoing COLAs. Low- and middle-income retirees gain the most, as pensions are their primary income and inflation protection is critical. However, the 3% cap and exclusion of disability/survivor benefits limit gains for some vulnerable subgroups.
Public employers (school districts, cities, counties, etc.) face higher contribution rates beginning in 2025 due to the 15-year amortization. While this avoids sudden spikes, the increased costs may lead to budget reallocations—potentially reducing services, increasing local levies, or delaying hiring—impacting communities broadly.
Future Plan 1 retirees will receive the ongoing COLA starting in 2026, but only if their benefit has been in effect for at least one year. Those retiring *after* July 1, 2026, may not receive the COLA until 2027, and all future retirees face the risk of legislative repeal—reducing long-term predictability.
The state budget benefits from more predictable long-term pension costs due to the 15-year amortization, reducing volatility in annual budget requests. However, this comes at the cost of higher near-term outlays and no new revenue generation—shifting the burden to employers and potentially straining other budget priorities.
Retirees with disabilities and survivors of deceased retirees are excluded from the COLA, leaving them without inflation protection. These groups often have higher medical expenses and lower alternative income, increasing their financial vulnerability relative to other retirees.