WSR 00-11-103

PERMANENT RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed May 18, 2000, 1:20 p.m. ]

Date of Adoption: May 17, 2000.

Purpose: The proposed rules conform to RCW 43.43.278 which requires that the department provide retiring WSPRS members with actuarially equivalent benefit options by July 1, 2000.

Statutory Authority for Adoption: RCW 43.43.278.

Other Authority: RCW 41.50.050.

Adopted under notice filed as WSR 00-08-085 on April 4, 2000.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 1, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 1, Amended 0, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 1, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0. Effective Date of Rule: Thirty-one days after filing.

May 17, 2000

John F. Charles

Director

by Maureen Westgard

OTS-3928.1


NEW SECTION
WAC 415-103-215
Retirement benefit options.

RCW 43.43.278 requires the department to provide retiring members with an actuarially equivalent retirement option by July 1, 2000. The option pays the retiree a reduced retirement allowance which, upon the retiree's death, continues throughout the life of the lawful surviving spouse. When retiring for service, the married member can select either the historic retirement option under RCW 43.43.270 (Option A) or the actuarially equivalent retirement option (Option B). Both options include a survivor feature that entitles the eligible surviving spouse to receive a monthly allowance after the retiree dies.

(1) Option A (historic retirement option and survivor benefit). The department pays the retiree a monthly retirement allowance in accordance with RCW 43.43.260. The department pays survivor benefits in accordance with RCW 43.43.270.

(a) When the retiree dies, the department pays the retiree's lawful spouse a monthly retirement allowance equal to the gross monthly allowance received by the retiree, or an allowance equal to fifty percent of the average final salary (AFS) used to determine the retiree's benefit, whichever is less. This allowance is paid for the duration of the spouse's lifetime. The surviving spouse allowance will be adjusted by the annual increase amount as provided by RCW 43.43.272.

(b) If a surviving spouse who is receiving benefits under this subsection marries another member of this retirement system and the retiree predeceases the spouse, the spouse can receive only the higher of the two survivor's allowances for which he or she qualifies. The surviving spouse cannot receive more than one survivor allowance at a time under this subsection.

(c) To be eligible for an allowance, the lawful surviving spouse of a retired member must have been married to the member prior to the member's retirement and continuously thereafter until the date of the member's death, or must have been married to the retired member at least two years prior to the member's death. As used in this section, the terms "spouse," "surviving spouse" and "eligible spouse" mean "lawful surviving spouse."

(d) If the retiree has surviving unmarried children under the age of eighteen years, each child shall be entitled to a benefit equal to five percent of the retiree's AFS at retirement. The combined benefits to the surviving spouse and all children cannot exceed sixty percent of the retiree's AFS.

(e) If there is no surviving spouse or the spouse dies, the child or children will receive a benefit equal to thirty percent of the retiree's AFS for one child and an additional ten percent of AFS for each additional child.

(f) All payments cease upon the death of the surviving spouse or the youngest unmarried child's attainment of age eighteen, whichever occurs last.

(2) Option B (actuarially equivalent retirement option and survivor benefit). The department pays the retiree a monthly benefit that is actuarially reduced by three percent to offset the cost of the survivor feature. The retiree's annual post-retirement increase (PRI) is based upon the amount of the retiree's reduced benefit.

(a) When the retiree dies, the department pays the retiree's eligible spouse a monthly retirement allowance equal to the gross monthly allowance received by the retiree. This allowance is paid for the duration of the spouse's lifetime. The surviving spouse allowance will be increased every July 1 by the amount of the PRI that had been paid to the retiree under the provisions of RCW 43.43.260(5).

(b) Benefits to the surviving spouse cease upon the spouse's death.

(3) Retiree's benefit increases if spouse ceases to be married to retiree or predeceases retiree (pop-up provision).

(a) This section applies to members retiring on or after July 1, 2000, who select Option B.

(b) If the retiree's spouse ceases to be married to the retiree or dies before the retiree, the retiree's monthly retirement allowance increases, effective the first day of the following month, to:

(i) The amount that would have been received had the retiree chosen Option A; plus

(ii) Any post-retirement increases the retiree received prior to the survivor's death or the termination of marriage.

(c) Pop-up recalculation example:

Option B:

Bob retires on August 1, 2000. He selects Option B so that his spouse Linda, to whom he has been married for 30 years, will receive his monthly allowance and post-retirement increases after he dies. As a result, his monthly allowance is reduced by three percent from $3,000, the Option A, historic retirement and survivor benefit, to $2,910. Bob's PRI is $58.20, two percent of his reduced retirement allowance.

Unfortunately, Linda dies in September 2002. Under the "pop-up" provision, Bob's monthly benefit will increase in October 2002 to a total of $3,116.40. His new benefit amount is composed of the $3,000 he would have received had he originally chosen Option A, plus the total of the PRIs he received in 2001 and 2002.


Year Option A (Historic Survivor Benefit) Annual PRI Based on Option A Benefit Option B (Full Survivor Benefit) Annual PRI Based on Optional B Benefit Total Benefit
08/01/2000 2,910.00 (not eligible.) 2,910.00
07/01/2001 2,910.00 58.20 2,968.20
07/01/2002 2,968.20 58.20 3.026.40
10/01/2002 3,000.00 3,116.40
07/01/2003 3,000.00 60.00 3,176.40


On July 1, 2003, Bob's PRI will be two percent of the Option A amount ($60.00) and his benefit will increase to $3,176.40.

(d) If the retiree whose benefit increases under this section thereafter dies before all contributions are exhausted and there is no surviving spouse or eligible child, the remaining balance is retained by the retirement fund.

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Washington State Code Reviser's Office