SB 5113
In CommitteeSenate
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 permanent, inflation-adjusted cost-of-living adjustment (COLA) for Plan 1 retirees of the Teachers’ and Public Employees’ Retirement Systems, starting in 2026, and changes how the state pays for both past and future COLAs—spreading the total cost over 15 years instead of 10 to help stabilize employer contribution rates.
- Provides one-time COLAs for Plan 1 retirees based on their retirement date: 1.5% (capped at $62.50) for those retired as of July 1, 2017; 3% (capped at $62.50 or $110) for later years, up to July 1, 2024.
- Establishes an ongoing, automatic annual COLA beginning July 1, 2026, tied to the consumer price index (CPI) for the Seattle area, with a cap of 3% per year and a minimum of 0% (no reduction).
- Requires the annual COLA to be applied cumulatively (compounded) for retirees who also receive the early retirement bonus under TRS/PERS Plan 1.
- Amends funding rules to amortize the combined cost of prior and new COLAs over 15 years (instead of 10), starting September 1, 2025, to reduce annual employer rate spikes.
- Applies the same COLA and funding rules to both TRS Plan 1 and PERS Plan 1 retirees.
- Clarifies that future legislatures may change or repeal the ongoing COLA, and retirees do not have a contractual right to it.
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, will receive one-time COLAs in 2018–2025 based on their retirement date, followed by annual adjustments starting in 2026.
- Public employers — State and local government employers (e.g., school districts, universities, cities, counties) will pay higher contribution rates beginning September 1, 2025, to fund the new and previously granted COLAs over a 15-year amortization period.
- Active public employees in TRS/PERS Plan 1 — State and local government employees who are active members of TRS or PERS Plan 1 may see higher employer contribution rates reflected in their pay or agency budgets, though their own contributions remain unchanged.
- State retirement agencies and boards — The Washington State Retirement Board and Department of Retirement Systems will be responsible for calculating and applying annual COLAs using the consumer price index, and for managing the new 15-year amortization schedule.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The automatic, inflation-adjusted COLA beginning in 2026 will help protect Plan 1 retirees—especially low- and moderate-income retirees—against rising housing, food, and healthcare costs, preserving real purchasing power and reducing poverty risk in retirement.
FinancialPeopleRef: Sec. 4(1)–(2) and Sec. 5(1)–(2)The one-time COLAs (1.5%–3%, capped at $62.50–$110) provide meaningful, immediate financial relief to retirees who have not received COLAs since 2017–2020, many of whom are living on fixed incomes and struggling with inflation—particularly those retired before 2020.
FinancialPeopleRef: Sec. 2 and Sec. 3 (one-time COLAs for 2018–2025)Spreading the amortization of COLA costs over 15 years (instead of 10) reduces annual employer contribution spikes, helping stabilize school district and local government budgets and reducing the risk of disruptive budget cuts to K–12, higher education, or public safety services.
FinancialPeopleRef: Sec. 1 and Sec. 6(d)(i)–(ii)The cap on year-to-year COLA changes (no more than 3% difference between consecutive years) prevents abrupt, destabilizing swings in benefit amounts—providing predictability for retirees and plan administrators alike.
FinancialPeopleRef: Sec. 4(2)(c) and Sec. 5(2)(c)The guarantee that retirement allowances cannot be reduced below the original amount (even if CPI declines) protects retirees from deflationary shocks—though deflation is historically rare, this provides peace of mind.
FinancialLean peopleRef: Sec. 4(2)(a) and Sec. 5(2)(a)
Potential Concerns (5)
The bill explicitly denies retirees a contractual right to the ongoing COLA and reserves the legislature’s right to amend or repeal it in the future, undermining retirement security and creating uncertainty for retirees who planned on stable inflation-adjusted income.
Rights & LibertiesPeopleRef: Sec. 4(6) and Sec. 5(6)The 15-year amortization of COLA costs increases employer contribution rates beginning September 1, 2025, which may lead to budget pressures on state and local governments—potentially resulting in reduced public services, hiring freezes, or increased local taxes—ultimately affecting everyday Washingtonians who rely on those services.
FinancialPeopleRef: Sec. 6(d)(i) and Sec. 6(d)(ii) and Sec. 7(10)The 3% annual COLA cap—while inflation-protective in high-inflation years—means retirees in periods of elevated inflation (e.g., >3%) will see their purchasing power erode, especially those on fixed incomes with no other inflation-adjusted income sources.
FinancialLean peopleRef: Sec. 4(2)(b) and Sec. 5(2)(b)The COLA is calculated using the Seattle-area CPI-U, which may overstate inflation for retirees living outside the Puget Sound region (e.g., Eastern WA, rural areas), where cost-of-living and inflation patterns differ—disadvantaging non-metro retirees.
FinancialPeopleRef: Sec. 4(1)(d) and Sec. 5(1)(d)The compounding of the COLA with the early retirement bonus may disproportionately benefit higher-earning retirees who lived longer and accumulated larger base benefits—reinforcing inequities tied to career earnings and longevity.
FinancialLean peopleRef: Sec. 4(5) and Sec. 5(5)
Who Is Most Affected
Plan 1 retirees—especially those with lower lifetime earnings and no other inflation-adjusted income—will see significant real-terms income gains starting in 2026, improving retirement security and reducing poverty risk. However, those outside the Seattle metro area may receive less accurate COLAs, and all face uncertainty due to the lack of contractual right to future adjustments.
State and local employers (e.g., school districts, cities, universities) will face higher contribution rates starting in 2025, which may strain budgets and lead to trade-offs such as reduced services, hiring freezes, or increased local levies—particularly impactful for cash-strapped districts in rural or high-need areas.
Active Plan 1 members may see little direct impact on their pay, but longer-term, they face higher employer contribution rates that could affect agency budgets and future benefit sustainability—though their own contributions remain unchanged, they may worry about long-term plan health.
The Department of Retirement Systems and Retirement Board gain clear statutory authority and methodology for COLA administration, but also face increased operational responsibility for annual CPI-based adjustments and amortization tracking—though this is a manageable administrative burden, not a fiscal one.