To calculate the contribution rates necessary to pre-fund the plan’s benefits, an actuary uses an actuarial cost method, asset valuation method, economic assumptions, and demographic assumptions. This section describes the actuarial assumptions we use in our valuation process. Please see
Methods - 2014 for descriptions of our actuarial cost and asset valuation methods. Please see the
Actuarial Methods and Assumptions section of the latest Actuarial Valuation Report for a list of frequently changing or new actuarial methods and assumptions.
In the valuation process, assumptions are required for four economic variables:
Economic assumptions affect expectations regarding the accumulation of assets and the growth of projected pension benefits.
The Pension Funding Council (PFC) adopts economic assumptions for all plans/systems except LEOFF 2. The LEOFF 2 Board adopts economic
assumptions for LEOFF 2. All economic assumptions are then subject to revision by the Legislature. The PFC and LEOFF 2 Board adopted
lower economic assumptions in 2011. In 2012, the Legislature enacted a schedule to decrease the investment rate of return assumption
for all plans except LEOFF 2, as follows.
The economic assumptions used in the Actuarial Valuation Report are shown in the following table.
These include rates of retirement, rates at which members become disabled, turnover rates, mortality rates, and several other demographic assumptions as disclosed later on this page.
Step Salary Increases
Probability of Service Retirement
Select a table from the drop-down below:
Probability of Service Retirement/TRS SERS (Hired before 5/1/2013)
Probability of Service Retirement/PERS PSERS LEOFF WSPRS (Hired before 5/1/2013)
Probability of Service Retirement (Hired on or after 5/1/2013)
Our mortality rates include an assumption for future mortality improvements. We took two steps to build our mortality assumptions.
First, we developed the base mortality table by starting with RP-2000, published by the Society of Actuaries, and applying age offsets for each system and plan. When age offsets are negative, it means we think people of a given age in the retirement plan are generally healthier than others their age from the general population. In other words, we expect their mortality experience will be similar to younger people. Conversely, a positive age offset means we expect mortality experience for a given age to match that of a higher age in the general population. For instance, we expect a 50-year-old PERS male to have the same mortality rate as 49-year-old males in the general population because we assume a negative one-year age offset.
Next, we applied mortality improvements to the RP-2000 mortality table using Scale BB, also published by the Society of Actuaries. We use “generational” mortality instead of projecting to a given year. Under generational mortality, a member is assumed to receive additional mortality improvements in each future year, throughout their lifetime.
As an example of generational mortality, consider a healthy PERS Plan 1 male, age 50. To project the RP-2000 mortality rates to a given year (2013 in this example), we use the following equation.
For a 50-year-old male, this is 0.001995 x (1 –0.003)^13 = 0.001919.
The next tables show the age offsets we used as well as the mortality rates projected to the year 2013 for each plan. Please note that this table is meant to be an example only. Under generational mortality, the mortality rate for each age will improve in each future year by the rates in the mortality improvement table.
Following these tables, the next table shows Scale BB. Please see the
2007-2012 Experience Study Report for more details regarding the development of these rates.
Mortality Projected to 2013 - age 20-54
Mortality Projected to 2013 - age 55-89
Mortality Projected to 2013 - age 90-120
100% Scale BB Mortality Improvement
Disabled Mortality Projected to 2013 - age 20-54
Disabled Mortality Projected to 2013 - age 55-89
Disabled Mortality Projected to 2013 - age 90-120
Probability of Disablement
Probability of Disablement/PERS TRS - age 20-49
Probability of Disablement/PERS TRS - age 50-80
Probability of Disablement/SERS PSERS LEOFF WSPRS - age 20-49
Probability of Disablement/SERS PSERS LEOFF WSPRS - age 50-80
Probability of Termination
Other Demographic Assumptions
Probability of Vesting upon Termination
Ratio of Survivors Selecting Annuities/PERS TRS - age 20-49
Ratio of Survivors Selecting Annuities/PERS TRS - age 50-80
Ratio of Survivors Selecting Annuities/SERS PSERS LEOFF WSPRS - age 20-49
Ratio of Survivors Selecting Annuities/SERS PSERS LEOFF WSPRS - age 50-80
Early Retirement Factors
Average Final Compensation Load
Certain and Life Annuities: Years Certain
Member/Beneficiary Age Difference
Assumed Retirement Age from Inactive Status
Percent Plan 3 Members Deferring Retirement
Duty-Related Death Assumption
LEOFF 2 Duty-Related Disability Assumption
Additional Duty-Related Assumptions for LEOFF 2
Average Ratio of Survivors of Inactive Deaths Selecting Annuities
Joint and 100 Percent Survivor Option Factors
Medical Premium Reimbursement
The costs for these benefits are included in the results presented in this report. However, the benefits are funded through irrevocable trust funds, known as 401(h) accounts, from contribution rates selected by the Department of Retirement Systems (DRS) and the LEOFF 2 Board. These contribution rates are “carved out” of the total adopted contribution rates. DRS and the LEOFF 2 Board will periodically review the funding requirements for these benefits and adjust the 401(h) contribution rates as necessary.
The information in the next section represents methods and assumptions tied directly to the medical premium reimbursement benefits. Please see the
2013 Other Post-Employment Benefits Actuarial Valuation Report (OPEB Report) for the following referenced assumptions.
Current and Future Survivors, and Future Disabilities: Uniform Medical Plan (UMP) Medicare and Pre-Medicare assumptions without excise tax (OPEB report).
Current Disabilities: 5 percent per year.
Future Disabilities: 85 percent.
Current Disabilities: 100 percent.
Percent with Children
Disabilities and Survivors: 100 percent, one child each.
When the data for members currently qualifying for total disability benefits does not provide information about how many family members are covered, we use the assumptions below to split the total premium into each family member’s share.
Assumed Coverage Type, Future Disabilities
Fifty percent covered by policies provided under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).
Fifty percent covered by employer-provided policies.
Assumed Timing/Length of Coverage
We include the following miscellaneous assumptions and methods in this valuation.