HOUSE BILL REPORT

HB 1560

BYRepresentatives Sayan and Grimm; by request of Department of Retirement Systems

Modifying public retirement benefits for persons who have attained age seventy and one-half and are still employed.

House Committe on Ways & Means/Appropriations

Majority Report:  Do pass.  (22)

      Signed by Representatives Locke, Chair; Belcher, Braddock, Brekke, Bristow, Brough, Butterfield, Ebersole, Fuhrman, Grant, Grimm, Hine, Holland, Nealey, Peery, Sayan, Silver, H. Sommers, Spanel, Sprenkle, Wang and B. Williams.

House Staff:Randy Acker (786-7136)

AS PASSED HOUSE FEBRUARY 15, 1988

BACKGROUND:

The Federal Tax Reform Act of 1986 includes a provision which requires that a person must begin receiving all pension and retirement benefits no later than April 1 of the year following the year in which individual reaches age 70-1/2.  The requirement holds even if the individual is still employed.  Individuals who do not begin receiving their pension benefits by the required age are subject to a 50 percent tax on what the benefit would have been if the person retired.

SUMMARY:

Members of the Judicial, Judges, Law Enforcement Officers and Firefighters, Teachers, Public Employees, and State Patrol Retirement Systems with five or more years of service and age 70-1/2 may apply for their retirement benefit.  The benefit is calculated in accordance with the rules of the system to which the member belongs, except that the member continues to be employed.  During employment the member continues to make contributions to the system and to receive service credit.  When the member separates from service their benefit is recalculated taking into consideration the additional service credit and compensation.

Fiscal Note:      Requested January 21, 1988.

Effective Date:The bill takes effect on January 1, 1989.

House Committee ‑ Testified For:    Bob Hollister, Director, Department of Retirement Systems.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    If the state does not act, there are three consequences.  1)  The individual must pay the tax penalty or stop working.  2)  The retirement systems will lose their status as qualified plans under IRS which will make the plans subject to the corporate rate of taxation on all investment earnings.  3)  Individuals would likely sue the state for not complying with the federal tax code, which would be more costly than the bill itself is.

House Committee - Testimony Against:      None Presented.