"NEW SECTION.  Sec. 1   The legislature recognizes that returns on the investment of retirement plan assets are volatile, and market volatility is reflected in variations in the funded status of the state retirement plans over time. The legislature also recognizes that the long-term liability in the plans 1 of the public employees' retirement system and the teachers' retirement system remains independent from short-term investment returns in the market. The legislature seeks to avoid contribution rate volatility that may unfairly benefit or burden particular groups of taxpayers with disproportionate responsibilities for retiring the unfunded liability in the plans 1. Therefore, it is the intent of the legislature to provide for the systematic payment of the plans 1 unfunded liability in a manner that promotes contribution rate adequacy and stability for the affected systems over time.

NEW SECTION.  Sec. 2   A new section is added to chapter 41.45 RCW to read as follows:
     (1) There shall be no suspension of those portions of the basic state and employer contribution rates that are necessary to pay for the unfunded actuarial accrued liability for plan 1 of the public employees' retirement system for the following periods: From July 1, 2005, through June 30, 2009, for the public employees' retirement system; from July 1, 2006, through June 30, 2009, for the public safety employees' retirement system; and from September 1, 2005, through August 31, 2009, for the school employees' retirement system.
     (2) There shall be no suspension of those portions of the basic state and employer contribution rates that are necessary to pay for the unfunded actuarial accrued liability for plan 1 of the teachers' retirement system for the period beginning September 1, 2005, and ending August 31, 2009.

NEW SECTION.  Sec. 3   A new section is added to chapter 41.45 RCW to read as follows:
     (1) Beginning July 1, 2009, a minimum 2.75 percent contribution is established as part of the basic state and employer contribution rate for the public employees' retirement system, to be used for the sole purpose of amortizing the unfunded actuarial accrued liability in the public employees' retirement system plan 1. This minimum contribution rate shall remain effective until the actuarial value of assets equals one hundred twenty-five percent of the actuarial accrued liability or June 30, 2024, whichever comes first.
     (2) Beginning July 1, 2009, a minimum 2.75 percent contribution is established as part of the basic state and employer contribution rate for the public safety employees' retirement system, to be used for the sole purpose of amortizing the unfunded actuarial accrued liability in the public employees' retirement system plan 1. This minimum contribution rate shall remain effective until the actuarial value of assets equals one hundred twenty-five percent of the actuarial accrued liability for the public employees' retirement system plan 1 or June 30, 2024, whichever comes first.
     (3) Beginning September 1, 2009, a minimum 2.75 percent contribution is established as part of the basic state and employer contribution rate for the school employees' retirement system, to be used for the sole purpose of amortizing the unfunded actuarial accrued liability in the public employees' retirement system plan 1. This minimum contribution rate shall remain effective until the actuarial value of assets equals one hundred twenty-five percent of the actuarial accrued liability for the public employees' retirement system plan 1 or June 30, 2024, whichever comes first.
     (4) Beginning September 1, 2009, a minimum 5.00 percent contribution is established as part of the basic state and employer contribution rate for the teachers' retirement system, to be used for the sole purpose of amortizing the unfunded actuarial accrued liability in the teachers' retirement system plan 1. This minimum contribution rate shall remain effective until the actuarial value of assets equals one hundred twenty-five percent of the actuarial accrued liability for the teachers' retirement system plan 1 or June 30, 2024, whichever comes first.
     (5) The minimum contribution rates for amortizing the unfunded liability in the plans 1 may exceed, but shall not drop below those specified in this section. Upon completion of each biennial actuarial valuation, the state actuary shall review the appropriateness of the minimum contribution rates and recommend to the legislature any adjustments as may be needed due to material changes in benefits or actuarial assumptions, methods, or experience.

Sec. 4   RCW 41.31.020 and 1998 c 340 s 2 are each amended to read as follows:
     (((1) The gain-sharing increase amount shall be the amount of increase, rounded to the nearest cent, that can be fully funded in actuarial present value by the amount of extraordinary investment gains, if any.)) The amount of extraordinary investment gains shall be calculated as follows:
     (((a) One-half of)) (1) The sum of the value of the net assets held in trust for pension benefits in the teachers' retirement system plan 1 fund and the public employees' retirement system plan 1 fund at the close of the previous state fiscal year;
     (((b))) (2) Multiplied by the amount which the compound average of investment returns on those assets over the previous four state fiscal years exceeds ten percent.
     (((2) The gain-sharing increase amount for July 1998, as provided for in RCW 41.31.010, is ten cents.))

Sec. 5   RCW 41.45.060 and 2003 c 294 s 10 and 2003 c 92 s 3 are each reenacted and amended to read as follows:
     (1) The state actuary shall provide actuarial valuation results based on the economic assumptions and asset value smoothing technique included in RCW 41.45.035 or adopted by the council under RCW 41.45.030 or 41.45.035.
     (2) Not later than September 30, 2002, and every two years thereafter, consistent with the economic assumptions and asset value smoothing technique included in RCW 41.45.035 or adopted under RCW 41.45.030 or 41.45.035, the council shall adopt and may make changes to:
     (a) A basic state contribution rate for the law enforcement officers' and fire fighters' retirement system plan 1;
     (b) Basic employer contribution rates for the public employees' retirement system, the teachers' retirement system, and the Washington state patrol retirement system to be used in the ensuing biennial period; and
     (c) A basic employer contribution rate for the school employees' retirement system for funding both that system and the public employees' retirement system plan 1.
     The contribution rates adopted by the council shall be subject to revision by the legislature.
     (3) The employer and state contribution rates adopted by the council shall be the level percentages of pay that are needed:
     (a) To fully amortize the total costs of the public employees' retirement system plan 1, the teachers' retirement system plan 1, and the law enforcement officers' and fire fighters' retirement system plan 1 not later than June 30, 2024, except as provided in subsection (5) of this section; and
     (b) To also continue to fully fund the public employees' retirement system plans 2 and 3, the teachers' retirement system plans 2 and 3, and the school employees' retirement system plans 2 and 3 in accordance with RCW 41.45.061, 41.45.067, and this section.
     (4) The aggregate actuarial cost method shall be used to calculate a combined plan 2 and 3 employer contribution rate and a Washington state patrol retirement system contribution rate.
     (5) An amount equal to the amount of extraordinary investment gains as defined in RCW 41.31.020 shall be used to shorten the amortization period for the public employees' retirement system plan 1 and the teachers' retirement system plan 1.
     (6) The council shall immediately notify the directors of the office of financial management and department of retirement systems of the state and employer contribution rates adopted. The rates shall be effective for the ensuing biennial period, subject to any legislative modifications.
     (((6))) (7) The director of the department of retirement systems shall collect the rates established in RCW 41.45.053 through June 30, 2003. Thereafter, the director shall collect those rates adopted by the council. The rates established in RCW 41.45.053, or by the council, shall be subject to revision by the council.

Sec. 6   RCW 41.45.060 and 2004 c 242 s 39 are each amended to read as follows:
     (1) The state actuary shall provide actuarial valuation results based on the economic assumptions and asset value smoothing technique included in RCW 41.45.035 or adopted by the council under RCW 41.45.030 or 41.45.035.
     (2) Not later than September 30, 2002, and every two years thereafter, consistent with the economic assumptions and asset value smoothing technique included in RCW 41.45.035 or adopted under RCW 41.45.030 or 41.45.035, the council shall adopt and may make changes to:
     (a) A basic state contribution rate for the law enforcement officers' and fire fighters' retirement system plan 1;
     (b) Basic employer contribution rates for the public employees' retirement system, the teachers' retirement system, and the Washington state patrol retirement system to be used in the ensuing biennial period; and
     (c) A basic employer contribution rate for the school employees' retirement system and the public safety employees' retirement system for funding both those systems and the public employees' retirement system plan 1.
     The contribution rates adopted by the council shall be subject to revision by the legislature.
     (3) The employer and state contribution rates adopted by the council shall be the level percentages of pay that are needed:
     (a) To fully amortize the total costs of the public employees' retirement system plan 1, the teachers' retirement system plan 1, and the law enforcement officers' and fire fighters' retirement system plan 1 not later than June 30, 2024, except as provided in subsection (5) of this section; and
     (b) To fully fund the public employees' retirement system plans 2 and 3, the teachers' retirement system plans 2 and 3, the public safety employees' retirement system plan 2, and the school employees' retirement system plans 2 and 3 in accordance with RCW 41.45.061, 41.45.067, and this section.
     (4) The aggregate actuarial cost method shall be used to calculate a combined plan 2 and 3 employer contribution rate and a Washington state patrol retirement system contribution rate.
     (5) An amount equal to the amount of extraordinary investment gains as defined in RCW 41.31.020 shall be used to shorten the amortization period for the public employees' retirement system plan 1 and the teachers' retirement system plan 1.
     (6) The council shall immediately notify the directors of the office of financial management and department of retirement systems of the state and employer contribution rates adopted. The rates shall be effective for the ensuing biennial period, subject to any legislative modifications.
     (((6))) (7) The director shall collect those rates adopted by the council. The rates established in RCW 41.45.054, or by the council, shall be subject to revision by the legislature.

NEW SECTION.  Sec. 7   The following acts or parts of acts are each repealed:
     (1) RCW 41.31.010 (Annual pension increases -- Increased by gain-sharing increase amount) and 1998 c 340 s 1;
     (2) RCW 41.31A.010 (Definitions) and 2000 c 247 s 407 & 1998 c 341 s 311;
     (3) RCW 41.31A.020 (Extraordinary investment gain -- Credited to member accounts -- Persons eligible -- Calculation of amount -- Contractual right not granted) and 2003 c 294 s 4, 2000 c 247 s 408, & 1998 c 341 s 312;
     (4) RCW 41.31A.030 (Retroactive extraordinary investment gain--Credited to member accounts -- Persons eligible -- Calculation of amount--Contractual right not granted) and 1998 c 341 s 313; and
     (5) RCW 41.31A.040 (Retroactive extraordinary investment gain--Credited to member accounts -- Persons eligible -- Calculation of amount--Contractual right not granted) and 2000 c 247 s 409.

NEW SECTION.  Sec. 8   (1) Section 3 of this act takes effect July 1, 2009.
     (2) Section 6 of this act takes effect July 1, 2006.

NEW SECTION.  Sec. 9   Section 5 of this act expires July 1, 2006.

NEW SECTION.  Sec. 10   Sections 1 and 2 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and take effect July 1, 2005."