Bill to merge legacy Plan 1 systems would create ongoing COLA, merge surpluses and pause employer UAAL charges through 2027

Senate Bill 5085, introduced to the Senate Ways & Means Committee as a consolidation and benefit bill, would merge assets, liabilities and membership of three closed Plan 1 retirement systems (PERS 1, TRS 1 and LEOFF 1) into a new legacy retirement system and create an ongoing annual cost‑of‑living adjustment (COLA) for Plan 1 annuitants.

Amanda Cecil, committee staff, briefed members that the bill would (1) merge the three Plan 1 systems into one legacy retirement system, (2) provide a recurring COLA for PERS 1 and TRS 1 retirees beginning July 1, fiscal year 2025 (an initial 3% and thereafter up to 3% based on Seattle CPI, with excess carried forward), and (3) eliminate employer unfunded actuarial accrued liability (UAAL) rates and supplemental benefit‑enhancement rates through fiscal year 2027. The merger would be contingent on Department of Retirement Systems (DRS) requests for IRS determination and private letter rulings confirming the merged plan’s qualified status and no adverse tax consequences for members; the bill specifies the COLA would be repealed if the IRS determination cannot be resolved.

Fiscal effect cited in the briefing: DRS estimated administrative costs of $1.2 million (2025‑27) and ongoing biennial administrative costs of $210,000. The actuarial fiscal note projected near‑general‑fund savings of $361 million in the 2025‑27 biennium and $853 million in savings across all employers in the same period, with four‑year near‑general‑fund savings of $598 million.

Supporters at the hearing said the bill restores an automatic COLA for retirees who lack it and leverages an overfunded legacy plan to reduce employer surcharges. Pete Diederich, executive director of the Washington State School Retirees Association, said, “We’re here in support of a Plan 1 COLA for TRS 1 and PERS 1 retirees,” and urged swift legislative action. Claire Olivers of the Retired Public Employees Council of Washington called the bill “a brilliant, reasonable, and affordable approach” and urged a do‑pass recommendation.

Opponents—many representing retired law enforcement and firefighter groups—urged caution and opposed the bill as drafted. Dennis Lawson, president of the Washington State Council of Fire Fighters, said the bill conflicts with the groups’ merger principles and raised concerns about funding status, IRS approval timing and adherence to case law. Teresa Taylor, executive director of the Washington Council of Police and Sheriffs, said the organizations “find 5085 is not consistent with those principles” and asked to remain at the table for negotiations. Remote testimony from retired firefighter groups emphasized the need for legal and actuarial analysis before enactment and raised governance and benefit‑specific concerns.

What it would change: according to staff, the merged legacy system would combine LEOFF 1’s surplus with underfunded Plan 1 liabilities, allowing elimination of current employer UAAL surcharge rates until 2027; if a new unfunded liability appears after 2027 the usual process would reimpose a UAAL rate (but the bill bars any contribution rate being imposed on LEOFF 1 employers or employees at any point).

Open questions and risk: staff and multiple witnesses noted the merger depends on IRS determinations that could take more than a year. Opponents flagged unresolved issues related to LEOFF 1 medical‑benefit statutes and governance, the “exclusive benefit” rule (that pension assets be used only for beneficiaries), and whether actuarial assumptions in current fiscal notes fully capture long‑term effects.

Ending: The committee received public testimony both for and against SB 5085 and moved on to consider related bills; no committee vote or final action occurred in the hearing.