FINAL BILL REPORT
HB 1206
C 156 L 03
Synopsis as Enacted
Brief Description: Making optional plan 3 member contributions.
Sponsors: By Representatives Pflug and Conway; by request of Joint Committee on Pension Policy.
House Committee on Appropriations
Senate Committee on Ways & Means
Background:
Members of the Public Employees' Retirement System Plan 3 (PERS 3), the School Employees' Retirement System Plan 3 (SERS 3), and the Teachers' Retirement System Plan 3 (TRS 3) are required to choose an employee contribution rate within 90 days of beginning covered employment. Currently there are three choices of contribution rates at fixed or escalating rates between 5 and 8.5 percent of pay.
Once members have chosen a contribution rate, or by default been placed at the minimum 5 percent, members may only change their contribution rate if they change employers.
Generally federal law has prohibited retirement plans like the Plans 3 of the state retirement systems, which are tax qualified defined contribution plans under Internal Revenue Code Section 401(a), from having variable employee contribution rates. During 2002 the Department of Retirement Systems (DRS) received an advance ruling from the Internal Revenue Service (IRS) for TRS 3 to offer employees a fixed base contribution rate of 5 percent, plus an additional variable contribution rate that the employees could change each year.
The DRS has applied for similar advanced rulings on tax qualification status from the IRS for PERS 3 and SERS 3.
Summary:
Each January members of PERS 3, SERS 3, and TRS 3 may change their contribution rate. In addition to the minimum contribution rate of 5 percent of pay, a member may choose to contribute according to one of six optional rate plans. The six plans offer both escalating and fixed additional rates of up to 10 percent of pay for a maximum contribution rate of 15 percent.
The first Plan 3 contribution rate change opportunity will be January 2004.
Votes on Final Passage:
House 97 0
Senate 47 0
Effective: July 27, 2003