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Committee reviews E2 SHB 2034 to restate and terminate LEOFF‑1; actuary projects about $3.9 billion could move to holding account
Summary
Staff and the Office of the State Actuary briefed the Select Committee on E2 SHB 2034, which would restate and terminate LEOFF‑1 on 06/30/2029, create a restated fund and a pension surplus holding account, and transfer assets (OSA projected ~ $3.9 billion) with an increased modeled chance of a future unfunded liability under some scenarios.
Committee staff and the Office of the State Actuary provided an informational briefing on E2 SHB 2034, a bill that would restate and terminate LEOFF‑1 and move assets into a restated fund and a pension surplus holding account.
Darren Painter (committee staff) outlined the bill’s principal provisions: creation of a restated LEOFF‑1 plan and a Restated LEOFF‑1 Fund (RLF), a Pension Surplus Holding Account (PSHA) in the state treasury, immediate vesting for a small number of non‑retired, non‑vested members to satisfy IRS rules, and a funding policy framework that would require the restated fund to be set to a 110% funded ratio on 06/30/2029. Painter said the bill also directs agencies to seek IRS guidance and assigns study duties to the Select Committee on Pension Policy.
Michael Harbor, actuary with the Office of the State Actuary, presented the fiscal‑note results and scenario analysis. He said the OSA’s best estimate projects that assets above the 110% buffer — on an expected basis — would amount to approximately $3,900,000,000 transferred to the PSHA on 06/30/2029. Harbor emphasized uncertainty: the projected transfer could vary by hundreds of millions of dollars with changes to inflation or investment‑return assumptions. On risk, Harbor summarized OSA’s stochastic modeling: “under current law 5% of our simulations produced an unfunded liability, versus under the bill roughly 40%,” and he said that represents an eight‑fold increase in modeled probability of needing future state contributions under the scenarios used.
Members probed the numbers and the timing. Representative Anthony Marietta asked for context on the shift from ~5% to ~40% and how the starting funded ratio drives that change; Harbor replied that the current funded ratio is roughly 160% and that the analysis examines outcomes over a multiyear projection (roughly 15 years after 2029). Representative Jacobson asked when the IRS guidance would arrive; DRS staff said they plan to submit a private‑letter request as soon as the provision is effective (06/11) but that IRS response times are uncertain (estimates ranged from 12 to 18 months).
No committee action was required; the briefing was informational. Staff noted that because the statutory effective date for restatement and transfer is deferred to 06/30/2029, the legislature has sessions between now and then to further study or modify the approach.
