Personnel & labor relations

Proposed pension rates

The Governor, the Senate, and the House of Representatives each released 2009-11 budget proposals that include several changes to pension funding methods and assumptions for all of the state’s retirement plans.

Although these proposed changes create short term savings for the biennium, any short-term reduction in pension contribution rates will be followed by higher future contribution rates for cities and other public employers resulting in greater long-term costs.

Clearly, there are significant differences in the various proposals and much more work to do. We will keep you posted.

The Governor’s budget proposals include:

• Change the Plans 2/3 funding method from the Aggregate funding method to Projected Unit Credit funding method.
• For the 2009-11 Biennium only, suspend projected mortality improvements assumptions for all plans (PERS, PSERS and LEOFF).
• Lower the general salary increase assumption from 4.5% to 4% for all plans (PERS, PSERS and LEOFF 2).
• Suspend the minimum contribution rates adopted by the Pension Funding Council and the LEOFF 2 Board.

The Senate budget proposals include:

• Change the Plan 1 unfunded actuarial accrued liability (UAAL) funding amortization method from June 30, 2024 to amortizing it over a rolling ten-year period. The new funding method also establishes short-term UAAL rate ceilings and higher long-term minimum UAAL rates. The 2009-11 UAAL rates are 60% lower than those adopted by the Pension Funding Council.
• Suspend the projected mortality improvement assumptions for all plans except LEOFF 2.
• Lower the general salary increase assumption from 4.5% to 4% for all plans except LEOFF 2.
• Suspend the minimum contribution rates adopted by the Pension Funding Council (excludes LEOFF 2).

The House budget proposals include:

• Change the Plan 1 unfunded actuarial accrued liability (UAAL) funding amortization method from June 30, 2024 to amortizing it over a rolling ten-year period. The new funding method also establishes short-term UAAL rate ceilings and higher long-term minimum UAAL rates. The 2009-11 UAAL rates are 50% lower than those adopted by the Pension Funding Council.
• Suspend the projected mortality improvement assumptions for all plans, PERS, PSERS and LEOFF 2.
• Lower the general salary increase assumption from 4.5% to 4% for all plans except LEOFF 2. The LEOFF 2 salary assumption under this proposal would be 4.25% (the LEOFF Plan 2 Board did not adopt any change to the general salary assumption rate of 4.5%)
• Suspend the minimum contribution rates adopted by the Pension Funding Council and the LEOFF 2 Board.

Employer Contribution Rates*

*Excludes current DRS administrative expense rate of 0.16%

Member Contribution Rates***

**PERS 1 member contribution rates are set in statute at 6%. PERS 3 members contribute to the to the defined contribution portion of their benefit at a self-selected rate.

***Excludes current DRS administrative expense rate of 0.16%

Restricting contact with medical providers after appeals have been filed on industrial insurance claims (SHB 1402)

SHB 1402, if passed, would restrict contact by employers, employees, and the Department of Labor and Industries with medical providers at specified stages after an industrial insurance claim denial has been appealed by the claimant. An employer, after receiving a notice of appeal, may not have contact with the employee’s medical provider to discuss issues in the appeal without written authorization. Likewise, the employee may not have contact with the employer’s independent medical examiner after an appeal has been filed, without written authorization.

Contact with medical providers would be permitted for ongoing claims management, including treatment needs and return-to-work issues. Written authorization for contact is valid only if given after the appeal is filed and expires in 90 days.

SHB 1402 passed the House 55-42, Wednesday, March 11. The Senate Committee on Labor, Commerce and Consumer Protection heard the bill on Tuesday, March 24 and passed it to Senate Rules for further consideration.

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