Committee backs participant fee to fund deferred-comp plan administration

Chair Roars opened the hearing on House Bill 11‑13, "Relating to payment of administrative expenses for the public employee's retirement system deferred compensation plan and to provide for a continuing appropriation." Derek Holbein, chief operating and financial officer for the Public Employees Retirement System (PERS), testified for the Board in support of the bill.

Holbein told the committee that PERS administers a Section 457 deferred compensation program with more than 11,000 participants served through 13 providers. He said the agency currently funds the plan's administrative costs through a complex mix of revenues (excess FICA savings from the flex compensation program, transfers from the main retirement plan and health insurance reserves) and that the mix will not remain available after the main defined‑benefit plan was closed to new participants on Jan. 1, 2025. The bill would let PERS charge a nominal participant fee — Holbein estimated roughly $10 per participant per quarter — and use that revenue to pay administrative expenses.

The bill would align the deferred‑comp funding mechanism with the Board's authority for the defined contribution plan, Holbein said. He said the fee would be charged directly from participants' accounts by the plan providers and would not be an out‑of‑pocket deduction. He also said the Board has in the past waived fees for small accounts (for example, balances under $1,000) on other plans and that the Board might adopt a similar policy here.

Committee members asked how the fee would be collected, what impact it would have on participant balances, and whether alternatives (such as an effective date tied to system‑ready milestones) could avoid future bills. Holbein said collection would be by the providers from account balances, that the fee would slightly reduce participants' balances but not benefits already earned, and that making broader operational changes (for example to bring higher education payrolls into the system) would require additional development work, budget approvals and coordination with employers.

The hearing closed with a motion to reconsider an earlier due‑pass and then a final motion to recommend a due pass with a referral to appropriations. Senator Castaneda moved the final motion; Senator Wallen seconded. Clerk roll call recorded Chair Roars, Vice Chair Castaneda, Senators Barta, Brownberger, Lee and Wallen voting aye; the motion passed 6‑0. Committee members noted a fiscal note of $900,000 associated with the bill and referred the measure to appropriations for further review.

Although proponents said the change shifts administrative cost from the state to plan participants, PERS staff and the Board framed the bill as a long‑term fix that avoids pulling funds from unrelated program reserves and prepares for the eventual unavailability of the current funding source.