WSR 04-05-039

PROPOSED RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed February 12, 2004, 9:51 a.m. ]

Original Notice.

Exempt from preproposal statement of inquiry under RCW 34.05.310(4).

Title of Rule: WAC 415-02-520 How can my Plan 1 or Plan 2 retirement account be split by a property division dissolution order?

Purpose: In subsection (11), change a cross reference from WAC 415-02-520(8) to WAC 415-02-520(9).

Statutory Authority for Adoption: RCW 41.50.050(5).

Statute Being Implemented: RCW 41.50.500, 41.50.670 et seq., 41.50.790.

Summary: In subsection (11) change a cross reference from WAC 415-02-520(8) to WAC 415-02-520(9).

Reasons Supporting Proposal: Correct a typographical error.

Name of Agency Personnel Responsible for Drafting: Merry A. Kogut, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7291; Implementation and Enforcement: Dorothy Bailey, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7069.

Name of Proponent: Department of Retirement Systems, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: Correct typographical error.

Proposal Changes the Following Existing Rules: Correct typographical error.

No small business economic impact statement has been prepared under chapter 19.85 RCW. These amendments have no effect on businesses.

RCW 34.05.328 does not apply to this rule adoption. The Department of Retirement Systems is not one of the named departments in RCW 34.05.328.

Hearing Location: Department of Retirement Systems, 6835 Capitol Boulevard, Conference Room 115, Tumwater, WA, on April 6, 2004, at 3:00 p.m.

Assistance for Persons with Disabilities: Contact the rules coordinator by seven days before the hearing, if possible, phone (360) 664-7291, TTY (360) 586-5450, e-mail joeo@drs.wa.gov.

Submit Written Comments to: Identify WAC Numbers, Merry A. Kogut, Rules Coordinator, Department of Retirement Systems, P.O. Box 48380, Olympia, WA 98504-8380, e-mail joeo@drs.wa.gov, fax (360) 753-3166, by 5:00 p.m. on April 6, 2004.

Date of Intended Adoption: No sooner than April 7, 2004.

February 11, 2004

Merry A. Kogut

Rules Coordinator

OTS-6922.1


AMENDATORY SECTION(Amending WSR 03-24-049, filed 11/26/03, effective 1/1/04)

WAC 415-02-520   How can my Plan 1 or Plan 2 retirement account be split1 by a property division dissolution order?   (1) Who may use this section? Vested members of LEOFF Plan 2, PERS Plans 1 or 2, TRS Plans 1 or 2, SERS Plan 2, or WSPRS Plan 2 who have or will have a property division dissolution order or amendment dated on or after July 1, 20032. If your ex-spouse will be receiving an interest in your account, use WAC 415-02-510.

(2) What are the rules for splitting my account? If you and your ex-spouse are eligible, the department will split your retirement account into two separate accounts -- one for you, and one for your ex-spouse. The rules for splitting your account are different depending on whether your dissolution order or most recent amendment is dated BEFORE or AFTER retirement.

(3) How will my account be affected if the department accepts the property division dissolution order BEFORE my retirement?

(a) The department will split your retirement account into two completely separate accounts and create an account for your ex-spouse under his or her Social Security number for the amount awarded in the dissolution order.

(b) The department will pay each of you out of your separate accounts either a monthly retirement benefit payment or a withdrawal of contributions.

(c) If you retire and receive a monthly retirement benefit payment, your monthly payment will have a permanent reduction to account for the amount awarded as a monthly payment to your ex-spouse.

(d) Your monthly benefit payment will be payable over your lifetime, and your ex-spouse's monthly payment will be payable over his or her lifetime.

(e) You will have the right to pick a survivor option for your monthly benefit payment.

(f) Your ex-spouse will not have the right to pick a survivor option for his or her monthly payment but may name a beneficiary to receive any final death payment that may be due.

(g) If you terminate employment, whatever decision you make about your accumulated contributions will have no effect upon your ex-spouse's separate account.

(h) When you or your ex-spouse dies, there will be no impact to the other person's retirement account because the accounts are independent from one another.

(i) Your ex-spouse may begin receiving monthly payments when he or she reaches retirement age for your retirement plan, or the first day of the month following the department's acceptance of the order, whichever is later. The retirement age for an ex-spouse receiving a benefit from TRS Plan 1 and PERS Plan 1 is age sixty; from PERS Plan 2, SERS Plan 2, and TRS Plan 2 it is age sixty-five; from LEOFF Plan 2 it is age fifty-three; and from WSPRS Plan 2 it is age fifty-five. Your age or retirement eligibility has no effect on when your ex-spouse is eligible to begin receiving his or her monthly benefit. Your ex-spouse must apply for his or her monthly payment according to the rules for your system and plan.

(j) Your ex-spouse may withdraw his or her share of the accumulated contributions at any time before receiving a monthly retirement benefit. Regardless of whether your ex-spouse withdraws or receives a monthly payment, your monthly benefit payment will be permanently reduced to account for your ex-spouse's share of your retirement account.

(4) Is there a limit to the amount of contributions I can award to my ex-spouse? Yes. The amount of contributions awarded to an ex-spouse, cannot be greater than the percentage of the member's monthly benefit used to determine the amount of the monthly benefit awarded to the ex-spouse.


Example:
Accumulated contributions earned during the marriage period: $50,000
Member's monthly benefit: $1,000
Percentage of member's monthly benefit awarded to ex-spouse: 50%
Monthly benefit awarded to ex-spouse: $500 (50% of $1,000)


Contributions awarded to ex-spouse: $25,000 (50% of 50,000)

(5) What happens if my retirement account was split and then I retire early?

(a) If you are eligible and decide to retire early, or must retire early because of a disability, your monthly retirement benefit payment will be reduced by an early retirement factor (ERF). See WAC 415-02-320.

(b) To determine the reduction to your benefit because of your preretirement split (see subsection (3)(c) of this section), the adjustment to the amount awarded to your ex-spouse in the dissolution order will be reduced by the ERF used to reduce your benefit.

Example: You are a member of PERS Plan 2 and retire for disability two years before you are eligible for a service retirement. The dissolution order awarded your ex-spouse a monthly benefit of five hundred dollars.

Your defined benefit before ERF is applied: $2,500
ERF (factor for retiring two years early) 0.82
Your base benefit: $2,050 ($2500 x 0.82 ERF)
Adjustment for divorce split: - $410 (ex-spouse's $500 x

0.82 (ERF))

The defined benefit you will receive: $1640 ($2050 - $410)
Your ex-spouse will receive the full monthly amount ($500) that was awarded to him or her in the dissolution order, regardless of your benefit amount.

(6) What language must be used for a property division dissolution order or amendment that is accepted by the department BEFORE my retirement?

(a) The order must include the language provided below. Do not use the language in RCW 41.50.670(2). The exact dollar amount of your ex-spouse's monthly benefit must be specified. Do not use formulas or percentages.

The Department of Retirement Systems (department) shall create an account for (ex-spouse) in the (name of retirement system and plan) and transfer $ from 's (member's) accumulated contributions account into 's (ex-spouse's) account. If (ex-spouse) does not withdraw the contributions and becomes eligible, the department will pay him or her $ (amount) as a monthly payment for his or her life. If (member) retires and receives a monthly retirement benefit payment, the payment will be permanently reduced to account for 's (ex-spouse's) monthly payment. This provision shall become effective no more than 30 days after the department's acceptance of the order.
(b) If you are a member of PERS Plan 1 or TRS Plan 1, the amount of service credit awarded to your ex-spouse must be specified in the order if he or she is awarded a portion of gainsharing payments and cost-of-living adjustments. Because gainsharing payments and cost-of-living adjustments are based on service credit, the following paragraph must be included:

If (ex-spouse) receives a monthly retirement payment, the department shall use (number) months of service credit to calculate future gainsharing payments, if any, and cost-of-living adjustments when he or she becomes eligible.
(7) How will my account be affected if the department accepts the property division dissolution order AFTER my retirement?

(a) The department will split your retirement account only if you selected your ex-spouse to receive survivor benefits at the time you retired. If you did not select your ex-spouse to receive survivor benefits at the time you retired, you cannot use this section. You must use WAC 415-02-510.

(b) If you selected your ex-spouse to receive survivor benefits at the time you retired, the rules in subsection (3)(a) through (f) of this section will apply.

(c) At the time the department splits your account, your ex-spouse will be removed as the survivor beneficiary on your account.

(d) Regardless of his or her age, your ex-spouse will begin receiving a monthly benefit the first month after the department has accepted the dissolution order.

(8) If the property division dissolution order is dated AFTER my retirement, how will my monthly retirement benefit payment be calculated after the split?

(a) The dissolution order must state the exact dollar amount your ex-spouse is to receive as his or her separate monthly benefit. The following describes how the new amount of your benefit will be calculated, assuming your ex-spouse was awarded a monthly benefit of one thousand dollars in the dissolution order.

Step 1 The department will determine the single life benefit of your current monthly benefit payment by dividing your current monthly benefit payment by the survivor option factor (see WAC 415-02-380) in effect at the time of the split.

Example:

Current monthly benefit = $1679.38

Option factor = 0.9400000

Single life benefit amount = $1679.38/0.9400000 = $1786.57


Step 2 The single life benefit ($1786.57) is divided by your annuity factor (see WAC 415-02-360) to determine the current present value of the single life benefit amount. The annuity factor the department uses is the factor for your age as of the date of the split.

Example:

Your age at time of the split = 61 years old

Annuity factor for age 61 = 0.0084149

Present value of single life benefit = $1786.57/0.0084149 = $212,310.31


Step 3 The department then determines the present value of your ex-spouse's share by dividing your ex-spouse's monthly benefit amount (as awarded in the dissolution order) by your ex-spouse's annuity factor. The annuity factor is the factor for your ex-spouse's age as of date of the split.

Example:

Ex-spouse's monthly benefit amount = $1000

Ex-spouse's age at time of the split = 67

Annuity factor for age 67 = 0.0095028

Present value of your ex-spouse's monthly benefit = $1000/0.0095028 = $105,232.14


Step 4 Next, the department subtracts your ex-spouse's present value from the single life benefit present value. The result is the present value of the benefit you will receive.

Example:

Present value of single life benefit = $212,310.31

Less present value of ex-spouse's benefit = -105,232.14

Your present value = $107,078.17


Step 5 The department determines your new monthly benefit amount by multiplying your present value by your annuity factor.

Example:

Your present value = $107,078.17

Annuity factor = 0.0084149

Your new monthly benefit amount = $107,078.17 x 0.0084149 = $901.05


(b) The department determines the percentage of the total present value each of you will receive by dividing each of your present value amounts by the single life benefit present value amount.


Example:

Your percentage of the single life benefit present value: $107,078.17/$212,310.31 = .5043

Your ex-spouse's percentage of the single life benefit present value: $105,232.14/$212,310.31 = .4957


(9) What language must be used in a property division dissolution order or amendment that is accepted by the department AFTER my retirement?

(a) The order must include the language provided below. Do not use the language in RCW 41.50.670(2). The exact dollar amount of your ex-spouse's monthly benefit must be specified. Do not use formulas or percentages.

The Department of Retirement Systems (department) shall create an account for (ex-spouse) in the (name of retirement system and plan) and pay him or her $ (amount) as a monthly benefit payment for his or her life. To pay for this benefit, 's (retiree's) monthly retirement benefit payment will be reduced for his or her life. If (retiree) has any unused contributions remaining in his or her account, $ (amount) shall be transferred to 's (ex-spouse's) account. This provision shall become effective no more than 30 days after the department's acceptance of the order.
(b) If the member is in PERS Plan 1 or TRS Plan 1, the amount of service credit awarded to the ex-spouse must be specified in the order if he or she is entitled to a portion of gainsharing payments and cost-of-living adjustments. Because gainsharing payments and cost-of-living adjustments are based on service credit, the following paragraph must be included:

If (ex-spouse) receives a monthly retirement payment, the department shall use (number) months of service credit to calculate future gainsharing payments, if any, and cost-of-living adjustments when he or she becomes eligible.
(10) Is there a maximum payment amount that the department will pay to my ex-spouse? Yes. See RCW 41.50.670(4) or WAC 415-02-500(10) for information.

(11) Can I amend an existing order that has awarded an interest in my account to my ex-spouse under WAC 415-02-520 and remove my ex-spouse as my survivor beneficiary? Yes. To remove your ex-spouse as your survivor beneficiary, you must submit a "conformed copy" of the court order splitting your account. A conformed copy is a copy of the order that has been signed by the judge or commissioner on or after July 1, 2003, and filed with the court. Removing your ex-spouse as survivor beneficiary will change your retirement benefit. See WAC 415-02-520(((8)))(9) for the language that must be used.


Example:

Julio and May were married when Julio retired. Julio chose survivor Option 2 (joint and one hundred percent survivorship) when he retired. This meant that if Julio died, May would receive monthly survivor benefits. Two years after Julio's retirement, the couple divorced. The court awarded "one hundred percent of retirement benefits" to Julio. Julio later learned that this award did not change the survivor option. Julio can return to court and obtain an order stating that May is to receive "$0" as the dollar amount for her separate monthly benefit. The order must use the language in WAC 415-02-520(8) and be signed by the court no sooner than July 1, 2003.


(12) How much is the fee the department charges for making payments directly to my ex-spouse? See RCW 41.50.680 and WAC 415-02-500(11) for information.

(13) What happens if I transfer to Plan 3 after the property division dissolution order has been filed with the department? See WAC 415-02-550 for information.

(14) Terms used:

(a) Department's acceptance - Order that fully complies with the department of retirement systems requirements and RCW 41.50.500.

(b) Dissolution order - RCW 41.50.500.

(c) Ex-spouse - WAC 415-02-030.

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

(e) PERS - Public employees' retirement system.

(f) Plan 3 retirement systems - WAC 415-111-100.

(g) SERS - School employees' retirement system.

(h) Split account - WAC 415-02-030.

(i) Survivor benefits - WAC 415-02-030.

(j) TRS - Teachers' retirement system.

(k) Vested - The length of service, by system and plan, required to receive a service retirement when age requirements are met.

(l) WSPRS - Washington state patrol retirement system.


Footnotes to section:

1 When a court splits your retirement account, the department will establish a separate account for your ex-spouse. Once the account is established, your account and your ex-spouse's account are not tied in any way.
2 If an ex-spouse was not listed as the member's survivor beneficiary at retirement, then no postretirement property division dissolution order (or postretirement amendment) may split the member's retirement account using WAC 415-02-520.

[Statutory Authority: RCW 41.50.050(5), 41.50.500, [41.50.]670 et seq., [41.50.]790. 03-24-049, 415-02-520, filed 11/26/03, effective 1/1/04. Statutory Authority: RCW 41.50.050(5), 41.50.500, [41.50.]670-[41.50.]710, [41.50.]790 and 2002 c 158. 03-12-014, 415-02-520, filed 5/27/03, effective 7/1/03.]

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