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Select Committee recommends preliminary 2025 contribution rates after valuation shows funded ratios near 94%
Summary
The legislature’s Select Committee on Pension Policy voted to recommend preliminary contribution rates based on the 2025 actuarial valuation, citing funded ratios at or above about 94% and roughly $8 billion in deferred investment gains; the Pension Funding Council will consider final rates next week.
The Select Committee on Pension Policy voted to recommend the preliminary contribution rates produced from the 2025 actuarial valuation to the Pension Funding Council after a staff presentation on the valuation’s key results and drivers.
Actuaries from the Office of State Actuary (OSA) reported that the combined DRS systems show funded ratios at or above about 94% in the 06/30/2025 valuation. Frank Sarah, an OSA actuary, said the valuation incorporates results from a recent demographic experience study and small adjustments to 19 assumptions, including changes in mortality, retirement timing and salary growth, and that "most plans are expected to see only a small net cost or savings" and funded-ratio changes of less than 1%.
Luke Maselink, senior actuary with OSA, presented the preliminary contribution-rate tables and said rates generally decline across systems for the 2027–29 biennium. Maselink provided budget-impact estimates: about $260,000,000 in general-fund savings for the 2027–29 biennium and an estimated $165,000,000 in savings for local governments (figures exclude certain Plan 1 items). He emphasized the numbers are preliminary while an external audit remains in progress.
Committee discussion highlighted two primary drivers of improved funding metrics: legislative changes to the long-term investment return assumption (noted by staff as an increase from 7% to 7.25% for most plans) and continued recognition of deferred investment gains under the actuarial value-of-assets smoothing method. The actuaries said fiscal 2025 produced a roughly 9.6% investment return and that approximately $8,000,000,000 in gains are still being deferred under the AVA smoothing approach.
Senator June Robinson moved that the committee recommend the rates presented by the actuaries to the Pension Funding Council. After a roll-call vote the tally was 14 yes, 1 no (Senator McEwen) and 4 excused; the motion carried. Committee staff noted the Pension Funding Council must adopt contribution rates for the 2027–29 biennium by the end of July.
The committee took no final action on statute or rate-setting today beyond forwarding the recommendation; audit materials and the valuation appendix were made available for members to review and staff said they will provide follow-up detail on budget impacts if requested.
