WSR 03-06-044

PERMANENT RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed February 27, 2003, 3:38 p.m. , effective April 1, 2003 ]

Date of Adoption: February 27, 2003.

Purpose: The Department of Retirement Systems (DRS) adopted a number of changes to its actuarial Washington Administrative Code (WAC), effective September 1, 2002 (WSR 02-18-048) to implement new actuarial projections from the Office of the State Actuary (OSA). DRS is now making additional enhancements to the actuarial WACs. These new WACs explain how DRS determines age and cost of living adjustments in calculating various benefits for the retirement plans that DRS administers.

Statutory Authority for Adoption: RCW 41.50.050(5).

Other Authority: Chapter 41.45 RCW.

Adopted under notice filed as WSR 03-02-041 on December 24, 2002.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 2, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.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: April 1, 2003.

February 27, 2003

John Charles

Director

OTS-6107.2


NEW SECTION
WAC 415-02-310   How does the department use my age in calculating benefits?   This section provides an overview of the several different ways in which the department uses age in calculating benefits. The department may use your age to determine your retirement date, early retirement factors to apply, survivor factors, or cost of living adjustment factors.

(1) Present value: The department uses a rounding method to determine your age when calculating what your future lifetime monthly benefit is worth in present-day dollars. If the number of months in your age is under six months, the department will round down. If the number is six months or more, the department will round up. See WAC 415-02-340 for more information about the present value calculations.


Example 1:


At the time that the department is calculating Sharon's age in making a present value calculation, Sharon is 55 years, 5 months and 26 days old. The department will round down and use 55 as Sharon's age.


Example 2:


At the time that the department is calculating Donna's age in making a present value calculation, Donna is 54 years and 7 months old. The department will round up and use 55 as Donna's age.


(2) Early retirement: The department uses the difference between your "fully eligible retirement date" and your actual retirement date in calculating any actuarial reductions to your benefits. See WAC 415-02-320 for more information about early retirement.

(a) Step 1: Determine the fully eligible retirement date.

(i) The department first calculates the date on which you would have been fully eligible to retire.

(ii) All plans (except for LEOFF Plan 1, TRS Plan 1, WSPRS Plans 1 and 2, JRF and JRS): You can retire the first day of the month following your meeting the age requirement for retirement if you are otherwise eligible.


Example: Jake was born on May 12, 1934. On May 12, 1999, Jake reaches age 65 and has met the age requirement for retirement. Provided that he is otherwise eligible, Jake's retirement date is June 1, 1999.

(iii) LEOFF Plan 1, TRS Plan 1, WSPRS Plans 1 and 2, JRF, and JRS: If a retirement date other than the first of the month is allowed, you can retire on the day you meet the age requirement, or the following day (depending on the plan).


Example: If Jake is a member of this type of plan, he could retire May 12th or 13th, 1999 (his birthday or the day after his birthday).

(b) Step 2: Determine the difference. The department next calculates the difference between your fully eligible retirement date and your actual retirement date by subtracting the actual retirement year and month from the fully eligible retirement year and month. (Days are not used in the calculation.)

(i) Example:

Fully eligible date: 06/01/99
Minus actual retirement date: 08/01/95
Difference: 3 years, 10 months
(ii) Example:

Fully eligible date: 05/25/99
Minus actual retirement date: 08/01/95
Difference: 3 years, 9 months
(c) Step 3: Determine the early retirement factor. The department uses the difference calculated in step 2 to determine the early retirement factor (ERF) used to calculate your benefit as described in WAC 415-02-320.

(3) Optional COLA Factor for PERS Plan 1 and TRS Plan 1. The department uses the rounding method described in the "present value" subsection in this section to calculate your age when determining the optional COLA factor. See WAC 415-02-360 for a description of the optional COLA factor calculation.

(4) Calculating age to use in determining the survivor option factor. At retirement, if you select a survivor option, the department must calculate the difference between your age and your beneficiary's age. See WAC 415-02-380 for more information about survivor options.

(a) Step 1: The department calculates your age and your beneficiary's age at the time of your retirement.

(b) Step 2: The department rounds the ages, using the same method described in the "present value" subsection in this section.

(c) Step 3: The department subtracts your beneficiary's age from your age.

Example:

Member's age: 60
Minus beneficiary's age: 49
11
Result: The department will use the survivor option factor for a beneficiary who is 11 years younger than the member.

Example:

Member's age: 65
Minus beneficiary's age: 67
-2
Result: The department will use the survivor option factor for a beneficiary who is two years older than the member.

(5) Terms used

(a) JRF - Judicial retirement fund.

(b) JRS - Judicial retirement system.

(c) LEOFF - Law enforcement officers' and fire fighters' system.

(d) PERS - Public employees' retirement system.

(e) SERS - School employees' retirement system.

(f) TRS - Teachers' retirement system.

(g) WSPRS - Washington state patrol retirement system.

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OTS-6108.1


NEW SECTION
WAC 415-02-350   What are cost of living adjustments (COLA) and how are they calculated?   (1) What is a cost of living adjustment (COLA)? A retiree's, beneficiary's, or ex-spouse's benefit is a fixed amount. The benefit's value can change in the years after retirement because of inflation or other factors. A COLA automatically adjusts benefits based on the cost of living changes.

(2) What retirement plans include COLAs? With one exception, all retirement plans that the department administers provide one or more of the types of COLAs listed in subsection (3) of this section. The judges retirement fund (JRF) (chapter 2.12 RCW) does not provide a COLA.

(3) What are the types of COLAs?

(a) Auto COLA

The auto COLA is an option members can select at retirement. Members who choose this option have their benefits actuarially reduced at retirement to provide for an automatic annual adjustment in the benefit for the members' lives. The auto COLA has no age requirement and is based on the annual Consumer Price Index (CPI)1 change up to a maximum of 3% times the monthly benefit. The annual adjustment for the uniform COLA is independent from the auto COLA or any other COLA.

1CPI for the Seattle-Tacoma-Bremerton, Washington area for urban wage earners and clerical workers compiled by the Bureau of Labor Statistics, United States Department of Labor.
(b) Base COLA

The base COLA is applied in July (April for LEOFF Plan 1) of each year and adjusts the benefit based on the change in the CPI for Seattle.

(c) Uniform COLA

The uniform COLA is an annual adjustment to the benefit, based on years of service, payable to:

(i) Retirees, beneficiaries, or ex-spouses age 66 or older who have been retired for at least one year by July 1st of each year; and

(ii) Retirees, beneficiaries, or ex-spouses of any age whose retirement is calculated under the minimum formula.

(4) How are COLAs calculated? The retirement statutes for all department administered systems explain how the COLAs are calculated. Refer to the following table to find your plan:

RETIREMENT SYSTEM PLAN COLA TYPE STATUTE
JUDICIAL Base RCW 2.10.170
LEOFF Plan 1 Base RCW 41.26.240
LEOFF Plan 2 Base RCW 41.26.440
PERS Plan 1 Uniform RCW 41.40.197
PERS Plan 1 Optional Auto RCW 41.40.188 (1)(c)
PERS Plan 2 Base RCW 41.40.640
PERS Plan 3 Base RCW 41.40.840
SERS Plans 2 and 3 Base RCW 41.35.210
TRS Plan 1 Uniform RCW 41.32.489
TRS Plan 1 Optional Auto RCW 41.32.530 (1)(d)
TRS Plan 2 Base RCW 41.32.770
TRS Plan 3 Base RCW 41.32.845
WSPRS Plans 1 and 2 Base RCW 43.43.260

(5) Who provides the amounts used in the calculations?

(a) The amount of change for each COLA is provided annually by the office of the state actuary (OSA) to the department. Questions concerning how a specific amount is calculated should be directed to OSA.

(b) Based upon the amounts that OSA provides, the department calculates the COLA applied to a benefit.

(c) Questions concerning eligibility and COLA formulas should be directed to the department. Please see WAC 415-06-100 for information on contacting the department.

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