HOUSE BILL REPORT

HB 2154

BYRepresentatives Belcher, Dellwo, Hargrove, Locke and H. Myers 

Regarding retirement benefits.

House Committe on Judiciary

Majority Report:  The second substitute bill be substituted therefor and the second substitute bill do pass.  (18)

      Signed by Representatives Appelwick, Chair; Crane, Vice Chair; Padden, Ranking Republican Member; Belcher, Dellwo, Forner, Hargrove, Inslee, P. King, Locke, R. Meyers, Moyer, H. Myers, Schmidt, Scott, D. Sommers, Tate and Wineberry.

House Staff:Pat Shelledy (786-7149)

AS REPORTED BY COMMITTEE ON JUDICIARY FEBRUARY 1, 1990

BACKGROUND:

When a married couple gets divorced, vested retirement benefits are divided according to community property rules.  Until 1977, the Department of Retirement Systems (DRS) was responsible for dividing the retirement benefits according to dissolution decrees or other court orders.  DRS was required under various retirement acts to make direct payments to the nonmember spouse (obligee) according to the property division in the divorce decree.

In addition to community property divisions, the court may order spousal maintenance based upon equitable principles.

In 1977, the Legislature enacted a bill that was intended to clarify the department's responsibilities when dividing payments.  The bill was also enacted to create a collection mechanism for obligees whose spouses were not paying court-ordered spousal maintenance.  However, when the collection mechanism was created for spousal maintenance, the law eliminated direct payment of community property interests.  As a result, obligees no longer automatically receive the benefits they had received automatically under the prior direct benefit scheme.  The mechanism created is termed the "mandatory benefits assignment order."  That mechanism places responsibility upon the obligee to obtain a court order requiring the department to make specified payments to the obligee.  The obligee may not obtain an order until the member spouse (obligor) is 15 days delinquent in an amount of $100 or more.  DRS may not withhold more than 50 percent of the obligor's disposable benefits.  The federal and state garnishment statutes also impose limits upon attaching an obligor's wages and pensions. DRS must notify an obligee if an obligor requests a lump sum withdrawal of accumulated contributions but no statutory mechanism exists to legally prevent DRS from disbursing those sums to the obligor.

SUMMARY:

SECOND SUBSTITUTE BILL:  Direct payments for community property division payments are restored.  The spouse may still obtain a mandatory assignment benefits order enforcing spousal maintenance awards. The provisions governing each mechanism are separated to reduce confusion.  The term disposable benefits is clarified to read that elective deductions by a member must be deducted after compliance with the court order. The 50 percent cap on withdrawing funds to satisfy the obligation is removed for community property divisions. The cap on spousal maintenance obligations still exists and is clarified to distinguish it from garnishments. The garnishment statute is amended to reflect that garnishments for spousal maintenance have a 50 percent cap.  An obligee may obtain a restraining order pending resolution of the dissolution restraining the department from disbursing funds to the obligor until a court rules on the appropriate distribution between the parties.  The department may collect a $75 fee for initially setting up the direct payment scheme and may charge $6 for subsequent disbursements. All benefits cease upon death of the nonmember spouse. The department must provide the obligee with information about the account so that the obligee can comply with federal tax requirements.

SECOND SUBSTITUTE BILL COMPARED TO ORIGINAL: Several technical changes are made to clarify the distinction between the mandatory benefits assignment order and distribution of community property benefits.  The modified definition of "disposable benefits" is retained.  A statutory format for court orders dividing retirement benefits between spouses is removed.  Garnishments are distinguished from mandatory assignment of benefits orders.  The garnishment statute is amended to cap garnishments for spousal maintenance at 50 percent of the disposable income.  "Reasonable fee" language is replaced by language establishing set fees.  The department does not have to find and review all decrees entered after July 1, 1977, but must notify spouses who have mandatory benefit assignment orders to collect community property that they have a right to direct payment of their community property interest.

Fiscal Note:      Requested February 4, 1990.

House Committee ‑ Testified For:    Chris Meserve, Thurston County Bar Association.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    Elimination of direct payments for property division obligations was an unintended adverse consequence of the mandatory assignments of benefits act.  Restoring direct pay provisions will correct that inequity.

House Committee - Testimony Against:      None.