AN ACT Relating to retirement system funding; amending RCW 2.10.090, 2.12.060, 41.26.040, 41.26.080, 41.26.450, 41.32.401, 41.32.775, 41.40.361, 41.40.650, and 43.43.220; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. Section 9, chapter 267, Laws of 1971 ex. sess. and RCW 2.10.090 are each amended to read as follows:

The total liability, as determined by the actuary, of this system shall be funded as follows:

(1) Every judge shall have deducted from his monthly salary an amount equal to seven and one-half percent of said salary.

(2) The state as employer shall contribute an equal amount on a quarterly basis.

(3) The state shall in addition guarantee the solvency of said fund and the legislature shall make biennial appropriations from the general fund of amounts sufficient to guarantee the making of retirement payments as herein provided for if the money in the judicial retirement fund shall become insufficient for that purpose((, but such biennial appropriation may be conditioned that sums appropriated may not be expended unless the money in the judicial retirement fund shall become insufficient to meet the retirement payments)).

Sec. 2. Section 1, chapter 37, Laws of 1973 as amended by section 6, chapter 106, Laws of 1973 and RCW 2.12.060 are each amended to read as follows:

For the purpose of providing moneys in said judges' retirement fund, concurrent monthly deductions from judges' salaries and portions thereof payable from the state treasury and withdrawals from the general fund of the state treasury shall be made as follows: Six and one-half percent shall be deducted from the monthly salary of each justice of the supreme court, six and one-half percent shall be deducted from the monthly salary of each judge of the court of appeals, and six and one-half percent of the total salaries of each judge of the superior court shall be deducted from that portion of the salary of such justices or judges payable from the state treasury; and a sum equal to six and one-half percent of the combined salaries of the justices of the supreme court, the judges of the court of appeals, and the judges of the superior court shall be withdrawn from the general fund of the state treasury. In consideration of the contributions made by the judges and justices to the judges' retirement fund, the state hereby undertakes to guarantee the solvency of said fund and the legislature shall make biennial appropriations from the general fund of amounts sufficient to guarantee the making of retirement payments as herein provided for if the money in the judges' retirement fund shall become insufficient for that purpose((, but such biennial appropriation may be conditioned that sums appropriated may not be expended unless the money in the judges' retirement fund shall become insufficient to meet the retirement payments)). The deductions and withdrawals herein directed shall be made on or before the tenth day of each month and shall be based on the salaries of the next preceding calendar month. The administrator for the courts shall issue warrants payable to the treasurer to accomplish the deductions and withdrawals herein directed, and shall issue the monthly salary warrants of the judges and justices for the amount of salary payable from the state treasury after such deductions have been made. The treasurer shall cash the warrants made payable to him hereunder and place the proceeds thereof in the judges' retirement fund for disbursement as authorized in this chapter.

Sec. 3. Section 4, chapter 209, Laws of 1969 ex. sess. as last amended by section 1, chapter 45, Laws of 1979 ex. sess. and RCW 41.26.040 are each amended to read as follows:

The Washington law enforcement officers' and fire fighters' retirement system is hereby created for fire fighters and law enforcement officers.

(1) (a) Notwithstanding RCW 41.26.030(8) and except as provided in subsection (1)(b) of this section, all fire fighters and law enforcement officers employed as such on or after March 1, 1970, on a full time fully compensated basis in this state shall be members of the retirement system established by this chapter with respect to all periods of service as such, to the exclusion of any pension system existing under any prior act except as provided in subsection (2) of this section.

(b) No fire fighter or law enforcement officer who commences a period of employment on or after July 1, 1979, as a participant under the federal comprehensive employment and training act of 1973 (CETA) (29 U.S.C. Sec. 801 et seq.), as amended, shall be a member of this system during the period of such participation unless, at the commencement of the participation under CETA, the fire fighter or law enforcement officer either:

(i) Has at least five years of service and the full amount of the employee's contributions for such service remains on deposit in the system; or

(ii) Has previously been retired from this system.

(2) Any employee serving as a law enforcement officer or fire fighter on March 1, 1970, who is then making retirement contributions under any prior act shall have his membership transferred to the system established by this chapter as of such date. Upon retirement for service or for disability, or death, of any such employee, his retirement benefits earned under this chapter shall be computed and paid. In addition, his benefits under the prior retirement act to which he was making contributions at the time of this transfer shall be computed as if he had not transferred. For the purpose of such computations, the employee's creditability of service and eligibility for service or disability retirement and survivor and all other benefits shall continue to be as provided in such prior retirement act, as if transfer of membership had not occurred. The excess, if any, of the benefits so computed, giving full value to survivor benefits, over the benefits payable under this chapter shall be paid whether or not the employee has made application under the prior act. If the employee's prior retirement system was the Washington public employees' retirement system, payment of such excess shall be made by that system; if the employee's prior retirement system was the state-wide city employees' retirement system, payment of such excess shall be made by the employer which was the member's employer when his transfer of membership occurred: PROVIDED, That any death in line of duty lump sum benefit payment shall continue to be the obligation of that system as provided in RCW 41.44.210; in the case of all other prior retirement systems, payment of such excess shall be made by the employer which was the member's employer when his transfer of membership occurred.

(3) All funds held by any firemen's or policemen's relief and pension fund shall remain in that fund for the purpose of paying the obligations of the fund. The municipality shall continue to levy the dollar rate as provided in RCW 41.16.060, and this dollar rate shall be used for the purpose of paying the benefits provided in chapters 41.16 and 41.18 RCW. The obligations of chapter 41.20 RCW shall continue to be paid from whatever financial sources the city has been using for this purpose.

(4) Any member transferring from the Washington public employees' retirement system or the state-wide city employees' retirement system shall have transferred from the appropriate fund of the prior system of membership, a sum sufficient to pay into the Washington law enforcement officers' and fire fighters' retirement system fund the amount of the employees' and employers' contributions plus credited interest in the prior system for all service, as defined in this chapter, from the date of the employee's entrance therein until March 1, 1970. Except as provided for in subsection (2), such transfer of funds shall discharge said state retirement systems from any further obligation to pay benefits to such transferring members with respect to such service.

(5) All unfunded liabilities created by this or any other section of this chapter shall be computed by the actuary in his biennial evaluation. Such computation shall provide for amortization of the unfunded liabilities ((~~over a period of not more than forty years from March 1, 1970~~)) as required by Article XXX of the state Constitution. The amount thus computed as necessary shall be reported to the ((governor by the department of retirement systems for inclusion in the budget. The legislature shall make the necessary appropriation to fund the unfunded liability from the state general fund beginning with the 1971-1973 biennium)) state pension committee.

Sec. 4. Section 8, chapter 209, Laws of 1969 ex. sess. and RCW 41.26.080 are each amended to read as follows:

The total liability of this system shall be funded as follows:

(1) Every member shall have deducted from each payroll a sum equal to six percent of his basic salary for each pay period.

(2) Every employer shall contribute monthly a sum equal to six percent of the basic salary of each employee who is a member of this retirement system. The employer shall transmit the employee and employer contributions with a copy of the payroll to the retirement system monthly.

(3) ((The biennial actuarial evaluation required by RCW 41.26.060(2) shall establish the total liability for this system. This liability shall be divided into current service liability and prior service liability. The contributions required by (1) and (2) above shall be applied toward the current service liability with the balance of the current service liability to be appropriated from the state general fund. The prior service liability shall be amortized over a period of not more than forty years from March 1, 1970. The amount thus computed shall be added to the current service liability to be appropriated from the state general fund.

This total amount shall be reported to the governor by the director of the retirement system, upon approval of the board, for inclusion in the budget. The legislature shall make the necessary appropriation from the state general fund to the Washington law enforcement officers' and fire fighters' retirement fund after considering the estimates as prepared and submitted. The transfer of funds from the state general fund to the retirement system shall be at a rate determined by the board of trustees on the basis of the latest actuarial valuation. The total amount of such transfers for a biennium shall not exceed the total amount appropriated by the legislature.)) The legislature shall appropriate or the state treasurer shall transfer the amount required under Article XXX of the state Constitution to fund the system.

(4) Every member shall be deemed to consent and agree to the contribution made and provided for herein, and shall receipt in full for his salary or compensation. Payment less said contributions shall be a complete discharge of all claims and demands whatsoever for the services rendered by such person during the period covered by such payments, except his claim to the benefits to which he may be entitled under the provisions of this chapter.

Sec. 5. Section 6, chapter 294, Laws of 1977 ex. sess. as amended by section 10, chapter 184, Laws of 1984 and RCW 41.26.450 are each amended to read as follows:

The required contribution rates to the retirement system for members, employers, and the state of Washington shall be established by the director from time to time as may be necessary upon the advice of the state actuary. The state actuary shall use the aggregate actuarial cost method to calculate contribution rates until the legislature directs by statute that a different actuarial cost method be used.

The member, the employer and the state shall each contribute the following shares of the cost of the retirement system:

!tn1Member !tl50%

Employer !tl30%

State!tl20%

Any adjustments in contribution rates required from time to time for future costs shall likewise be shared proportionally by the members, employers, and the state((~~: PROVIDED, That the costs of amortizing the unfunded supplemental present value of the retirement system, in existence on September 30, 1977, shall be borne in full by the state~~)).

Any increase in the contribution rate required as the result of a failure of the state or of an employer to make any contribution required by this section shall be borne in full by the state or by that employer not making the contribution.

The director shall notify all employers of any pending adjustment in the required contribution rate and such increase shall be announced at least thirty days prior to the effective date of the change.

Members' contributions required by this section shall be deducted from the members basic salary each payroll period. The members contribution and the employers contribution shall be remitted directly to the department within fifteen days following the end of the calendar month during which the payroll period ends.

((~~Until such time as the director shall establish other rates, members, employers of such members, and the state shall each contribute the following percentages of basic salary:~~

~~!tn1Member !tl8.14%~~

~~Employer !tl4.88%~~

~~State !tl3.28%~~

In addition, the state shall initially contribute an additional twenty percent of basic salary per member to amortize the unfunded supplemental present value of the retirement system in effect on September 30, 1977.))

Sec. 6. Section 11, chapter 14, Laws of 1963 ex. sess. as last amended by section 1, chapter 236, Laws of 1984 and RCW 41.32.401 are each amended to read as follows:

(1) For the purpose of establishing and maintaining an actuarial reserve adequate to meet present and future liabilities of the system and to pay for an equitable portion of the operating expenses of the department, the director shall determine the necessary contribution rates to be made by each employer on all members' total earnable compensation on the basis of the latest valuation prepared by the state actuary((, and shall include a percentage contribution of the total earnable compensation, to be known as the "normal contribution" and an additional percentage contribution of such earnable compensation, to be known as the "unfunded liability contribution.")). The director shall notify employers of such rates at least thirty days prior to their effective date. ((~~Such determination shall provide for amortization of unfunded retirement system liabilities over a period of not more than fifty years from July 1, 1964.~~)) The legislature shall appropriate to the superintendent of public instruction the full amount recommended by the state actuary for the employer contribution rates for state funded certificated staff. The amounts shall be deposited in the teachers' retirement fund for the payment of pensions, survivors' benefits, and the employer's share of the operating expenses for the system. However, a school district for the 1985-86 school year shall not be required to pay to the department of retirement systems for the employer contribution to the teachers' retirement system, any amount in excess of the funds received by such school district from the state through the office of the superintendent of public instruction for such purpose, and for the 1986-87 school year and thereafter, a school district shall not be required to pay at a rate exceeding the rate that the director sets for the employer contribution for each employee.

(2) In order to equitably reimburse the department of retirement systems expense fund, the director shall ascertain and report to each employer the contribution rate necessary to defray its proportional share of the cost of administering this chapter during either the next biennium or fiscal year, whichever is required to provide the amounts needed to defray such cost of administration. The director shall also ascertain at the beginning of either each biennium or each fiscal year, whichever is required, and request from the legislature an appropriation for the department of retirement systems expense fund sufficient to cover estimated expenses for the biennium or fiscal year.

Sec. 7. Section 6, chapter 293, Laws of 1977 ex. sess. as amended by section 11, chapter 184, Laws of 1984 and RCW 41.32.775 are each amended to read as follows:

The required contribution rates to the retirement system for both members and employers shall be established by the director from time to time as may be necessary upon the advice of the state actuary: PROVIDED, That the employer contribution shall be contributed as provided in RCW 41.32.401. The state actuary shall use the aggregate actuarial cost method to calculate contribution rates until the legislature directs by statute that a different actuarial cost method be used. Contribution rates required to fund the costs of the retirement system shall always be equal for members and employers, except as herein provided. Any adjustments in contribution rates required from time to time for future costs shall likewise be shared equally by the members and employers((~~: PROVIDED, That the costs of amortizing the unfunded supplemental present value of the retirement system, in existence on September 30, 1977, shall be borne in full by the employers~~)).

Any increase in the contribution rate required as the result of a failure of an employer to make any contribution required by this section shall be borne in full by the employer not making the contribution.

Members contributions required by this section shall be deducted from the members earnable compensation each payroll period. The members contribution shall be remitted directly to the department within fifteen days following the end of the calendar month during which the payroll period ends and the employers contribution shall be remitted as provided by law.

((Until such time as the director shall establish other rates, members and employers of such members shall each contribute 5.66% of earnable compensation: PROVIDED, That employers shall initially contribute an additional 5.80% of earnable compensation per member to amortize the unfunded supplemental present value of the retirement system in effect on September 30, 1977.))

Sec. 8. Section 4, chapter 231, Laws of 1957 as last amended by section 13, chapter 190, Laws of 1973 1st ex. sess. and RCW 41.40.361 are each amended to read as follows:

(1) For the purpose of this section, the "fundable employer liability" at any date shall be the present value of

(a) all future pension benefits payable in respect of all members in the retirement system at that date, and

(b) all future benefits in respect of beneficiaries then receiving retirement allowances or pensions.

(2) The contributions by the employer for benefits under the retirement system shall consist of the sum of a percentage of the compensation of members to be known as the "normal contribution", a percentage of such compensation to be known as the "unfunded liability contribution" and in the case of employers admitted to the retirement system after April 1, 1949, a percentage of such compensation to be known as the "additional contribution". The rates of such contributions shall be determined by the retirement board on the basis of assets and liabilities as shown by actuarial valuation: PROVIDED, That as to state employers effective July 1, 1973 the total combined contributions of the normal contribution and unfunded liability contribution shall not exceed a total combined percentage rate of seven percent for each employer unless authorized by the legislature.

(3) After the completion of each actuarial valuation subsequent to the first actuarial valuation of June 30, 1953, the retirement board shall determine the normal contribution rate and such contribution rate shall become effective in the ensuing biennium. In addition the board shall determine the additional employer contribution rate necessary to fund the benefits granted officials holding office pursuant to Articles II and III of the Constitution of the state of Washington and RCW 48.02.010. Said additional employer contribution rate shall be paid in the same manner as the normal contribution and the unfunded liability contribution. Until the unfunded liability contribution shall have been discontinued, such normal contribution rate shall be computed to be sufficient, when applied to the present value of the future compensation of the average new member entering the system, to provide for the payment of all prospective pension benefits in respect of such member. After the unfunded liability contributions have been discontinued, such normal contribution rate shall be determined as the uniform and constant percentage of the prospective compensation of all members of the retirement system at the date of such valuation which is equivalent to the excess of the fundable employer liability over the amount of funds currently standing to the credit of the benefit account fund.

(4) After the completion of each actuarial valuation subsequent to the first actuarial valuation of June 30, 1953, the retirement board shall determine the unfunded liability contribution, and such rate shall become effective in the ensuing biennium. The unfunded liability contribution rate shall not be less than the uniform and constant percentage of the prospective compensation of all members of the retirement system for the ((~~forty-year~~)) twenty-five year period ((~~following the date of such valuation~~)) established in Article XXX of the state Constitution which is equivalent to the unfunded liability. The unfunded liability shall be determined at such date as the excess of the fundable employer liability over the sum of the present value of the future normal contributions payable in respect of all members in the retirement system at that date, and the amount of all funds currently standing to the credit of the benefit account fund. The unfunded liability contributions shall continue until there remains no unfunded liability.

(5) Any employer admitted to the retirement system after April 1, 1949, shall make an additional contribution until such time as the sum of such additional contributions equals the amount of contributions which such employer and employee would have been required to contribute between April 1, 1949, and the date of such employer's admission to the retirement system: PROVIDED, That either the employee or employer may make the contributions the employee would have made during the same period of time: PROVIDED FURTHER, That all additional contributions hereunder and under the provisions of RCW 41.40.160(2) must be completed within fifteen years from the date of the employer's admission. Employee contributions for these periods must be made before the member will receive credit for those periods of service, pursuant to such regulations as the retirement board may adopt.

(((6) For the biennium beginning July 1, 1971, and ending June 30, 1973, only, and notwithstanding any other provision of the chapter, the rate determined by the board for state employer contributions shall be only the percentage of compensation for members equal to the "normal contribution" computed to be four and thirty-six one-hundredths percent of compensation.))

Sec. 9. Section 6, chapter 295, Laws of 1977 ex. sess. as amended by section 12, chapter 184, Laws of 1984 and RCW 41.40.650 are each amended to read as follows:

The required contribution rates to the retirement system for both members and employers shall be established by the director from time to time as may be necessary upon the advice of the state actuary. The state actuary shall use the aggregate actuarial cost method to calculate contribution rates until the legislature directs by statute that a different actuarial cost method be used.

Contribution rates required to fund the costs of the retirement system shall always be equal for members and employers, except as herein provided. Any adjustments in contribution rates required from time to time for future costs shall likewise be shared equally by the members and employers((~~: PROVIDED, That the costs of amortizing the unfunded supplemental present value of the retirement system, in existence on September 30, 1977, shall be borne in full by the employers~~)).

Members contributions required by this section shall be deducted from the members compensation earnable each payroll period. The members contribution and the employers contribution shall be remitted directly to the department within fifteen days following the end of the calendar month during which the payroll period ends.

((Until such time as the director shall establish other rates, members and employers of such members shall each contribute 5.51% of compensation earnable: PROVIDED, That employers shall initially contribute an additional one and one-half percent of compensation earnable per member to amortize the unfunded supplemental present value of the retirement system in effect on September 30, 1977.))

Sec. 10. Section 43.43.220, chapter 8, Laws of 1965 as amended by section 2, chapter 180, Laws of 1973 1st ex. sess. and RCW 43.43.220 are each amended to read as follows:

(1) The Washington state patrol retirement fund shall be the fund from which shall be paid all retirement allowances or benefits in lieu thereof which are payable as provided herein. The expenses of operating the retirement system shall be paid from appropriations made for the operation of the Washington state patrol.

(2) The "fundable employer liability" at any date shall be the present value of:

(a) All future pension benefits payable in respect of all members in the retirement system at that date, and

(b) All future benefits in respect of beneficiaries then receiving retirement allowances or pensions.

(3) The contributions by the state for benefits under the retirement system shall consist of the sum of a percentage of the compensation of members to be known as the "normal contribution", and a percentage of such compensation to be known as the "unfunded liability contribution". The rates of such contributions shall be determined by the ((~~retirement board~~)) director on the basis of assets and liabilities as shown by actuarial valuation.

(4) After the completion of each actuarial valuation, the ((~~retirement board~~)) director shall determine or redetermine the normal contribution rate and such contribution rate shall become effective in the ensuing biennium. Until the unfunded liability contribution shall have been discontinued pursuant to Article XXX of the state Constitution, such normal contribution rate shall be computed to be sufficient, when applied to the present value of the future compensation of the average new member entering the system, to provide for the payment of all prospective pension benefits in respect of such member. After the unfunded liability contributions have been discontinued, such normal contribution rate shall be determined as the uniform and constant percentage of the prospective compensation of all members in the retirement system at the date of such valuation which is equivalent to the excess of the fundable employer liability over the amount of funds currently standing to the credit of the retirement fund.

(5) After the completion of each actuarial valuation, the retirement board shall determine or redetermine the unfunded liability contribution rate, and such rate shall become effective in the ensuing biennium. The unfunded liability contribution rate shall not be less than the uniform and constant percentage of the prospective compensation of all members in the retirement system for the ((~~forty-year~~)) twenty-five period ((~~following the date of such valuation~~)) established in Article XXX of the state Constitution which is equivalent to the unfunded liability. The unfunded liability shall be determined at such date as the excess of the fundable employer liability over the sum of the present value of the future normal contributions payable in respect of all members in the retirement system at that date, and the amount of all funds currently standing to the credit of the retirement fund. The unfunded liability contributions shall continue until there remains no unfunded liability.

(6) The retirement board shall estimate biennially the amount required to maintain the retirement fund for the ensuing biennium.

NEW SECTION. Sec. 11. This act shall take effect on July 1, 1987, if the proposed amendment to Article XXX of the state Constitution providing for the funding of retirement system benefits is validly submitted to and is approved and ratified by the voters at a general election held in November 1985. If the proposed amendment is not so approved and ratified, this act shall be null and void in its entirety.