Pension Funding Council recommends lower pension rates

The Pension Funding Council met in July and made a recommendation to lower pension rates for the next biennium (2021-2023).

The Pension Funding Council considered two options—one based on the current rate of investment returns of 7.5% and a second based on a slightly lower rate of return of 7.4%. The Pension Funding Council voted to keep the 7.5% rate, as it would allow for greater savings due to lower pension rates and did not significantly impact the pension funded status. The final rates are subject to legislative confirmation in the upcoming 2021 legislative session.

AWC staff provided public comment at the meeting, supporting this action given the current economic crisis. However, AWC recognizes and commented that decisions about rates need to be supported by actuarial data and not be based solely on local and state budget savings. Artificially lowering pension contributions can have long-term cost implications that outweigh short-term savings.

The recommended employer rates for 2021-2023 are as follows:

Note: Rates exclude the current administrative expense rate of 0.18%

LEOFF 2 pension rates are not included as they are set by the LEOFF 2 Board.

The recommended rates are forecasted to save local government employers $460 million (including school districts paying in to the TERS retirement plan) and the State $580 million.

There is also a corresponding reduction in the recommended employee contribution rates:

AWC will continue to monitor how the Legislature addresses pension rates in the upcoming session.