US: State may heed longer lives, raise workers’ pension costs

By Adam Wilson

If you’re a 52-year-old man, you’ve got 28 years left to live. At least, that’s what the state figures as it plans pension payments. It figures the life spans of female employees to be three years longer, and teachers are expected to live to 85.

Such statistics are used in the management of the $63 billion state pension-investment fund, which is expected to pay for the retirements of 121,000 public workers.

Washington’s average life expectancy grows by about two years every decade. But the state doesn’t automatically account for the increasing average life span in its pension planning.

The state is considering adding continuously increasing life expectancies to its pension calculations. The change likely would require workers and the state to pay more into their retirement plans, but it could save the state from catch-up payments later.

Washington uses a fixed mortality table and changes it occasionally.

“If you don’t project mortality improvement,” state actuary Matt Smith said, “then what happens is, every five to six years, you have to update, and there’s these jumps. You become a little bit more current, but you’re still not projecting into the future.”

He recommends that the state assume life spans will continue lengthening.

Jean Kelly, president of the Olympia chapter of the Retired Public Employees Council, said people need more education on retirement planning. But even with extra help, and Medicare health insurance starting at age 65, “I don’t see the average person being able to plan out to their 100s,” she said.

The state faces similar challenges on a much larger scale. State retirement plans guarantee employees a steady check for the rest of their lives, based on how much they earn at the end of their careers.

If workers live longer than the state had planned for, taxpayers still will be on the hook to pay for their retirement.

Asking both workers and the state to put more into the pension fund now means the money can be invested to cover costs later on, said state Sen. Mark Schoesler, R-Ritzville, Adams County, who leads the Select Committee on Pension Policy.

(The Seattle Times)

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