WSR 08-15-113

PROPOSED RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed July 18, 2008, 3:37 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 08-09-060.

Title of Rule and Other Identifying Information: WAC 415-111-230 Self-directed investment program.

Hearing Location(s): Department of Retirement Systems, 6835 Capitol Boulevard, Conference Room 115, Tumwater, WA, on August 26, 2008, at 1:00 p.m.

Date of Intended Adoption: August 27, 2008.

Submit Written Comments to: Sarah Monaly, Rules Coordinator, Department of Retirement Systems, P.O. Box 48380, Olympia, WA 98504-8380, e-mail rules@drs.wa.gov, fax (360) 753-3166, by 5:00 p.m. on August 26, 2008.

Assistance for Persons with Disabilities: Contact Sarah Monaly, rules coordinator, by August 19, 2008, 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: The purpose of this proposal is to update rules regarding changes to the default investment options for members of Plan 3 who elect to self-direct their investments.

Reasons Supporting Proposal: The state investment board selected a new fund as the default investment option for members of Plan 3 who elect to self-direct their investments. The department of retirement systems (DRS) needs to update its rules to reflect these changes.

Statutory Authority for Adoption: RCW 41.50.050(5).

Statute Being Implemented: Chapter 41.34 RCW.

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: Sarah Monaly, Sarah Monaly, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7291; Implementation and Enforcement: Michelle Hardesty, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7193.

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.

July 18, 2008

Sarah Monaly

Rules Coordinator

OTS-1782.1


AMENDATORY SECTION(Amending WSR 06-03-098, filed 1/17/06, effective 2/17/06)

WAC 415-111-230   Self-directed investment program allocation.   This section applies only to members who elect the self-directed investment program pursuant to WAC 415-111-210.

(1) What is an allocation? An allocation is a set of instructions identifying your choice of investment program funds and the percentage of your money you want to invest in each fund. The amount you allocate to each fund must be designated as a whole percentage, and the total must equal one-hundred percent.

Example: Martha has elected the self-directed investment program ((as her investment manager)) and is contributing $150 per month. Martha decides to invest in three different funds with the following amounts: $30 invested in fund #1, $45 invested in fund #2 and $75 invested in fund #3. To accomplish this she must establish the following allocation:

Allocation to fund #1 20%
Allocation to fund #2 30%
Allocation to fund #3 50%
Total Allocation 100%

(2) How do I establish an allocation? You must establish your allocation by contacting the department's designated recordkeeper. Once established, you may change your allocation according to the provisions in subsection (5) of this section.

(3) What happens if I do not establish an allocation? If you do not provide an allocation before the department's designated recordkeeper begins receiving your investment money, or if you provide an allocation but the sum of the allocated portions does not equal one-hundred percent, your investment money will be invested as follows:

(a) If the total of the percentages you have allocated is less than one-hundred percent, the department will determine the percentage that is unallocated, and invest the unallocated percentage in the default fund.

Example: Ralph designates the following allocation: 33% fund #1, 33% fund #2, and 33% fund #3. Since the total allocation equals 99%, the unallocated 1% will be invested in the default fund.
(b) If the total of the percentages you have allocated is greater than one-hundred percent, all of your investment money will be invested in the default fund.

Example: Chris designates the following allocations: 38% into fund #1, 40% into fund #2, 10% into fund #3, and 15% into fund #4. Since the total allocation equals 103%, all of Chris' investment money will be invested in the default fund.
(c) If you do not provide an allocation, your money will be invested as follows:

(i) If you previously participated in the self-directed investment program, your most recent allocation will be used. However, if your allocation includes a fund or funds that are no longer available, the portion of your investment money allocated to the unavailable fund(s) will be invested in the default fund.

(ii) If you do not meet the conditions in (c)(i) of this subsection, all of your investment money will be invested in the default fund.

Example: Lew is a new member and elects the self-directed investment program, but does not establish an allocation. All of Lew's investment money will be invested in the default fund.
Example: Linda becomes reemployed in an eligible position and elects to participate in the self-directed investment program again, but does not provide an allocation.
Linda previously participated in the self-directed investment program and had the following allocation:

10% in Fund #1
10% in Fund #2
30% in Fund #3
25% in Fund #4
25% in Fund #5

Because she did not establish a new allocation, her previous allocation will be used. However, fund #2 is no longer available, so that portion of her money will be invested in the default fund. A new allocation will be established for Linda as follows:

10% in Fund #1
10% in Default Fund
30% in Fund #3
25% in Fund #4
25% in Fund #5

(4) What is the default fund? The default fund for the self-directed investment program is the ((Money Market Fund)) Target Date Fund that assumes your current age is 65.

(5) May I change my allocation? Once you have established an allocation or been directed into the default fund, you may change your allocation by contacting the department's designated recordkeeper. However, changes must be consistent with any restrictions on trading imposed by the funds involved, and, if necessary to protect the performance results of the investment program funds, the department may:

(a) Limit the number of times you change allocations;

(b) Limit the frequency of the changes;

(c) Limit the manner of making changes; or

(d) Impose other restrictions.

[Statutory Authority: RCW 41.50.050(5) and chapter 41.34 RCW. 06-03-098, 415-111-230, filed 1/17/06, effective 2/17/06. Statutory Authority: Chapters 41.32, 41.34, 41.35, 41.50 RCW. 01-01-059, 415-111-230, filed 12/12/00, effective 1/12/01.]

Washington State Code Reviser's Office