BILL REQ. #:  S-1523.1 

Read first time 02/08/2007.   Referred to Committee on Ways & Means.

     AN ACT Relating to funding the state actuary's recommendations concerning projected improvements in the mortality of members and beneficiaries of the Washington state retirement systems; adding a new section to chapter 41.45 RCW; creating a new section; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature has adopted a process for the dependable and systematic funding of the Washington state retirement systems, and to that end, has established the office of the state actuary. It is the legislature's intent to follow the recommendations of the state actuary absent a clear indication that his or her judgment is unreasonable. The legislature also recognizes that it is more cost-efficient to begin to fund the expected long-term obligations of the retirement systems as soon as possible, as this policy increases opportunities to generate investment earnings to offset plan liabilities. Furthermore, prefunding these expected long-term obligations promotes intergenerational equity for taxpayers, contribution rate adequacy, and benefit security for retirement system members and their beneficiaries.
     The cost of retirement benefits is closely linked to the longevity of retirees. As life expectancy increases, so do the financial resources needed to fund pension plans. In the 2005 preliminary actuarial valuation report, the state actuary recommended an assumption change that recognized projected improvements in mortality. In response, the legislature has the opportunity to make small adjustments to pension contribution rates today in order to avoid large increases tomorrow. For these reasons, it is the legislature's intent to adopt contribution rates for the state retirement systems that are adequate to address projected mortality improvements.

NEW SECTION.  Sec. 2   A new section is added to chapter 41.45 RCW to read as follows:
     (1) For actuarial valuation reports issued after July 1, 2007, the state actuary shall include a recommendation regarding the impact of projected mortality improvements on contribution rates.
     (2) Beginning July 1, 2007, the legislature shall recognize projected mortality improvements when adopting contribution rates for the Washington state retirement systems. To implement this change, the legislature hereby adopts the contribution rate increases identified in this section, which shall be collected in addition to the basic state, employer, and plan 2 member rates otherwise adopted under this chapter.
     (3) Beginning July 1, 2007, the following contribution rates shall be charged in addition to the basic state and employer contribution rates: 0.62 percent for the public employees' retirement system, of which 0.16 percent shall be applied to the unfunded actuarial accrued liability in plan 1; 0.16 percent for the public safety employees' retirement system, all of which shall be applied to the unfunded actuarial accrued liability in plan 1 of the public employees' retirement system; and 1.04 percent for the Washington state patrol retirement system.
     (4) Beginning September 1, 2007, the following contribution rates shall be charged in addition to the basic state and employer contribution rates: 0.74 percent for the teachers' retirement system, of which 0.28 percent shall be applied to the unfunded actuarial accrued liability in plan 1; and 0.65 percent for the school employees' retirement system, of which 0.16 percent shall be applied to the unfunded actuarial accrued liability in plan 1.
     (5) Beginning July 1, 2007, the following contribution rates shall be charged in addition to the member rates: 0.45 percent for the public employees' retirement system plan 2; 0.00 percent for the public safety employees' retirement system; and 1.04 percent for the Washington state patrol retirement system.
     (6) Beginning September 1, 2007, the following contribution rates shall be charged in addition to the member rates: 0.40 percent for the teachers' retirement system, and 0.40 percent for the school employees' retirement system.
     (7) The contribution rates in subsections (3) and (5) of this section shall be collected through June 30, 2009, for the public employees' retirement system, public safety employees' retirement system, and Washington state patrol retirement system. The contribution rates in subsections (2) and (4) of this section shall be collected through August 31, 2009, for the teachers' retirement system and the school employees' retirement system.

NEW SECTION.  Sec. 3   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2007.