Swansenreport

More than 26,000 Washington state public school teachers just won a fight that started before some of their current students were born. Thurston County Superior Court entered a final order last week, June 25, requiring the Washington State Department of Retirement Systems to return about $120 million in skimmed interest and investment returns to teachers’ retirement accounts. The case took 23 years to resolve.

The mechanics: when teachers transferred from the state’s Plan 2 to Plan 3 retirement system, the department was supposed to carry over their accrued interest at a promised 5.5% annual rate. It didn’t. Attorney Steve Strong, who’s represented the plaintiffs since the case was filed in 2003, put it bluntly — the state simply decided the original promise “didn’t mean anything.” A 2018 federal appeals court ruling found the skimming went back to 1996, and Washington kept fighting the case even after losing.

The human toll shows up in the numbers DRS itself provided to the court. Sixty-one percent of the affected class has already retired and needs the money now. Seven percent have died while the case dragged through the courts. Roughly a fifth of the class has been lost track of entirely and will need to be located — work the court has put on the department, not the teachers.

Here’s where Wisconsin comes in, and it’s a useful contrast. The Wisconsin Retirement System is something close to the opposite story: it closed out 2024 at 100% funded, and Wisconsin’s Legislative Audit Bureau found WRS had a 98.8% funded ratio against its peer group of public pension plans — the highest of the group. The WRS holds roughly $134.5 billion in assets, making it one of the ten largest public pension systems in the country. Part of that comes down to design, not luck: WRS splits investment risk between employees, employers, and retirees, rather than guaranteeing a fixed return the way Washington’s old Plan 2 did — the very design that, ironically, created the gap Washington got sued over.

That’s not to say Wisconsin’s system is risk-free or beyond scrutiny — cost-sharing means retirees can see their own benefits adjust based on investment performance, a tradeoff some critics argue shifts risk onto individuals who can least absorb it. But on the specific failure mode in the Washington case — a state quietly not honoring a promised, fixed-rate transfer of interest — WRS’s structure doesn’t create that same vulnerability.

Sources:
Just The News / The Center Square
Wisconsin Department of Employee Trust Funds
Wisconsin Legislative Audit Bureau, Report 25-16