Tuesday, May 27, 2008

State of Washington considers adding life-expectancy patterns to its pension planning

Continuously increasing life expectancies to its pension calculations is being considered by the state. 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 currently uses a fixed mortality table and changes it occasionally.

“If you don’t project mortality improvement, 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,” State Actuary Matt Smith said. He recommends that the state assume life spans will continue stretching.

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 when people are 65, “I don’t see the average person being able to plan out to their 100s.”

“It’s critically important that we get it right, so that we get the contribution rates right to properly fund the pensions,” said state Sen. Mark Schoesler, a Ritzville Republican who leads the Select Committee on Pension Policy.

He and other members of the pension committee listened recently to a presentation about factoring in the mortality rates when deciding how much workers and the state should set aside for retirements.

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