WSR 06-16-043

PERMANENT RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed July 26, 2006, 10:26 a.m. , effective August 26, 2006 ]


Effective Date of Rule: Thirty-one days after filing.

Purpose: To implement new legislation giving LEOFF, PERS, PSERS, SERS, TRS and WSPRS members and opportunity to purchase up to sixty months of additional service credit at the time of retirement.

Statutory Authority for Adoption: RCW 41.50.050(5).

Other Authority: Chapter 214, Laws of 2006, and RCW 41.26.432.

Adopted under notice filed as WSR 06-13-095 on June 21, 2006.

Changes Other than Editing from Proposed to Adopted Version: Changed "or" to "and" in subsection (1)(g) to be consistent with (1)(a) through (f).

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 1, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 1, Amended 0, Repealed 0.

Date Adopted: July 26, 2006.

Sandra J. Matheson

Director

OTS-8970.2


NEW SECTION
WAC 415-02-177   May I purchase additional service credit?   (1) What is the option for purchasing additional service credit? The following statutes provide an option for eligible members to purchase additional service credit that provides a guaranteed, lifetime increase to their monthly retirement allowance:

(a) Section 5, chapter 214, Laws of 2006 for LEOFF Plan 1 members;

(b) RCW 41.26.432 for LEOFF Plan 2 members;

(c) Section 1, chapter 214, Laws of 2006 for PERS Plan 1, 2, and 3 members;

(d) Section 4, chapter 214, Laws of 2006 for PSERS Plan 2 members;

(e) Section 3, chapter 214, Laws of 2006 for SERS Plan 2 and 3 members;

(f) Section 2, chapter 214, Laws of 2006 for TRS Plan 1, 2, and 3 members; and

(g) Section 6, chapter 214, Laws of 2006 for WSPRS Plan 1 and 2 members.

(2) Am I eligible to purchase additional service credit?

(a) You may purchase additional service credit if you are eligible to retire from one or more of the following plans and you take your benefit as a monthly allowance rather than a lump sum payment:

(i) LEOFF Plan 1 or 2 under RCW 41.26.090 or 41.26.430;

(ii) PERS Plan 1, 2 or 3 under RCW 41.40.180, 41.40.630, or 41.40.820;

(iii) PSERS Plan 2 under RCW 41.37.210;

(iv) SERS Plan 2 or 3 under RCW 41.35.420 or 41.35.680;

(v) TRS Plan 1, 2, or 3 under RCW 41.32.480, 41.32.765, or 41.32.875; or

(vi) WSPRS Plan 1 or 2 under RCW 43.43.250.

(b) If you retire as a result of a disability, you may purchase additional service credit if you meet the requirements in (a) of this section.

(3) How much additional service credit may I purchase? If you are eligible, you may purchase from one to sixty months of additional service credit in whole month increments.

(4) May I use the additional purchased service credit to qualify for retirement, or to qualify for the three percent reduction instead of the actuarial reduction for early retirement? No. You may not use the purchased service credit to qualify for retirement or to qualify for a three percent reduction factor instead of an actuarial reduction for early retirement.

(5) When must I apply to purchase additional service credit? You must submit your request to purchase additional service credit to the department at the same time you submit your application for retirement.

(6) How much will my monthly retirement allowance increase if I purchase additional service credit? The increase in your monthly retirement allowance will be calculated using the benefit formula for your system and plan, with a reduction for early retirement, if applicable. If your monthly allowance will be reduced for early retirement, the same early reduction factor will be used to calculate the increase due to the additional service credit.

PERS Plan 2 example 1: John is a member of PERS Plan 2. He applies for retirement, effective the first month after his 62nd birthday. His AFC is $4000 per month. If he purchases sixty months of additional service credit, his monthly retirement allowance will increase by $292 per month, calculated as follows:


Additional service credit: 60 months 12 = 5 yearsEarly retirement factor: .7300000
Amount of increase = 2% x additional service credit years x AFC x early retirement factor
= 2% x 5 years x $4000 x .7300000
= $292

TRS Plan 3 example 2: Jane is a member of TRS Plan 3. She applies for retirement, effective the first month after her 62nd birthday. Her AFC is $4000 per month. If she purchases sixty months of additional service credit, her monthly retirement allowance will increase by $146 per month, calculated as follows:

Additional service credit: 60 months 12 = 5 yearsEarly retirement factor: .7300000
Amount of increase = 1% x additional service credit years x AFC x early retirement factor
= 1% x 5 years x $4000 x .7300000
= $146

LEOFF Plan 2 example 3: Jim is a member of LEOFF Plan 2. He applies for retirement, effective the first month after his 53rd birthday. His FAS is $4000 per month. If he purchases sixty months of additional service credit, his monthly retirement allowance will increase by $400 per month, calculated as follows:


Additional service credit: 60 months 12 = 5 years
Amount of increase = 2% x additional service credit years x FAS
= 2% x 5 years x $4000
= $400

(7) How is the cost of the additional purchased service credit calculated? The cost to purchase additional service credit is calculated by dividing the amount of the increase in subsection (6) of this section by the age-based annuity factor in WAC 415-02-340.

Example. In subsection (6) of this section, Example 1, it was determined that John's retirement allowance would increase by $292 per month. The cost to purchase the five years of additional service credit would be $43,558.68, calculated as follows:


Cost = Amount of increase age-based annuity factor
= $292 .0067036
= $43,558.68

(8) How and when do I pay for the additional service credit?

(a) Payment may be made with an eligible rollover, a direct rollover or a trustee-to-trustee transfer. You may also use after-tax dollars, such as those from a personal savings account; however, IRS regulations limit the amount of after-tax dollars you can use for this type of purchase.

(b) Payment must be made in full ninety days after the bill issue date.

(9) If I choose a benefit option with a survivor feature, will my survivor beneficiary's monthly allowance reflect the additional purchased service credit? Yes. Depending upon the rules for your retirement system and plan and the benefit option you choose at retirement, your survivor beneficiary's monthly allowance will be a percentage of the gross monthly retirement allowance you were receiving at the time of your death. If you choose a benefit option with a survivor feature and your survivor beneficiary dies before you, your monthly retirement allowance will increase to the amount it would have been had you not selected a survivor option.

(10) Will I receive a cost of living adjustment (COLA) on the portion of my allowance that is based on the additional purchased service credit?

(a) For all systems and plans except PERS Plan 1 and TRS Plan 1, your COLA will be based on your gross monthly retirement allowance, including the increase due to the purchased service credit.

(b) If you retired from PERS Plan 1 or TRS Plan 1 and you did not elect the COLA option, you will not receive a COLA on the additional purchased service credit amount.

(11) If I purchase additional service credit and then return to work, how will my retirement allowance be affected? If you return to work and your retirement allowance is suspended, the portion of your retirement allowance attributable to service credit purchased under this section will also be suspended. When your retirement allowance resumes, the portion attributable to service credit purchased under this section will also resume.

(12) If I retire and purchase less than sixty months of additional service credit, may I purchase more at a later time? If you retire and purchase less than sixty months of additional service credit, you may not purchase additional months of service credit from the same plan unless you return to membership and reretire from the same system and plan. You must meet the eligibility requirements provided in subsection (2) of this section at the time you reretire. You may not purchase more than a total of sixty months of service credit regardless of how many times you reretire from the same system and plan.

(13) May I purchase service credit from more than one retirement plan?

(a) If you are a dual member under chapter 415-113 WAC, Portability of public employment benefits, and combine service credit to retire from two retirement plans, you may purchase up to sixty months of additional service credit from each plan.

(b) If you retire from more than one plan, but are not a dual member under chapter 415-113 WAC, you may purchase up to sixty months of additional service credit from each plan in which you meet the eligibility requirements in subsection (2) of this section.

(14) Will the money I paid to purchase the additional service credit be distributed to my beneficiary or estate if I die?

(a) If you have a survivor beneficiary at the time of your death, your survivor beneficiary will receive a monthly allowance according to subsection (9) of this section.

(b) If you do not have a survivor beneficiary at the time of your death, and you die before the total of the retirement allowance paid equals the amount of your accumulated contributions at the time of retirement (including the money you paid for additional service credit):

(i) Plan 1 members: The balance will be distributed according to RCW 41.26.160 and 41.26.161 (LEOFF), 41.40.188 (PERS), 41.32.530 (TRS), or WAC 415-103-215 (WSPRS).

(ii) Plan 2 members and PSERS: The balance will be distributed according to RCW 41.26.460 (LEOFF), 41.40.660 (PERS), 41.35.220 (SERS), 41.37.170 (PSERS), 41.32.785 or 41.32.790 (TRS), or 43.43.271 (WSPRS).

(iii) Plan 3 members: The balance will be retained by the Plan 3 trust fund. Money paid for additional service credit is posted directly to the Plan 3 trust fund to cover the increased cost of defined benefits, and is not distributable.

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Washington State Code Reviser's Office