As part of her 2011-13 biennial budget proposal, Governor Gregoire has introduced a number of changes to the state’s pension system.
They primarily affect members of Plans 1, new hires, and higher education retirement plans.

Plans 1 Uniform COLA:

When the original Public Employees Retirement System (PERS) and Teachers Retirement System (TRS) were set up, there was no mechanism in place for cost-of-living-adjustments (COLAs). Annual increases were periodically provided by the State Legislature. In 1995, the Legislature passed an annual benefit called the Uniform COLA.

The Uniform COLA is a fixed dollar amount multiplied by the member’s total years of service. As of July 1, 2010, the amount is $1.88/per month/year of service. Therefore, someone with 30 years of service got a $676.80 increase in their pension. The amount ($1.88) increases each year by three percent.

State statute specifies that future increases to the Uniform COLA are not a contractual right. The Uniform COLA was never funded by Plan 1 employees and employers and has therefore contributed to the state’s unfunded liability.

The Governor proposed to end future automatic Uniform COLA increases. This proposal would save the state $368 million General Fund-State in the 2011-13 biennium. In addition, it will reduce public employer payments by an estimated $9 billion over the next 25 years.

New Hires:

The Governor is proposing to discontinue incentives to retire earlier than age 65 for new hires in Plans 2 and 3 for PERS, TRS and SERS (School Employee Retirement System). This action would save $2.2 billion over 25 years for state and local governments. There is no immediate fiscal impact in the 2011-13 biennium.

Higher Education Retirement Plans:

Faculty and some administrative staff in our state’s higher education institutions participate in a different pension plan, otherwise referred to as a HERP, or higher education retirement plan. Many higher education employees have chosen TIAA-CREF (Teachers Insurance and Annuity Association - College Retirement Equities Fund), the nation’s largest HERP companies. These HERPs now provide both a defined contribution amount and a supplemental guaranteed minimum benefit. This is not part of the state pension systems that are invested by the State Investment Board.


The Governor is proposing to cap the state’s contribution to these plans at 6 percent. For the 2011-13 biennium, the state would save $57 million General Fund-State.

Retire-Rehire Reform:

In 2001, the Legislature expanded the opportunity for retirees from state-administered retirement systems to return to work while still receiving their monthly pension. After reports of some abuses, in 2003, the Legislature added safeguards and limits on the number of hours retirees could work while still receiving their pension.

As reported in the press earlier this year, an exception occurs when a retired public employee returns to work for an institution of higher education and participates in a HERP. In these cases, there are no limits. The retiree can work and draw full retirement and full salary.

The Governor proposes to close this exception by disallowing retired employees from participating in a higher education retirement plan. Restrictions would be imposed to now allow individuals to draw full-time retirement benefits as well as a salary.

There is no fiscal impact in the 2011-13 biennium.