WSR 00-22-049

PERMANENT RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed October 27, 2000, 12:49 p.m. ]

Date of Adoption: October 26, 2000.

Purpose: To amend the department's rules implementing the law codified in chapters 41.34 and 41.35 RCW in order to make those rules consistent with TRS Plan 3 which became effective July 1, 1996, and with SERS which became effective September 1, 2000, and with clear rule-writing principles. References to these two RCW chapters are added to the rules.

Citation of Existing Rules Affected by this Order: Amending WAC 415-10-010, 415-10-020, 415-10-030, 415-10-040, 415-10-050, 415-10-080, and 415-10-100.

Statutory Authority for Adoption: Chapter 41.50 RCW.

Adopted under notice filed as WSR 00-16-155 on August 2, 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Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 1, Amended 4, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 1, Amended 7, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 1, Amended 7, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.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.

October 26, 2000

John Charles

Director

OTS-4188.3


AMENDATORY SECTION(Amending WSR 97-01-014, filed 12/6/96, effective 1/6/97)

WAC 415-10-010
Can I purchase service credit after the statutory deadline?

RCW 41.50.165 generally allows ((you)) the member to purchase service credit ((you)) that he or she failed to establish or reestablish within the statutory deadline.

(1) You must pay the actuarial value of the increase to your retirement allowance. The actuarial value of the increase to ((your)) the member's benefit means the cost to the retirement system trust fund of:

(a) Including the additional service credit in ((your)) the member's retirement allowance calculation; and

(b) Commencing ((your)) the member's retirement allowance at an earlier age, if applicable. This second factor will not apply if ((your)) the member's retirement system is LEOFF ((I)) 1, LEOFF ((II)) 2, PERS ((II)) 2, or TRS ((II)) 2, because length of service is not a factor in determining eligibility to retire in those systems.

(2) The valuation is based upon economic assumptions. The cost to the retirement system trust fund for the increased value to ((your)) the member's benefit is calculated based upon interest rate assumptions adopted by the ((economic and revenue forecast)) pension funding council and actuarial factors adopted or approved by the state actuary.

[Statutory Authority: RCW 41.50.050 and 41.50.165. 97-01-014, 415-10-010, filed 12/6/96, effective 1/6/97.]


AMENDATORY SECTION(Amending WSR 97-01-014, filed 12/6/96, effective 1/6/97)

WAC 415-10-020
Definitions.

As used in this chapter:

(1) "Average earnings" means:

(a) The average of your two highest consecutive years of compensation as of the date of your service credit purchase if you are purchasing service credit in PERS Plan ((I)) 1, TRS Plan ((I)) 1 or WSPRS;

(b) The average of your five highest consecutive years of compensation as of the date of your service credit purchase if you are purchasing service credit in Plan ((II)) 2 or Plan 3.

(c) The basic salary attached to your position at the date of your service credit purchase if you are purchasing service credit in LEOFF Plan ((I)) 1.

(2) "Factor 1" means the actuarial cost factor calculated by the state actuary and adopted by the department. The actual factor used varies depending upon the time between the date of payment and the projected date of retirement. Generally, the longer the gap between date of payment and date of retirement the lower the factor.

(3) "Factor 2" is the actuarial factor calculated by the state actuary based upon demographic differences between the membership of the different retirement systems. Those factors are: .00788 (PERS ((I)) 1); .00698 (TRS ((I)) 1); and .00908 (WSPRS).

(4) "Factor 3" means the interest factor calculated by the state actuary and adopted by the department. This factor is used only when the service credit purchase lowers the projected retirement age and is based upon the higher cost to the system of the earlier retirement.

(5) "LEOFF" means the law enforcement officers' and fire fighters' retirement system established under chapter 41.26 RCW.

(6) "PERS" means the public employees' retirement system established under chapter 41.40 RCW.

(7) "Plan ((I)) 1" means the retirement system plan that includes persons who established membership before October 1, 1977. PERS((, TRS)) and LEOFF are divided into Plan ((I)) 1 and Plan ((II)) 2. TRS is divided into Plan 1, Plan 2 and Plan 3. WSPRS has only one plan.

(8) "Plan ((II)) 2" means the retirement system plan that includes persons who established membership on or after October 1, 1977. PERS((, TRS)) and LEOFF are divided into Plan ((I)) 1 and Plan ((II)) 2. TRS is divided into Plan 1, Plan 2 and Plan 3. SERS is divided into Plan 2 and Plan 3. WSPRS has only one plan.

(9) "Plan ((III)) 3" means the teachers' retirement system Plan ((III)) 3 established by RCW 41.32.831 and the school employees' retirement system Plan 3 established by RCW 41.35.600.

(10) "Service credit being purchased" means the number of service credit months or service credit years you are purchasing.

(11) "TRS" means the teachers' retirement system established under chapters 41.32 and 41.34 RCW.

(12) "WSPRS" means the Washington state patrol retirement system established under chapter 43.43 RCW.

(13) "Years of earlier retirement" equals the number of years or fractions of years you will be able to retire earlier as a result of your purchase of service credit.

(14) "Years of service" equals the total anticipated years of service you will have accrued at retirement, including the additional service credit you purchase under this section.

(15) "SERS" means the school employees' retirement system established under chapters 41.34 and 41.35 RCW.

[Statutory Authority: RCW 41.50.050 and 41.50.165. 97-01-014, 415-10-020, filed 12/6/96, effective 1/6/97.]


AMENDATORY SECTION(Amending WSR 97-01-014, filed 12/6/96, effective 1/6/97)

WAC 415-10-030
Calculation of cost to purchase service credit in LEOFF Plan ((I)) 1, LEOFF Plan ((II)) 2, PERS Plan ((II)) 2, ((or)) TRS Plan ((II)) 2, or SERS Plan 2.

If you are a member of LEOFF Plan ((I)) 1, LEOFF Plan ((II)) 2, PERS Plan ((II or)) 2, TRS Plan ((II)) 2, TRS Plan 3, SERS Plan 2 or SERS Plan 3, the department will calculate the actuarial value of the service credit you purchase under RCW 41.50.165(2) using the following formula:

Average Earnings Service Credit Being Purchased Factor 1

=Cost to purchase service credit


[Statutory Authority: RCW 41.50.050 and 41.50.165. 97-01-014, 415-10-030, filed 12/6/96, effective 1/6/97.]


AMENDATORY SECTION(Amending WSR 97-01-014, filed 12/6/96, effective 1/6/97)

WAC 415-10-040
Calculation of cost to purchase service credit for members of PERS ((I)) 1, TRS ((I)) 1 or WSPRS.

If you are a member of PERS ((I)) 1, TRS ((I)) 1 or WSPRS, the department will calculate the actuarial value of the service credit you purchase under RCW 41.50.165(2) using the following three part formula:


Part 1 Cost= Part 2 Cost=
Service Credit Being Purchased Years of Service
x x
Average Earnings Average Earnings
x x
Factor 1 Factor 2
x
Years of Earlier Retirement
x
Factor 3
Cost to purchase service credit= Part 1 Cost+ Part 2 Cost.

The Part 1 Cost represents the cost of including the additional service in your retirement allowance calculation. The Part 2 Cost represents the cost of commencing your retirement allowance at the earliest possible age.

[Statutory Authority: RCW 41.50.050 and 41.50.165. 97-01-014, 415-10-040, filed 12/6/96, effective 1/6/97.]


AMENDATORY SECTION(Amending WSR 97-01-014, filed 12/6/96, effective 1/6/97)

WAC 415-10-050
Restrictions on purchasing service credit.

(1) You may not purchase service credit under RCW 41.50.165(2) if your deadline to establish or reestablish the service credit has not expired.

(2) If you are reestablishing credit you must purchase at least the service credit you earned in any one calendar month of employment.

(3) If you are establishing credit for the first time you must purchase the entire period of service. If you are not reestablishing credit canceled by a withdrawal of contributions, you must purchase the entire period of service.

(4) Your ability to purchase service credit may be limited by Internal Revenue Code restrictions. The department may limit the amount of service credit you may purchase in any calendar year in order to stay within the maximum employee contribution limits established by the Internal Revenue Code for 401(a) tax qualified plans.

(5) You may not make installment payments. If you purchase service credit under this section, you must make payment in a single lump-sum as determined by the department for each unit of service credit purchased.

(6) Purchasing service credit ((for periods prior to October 1, 1977,)) will not move you from ((Plan I to Plan II)) one plan to another. Plan membership is based upon the date your retirement system membership was established. Purchasing prior service credit does not change the date you first established membership and therefore does not change your plan membership.

[Statutory Authority: RCW 41.50.050 and 41.50.165. 97-01-014, 415-10-050, filed 12/6/96, effective 1/6/97.]


AMENDATORY SECTION(Amending WSR 97-01-014, filed 12/6/96, effective 1/6/97)

WAC 415-10-080
If I purchase service credit, can I receive a refund of my payments?

(1) You may not receive a refund unless you separate from service and withdraw your contributions. Except as provided under subsections (2) and (3) of this section, your payments to purchase service credit under RCW 41.50.165(2) qualify as a part of your accumulated contributions. As with other accumulated contributions, you may not receive a refund of your payments unless you separate from service and withdraw all your contributions.

(2) Additional restrictions for TRS ((I)) 1 members. If you are a TRS ((I)) 1 member, RCW 41.32.498(2) prohibits you from withdrawing payments made to purchase service credit under RCW 41.50.165(2) at the time of retirement.

(3) Additional restrictions for LEOFF ((II)) 2 members. If you are a LEOFF Plan ((II)) 2 member, payments made to purchase service credit under RCW 41.50.165(2) and interest on those payments may be refunded. However, such payments may not be included when calculating the one hundred fifty percent refund of contributions under RCW 41.26.540.

[Statutory Authority: RCW 41.50.050 and 41.50.165. 97-01-014, 415-10-080, filed 12/6/96, effective 1/6/97.]


AMENDATORY SECTION(Amending WSR 97-01-014, filed 12/6/96, effective 1/6/97)

WAC 415-10-100
Can I purchase TRS Plan ((II)) 2 credit in TRS Plan ((III)) 3? Yes.

(1) Transferring purchased TRS Plan ((II)) 2 credit into TRS Plan ((III)) 3. If you purchase TRS Plan ((II)) 2 service credit under this chapter and later elect to enter TRS Plan ((III)) 3, that credit will also transfer to TRS Plan ((III)) 3. Fifty percent of the money you paid to purchase the service credit will be credited to the TRS Plan ((III)) 3 defined contribution account established under chapter 41.34 RCW. The other fifty percent will be credited to the TRS Plan ((III)) 3 defined benefit portion established under RCW 41.32.831.

(2) Purchasing TRS Plan ((II)) 2 service credit after transferring to TRS Plan ((III)) 3. You may purchase service credit initially available under TRS Plan ((II)) 2 after you transfer to TRS Plan ((III)) 3. The service will be credited in TRS Plan ((III)) 3. Fifty percent of the money you pay to purchase the service credit will be credited to the TRS Plan ((III)) 3 defined contribution account established under chapter 41.34 RCW. The other fifty percent will be credited to the TRS Plan ((III)) 3 defined benefit portion established under RCW 41.32.831.

(3) Service earned after transferring to TRS Plan ((III)) 3 cannot be purchased. Service earned as a Plan ((III)) 3 member is automatically recredited if the member reenters membership and earns at least twelve service credit months. Plan ((III)) 3 does not have any deadlines on establishing optional service. Because there are no deadlines for establishing or reestablishing service credit there is no provision for purchasing service credit earned in Plan ((III)) 3 under RCW 41.50.165

[Statutory Authority: RCW 41.50.050 and 41.50.165. 97-01-014, 415-10-100, filed 12/6/96, effective 1/6/97.]


NEW SECTION
WAC 415-10-110
Can I purchase SERS Plan 2 credit in SERS Plan 3?

Yes. (1) Transferring purchased SERS Plan 2 credit into SERS Plan 3. If you purchase SERS Plan 2 service credit under this chapter and later elect to enter SERS Plan 3, that credit will also transfer to SERS Plan 3. Fifty percent of the money you paid to purchase the service credit will be credited to the SERS Plan 3 defined contribution account established under chapter 41.34 RCW. The other fifty percent will be credited to the SERS Plan 3 defined benefit portion established under RCW 41.35.600.

(2) Purchasing SERS Plan 2 service credit after transferring to SERS Plan 3. You may purchase service credit initially available under SERS Plan 2 after you transfer to SERS Plan 3. The service will be credited in SERS Plan 3. Fifty percent of the money you pay to purchase the service credit will be credited to the SERS Plan 3 defined contribution account established under chapter 41.34 RCW. The other fifty percent will be credited to the SERS Plan 3 defined benefit portion established under RCW 41.35.600.

(3) Service earned after transferring to SERS Plan 3 cannot be purchased. Service earned as a Plan 3 member is automatically recredited if the member reenters membership and earns at least twelve service credit months. Plan 3 does not have any deadlines on establishing optional service. Because there are no deadlines for establishing or reestablishing service credit there is no provision for purchasing service credit earned in Plan 3 under RCW 41.50.165.

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Washington State Code Reviser's Office