FINAL BILL REPORT

SHB 1204

C 295 L 03

Synopsis as Enacted

Brief Description: Creating the select committee on pension policy.

Sponsors: By House Committee on Appropriations (originally sponsored by Representatives Fromhold, Delvin, Conway, Alexander, Pflug, Anderson, Cooper and Chase; by request of Joint Committee on Pension Policy).

House Committee on Appropriations

Senate Committee on Ways & Means

Background:

Prior to 1976, the major state retirement systems were under the oversight of boards of trustees that had such functions as the investment of the retirement funds, hiring the executive director, contracting for actuarial services, and proposing legislation to improve benefits for members and retirees.

In 1976, following a period of rapid increases in pension benefits and costs, the Legislature created the Department of Retirement Systems (DRS), with a director appointed by the Governor, to assume most of the oversight duties of the various retirement boards. The Office of the State Actuary (OSA) was also created in 1976 to provide all retirement system actuarial services for both DRS and the Legislature, including the studies used for setting contribution rates and determining the cost of proposed legislation. The OSA was established as an office in the legislative branch.

In 1981 the State Investment Board (SIB) was created to manage the investment of the assets of the state retirement systems. The SIB has nine voting members and four non-voting members who are investment professionals.

In 1987 the Joint Committee on Pension Policy (JCPP) was created to study pension benefit and funding policies and issues and to appoint or remove the State Actuary by a two-thirds vote. The JCPP consists of eight members of the Senate and eight members of the House of Representatives, split evenly between the two largest caucuses of each body. The OSA provides staffing to the JCPP.

In 1995 the Employee Retirement Benefits Board (ERBB) was created. The ERBB oversees certain aspects of the Teachers' Retirement System Plan 3, Public Employees' Retirement System Plan 3, School Employees' Retirement System Plan 3 and the state's deferred compensation program.

In 1998 the Pension Funding Council (PFC) was created to adopt the long-term economic assumptions and employer contribution rates for most of the state's retirement systems. The PFC also administers audits of the actuarial analysis produced for the PFC by the State Actuary. The membership of the PFC consists of the chair and ranking minority members of the Senate Ways and Means Committee and the House Appropriations Committee, and the directors of the Office of Financial Management (OFM) and DRS.

In 2002 the voters passed Initiative 790, creating a Law Enforcement Officers' and Fire Fighters' Retirement System Plan 2 (LEOFF 2) board of trustees. The LEOFF 2 Board statute becomes effective on July 1, 2003. The intent of I-790 is in part to replace the functions of the JCPP and the PFC with respect to LEOFF 2.

Summary:

The JCPP is repealed and its duties, except for the duty of appointing and removing the State Actuary, are assumed by the Select Committee on Pension Policy (Select Committee). The duty of appointing and removing the State Actuary is assigned to the State Actuary Appointment Committee.

The Select Committee is composed of four members of the Senate, four members of the House of Representatives, four members representing active employees, two members representing retired employees, four employer representatives, and the directors of the DRS and the OFM.

The eight Select Committee members from the House of Representatives and the Senate are divided evenly between the majority and minority parties of each chamber, and at least three of the four from each chamber must be members of the House Appropriations and Senate Ways and Means committees. The House members are appointed by the Speaker, and the Senate members by the President of the Senate.

The members representing active members, retired members, and employers are appointed by the Governor to staggered three-year terms. No more than two members representing active members, and no more than one member representing retired members, may be from the same retirement system. The retiree appointments must be rotated among the retirement systems to ensure each system is periodically represented.

The Select Committee will form a five member executive committee composed of the chair and vice-chair, an employee representative, an employer representative, and either the director of the DRS or the OFM. The Select Committee may also form three subject-specific subcommittees.

Like the JCPP, the Select Committee makes recommendations to the Legislature on pension and pension funding policies and, in addition, receives the results from and makes recommendations to the Pension Funding Council on the results of actuarial audits of contribution rates and assumptions the Pension Funding Council conducts.

The State Actuary Appointment Committee (Appointment Committee) is created. The Appointment Committee consists of eight members and has the power to appoint or remove the State Actuary by a two-thirds vote. Four members of the Appointment Committee are the chairs and ranking minority members of the House of Representatives Appropriations and the Senate Ways and Means committees, and four are members of the Select Committee, including one member representing active and retired employees and one member representing employers.

The Appointment Committee may be convened by the chairs of the House Appropriations and the Senate Ways and Means committees whenever the position becomes vacant or upon the written request of four members of the Appointment Committee.

Votes on Final Passage:

House 74  24

Senate 45  3    (Senate amended)

House             (House refused to concur)

Senate 48  1    (Senate amended)

House 79  18  (House concurred)

Effective: July 27, 2003