SSB 5085
In CommitteeSenate
Closed retirement plans
Concerning three of Washington state's closed retirement plans.
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 merges three Washington state closed retirement plans—Law Enforcement Officers' and Firefighters' Retirement System Plan 1, Teachers' Retirement System Plan 1, and Public Employees' Retirement System Plan 1—into a single 'legacy retirement system' to improve overall funding stability. The merger transfers excess assets from the well-funded LEOFF Plan 1 to help shore up the underfunded teachers' and public employees' plans, while preserving all existing benefits and adding new cost-of-living adjustments.
- Merge the assets, liabilities, and membership of the three closed retirement plans—Law Enforcement Officers' and Firefighters' Retirement System Plan 1, Teachers' Retirement System Plan 1, and Public Employees' Retirement System Plan 1—into a new single plan called the 'legacy retirement system'.
- Establish three separate benefit tiers within the legacy retirement system, one for each original plan, ensuring members receive the same benefits they were entitled to before the merger.
- Provide new and ongoing cost-of-living adjustments (COLAs) for retirees and beneficiaries of the teachers' and public employees' retirement system Plan 1, beginning in 2025 and transitioning to an annual inflation-based adjustment starting in 2026.
- Close the individual Plan 1 trust funds and transfer all assets to a single 'legacy retirement system account' to improve funding efficiency and long-term sustainability.
- Require the Department of Retirement Systems to seek federal tax determination and private letter rulings to ensure the merged plan remains compliant with federal tax qualification rules.
Who is affected
- Retirees and beneficiaries of the three merged plans — Retirees and beneficiaries currently receiving benefits from the three closed plans (Plan 1 of LEOFF, Plan 1 of PEBB/Teachers, and Plan 1 of PERA) will continue to receive the same benefits they were receiving before the merger, plus new or increased cost-of-living adjustments starting in 2025–2026.
- Active employees in the three merged plans — Current active employees in the three merged plans will remain in their respective benefit tiers with no reduction in benefits, but their future contributions (if any) and employer contributions will be allocated to the new legacy retirement system account.
- State and local government employers — State and local government employers will continue to pay employer contribution rates as set by the pension funding council, but those employers who previously paid into the now-closed Plan 1 funds will now contribute to the legacy retirement system account instead.
- Department of Retirement Systems — The Department of Retirement Systems will take on expanded administrative responsibilities for the merged legacy retirement system, including compliance with federal tax rules and coordination with the Pension Funding Council.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (4)
The bill provides new and ongoing cost-of-living adjustments for retirees and beneficiaries of the teachers’ and public employees’ retirement system Plan 1—starting with fixed 3% annual increases beginning in 2025, then transitioning to inflation-indexed adjustments in 2026. This significantly improves retirement security for tens of thousands of low- and middle-income retirees (e.g., K–12 teachers, school staff, state and local government workers) who previously received only minimal or no COLAs, especially those earning below the median pension.
FinancialPeopleRef: Sec. 401(6); Sec. 402(6); Sec. 403(1)-(4); Sec. 404(1)-(4)The merger transfers excess assets from the overfunded LEOFF Plan 1 (149% funded) to shore up the underfunded teachers’ and public employees’ plans (86% and 80% respectively), improving overall system solvency without raising taxes or cutting benefits. This reallocation prevents future benefit cuts or massive employer contribution spikes that would otherwise be needed to fix the underfunded plans, protecting retirees and active workers from abrupt fiscal shocks.
FinancialPeopleRef: Sec. 201(1); Sec. 202; Sec. 507(4)(b), (5)(b), (6)(b)The bill explicitly preserves all existing benefits for members of all three legacy tiers and prohibits any reduction in benefits upon merger—reinforcing contractual rights under Washington’s public pension law. This protects retirees and active workers from benefit erosion due to underfunding, ensuring that promised retirement security remains intact regardless of future market conditions or legislative changes.
Rights & LibertiesPeopleRef: Sec. 201(1); Sec. 202; Sec. 204; Sec. 301(1)The merger improves actuarial sustainability by creating a single funding pool with a more reliable contribution base (e.g., eliminating the risk that LEOFF Plan 1—now with only 7 active members—could become underfunded with no funding source). This reduces the risk of future general fund bailouts, which would otherwise come at the expense of all Washington taxpayers through higher taxes or reduced public services.
FinancialPeopleRef: Sec. 201(2)(a); Sec. 202; Sec. 301(2)-(3)
Potential Concerns (4)
The merger consolidates underfunded liabilities into a single account, but the new funding structure shifts the cost of amortizing the legacy system’s unfunded liability onto *all* public employer groups (teachers, school employees, public safety, and general public employees) through mandatory minimum contribution rates starting in 2027—even though the original underfunding stemmed primarily from the teachers’ and public employees’ plans. This creates a regressive cost shift where smaller employers and districts (e.g., rural school districts) may face disproportionate budget pressure to support a system where they have no historical liability, and where the state’s own fiscal responsibility for LEOFF Plan 1’s surplus is not offset by new revenue.
FinancialPeopleRef: Sec. 201(6); Sec. 302(6); Sec. 504(4)-(8); Sec. 505(13); Sec. 506(3)(c); Sec. 507(4)(b), (5)(b), (6)(b)The new COLAs for teachers’ and public employees’ retirees begin in 2025 as fixed percentage increases (3% of monthly benefit), but the transition to inflation-based adjustments in 2026 includes caps (3% annual change, no reduction) that *under-index* to actual inflation over time—especially during high-inflation periods. This effectively reduces real purchasing power for retirees over the long term, disproportionately affecting low- and middle-income retirees who rely heavily on fixed pensions and lack other inflation-protected assets.
FinancialPeopleRef: Sec. 401(6); Sec. 402(6); Sec. 403(2)(b); Sec. 404(2)(b)While the merger improves funding stability, it does *not* change the existing legal framework that allows LEOFF Plan 1 members to receive full-service credit for line-of-duty disabilities without requiring additional contributions—even though the plan is now 149% funded. This preserves a generous benefit structure that is fiscally unsustainable if investment returns decline, and it does not require LEOFF retirees (many of whom are high earners) to contribute more during periods of underfunding, increasing long-term risk to the merged system.
Public SafetyLean peopleRef: Sec. 201(2)(b); Sec. 202(3)(a); Sec. 303(2)(b)Local government employers (school districts, cities, counties) will continue paying employer contributions to the legacy system, but the bill eliminates the *amortization phase-out* for the unfunded liability that was scheduled to end in 2023. Instead, it reinstates a 0.5% minimum contribution in 2027 *only if* the legacy system falls below 100% funded—creating uncertainty and potential future budget volatility for local governments that already face constrained revenues and rising pension costs.
Local GovernmentLean peopleRef: Sec. 507(4)(a), (5)(a), (6)(a); Sec. 507(4)(b), (5)(b), (6)(b)
Who Is Most Affected
Retirees and beneficiaries of the merged plans—especially low- and middle-income teachers, school staff, and public employees—will benefit significantly from new COLAs and improved funding stability, while LEOFF retirees (often higher earners) gain little beyond preservation of existing benefits. The net effect is strongly positive for the majority of retirees who rely on pensions as primary income.
Active employees in the merged plans retain their existing benefit tiers and accrual rates, but face potential future contribution increases if the legacy system becomes underfunded. Since most are mid-career or early-career, they benefit from long-term stability but may bear some cost if investment returns underperform. Net effect is slightly positive.
State and local government employers (especially school districts and small municipalities) will continue paying employer contributions, but the bill eliminates the scheduled phase-out of UAAL amortization and reinstates a minimum 0.5% contribution in 2027 if underfunded—creating future budget uncertainty. However, they avoid the risk of sudden funding shortfalls. Net effect is mixed but slightly negative due to long-term fiscal risk.
The Department of Retirement Systems gains administrative responsibility for the merged system but gains no new funding or authority to improve actuarial outcomes. Its role is more complex, but the bill does not address chronic underfunding or investment risk. Net effect is neutral to slightly negative.