PROPOSED RULES
RETIREMENT SYSTEMS
Original Notice.
Preproposal statement of inquiry was filed as WSR 04-09-041.
Title of Rule and Other Identifying Information: WAC 415-108-805 What is The PERS Plan 1 "adjusted minimum benefit"? and 415-112-555 What is the TRS Plan 1 "adjusted minimum benefit"?
Hearing Location(s): Department of Retirement Systems, 6835 Capitol Boulevard, Conference Room 115, Tumwater, WA, on September 21, 2004, at 1:30 p.m.
Date of Intended Adoption: No sooner than September 23, 2004.
Submit Written Comments to: Leslie L. Saeger, Rules Coordinator, Department of Retirement Systems, P.O. Box 48380, Olympia, WA 98504-8380, e-mail leslies@drs.wa.gov, fax (360) 753-3166, by 5:00 p.m. on September 21, 2004.
Assistance for Persons with Disabilities: Contact Leslie L. Saeger, Rules Coordinator, by September 14, 2004, TDD (360) 664-7291, TTY (360) 586-5450, phone (360) 664-7291.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: These new rules implement chapter 85, Laws of 2004 (HB 2538), which entitles certain qualifying TRS Plan 1 and PERS Plan 1 retirees and beneficiaries to a minimum benefit.
Reasons Supporting Proposal: To implement 2004 legislation.
Statutory Authority for Adoption: RCW 41.50.050(5).
Statute Being Implemented: RCW 41.32.4851 (for WAC 415-112-555) and 41.40.1984 (for WAC 415-108-805).
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Department of Retirement Systems, governmental.
Name of Agency Personnel Responsible for Drafting: Leslie Saeger, 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) 664-7291.
No small business economic impact statement has been prepared under chapter 19.85 RCW. These rules have no effect on businesses.
A cost-benefit analysis is not required under RCW 34.05.328. The Department of Retirement Systems is not one of the named departments in RCW 34.05.328.
August 12, 2004
Leslie Saeger
Rules and Contacts Coordinator
OTS-7420.1
NEW SECTION
WAC 415-108-805
What is the PERS Plan 1 "adjusted
minimum benefit"?
RCW 41.40.1984 entitles certain PERS Plan 1
retirees and beneficiaries to a minimum benefit of one
thousand dollars, adjusted by the same actuarial reduction
factors as were used to calculate their benefit at the time of
retirement; or for beneficiaries, at the time benefit payments
commenced.
(1) Do I qualify for the adjusted minimum benefit?
(a) Except as provided in (b) of this subsection:
(i) You qualify if you are a PERS Plan 1 retiree and you:
(A) Have at least twenty-five years of PERS service credit;
(B) Have been retired at least twenty years; and
(C) Have a current retirement benefit, including adjustments, that is less than the amount of the adjusted minimum benefit.
(ii) You qualify if you are a PERS Plan 1 member's beneficiary, as defined in RCW 41.40.010 (14)(a), and:
(A) The member had at least twenty-five years of PERS service credit;
(B) The member and/or beneficiary have been receiving benefits for at least twenty years; and
(C) Your current retirement benefit, including adjustments, is less than the amount of the adjusted minimum benefit.
(b) You do not qualify if you are a retiree or beneficiary who receives a duty disability retirement allowance under RCW 41.40.220(1) or a statewide cities employee's retirement duty disability retirement allowance under RCW 41.44.170 (3) or (5).
(2) How is the amount of the adjusted minimum benefit calculated? The benefit calculation starts with one thousand dollars and is adjusted by the same factors that were used to calculate the benefit at the time of retirement.
(3) What factors are used to calculate the amount of the adjusted minimum benefit? The factors used to calculate the minimum benefit are:
(a) Annuity withdrawal;
(b) Early retirement;
(c) Automatic cost of living (COLA) increases chosen at retirement;
(d) Joint survivor option chosen at retirement;
(e) Extra contributions made by the member;
(f) Survivor percentage. See Example 2 in this subsection.
| Example 1: | At the time of retirement, Bill withdrew his contributions and chose a joint and 50% survivor option, with Betty as his beneficiary. The one thousand dollar minimum benefit will be adjusted by the same factors that were used to calculate Bill's original benefit, as follows: |
| Minimum benefit per RCW 41.32.4851 | $1000.00 |
| Reduction for contribution withdrawal | -$140.00 |
| Adjustment for the joint survivor option | -$129.00 |
| Bill's adjusted minimum benefit | $731.00 |
| Example 2: | Betty is Bill's beneficiary. After Bill's death, Betty receives 50% of the amount of his benefit. For Betty, the $1,000 minimum benefit will be adjusted by the same factors that were used to calculate Bill's original benefit, and also by the survivor percentage (50%) chosen at the time of Bill's retirement: |
| Minimum benefit per RCW 41.32.4851 | $1000.00 |
| Reduction for contribution withdrawal | -$140.00 |
| Adjustment for the joint survivor option | -$129.00 |
| Retiree's adjusted minimum benefit as calculated in Example 1 | $731.00 |
| Survivor percentage (which, in this case, is 50% because of the survivor option selected at the time of retirement) | -$365.50 |
| Betty's adjusted minimum benefit | $365.50 |
(4) If the adjusted minimum benefit is less than my current benefit, will my benefit be reduced? No, the department will compare the amount of the adjusted minimum benefit to your current benefit. You will always receive the higher of the two benefits.
(5) If I qualify for the adjusted minimum benefit, when will I begin to receive the higher benefit?
(a) If you meet the requirements as of July 1, 2004, you will begin receiving the adjusted minimum benefit, in lieu of your regular benefit, at the end of July 2004.
(b) If you qualify after July 1, 2004, you will automatically begin receiving the adjusted minimum benefit, in lieu of your regular benefit, at the end of the month in which you qualify.
(6) Will I continue to get cost of living increases (COLAs) if I receive the adjusted minimum benefit? No. Under the provisions of RCW 41.40.1984, the adjusted minimum benefit will not be adjusted for COLAs.
(7) How long will I continue to receive the adjusted minimum benefit? You will receive the adjusted minimum benefit until your original retirement benefit, plus on-going adjustments, exceeds the adjusted minimum benefit. At that time you will automatically start receiving the higher benefit.
| Example: | Joe retired with a survivor option, requiring an actuarial reduction of his monthly benefit (87% of full allowance). He received a 3% COLA each year. In 2004, Joe's retirement benefit was $806.25. The following table shows how his benefit is compared to the adjusted minimum benefit from 2004 through 2008. |
| Regular Benefit (including COLAs) |
Adjusted Minimum Benefit (Fixed - No COLAs added) |
Actual Amount Joe Received |
|
| 2004 | $806.25 (benefit + COLAs) | $870 ($1,000 x .87) | $870 |
| 2005 | $830.44 ($806.25 + COLA) | $870 ($1,000 x .87) | $870 |
| 2006 | $855.35 ($830.44 + COLA) | $870 ($1,000 x .87) | $870 |
| 2007 | $881.01 ($855.35 + COLA) | No longer applicable | $881.01 |
| 2008 | $907.44 ($881.01 + COLA) | No longer applicable | $907.44 |
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OTS-7421.1
NEW SECTION
WAC 415-112-555
What is the TRS Plan 1 "adjusted minimum
benefit"?
RCW 41.32.4851 entitles certain TRS Plan 1 retirees
and beneficiaries to a minimum benefit of one thousand
dollars, adjusted by the same actuarial reduction factors as
were used to calculate their benefit at the time of
retirement; or for beneficiaries, at the time benefit payments
commenced.
(1) Do I qualify for the adjusted minimum benefit?
(a) Except as provided in (b) of this subsection:
(i) You qualify if you are a TRS Plan 1 retiree and you:
(A) Have at least twenty-five years of TRS service credit;
(B) Have been retired at least twenty years; and
(C) Have a current retirement benefit, including adjustments, that is less than the amount of the adjusted minimum benefit.
(ii) You qualify if you are a TRS Plan 1 member's beneficiary, as defined in RCW 41.32.010 (5)(a), and:
(A) The member had at least twenty-five years of TRS service credit;
(B) The member and/or beneficiary have been receiving benefits for at least twenty years; and
(C) Your current retirement benefit, including adjustments, is less than the amount of the adjusted minimum benefit.
(b) You do not qualify if you are receiving a temporary disability benefit under RCW 41.32.540.
(2) How is the amount of the adjusted minimum benefit calculated? The benefit calculation starts with one thousand dollars and is adjusted by the same factors that were used to calculate the benefit at the time of retirement.
(3) What factors are used to calculate the amount of the adjusted minimum benefit? The factors used to calculate the minimum benefit are:
(a) Annuity withdrawal;
(b) Early retirement;
(c) Automatic cost of living (COLA) increases chosen at retirement;
(d) Joint survivor option chosen at retirement;
(e) Extra contributions made by the member;
(f) Survivor percentage. See Example 2 in this subsection.
| Example 1: | At the time of retirement, Bill withdrew his contributions and chose a joint and 50% survivor option, with Betty as his beneficiary. The $1,000 minimum benefit will be adjusted by the same factors that were used to calculate Bill's original benefit, as follows: |
| Minimum benefit per RCW 41.32.4851 | $1000.00 |
| Reduction for contribution withdrawal | -$140.00 |
| Adjustment for the joint survivor option | -$129.00 |
| Bill's adjusted minimum benefit | $731.00 |
| Example 2: | Betty is Bill's beneficiary. After Bill's death, Betty receives 50% of the amount of his benefit. For Betty, the $1,000 minimum benefit will be adjusted by the same factors that were used to calculate Bill's original benefit, and also by the survivor percentage (50%) chosen at the time of Bill's retirement: |
| Minimum benefit per RCW 41.32.4851 | $1000.00 |
| Reduction for contribution withdrawal | -$140.00 |
| Adjustment for the joint survivor option | -$129.00 |
| Retiree's adjusted minimum benefit as calculated in Example 1 | $731.00 |
| Survivor percentage (which, in this case, is 50% because of the survivor option selected at the time of retirement) | -$365.50 |
| Betty's adjusted minimum benefit | $365.50 |
(4) If the adjusted minimum benefit is less than my current benefit, will my benefit be reduced? No, the department will compare the amount of the adjusted minimum benefit to your current benefit. You will always receive the higher of the two benefits.
(5) If I qualify for the adjusted minimum benefit, when will I begin to receive the higher benefit?
(a) If you meet the requirements as of July 1, 2004, you will begin receiving the adjusted minimum benefit, in lieu of your regular benefit, at the end of July 2004.
(b) If you qualify after July 1, 2004, you will automatically begin receiving the adjusted minimum benefit, in lieu of your regular benefit, at the end of the month in which you qualify.
(6) Will I continue to get cost of living increases (COLAs) if I receive the adjusted minimum benefit? No. Under the provisions of RCW 41.32.4851, the adjusted minimum benefit will not be adjusted for COLAs.
(7) How long will I continue to receive the adjusted minimum benefit? You will receive the adjusted minimum benefit until your original retirement benefit, plus on-going adjustments, exceeds the adjusted minimum benefit. At that time you will automatically start receiving the higher benefit.
| Example: | Joe retired with a survivor option, requiring an actuarial reduction of his monthly benefit (87% of full allowance). He received a 3% COLA each year. In 2004, Joe's retirement benefit was $806.25. The following table shows how his benefit is compared to the adjusted minimum benefit from 2004 through 2008. |
| Regular Benefit (including COLAs) |
Adjusted Minimum Benefit (Fixed - No COLAs added) |
Actual Amount Joe Received |
|
| 2004 | $806.25 (benefit + COLAs) | $870 ($1,000 x .87) | $870 |
| 2005 | $830.44 ($806.25 + COLA) | $870 ($1,000 x .87) | $870 |
| 2006 | $855.35 ($830.44 + COLA) | $870 ($1,000 x .87) | $870 |
| 2007 | $881.01 ($855.35 + COLA) | No longer applicable | $881.01 |
| 2008 | $907.44 ($881.01 + COLA) | No longer applicable | $907.44 |
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