PERS 1 and TRS 1 UAAL Contribution Rates
current law, the PERS 1 and TRS 1 unfunded actuarial accrued liability (UAAL) rates have two components:
Base UAAL Rates: The UAAL, excluding the unfunded cost of any Plan 1 benefit improvements (see below), is amortized over a rolling ten-year period, as a level percentage of projected system payroll. All employers of PERS, SERS, and PSERS members contribute towards the PERS 1 UAAL, while all employers of TRS members contribute towards the TRS 1 UAAL.
- Base UAAL rates include minimum contribution rates to ensure complete amortization of the UAAL.
- Employees do not make Plan 1 UAAL contributions.
Amortization of Past Benefit Improvements: The expected cost of benefit improvements enacted after June 30, 2009, is amortized over a fixed ten-year period, as a level percentage of projected system payroll. These rates are collected in addition to Base UAAL rates.
Based on current law and rate-setting practices, the minimum contribution rates apply to Base UAAL rate calculations until the actuarial value of assets equals one hundred percent of the actuarial accrued liability (AAL) during a rate-setting valuation. For purposes of this calculation, we exclude the unfunded cost of any outstanding plan 1 benefit improvements.
Contribution rates to amortize the expected cost of a Plan 1 benefit improvement cease after the completion of the 10-year amortization period. As a result, it is possible that rates to amortize benefit improvements could continue after Base UAAL rates cease.
It is possible for the Plan 1 UAAL to re-emerge in our Projections Model. In that case, we assume the current Plan 1 funding policy will also resume. Employers would resume paying Base UAAL rates including minimum contribution rates if applicable.
$800 Million Appropriation to TRS 1
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.
LEOFF Plans 1 and 2 Law Changes from 2022 Session
Legislation in the 2022 session expanded benefits for all members of LEOFF Plans 1 and 2.
SSB 5791 (C 168, L 2022) increased members benefits in LEOFF 1 while
SHB 1701 (C 127, L 2022) increased the benefits in LEOFF 2.
Consistent with the law changes, our Projections Model assumes lump sum disbursements occur in January 2023. In addition, the model relies on the actual value of the LEOFF 2 Benefit Improvement Account on June 30, 2022 as the amount transferred into the LEOFF 2 trust fund.
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.
Approach to UAAL in LEOFF 1 Retirement Plan
As of the most recent AVR, LEOFF Plan 1 does not have any unfunded liabilities so contributions to the plan are not required under current law. If UAAL emerges then it is
intended 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.
Comments on Projections Model
As required under
ASOP 56 - Modeling, we share comments in the
2021 Actuarial Valuation Report related to our reliance on the ProVal® software developed by
Winklevoss Technologies. Please see the 2021 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.