Bobby J. Woolley
4007 SW 325th Street
Federal Way, WA 98023
Dear Mr. Woolley:
Pursuant to RCW 34.05.330(3), I have reviewed your appeal of the Department of Retirement Systems' (DRS) decision not to initiate a rule-making procedure to amend the definition of "school year" contained within WAC 415-112-015(10).
I understand that you believe the DRS should use the
definition of school year found in RCW 28A.150.040. I also
understand that DRS is concerned that using that definition is
not consistent with the Legislature's intent as expressed in
RCW 41.32 and would have unintended and adverse consequences
for the members of TRS Plan 1.
I note that your April 13, 2004, petition to DRS and your
subsequent appeal regarding its decision is essentially a
repeat of your petition in 2001, except that in 2001 you were
addressing a specific concern regarding the impact of the law
on teachers working in school districts with extended school
years. At that time you asked DRS to use the definition of
school year found in 28A.150.040. I denied your appeal, and
requested DRS review the need for legislation to address the
specific concern you raised regarding extended school year
teachers. Legislation passed in 2003 allowing an exception to
the general approach of using fiscal years in TRS Plan 1 for
those teachers working in a school district using an extended
school year.
The Legislature has not changed RCW 41.32 or RCW 28A.150 since
2001 in a manner that would lead me to conclude that it
intends for the definition of school year in RCW 28A.150.040
to apply generally to RCW 41.32. Therefore, I am denying your
appeal of the DRS decision not to initiate a rule making
process to consider your proposed definition of "school year."
The Department of Retirement Systems has reasonably
interpreted RCW 41.32.498(2), which describes the retirement
allowance for members and references "earnable compensation";
RCW 41.32.010 (10)(a)(i), which defines "earnable compensation
for Plan 1 members and specifies that it includes salaries and
wages for services rendered during a "fiscal year"; and RCW 41.32.010(12), which defines "fiscal year" as a year beginning
July 1 and ending June 30 of the following year; to mean that
the Legislature intends "school year" for TRS Plan 1 to mean
fiscal year except in specific expressed cases. The
interpretation is bolstered by the fact that the Legislature,
when confronted with the issue of districts with extended
school years, chose to make a limited exception. It is
further bolstered by the fact that the Legislature, when it
used the definition of school year contained in RCW 28A.150.040, did so by specifically and narrowly referencing
it in RCW 41.32.013 to define school year for a specific
purpose and a specific group of teachers. The fact that the
Legislature chose in a specific section of one statute to
reference a definition in a section in another statute that it
found useful, does not mean it intended for DRS to do so in
all other cases.
DRS is also justifiably concerned regarding the potential
impact of changing TRS Plan 1 from being based on "fiscal
year" to being based on "school year" as defined in RCW 28A.150.040. TRS Plan 1 service credit and average final
compensation (AFC) is calculated on a yearly basis, not
monthly as in other plans, and the AFC is the two highest
consecutive years of salary. A wholesale change of the
definition of "year" from July 1 through June 30, to September
1 through August 31, would permanently shift that yearly
period for calculating benefits two months into the future.
As an example of how this would impact members, future TRS
Plan 1 retirees would have to wait until September to begin
receiving their pension payments. Plan 1 members who need the
full year of service to retire must have an effective
retirement date after the completion of the year used in the
benefit calculation. Since the AFC year would end in August
instead of June, their effective retirement date and their
first pension payment would be delayed two months by this
change.
Another example of the impact is that school administrators
are contracted with on a fiscal year basis, and work in each
of the twelve calendar months. Under a change from the July
through June approach to the September through August
approach, administrators under Plan 1 would have a two-month
gap in salary and benefits from the time their contract ended
until the time their pensions started. It would also result
in a lower pension calculation for these administrators, as
their last and likely highest months of salary, and their
vacation leave cash-out, would occur in a year where no salary
would be reported for two months (July and August). The
pension would be calculated using the highest two years, but
the latest year might not be used since it only has ten months
of salary. I cite these examples to illustrate that any
changes in the WAC have to be made very carefully to avoid
unintended and adverse consequences on plan members.
I understand that DRS has initiated a rule making procedure to
update WAC 415-112. Included in that process will be changes
in the language to clarify exactly when a provision relates to
fiscal year, and when a provision relates to the time period
September 1 through August 31 because of a specific statutory
difference within RCW 41.32. I believe that is a reasonable
approach to take in making sure the regulations are clear in
the distinction between the time periods without triggering
wholesale changes in legislatively directed policy. It also
gives you and other members of the public the opportunity to
provide testimony concerning each proposed change.
Thank you for your diligence in reviewing how the retirement
statutes are being administered. While I am denying this
particular appeal, I encourage you to continue to bring issues
of concern to DRS and to the Select Committee on Pension
Policy.
Sincerely,
Gary Locke
Governor