BILL REQ. #: S-2931.1
| State of Washington | 59th Legislature | 2005 Regular Session |
Read first time 03/30/2005. Referred to Committee on Ways & Means.
AN ACT Relating to public pensions; amending RCW 41.31.010, 41.31.020, 41.31A.020, 41.45.060, 41.45.070, 41.45.010, 41.45.010, and 41.45.054; reenacting and amending RCW 41.45.060 and 41.45.070; adding a new section to chapter 41.31 RCW; adding a new section to chapter 41.31A RCW; providing effective dates; providing an expiration date; and declaring an emergency.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1 RCW 41.31.010 and 1998 c 340 s 1 are each amended to read
as follows:
Beginning July 1, 1998, and on January 1st of even-numbered years
((thereafter)) until January 1, 2005, the annual increase amount as
defined in RCW 41.32.010 and 41.40.010 shall be increased by the gain-sharing increase amount, if any. The monthly retirement allowance of
a person in receipt of the benefit provided in RCW 41.32.489 or
41.40.197 shall immediately be adjusted to reflect any increase.
Sec. 2 RCW 41.31.020 and 1998 c 340 s 2 are each amended to read
as follows:
(1) The gain-sharing increase amount, if authorized by the
legislature, shall be the amount of increase, rounded to the nearest
cent, that can be fully funded in actuarial present value by the amount
of extraordinary investment gains, if any. The amount of extraordinary
investment gains shall be calculated as follows:
(a) One-half of the sum of the value of the net assets held in
trust for pension benefits in the teachers' retirement system plan 1
fund and the public employees' retirement system plan 1 fund at the
close of the previous state fiscal year;
(b) Multiplied by the amount which the compound average of
investment returns on those assets over the previous four state fiscal
years exceeds ten percent.
(2) The gain-sharing increase amount for July 1998, as provided for
in RCW 41.31.010, is ten cents.
NEW SECTION. Sec. 3 A new section is added to chapter 41.31 RCW
to read as follows:
Beginning July 1, 2005, and on July 1st of even-numbered years
thereafter, the legislature may authorize an increase as provided in
RCW 41.31.020.
NEW SECTION. Sec. 4 A new section is added to chapter 41.31A RCW
to read as follows:
Beginning July 1, 2005, and on July 1st of even-numbered years
thereafter, the legislature may authorize an increase as provided in
RCW 41.31A.020.
Sec. 5 RCW 41.31A.020 and 2003 c 294 s 4 are each amended to read
as follows:
(1) On January 1, 2004, and on January 1st of even-numbered years
((thereafter)) until January 1, 2005, the member account of a person
meeting the requirements of this section shall be credited by the
extraordinary investment gain amount.
(2) The following persons shall be eligible for the benefit
provided in subsection (1) of this section or as authorized by section
4 of this act:
(a) Any member of the teachers' retirement system plan 3, the
Washington school employees' retirement system plan 3, or the public
employees' retirement system plan 3 who earned service credit during
the twelve-month period from September 1st to August 31st immediately
preceding the distribution and had a balance of at least one thousand
dollars in their member account on August 31st of the year immediately
preceding the distribution; or
(b) Any person in receipt of a benefit pursuant to RCW 41.32.875,
41.35.680, or 41.40.820; or
(c) Any person who is a retiree pursuant to RCW 41.34.020(8) and
who:
(i) Completed ten service credit years; or
(ii) Completed five service credit years, including twelve service
months after attaining age fifty-four; or
(d) Any teacher who is a retiree pursuant to RCW 41.34.020(8) and
who has completed five service credit years by July 1, 1996, under plan
2 and who transferred to plan 3 under RCW 41.32.817; or
(e) Any classified employee who is a retiree pursuant to RCW
41.34.020(8) and who has completed five service credit years by
September 1, 2000, and who transferred to plan 3 under RCW 41.35.510;
or
(f) Any public employee who is a retiree pursuant to RCW
41.34.020(8) and who has completed five service credit years by March
1, 2002, and who transferred to plan 3 under RCW 41.40.795; or
(g) Any person who had a balance of at least one thousand dollars
in their member account on August 31st of the year immediately
preceding the distribution and who:
(i) Completed ten service credit years; or
(ii) Completed five service credit years, including twelve service
months after attaining age fifty-four; or
(h) Any teacher who had a balance of at least one thousand dollars
in their member account on August 31st of the year immediately
preceding the distribution and who has completed five service credit
years by July 1, 1996, under plan 2 and who transferred to plan 3 under
RCW 41.32.817; or
(i) Any classified employee who had a balance of at least one
thousand dollars in their member account on August 31st of the year
immediately preceding the distribution and who has completed five
service credit years by September 1, 2000, and who transferred to plan
3 under RCW 41.35.510; or
(j) Any public employee who had a balance of at least one thousand
dollars in their member account on August 31st of the year immediately
preceding the distribution and who has completed five service credit
years by March 1, 2002, and who transferred to plan 3 under RCW
41.40.795.
(3) The extraordinary investment gain amount, if authorized by the
legislature, shall be calculated as follows:
(a) One-half of the sum of the value of the net assets held in
trust for pension benefits in the teachers' retirement system combined
plan 2 and 3 fund, the Washington school employees' retirement system
combined plan 2 and 3 fund, and the public employees' retirement system
combined plan 2 and 3 fund at the close of the previous state fiscal
year not including the amount attributable to member accounts;
(b) Multiplied by the amount which the compound average of
investment returns on those assets over the previous four state fiscal
years exceeds ten percent;
(c) Multiplied by the proportion of:
(i) The sum of the service credit on August 31st of the previous
year of all persons eligible for the benefit provided in subsection (1)
of this section; to
(ii) The sum of the service credit on August 31st of the previous
year of:
(A) All persons eligible for the benefit provided in subsection (1)
of this section;
(B) Any person who earned service credit in the teachers'
retirement system plan 2, the Washington school employees' retirement
system plan 2, or the public employees' retirement system plan 2 during
the twelve-month period from September 1st to August 31st immediately
preceding the distribution;
(C) Any person in receipt of a benefit pursuant to RCW 41.32.765,
41.35.420, or 41.40.630; and
(D) Any person with five or more years of service in the teachers'
retirement system plan 2, the Washington school employees' retirement
system plan 2, or the public employees' retirement system plan 2;
(d) Divided proportionally among persons eligible for the benefit
provided in subsection (1) of this section on the basis of their
service credit total on August 31st of the previous year.
(4) The legislature reserves the right to amend or repeal this
section in the future and no member or beneficiary has a contractual
right to receive this distribution not granted prior to that time.
Sec. 6 RCW 41.45.060 and 2003 c 294 s 10 and 2003 c 92 s 3 are
each reenacted and amended to read as follows:
(1) The state actuary shall provide actuarial valuation results
based on the economic assumptions and asset value smoothing technique
included in RCW 41.45.035 or adopted by the council under RCW 41.45.030
or 41.45.035.
(2) Not later than September 30, 2002, and every two years
thereafter, consistent with the economic assumptions and asset value
smoothing technique included in RCW 41.45.035 or adopted under RCW
41.45.030 or 41.45.035, the council shall adopt and may make changes
to:
(a) A basic state contribution rate for the law enforcement
officers' and fire fighters' retirement system plan 1;
(b) Basic employer contribution rates for the public employees'
retirement system, the teachers' retirement system, and the Washington
state patrol retirement system to be used in the ensuing biennial
period; and
(c) A basic employer contribution rate for the school employees'
retirement system for funding both that system and the public
employees' retirement system plan 1.
The contribution rates adopted by the council shall be subject to
revision by the legislature.
(3) The employer and state contribution rates adopted by the
council shall be the level percentages of pay that are needed:
(a) To fully amortize the total costs of the public employees'
retirement system plan 1, the teachers' retirement system plan 1, and
the law enforcement officers' and fire fighters' retirement system plan
1 not later than June 30, 2024; and
(b) To also continue to fully fund the public employees' retirement
system plans 2 and 3, the teachers' retirement system plans 2 and 3,
and the school employees' retirement system plans 2 and 3 in accordance
with RCW 41.45.061, 41.45.067, and this section.
(4) The aggregate actuarial cost method shall be used to calculate
a combined plan 2 and 3 employer contribution rate and a Washington
state patrol retirement system contribution rate.
(5) The council shall immediately notify the directors of the
office of financial management and department of retirement systems of
the state and employer contribution rates adopted. The rates shall be
effective for the ensuing biennial period, subject to any legislative
modifications.
(6) The director of the department of retirement systems shall
collect the rates established in RCW 41.45.053 through June 30, 2003.
Thereafter, the director shall collect those rates adopted by the
council. The rates established in RCW 41.45.053, or by the council,
shall be subject to revision by the council.
(7) For benefit increases under chapter 41.31 or 41.31A RCW, the
basic contribution rate shall include the cost of the increases
beginning with the next valuation after the effective date of the
increase.
Sec. 7 RCW 41.45.060 and 2004 c 242 s 39 are each amended to read
as follows:
(1) The state actuary shall provide actuarial valuation results
based on the economic assumptions and asset value smoothing technique
included in RCW 41.45.035 or adopted by the council under RCW 41.45.030
or 41.45.035.
(2) Not later than September 30, 2002, and every two years
thereafter, consistent with the economic assumptions and asset value
smoothing technique included in RCW 41.45.035 or adopted under RCW
41.45.030 or 41.45.035, the council shall adopt and may make changes
to:
(a) A basic state contribution rate for the law enforcement
officers' and fire fighters' retirement system plan 1;
(b) Basic employer contribution rates for the public employees'
retirement system, the teachers' retirement system, and the Washington
state patrol retirement system to be used in the ensuing biennial
period; and
(c) A basic employer contribution rate for the school employees'
retirement system and the public safety employees' retirement system
for funding both those systems and the public employees' retirement
system plan 1.
The contribution rates adopted by the council shall be subject to
revision by the legislature.
(3) The employer and state contribution rates adopted by the
council shall be the level percentages of pay that are needed:
(a) To fully amortize the total costs of the public employees'
retirement system plan 1, the teachers' retirement system plan 1, and
the law enforcement officers' and fire fighters' retirement system plan
1 not later than June 30, 2024; and
(b) To fully fund the public employees' retirement system plans 2
and 3, the teachers' retirement system plans 2 and 3, the public safety
employees' retirement system plan 2, and the school employees'
retirement system plans 2 and 3 in accordance with RCW 41.45.061,
41.45.067, and this section.
(4) The aggregate actuarial cost method shall be used to calculate
a combined plan 2 and 3 employer contribution rate and a Washington
state patrol retirement system contribution rate.
(5) The council shall immediately notify the directors of the
office of financial management and department of retirement systems of
the state and employer contribution rates adopted. The rates shall be
effective for the ensuing biennial period, subject to any legislative
modifications.
(6) The director shall collect those rates adopted by the council.
The rates established in RCW 41.45.054, or by the council, shall be
subject to revision by the legislature.
(7) For benefit increases under chapter 41.31 or 41.31A RCW, the
basic contribution rate shall include the cost of the increases
beginning with the next valuation after the effective date of the
increase.
Sec. 8 RCW 41.45.070 and 2003 1st sp.s. c 11 s 3 and 2003 c 92 s
5 are each reenacted and amended to read as follows:
(1) In addition to the basic employer contribution rate established
in RCW 41.45.060 or 41.45.054, the department shall also charge
employers of public employees' retirement system, teachers' retirement
system, school employees' retirement system, or Washington state patrol
retirement system members an additional supplemental rate to pay for
the cost of additional benefits, if any, granted to members of those
systems. Except as provided in subsections (6) and (7) of this
section, the supplemental contribution rates required by this section
shall be calculated by the state actuary and shall be charged
regardless of language to the contrary contained in the statute which
authorizes additional benefits.
(2) In addition to the basic member, employer, and state
contribution rate established in RCW 41.45.0604 for the law enforcement
officers' and fire fighters' retirement system plan 2, the department
shall also establish supplemental rates to pay for the cost of
additional benefits, if any, granted to members of the law enforcement
officers' and fire fighters' retirement system plan 2. Except as
provided in subsection (6) of this section, these supplemental rates
shall be calculated by the actuary retained by the law enforcement
officers' and fire fighters' board and the state actuary through the
process provided in RCW 41.26.720(1)(a) and the state treasurer shall
transfer the additional required contributions regardless of language
to the contrary contained in the statute which authorizes the
additional benefits.
(3) The supplemental rate charged under this section to fund
benefit increases provided to active members of the public employees'
retirement system plan 1, the teachers' retirement system plan 1, and
Washington state patrol retirement system, shall be calculated as the
level percentage of all members' pay needed to fund the cost of the
benefit not later than June 30, 2024.
(4) The supplemental rate charged under this section to fund
benefit increases provided to active and retired members of the public
employees' retirement system plan 2 and plan 3, the teachers'
retirement system plan 2 and plan 3, or the school employees'
retirement system plan 2 and plan 3 shall be calculated as the level
percentage of all members' pay needed to fund the cost of the benefit,
as calculated under RCW 41.45.060, 41.45.061, or 41.45.067.
(5) The supplemental rate charged under this section to fund
postretirement adjustments which are provided on a nonautomatic basis
to current retirees shall be calculated as the percentage of pay needed
to fund the adjustments as they are paid to the retirees. The
supplemental rate charged under this section to fund automatic
postretirement adjustments for active or retired members of the public
employees' retirement system plan 1 and the teachers' retirement system
plan 1 shall be calculated as the level percentage of pay needed to
fund the cost of the automatic adjustments not later than June 30,
2024.
(6) A supplemental rate shall not be charged to pay for the cost of
additional benefits granted to members pursuant to chapter 340, Laws of
1998.
(7) A supplemental rate shall not be charged to pay for the cost of
additional benefits granted to members pursuant to chapter 41.31A RCW;
section 309, chapter 341, Laws of 1998; or section 701, chapter 341,
Laws of 1998.
(8) For benefit increases under chapter 41.31 or 41.31A RCW, the
basic contribution rate shall include the cost of the increases
beginning with the next valuation after the effective date of the
increase.
Sec. 9 RCW 41.45.070 and 2004 c 242 s 41 are each amended to read
as follows:
(1) In addition to the basic employer contribution rate established
in RCW 41.45.060 or 41.45.054, the department shall also charge
employers of public employees' retirement system, teachers' retirement
system, school employees' retirement system, public safety employees'
retirement system, or Washington state patrol retirement system members
an additional supplemental rate to pay for the cost of additional
benefits, if any, granted to members of those systems. Except as
provided in subsections (6) and (7) of this section, the supplemental
contribution rates required by this section shall be calculated by the
state actuary and shall be charged regardless of language to the
contrary contained in the statute which authorizes additional benefits.
(2) In addition to the basic member, employer, and state
contribution rate established in RCW 41.45.0604 for the law enforcement
officers' and fire fighters' retirement system plan 2, the department
shall also establish supplemental rates to pay for the cost of
additional benefits, if any, granted to members of the law enforcement
officers' and fire fighters' retirement system plan 2. Except as
provided in subsection (6) of this section, these supplemental rates
shall be calculated by the actuary retained by the law enforcement
officers' and fire fighters' board and the state actuary through the
process provided in RCW 41.26.720(1)(a) and the state treasurer shall
transfer the additional required contributions regardless of language
to the contrary contained in the statute which authorizes the
additional benefits.
(3) The supplemental rate charged under this section to fund
benefit increases provided to active members of the public employees'
retirement system plan 1, the teachers' retirement system plan 1, and
Washington state patrol retirement system, shall be calculated as the
level percentage of all members' pay needed to fund the cost of the
benefit not later than June 30, 2024.
(4) The supplemental rate charged under this section to fund
benefit increases provided to active and retired members of the public
employees' retirement system plan 2 and plan 3, the teachers'
retirement system plan 2 and plan 3, the public safety employees'
retirement system plan 2, or the school employees' retirement system
plan 2 and plan 3 shall be calculated as the level percentage of all
members' pay needed to fund the cost of the benefit, as calculated
under RCW 41.45.060, 41.45.061, or 41.45.067.
(5) The supplemental rate charged under this section to fund
postretirement adjustments which are provided on a nonautomatic basis
to current retirees shall be calculated as the percentage of pay needed
to fund the adjustments as they are paid to the retirees. The
supplemental rate charged under this section to fund automatic
postretirement adjustments for active or retired members of the public
employees' retirement system plan 1 and the teachers' retirement system
plan 1 shall be calculated as the level percentage of pay needed to
fund the cost of the automatic adjustments not later than June 30,
2024.
(6) A supplemental rate shall not be charged to pay for the cost of
additional benefits granted to members pursuant to chapter 340, Laws of
1998.
(7) A supplemental rate shall not be charged to pay for the cost of
additional benefits granted to members pursuant to chapter 41.31A RCW;
section 309, chapter 341, Laws of 1998; or section 701, chapter 341,
Laws of 1998.
(8) For benefit increases under chapter 41.31 or 41.31A RCW, the
basic contribution rate shall include the cost of the increases
beginning with the next valuation after the effective date of the
increase.
Sec. 10 RCW 41.45.010 and 2002 c 26 s 3 are each amended to read
as follows:
It is the intent of the legislature to provide a dependable and
systematic process for funding the benefits provided to members and
retirees of the public employees' retirement system, chapter 41.40 RCW;
the teachers' retirement system, chapter 41.32 RCW; the law enforcement
officers' and fire fighters' retirement systems, chapter 41.26 RCW; the
school employees' retirement system, chapter 41.35 RCW; and the
Washington state patrol retirement system, chapter 43.43 RCW.
The legislature finds that the funding status of the state
retirement systems has improved dramatically since 1989. Because of
the big reduction in unfunded pension liabilities, it is now prudent to
adjust the long-term economic assumptions that are used in the
actuarial studies conducted by the state actuary. The legislature
finds that it is reasonable to increase the salary growth assumption in
light of Initiative Measure No. 732, to increase the investment return
assumption in light of the asset allocation policies and historical
returns of the state investment board, and to reestablish June 30,
2024, as the target date to achieve full funding of all liabilities in
the public employees' retirement system plan 1, the teachers'
retirement system plan 1, and the law enforcement officers' and fire
fighters' retirement system plan 1.
The funding process established by this chapter is intended to
achieve the following goals:
(1) To continue to fully fund the public employees' retirement
system plans 2 and 3, the teachers' retirement system plans 2 and 3,
the school employees' retirement system plans 2 and 3, and the law
enforcement officers' and fire fighters' retirement system plan 2 as
provided by law;
(2) To fully amortize the total costs of the public employees'
retirement system plan 1, the teachers' retirement system plan 1, and
the law enforcement officers' and fire fighters' retirement system plan
1, not later than June 30, 2024;
(3) To establish ((predictable)) long-term employer contribution
rates which will remain a relatively ((constant)) predictable
proportion of the future state budgets; and
(4) To fund, to the extent feasible, benefit increases for plan 1
members and all benefits for plan 2 and 3 members over the working
lives of those members so that the cost of those benefits are paid by
the taxpayers who receive the benefit of those members' service.
Sec. 11 RCW 41.45.010 and 2004 c 242 s 36 are each amended to
read as follows:
It is the intent of the legislature to provide a dependable and
systematic process for funding the benefits provided to members and
retirees of the public employees' retirement system, chapter 41.40 RCW;
the teachers' retirement system, chapter 41.32 RCW; the law enforcement
officers' and fire fighters' retirement systems, chapter 41.26 RCW; the
school employees' retirement system, chapter 41.35 RCW; the public
safety employees' retirement system, chapter 41.37 RCW; and the
Washington state patrol retirement system, chapter 43.43 RCW.
The legislature finds that the funding status of the state
retirement systems has improved dramatically since 1989. Because of
the big reduction in unfunded pension liabilities, it is now prudent to
adjust the long-term economic assumptions that are used in the
actuarial studies conducted by the state actuary. The legislature
finds that it is reasonable to increase the salary growth assumption in
light of Initiative Measure No. 732, to increase the investment return
assumption in light of the asset allocation policies and historical
returns of the state investment board, and to reestablish June 30,
2024, as the target date to achieve full funding of all liabilities in
the public employees' retirement system plan 1, the teachers'
retirement system plan 1, and the law enforcement officers' and fire
fighters' retirement system plan 1.
The funding process established by this chapter is intended to
achieve the following goals:
(1) To fully fund the public employees' retirement system plans 2
and 3, the teachers' retirement system plans 2 and 3, the school
employees' retirement system plans 2 and 3, the public safety
employees' retirement system plan 2, and the law enforcement officers'
and fire fighters' retirement system plan 2 as provided by law;
(2) To fully amortize the total costs of the public employees'
retirement system plan 1, the teachers' retirement system plan 1, and
the law enforcement officers' and fire fighters' retirement system plan
1, not later than June 30, 2024;
(3) To establish ((predictable)) long-term employer contribution
rates which will remain a relatively ((constant)) predictable
proportion of the future state budgets; and
(4) To fund, to the extent feasible, benefit increases for plan 1
members and all benefits for plan 2 and 3 members over the working
lives of those members so that the cost of those benefits are paid by
the taxpayers who receive the benefit of those members' service.
Sec. 12 RCW 41.45.054 and 2003 1st sp.s. c 11 s 2 are each
amended to read as follows:
The basic employer and state contribution rates and plan 2 member
contribution rates are changed to reflect the ((2000)) 2002 actuarial
valuation((, incorporating the 1995-2000 actuarial experience study
conducted by the office of the state actuary. The results of the 2001
actuarial valuation for the public employees' retirement system, the
teachers' retirement system, and the school employees' retirement
system shall be restated as a result of the new asset smoothing method
adopted in RCW 41.45.035,)) and suspension of payments on the unfunded
liability in the public employees' retirement system and teachers'
retirement system, to collect the following contribution rates:
(1) Beginning July 1, ((2003)) 2005, the following employer
contribution rates shall be charged:
(a) ((1.18)) 3.38 percent for the public employees' retirement
system; and
(b) 3.03 percent for the law enforcement officers' and fire
fighters' retirement system plan 2.
(2) Beginning July 1, 2003, the basic state contribution rate for
the law enforcement officers' and fire fighters' retirement system plan
2 shall be 2.02 percent.
(3) Beginning September 1, ((2003)) 2005, the following employer
contribution rates shall be charged:
(a) ((0.84)) 3.51 percent for the school employees' retirement
system; and
(b) ((1.17)) 2.74 percent for the teachers' retirement system.
(4) Beginning July 1, ((2003)) 2005, the following member
contribution rates shall be charged:
(a) ((1.18)) 3.38 percent for the public employees' retirement
system plan 2; and
(b) 5.05 percent for the law enforcement officers' and fire
fighters' retirement system plan 2.
(5) Beginning September 1, ((2003)) 2005, the following member
contribution rates shall be charged:
(a) ((0.84)) 3.51 percent for the school employees' retirement
system plan 2; and
(b) ((0.87)) 2.48 percent for the teachers' retirement system plan
2.
(((6) The contribution rates in this section shall be collected
through June 30, 2005, for the public employees' retirement system and
the law enforcement officers' and fire fighters' retirement system, and
August 31st, 2005, for the school employees' retirement system and the
teachers' retirement system.))
(7) The July 1, 2003, contribution rate changes provided in this
section shall be implemented notwithstanding the thirty-day advanced
notice provisions of RCW 41.45.067.
NEW SECTION. Sec. 13 This act is necessary for the immediate
preservation of the public peace, health, or safety, or support of the
state government and its existing public institutions, and takes effect
July 1, 2005, except for sections 7, 9, and 11 of this act which take
effect July 1, 2006.
NEW SECTION. Sec. 14 Sections 6, 8, and 10 of this act expire
July 1, 2006.