Approach to UAAL in LEOFF 1 Retirement Plan Under current law, no contributions to LEOFF Plan 1 are required when the plan is fully funded. When LEOFF 1 was not fully funded, any unfunded actuarial accrued liability (UAAL) was required, under prior law, to be amortized by June 30, 2024. A LEOFF 1 UAAL can occur beyond June 30, 2024 under our stochastic projections. When this occurs within the model, we assume the UAAL will be amortized, through contributions from the GF-S exclusively, over a ten-year rolling period of total LEOFF retirement system salary. This assumed funding method is similar to the current funding method for PERS 1 and TRS 1 except we do not assume a minimum contribution rate for LEOFF 1. PERS 1 and TRS 1 UAAL Under
current law, employers of PERS, SERS, and PSERS contribute to the PERS 1 UAAL while employers of TRS contribute to the TRS 1 UAAL until the plans attain a 100 percent funded ratio. When this occurs, our Projections Model assumes all UAAL contributions, including the supplemental 10-year fixed contributions for past Plan 1 benefit improvements, will no longer continue.
RCW 41.45.060 is silent on what happens if a UAAL re-emerges so our model assumes UAAL contributions may resume. Our model assumes the employers would resume contributions based on current funding policy until the plan once again attains a 100 percent funded ratio. Approach to Phase-In of Contribution Rates During their October 2021 meeting, the Pension Funding Council adopted language to phase in contribution rates over six years. This action included a cap on 2023-25 biennium rates. (Link: Pension Funding Council - Adoption of Economic Assumptions). The Council did not further define the parameters of the phase in. To acknowledge this action, we held contribution rates in the 2023-25 biennium constant with what is being collected during the current biennium (2021-23 biennium). Beyond the 2023-25 biennium, we allow our Projections Model to calculate contributions rates consistent with current funding policy.
The phase in used within the Projections Model is a placeholder and should not be considered our recommendation for this approach. We expect to work closely with the Pension Funding Council beginning in the 2022 Legislative Interim to develop this approach. $800 Million Appropriation to TRS 1 Under
Engrossed Substitute Senate Bill (ESSB) 5092, the General Fund-State is scheduled to appropriate $800 million to fund the TRS 1 UAAL. Given this is in current law, our Projections Model assumes this payment will occur on June 30, 2023 and will be an additional contribution, over and above, the
standard normal cost and UAAL rates collected over retirement system salaries. Plan 3 Total Allocation Portfolio (TAP) Annuities The Projections Model includes assets, benefit payments, and liabilities for Plan 3 TAP annuities that have been purchased by members. The model does not forecast future purchases of Plan 3 TAP annuities.
Comments on Projections Model As required under
ASOP 56 - Modeling, we share comments in the
2020 Actuarial Valuation Report related to our reliance on the ProVal® software developed by
Winklevoss Technologies. Please see the 2020 AVR for disclosures related to the software created by an external source. Using Microsoft Excel, our office created a Projections Model for developing measurements as of a future point in time. The model relies on output from ProVal software as well as assumptions, methods, data, and assets disclosed on this webpage. The output was reviewed for reasonableness by comparing results to simplified estimates done in Microsoft Excel. A limitation of our deterministic Projections Model is if experience is materially different from our expectations. Stochastic analysis can be run in the Projections Model to demonstrate how the investment experience and choices made by policy makers can deviate from our expectations; however, the model does not perform analysis on potential changes in demographic experience. |