September 2025 Pension Report

Pension Law Demystified

LEOFF 1 vs. LEOFF 2: A Tale of Two Retirement Systems

When it comes to retirement security for Washington’s firefighters and law enforcement officers, few topics generate more confusion—and sometimes more debate—than the differences between LEOFF Plan 1 (RCW 41.26, enacted in 1970) and LEOFF Plan 2 (established in 1977). Both plans fall under Chapter 41.26 RCW, but they diverge in several material ways that affect not only pension income but also health coverage and survivorship. Let’s demystify those differences.

1. Lifetime Medical Benefits: The LEOFF 1 Advantage

The most visible—and often envied—distinction is health coverage.

- LEOFF 1 members (those who entered service prior to October 1, 1977) are entitled to lifetime medical services paid for by their employer. RCW 41.26.150 provides that employers must “pay for all medical services for any member” necessary due to sickness or disability, without cost to the member. In practice, this has meant comprehensive, employer-funded medical benefits for life. Importantly, these benefits apply only to the member—not the spouse.
- LEOFF 2 members, by contrast, receive no statutory lifetime medical coverage in retirement. Post-retirement health insurance must be obtained privately, through a spouse’s plan, or Medicare at eligibility age. This difference alone often leads to the perception that LEOFF 1 is the “gold standard.”

2. Final Average Salary: Overtime Makes a Difference

Where LEOFF 2 balances the scales is in how pensionable salary is calculated.

- LEOFF 1 defines “final average salary” as the basic salary attached to the member’s rank at retirement, excluding overtime and specialty pay (RCW 41.26.030(15)(a) (Final Average Salary) and RCW 41.26.030(4)(a) (Basic Salary).
- LEOFF 2, however, defines final average salary as the average of the member’s 60 highest-paid consecutive months, and this figure includes overtime pay (RCW 41.26.030(15(b) (Final Average Salary) and RCW 41.26.030(4)(b) (Basic Salary). For firefighters who consistently worked overtime, this can raise the pension base significantly, sometimes enough to narrow or even offset the gap created by the absence of lifetime medical coverage.

3. Deferred Compensation: Another Tool in the LEOFF 2 Toolbox

LEOFF 2 members also have the opportunity to supplement their defined benefit pension with what essentially acts as a defined contribution plan—the state’s Deferred Compensation Program (DCP), codified at RCW 41.50.770. This optional, tax-deferred savings vehicle allows members to accumulate substantial additional retirement assets. While LEOFF 1 retirees never had access to this as part of their plan, many LEOFF 2 retirees have built sizable accounts that help cover health care costs and enhance income security in retirement.

4. Survivor Benefits: A Technical but Crucial Distinction

Survivorship provisions may be the least understood, yet they represent a critical difference between the two systems.

- LEOFF 1: RCW 41.26.160(1) provides that upon the death of a retiree, the surviving spouse is entitled to effectively the member’s retirement allowance for life, without the member ever having to take a reduced pension to “fund” that benefit. In other words, the benefit is automatic and unreduced (the actual amounts differ based on service credit or duty-disability retirement eligibility).
   - The only exception is in remarriage cases: if a LEOFF 1 retiree remarries after retirement and wishes to provide survivor coverage to the new spouse, RCW 41.26.164 requires that the member accept an actuarially reduced pension, determined by the Department of Retirement Systems (DRS).
- LEOFF 2: Survivor benefits are not automatic. RCW 41.26.164 and RCW 41.26.460 provide that a member must choose, at retirement, to provide for a survivor annuity. That choice comes with a cost: the member’s pension is actuarially reduced to account for the joint life expectancy of both the retiree and the designated survivor. In effect, the retiree “pays” for survivor coverage through a smaller monthly pension.

This is where LEOFF 1 shows its strength. A LEOFF 1 retiree receives an unreduced pension and still guarantees the surviving spouse a lifetime continuation of benefits. LEOFF 2 retirees must trade off present pension dollars to secure that same protection.

5. Putting It Together

So which plan is “better”? The answer depends on perspective:

- LEOFF 1 is more generous in its statutory guarantees: lifetime employer-paid medical coverage and unreduced survivor benefits for the spouse. For retirees on fixed incomes, these features are invaluable.
- LEOFF 2 is more flexible and, in some cases, more lucrative: overtime boosts pensionable salary, and members can build significant supplemental assets through the DCP. Survivorship, however, requires careful actuarial planning and comes at a cost.

Conclusion

Both systems were designed with the same goal: to provide dignity and security in retirement for those who dedicated their lives to public safety. Yet the paths diverged. LEOFF 1 delivers certainty and generous guarantees, while LEOFF 2 emphasizes flexibility and supplemental opportunities. Understanding the statutory underpinnings—RCW 41.26.150 (medical benefits), RCW 41.26.030 (definitions of salary), RCW 41.26.160 and RCW 41.26.460 (survivorship), and RCW 41.50.770 (deferred compensation)—helps retirees appreciate not only what they earned, but why the plans differ.

As always, consult with counsel or a retirement specialist before making elections that may affect your pension or your spouse’s long-term security. In pension law, the details matter.