WSR 06-18-008

PERMANENT RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed August 24, 2006, 10:31 a.m. , effective September 24, 2006 ]


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

Purpose: To clarify portability provisions for retroactive retirement.

Citation of Existing Rules Affected by this Order: Amending WAC 415-113-080.

Statutory Authority for Adoption: RCW 41.50.050(5).

Other Authority: Chapter 41.54 RCW.

Adopted under notice filed as WSR 06-15-019 on July 7, 2006.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 1, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 1, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 1, Repealed 0.

Date Adopted: August 23, 2006.

S. J. Matheson

Director

OTS-8996.2


AMENDATORY SECTION(Amending WSR 02-18-046, filed 8/28/02, effective 9/30/02)

WAC 415-113-080   ((Can I retire retroactively?)) May I receive a retroactive payment from a prior system?   ((You may retire retroactively. If you retire from all dual member systems, your retirement allowance from a prior system will be retroactive back to your accrual date under the prior system.

(1) Accrual date determined. The department will determine your accrual date in each system by combining your total service and applying the statute or rule designating accrual dates in the particular system. Your accrual date for purposes of this section is the date that your combined service first makes you eligible for an unreduced benefit.


Example 11: A person is a fifty-five year old member participant in PERS Plan 2 and a nonmember participant in LEOFF Plan 2. The person decides not to retire from LEOFF Plan 2 until he is eligible to retire with full benefits from PERS Plan 2 at age sixty-five. Upon retirement, he will be entitled to a LEOFF Plan 2 retirement allowance effective on his accrual date under LEOFF Plan 2 (i.e., age fifty-five).
Example 12: A person with twenty years of prior service in TRS Plan 1 becomes a member participant in PERS Plan 2 on her fifty-fourth birthday. By combining her service in both systems under chapter 41.54 RCW, she will become eligible to retire under TRS Plan 1 at age fifty-nine with twenty-five total years of service. Assume she retires from both systems at age sixty-five. Her TRS Plan 1 retirement allowance will be effective back to the date it accrued under TRS Plan 1 (i.e., the first of month following the month she turns fifty-nine).

(2) You cannot use salary earned after your accrual date in calculating your retroactive benefit. If you retire retroactively from a prior system, the department will not use any of the salary you earned after your accrual date to compute your benefit from the prior system.


Example 13: A PERS Plan 1 member receives a salary of $3,000 per month. She has 30 years of service credit at age 50 and is eligible to retire with an unreduced (full) benefit.

Subsequently, she is offered a TRS Plan 3 covered position at a monthly salary of $3,500. If she accepts the TRS Plan 3 position, will she be able to use its higher monthly salary of $3,500 as base salary to calculate her PERS Plan 1 retirement benefit when she does retire? No, she will not. The TRS Plan 3 salary would have been earned after the PERS Plan 1 accrual date: The date that she first became eligible to retire with an unreduced benefit under PERS Plan 1 rules.

(3) Defined terms used. Definitions for the following terms used in this section may be found in the sections listed.

(a) "Dual member system" - WAC 415-113-030.

(b) "Member participant" - WAC 415-113-030.

(c) "Nonmember participant" - WAC 415-113-030.)) (1) Eligibility. You are eligible to receive a retroactive payment from a prior system if:

(a) You retire with a multiple system benefit according to WAC 415-113-055; and

(b) You were eligible to retire from a prior system with an unreduced benefit before the date of your multiple system retirement.

(2) Accrual date. At the time of your retirement from all dual member systems, you must choose the date on which the benefit from your prior system will accrue. This may be any date on or after the date you first became eligible for an unreduced retirement allowance from that system. The date you choose will affect your monthly retirement allowance from that system and your retroactive payment.

(3) Monthly retirement allowance from prior system. Your monthly retirement allowance from your prior system will be calculated under the rules of that system.

(a) Service credit. Your service credit is the actual credit earned in the prior system.

(b) Average compensation. Your average compensation is calculated under the rules in WAC 415-113-030(2) and 415-113-065. If you substitute base salary from another system, the base salary must have been earned prior to your chosen accrual date.

(4) Retroactive payment. Your retroactive payment will be computed by multiplying:

(a) The amount of your monthly retirement allowance in subsection (3) of this section; by

(b) The number of months from your accrual date to the month your first monthly retirement allowance is paid.

Example. Tom became a member of LEOFF 2 on January 1, 1981, and remained a member through December 31, 2000. He earned 20 years of service credit. Tom reached age 48 on December 31, 2000. His highest years of compensation in LEOFF 2 were as follows:

1996 -- $49,200/year
1997 -- $50,400/year
1998 -- $51,600/year
1999 -- $52,800/year
2000 -- $54,000/year

Tom became a member of PERS 2 on January 1, 2001. He separated from service on December 31, 2014. He earned 14 years of service credit. On December 31, 2005, Tom reached age 53 and met the eligibility requirements for an unreduced retirement from his prior system (LEOFF 2). During the period of his PERS employment, Tom's compensation was as follows:

2001 -- $55,200/year 2006 -- $84,000/year 2011 -- $90,000/year
2002 -- $56,400/year 2007 -- $85,200/year 2012 -- $91,200/year
2003 -- $57,600/year 2008 -- $86,400/year 2013 -- $92,400/year
2004 -- $81,600/year 2009 -- $87,600/year 2014 -- $93,600/year
2005 -- $82,800/year 2010 -- $88,800/year

Upon separation on December 31, 2014, Tom chooses to retire from both LEOFF 2 and PERS 2 with a multiple system benefit. Because Tom met the eligibility requirements for an unreduced benefit from LEOFF 2 on December 31, 2005, he may choose an accrual date on or after January 1, 2006. His benefit will vary depending on the accrual date chosen. For example, an accrual date of January 1, 2006, yields a different result from an accrual date of January 1, 2009, as shown in Option 1 and Option 2 below. Tom may also retire from both systems with a January 1, 2015, effective date, as shown in Option 3.

Option 1: Accrual date of January 1, 2006. Tom chooses January 1, 2006, as the accrual date for his LEOFF 2 benefit.

Monthly allowance: The department will compare Tom's average compensation in LEOFF 2 with his highest sixty consecutive months of base salary in PERS 2, and will use whichever is greater in the calculation of his LEOFF 2 monthly allowance. Note: Tom's PERS 2 base salary must have been earned prior to January 1, 2006.

Tom's average compensation, based on his highest sixty consecutive months of service in LEOFF 2, is:

$49,200 + $50,400 + $51,600 + $52,800 + $54,000 = $4,300/month

60


Tom's base salary, based on his highest sixty consecutive months of service in PERS 2, is:

$55,200 + $56,400 + $57,600 + $81,600 + $82,800 = $5,560/month

60


The highest average compensation, i.e., $5,560/month, will be used in the calculation of Tom's LEOFF 2 monthly allowance.


LEOFF 2 Benefit Calculation PERS 2 Benefit Calculation1
Service credit 20 yrs 14 yrs
Average compensation $5,560/month $7,600/month
2% monthly benefit 2% x 20 x $5,560 = $2,224/month2 2% x 14 x $7,600 = $2,128/month

Retroactive payment. Tom will receive a retroactive payment representing monthly retirement payments from January 1, 2006 (accrual date), through December 31, 2014, including applicable COLAs. This is nine years or one hundred eight monthly payments. His retroactive payment will be $240,192, calculated as follows:

108 x $2,224 = $240,192
(This assumes no COLAs were given during the nine-year period. If COLAs were given, the retroactive payment would be greater.)


Total multiple system benefit (LEOFF 2 and PERS 2): Tom will receive a retroactive payment of $240,192 from LEOFF 2. He will receive a total monthly allowance of $4,352 ($2,224 from LEOFF 2 and $2,128 from PERS 2), beginning January 1, 2015.

Option 2: Accrual date of January 1, 2009. Tom chooses January 1, 2009, as the accrual date for his LEOFF 2 benefit.

Monthly allowance: The department will compare Tom's average compensation in LEOFF 2 with his highest sixty consecutive months of base salary in PERS 2, and will use whichever is greater in the calculation of his LEOFF 2 monthly allowance. Note: Tom's PERS 2 base salary must have been earned prior to January 1, 2009.

Tom's average compensation, based on his highest sixty consecutive months of service in LEOFF 2, is:

$49,200 + $50,400 + $51,600 + $52,800 + $54,000 = $4,300/month

60


Tom's base salary, based on his highest sixty consecutive months of service in PERS 2, is:

$81,600 + $82,800 + $84,000 + $85,200 + $86,400 = $7,000/month

60


The highest average compensation, i.e., $7,000/month, will be used in the calculation of Tom's LEOFF 2 monthly allowance.


LEOFF 2 Benefit Calculation PERS 2 Benefit Calculation1
Service credit 20 yrs 14 yrs
Average compensation $7,000/month $7,600/month
2% monthly benefit 2% x 20 x $7,000 =

$2,800/month

2% x 14 x $7,600 =

$2,128/month


Retroactive payment. Tom will receive a retroactive payment representing monthly retirement payments from January 1, 2009 (accrual date), through December 31, 2014, including applicable COLAs. This is six years or seventy-two monthly payments. His retroactive payment will be $201,600, calculated as follows:

72 x $2,800 = $201,600
(This assumes no COLAs were given during the six-year period. If COLAs were given, the retroactive payment would be greater.)


Total multiple system benefit (LEOFF 2 and PERS 2): Tom will receive a retroactive payment of $201,600 from LEOFF 2. He will receive a total monthly allowance of $4,928 ($2,800 from LEOFF 2 and $2,128 from PERS 2), beginning January 1, 2015.

Option 3: Accrual date of January 1, 2015 (no retroactive payment). Tom is not required to choose a retroactive payment from his prior system. He may choose a multiple system benefit of $5,168/month calculated as follows:

Monthly allowance: The department will compare Tom's average compensation in LEOFF 2 with his highest sixty consecutive months of base salary in PERS 2, and will use whichever is greater in the calculation of his LEOFF 2 monthly allowance.

Tom's average compensation, based on his highest sixty consecutive months of service in LEOFF 2, is:

$49,200 + $50,400 + $51,600 + $52,800 + $54,000 = $4,300/month

60


Tom's base salary, based on his highest sixty consecutive months of service in PERS 2, is:

$88,800 + $90,000 + $91,200 + $92,400 + $93,600 = $7,600/month

60


The highest average compensation, i.e., $7,600/month, will be used in the calculation of Tom's LEOFF 2 monthly allowance.


LEOFF 2 PERS 2
Service credit 20 yrs 14 yrs
Average compensation $7,600/month $7,600/month1
2% monthly benefit 2% x 20 x $7,600 =

$3,040/month

2% x 14 x $7,600 =

$2,128/month


Total multiple system benefit (LEOFF 2 and PERS 2): Tom will not receive a retroactive payment. He will receive a total monthly allowance of $5,168 ($3,040 from LEOFF 2 and $2,128 from PERS 2), beginning January 1, 2015.


1Tom's PERS 2 allowance will be based on sixty consecutive months of PERS service, which yields a greater AFC than sixty consecutive months of LEOFF 2 base salary.

$88,800 + $90,000 + $91,200 + $92,400 + $93,600 = $7,600/month

60


His PERS 2 allowance is NOT affected by his retroactive payment from LEOFF or by the accrual date he chooses.
2In certain cases, an increased benefit may be available from LEOFF Plan 2 (WAC 415-113-084).

[Statutory Authority: RCW 41.50.050(5) and chapter 41.54 RCW. 02-18-046, 415-113-080, filed 8/28/02, effective 9/30/02. Statutory Authority: RCW 41.50.050. 99-22-043, 415-113-080, filed 10/29/99, effective 11/29/99; 95-03-001, 415-113-080, filed 1/4/95, effective 2/4/95.]

Washington State Code Reviser's Office