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Economic Assumptions

In the valuation process, assumptions are required for four economic variables:

▪ Expected investment rate of return.

▪ Inflation.

▪ General Salary growth.

▪ Membership growth.

Economic assumptions affect expectations regarding the accumulation of assets and the growth of projected pension benefits.

The Pension Funding Council (PFC) adopts economic assumptions for all plans/systems except LEOFF 2.  The LEOFF 2 Board adopts economic assumptions for LEOFF 2.  All economic assumptions are then subject to revision by the Legislature.  The PFC and LEOFF 2 Board adopted lower economic assumptions in 2011.  In 2012, the Legislature enacted a schedule to decrease the investment rate of return assumption for all plans except LEOFF 2, as follows.

Assumed Investment Rate of Return Schedule
Biennium Rate 
2013-15 7.90%
2015-17 7.80%
2017-19 7.70%

Below is a summary of the economic assumptions used in the 2013 Actuarial Valuation Report (AVR). Please refer to the appendices of the report for a full list of the economic assumptions relied on for the valuation.

All Systems
Assumptions Rate 
Investment Rate of Return 7.80%1
Inflation 3.00%
General Salary Growth 3.75%2
Membership Growth 0.95%3
17.50% in LEOFF 2.
2Excludes longevity, merit or step increases.
30.80% in TRS; 1.25% in LEOFF.   Used for
 the amortization of PERS 1, TRS 1, and
 LEOFF 1 UAAL only.

Please see the Report on Long-Term Economic Assumptions for further information.


LLast Reviewed: 10/20/2014
Last Updated: 10/29/2014

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