March Pension Report

This month’s Pension Report will highlight what the representative from the Office of the State Actuary (OSA), Frank Serra, shared with us at the General Membership Meeting on March 13th.  He gave us a report on various statistics related to the LEOFF 1 and LEOFF 2 retirement systems.  Here are the highlights of what he shared:

1.     Pension statistics are point in time measurements based on June 30, 2022 information. Next report will be coming out this summer and the “snapshot” will be available on the OSA website.  Snapshots are available on the OSA website, and he will provide the link to President Duchemin so it can be shared.

2.     As of June 30, 2022, there were 15,000 retirees and beneficiaries in the LEOFF 1 and LEOFF 2 pension systems.  In LEOFF 1 there are 6,300 members with an average age of 78 years old and the average annual pension is about $60,000.  In the LEOFF 2 system there are roughly 8,600 retirees and beneficiaries with an average age of 63 also receiving about an average of $60,000 a year as well.  Both pension amounts will go up in the future with LEOFF 1 receiving 100% of the Seattle/Tacoma/Bellevue Consumer Price Index (CPI) and LEOFF 2 limited to no more than 3% per year.

3.     In making these calculations the OSA must make various assumptions to calculate current and future costs.

4.     The LEOFF 1 pension is funded at 152% with an excess of about 2.2 billion dollars and the LEOFF 2 pension is funded at 104% with an excess of about 650 million dollars which means that the State has more funds available than what is expected to be paid out over time in the future.  The presumed return on LEOFF investments is set at 7% over which the Washington State Investment Board has control (and they have a good record).

5.     Both LEOFF 1 and LEOFF 2 are the best funded plans in the country and based on their assumptions they are both expected to remain overfunded into the future.

6.     The Teachers Retirement Systems, Plan 1 is 81% funded but the last time they looked by the end of the decade TERS should be back to a 100% funded plan.  The same is true for PERS 1 and PERS 2.  These funds are climbing each year headed towards 100%.

7.     The assumptions used are the best estimates that the OSA can determine but could change with pension enhancements, members living longer than expected, downturns and upturns in the economy, better or worse returns in the stock and bond fund markets, etc.  These assumptions are updated on a regular basis.

8.     Looking back at the last 2-3 years, the mortality experience in LEOFF 1 is about 200 retiree deaths per year (but that does not consider the possibility of surviving spouses), or about 4%.  In LEOFF 2 they see about 60 retiree deaths per year, which is about 1%.

9.     The cash distribution to LEOFF 1 members in 2023 was about150-200 million dollars and for LEOFF 2, because there were enhancements for both current employees and retirees, they have ongoing future costs that total about a billion dollars.

10.  LEOFF 1 gets an uncapped COLA and LEOFF 2 has a 3% lid.  For 2024 the LEOFF 1 COLA is 5.52% and for LEOFF 2 it will be 3%.

11.  Predicted life spans are mostly developed using a nationwide organization that calculates expected life spans for public pension plans, but they do compare those to what is actually happening in Washington State retired firefighter plans.  They account for the possibility that life spans will increase in the future due to developments in medical services.