Preproposal statement of inquiry was filed as WSR 10-07-152.
Title of Rule and Other Identifying Information: WAC 415-02-340 Monthly benefit per $1.00 of accumulation for defined benefit plans and 415-02-350 What are cost-of-living adjustments (COLA) and how are they calculated?
Hearing Location(s): Department of Retirement Systems
6835 Capitol Boulevard, Conference Room 115, Tumwater, WA, on July 29, 2010, at 1:30 p.m.
Date of Intended Adoption: July 29, 2010.
Submit Written Comments to: Ken Goolsby, Rules Coordinator, Department of Retirement Systems, P.O. Box 48380, Olympia, WA 98504-8380, e-mail email@example.com, fax (360) 753-5397, by 5:00 p.m. on July 29, 2010.
Assistance for Persons with Disabilities: Contact Ken Goolsby, rules coordinator, by May 20, 2010, 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 the department's administrative rules with new administrative factors provided by the state actuary.
Reasons Supporting Proposal: The office of the state actuary (OSA) has provided the department with new actuarial projections. The department must amend its rules to update administrative factors for the law enforcement officers' and firefighters' retirement system (LEOFF), public employees' retirement system (PERS), public safety employees' retirement system (PSERS), school employees' retirement system (SERS), teachers' retirement system (TRS), Washington state patrol retirement system (WSPRS), and judicial retirement system (JRS).
Statutory Authority for Adoption: RCW 41.50.050(5).
Statute Being Implemented: WAC 415-02-340 is chapter 41.45 RCW; and 415-02-350 is RCW 2.10.170, 41.26.240, 41.26.440, 41.32.489, 41.32.530 (1)(d), 41.32.770, 41.32.845, 41.35.210, 41.37.160, 41.40.188 (1)(c), 41.40.197, 41.40.640, 41.40.840, 43.43.260.
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: Ken Goolsby, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7291; Implementation and Enforcement: Cathy Cale, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7305.
No small business economic impact statement has been prepared under chapter 19.85 RCW. These rules have no affect 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.
June 23, 2010
(a) Determine what a future lifetime monthly benefit is worth in present-day dollars;
(b) Determine the equivalent value of a lump sum when
compared with monthly payments; ((
(c) Determine the cost of purchasing additional service credit as described in WAC 415-02-177(7); and
(d) For TRS Plan 1 only: ((
Reduce)) Determine the
reduction in the monthly retirement (( allowance)) benefit if
some or all of the (( funds)) accumulated contributions in a
member's individual account are (( taken in a lump sum
payment)) withdrawn at retirement pursuant to RCW 41.32.498.
(2) What type of information is in this table? The
information in this table ((
reflects)) is based on the
expected duration of lifetime payments for recipients over a
range of ages. These values differ by system and plan, and
all reflect an assumed rate of return of 8.0%.(( 3)) The younger
a person is at retirement, the longer the anticipated lifetime
of payments would be, and the greater the sum required to
provide for these payments. The amount of monthly lifetime
benefit that a present-day dollar buys increases as the
remaining life expectancy of the recipient decreases.
Celina is a 65-year-old PERS Plan 2 member who is
eligible to receive $45.00 per month. She wants to know how
much money she would receive if she accepted a lump sum
payment instead. Celina looks at the row in the table for age
65 in the PERS Plan 2 column and learns that ((
$0.0069798 per month for life (( is equivalent to)) has a
present day cash value of one dollar (( in cash)) ($1.00) for
this system, plan, and age class. Celina divides $45.00 by
(( 0.0072458)) 0.0069798 and learns that her lump sum payment
would be (( $6,210.49.)) $6,447.18.
Fred is a 58-year-old TRS Plan 1 member. The balance in
Fred's account is $124,934.00. Upon retirement, Fred chooses
to withdraw the $124,934.00 (as only members of TRS Plan 1 can
do and still receive a monthly ((
allowance)) benefit). From
the row in the table for age 58 in the TRS Plan 1 column, Fred
learns that (( $0.0077573)) $0.0077298 per month for life (( is
the equivalent to)) has a present day cash value of one dollar
(( in cash)) ($1.00) for this system, plan, and age class. Fred multiplies $124,934.00 by (( 0.0077573)) 0.0077298, and
learns that his monthly retirement (( allowance)) benefit will
be reduced by (( $969.15)) $965.71 per month if he withdraws
his account balance.
(4))) (3) Table(( 1)) - Monthly benefit per $1.00 of
accumulation for defined benefit plans. The rates contained
in this table are effective:
(a) January 1, 2010, for LEOFF Plan 2.
(b) September 1, 2010, for LEOFF Plan 1, PSERS Plan 2, PERS Plans 1, 2, and 3, SERS Plans 2 and 3, TRS Plans 1, 2 and 3, and WSPRS Plans 1 and 2.
|Age||LEOFF 1||LEOFF 2||PERS 1||PERS 2/3||PSERS||SERS 2/3||TRS 1||TRS 2/3||WSPRS
1This table is based on the 1995-2000 actuarial experience
study monthly benefit per $1.00 of accumulation defined
benefit (DB) single life pension.))
[Statutory Authority: RCW 41.50.050(5), chapter 41.45 RCW. 06-18-009, § 415-02-340, filed 8/24/06, effective 9/24/06; 02-18-048, § 415-02-340, filed 8/28/02, effective 9/1/02.]
Reviser's note: The typographical errors in the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.
AMENDATORY SECTION(Amending WSR 08-20-068, filed 9/25/08, effective 10/26/08)
WAC 415-02-350 What are cost-of-living adjustments (COLA) and how are they calculated? (1) What is a cost-of-living adjustment (COLA)? The value of a retiree's, beneficiary's, or ex-spouse's monthly ((
may change in the years after retirement because of inflation
or other factors. A COLA automatically adjusts benefits based
on the cost of living changes.
(2) What retirement plans include COLAs? With one exception, all retirement plans administered by the department provide one or more of the types of COLAs listed in subsection (3) of this section. The judges retirement fund (chapter 2.12 RCW) does not provide a COLA.
|RETIREMENT SYSTEM||PLAN||COLA TYPE||STATUTE|
|LEOFF||Plan 1||Base||RCW 41.26.240|
|LEOFF||Plan 2||Base||RCW 41.26.440|
|PERS||Plan 1||Uniform||RCW 41.40.197|
|PERS||Plan 1||Optional Auto||RCW 41.40.188 (1)(c)|
|PERS||Plan 2||Base||RCW 41.40.640|
|PERS||Plan 3||Base||RCW 41.40.840|
|SERS||Plans 2 and 3||Base||RCW 41.35.210|
|TRS||Plan 1||Uniform||RCW 41.32.489|
|TRS||Plan 1||Optional Auto||RCW 41.32.530 (1)(d)|
|TRS||Plan 2||Base||RCW 41.32.770|
|TRS||Plan 3||Base||RCW 41.32.845|
|WSPRS||Plans 1 and 2||Base||RCW 43.43.260|
(a) Optional Auto COLA
The optional auto COLA((
, if offered under your plan,))
is an option you may select at retirement. If you choose this
option, your monthly retirement (( allowance)) benefit will be
actuarially reduced at retirement, and you will receive an
automatic adjustment in your monthly retirement (( allowance))
benefit each year for the rest of your life. The optional
auto COLA has no age requirement and is limited to a maximum
of three percent of your monthly (( allowance)) benefit.
(b) Base COLA
The base COLA is applied in July (April for LEOFF Plan 1)
of each year and adjusts the benefit based on the change in
the Consumer Price Index for the Seattle-Tacoma-Bremerton,
Washington area for all plans except the Judicial Retirement
System which is based on the U.S. City Average. Base COLAs
are limited to a maximum of three percent of the monthly
allowance)) benefit for all affected plans except LEOFF Plan
1. During a calendar year, the base COLA is payable to:
(i) Retirees who have been retired for at least one year by July 1st of each year (April 1st for LEOFF Plan 1); and
(ii) Beneficiaries or eligible ex-spouses who receive benefit payments from an account that, by July 1st, has paid a monthly benefit for at least one year (April 1st for LEOFF Plan 1).
(c) Uniform COLA
The uniform COLA is an annual adjustment to the benefit, based on years of service. The annual adjustment for the uniform COLA is independent from any other COLA. During a calendar year, it is payable to:
(i) Retirees who, by July 1st, have received a retirement benefit for at least one year and who, by December 31st, will have reached age sixty-six or older;
(ii) Beneficiaries and eligible ex-spouses who receive benefit payments from an account that, by July 1st, has paid a monthly benefit for at least one year and who, by December 31st, will have reached age sixty-six or older; and
(iii) Retirees, beneficiaries, or eligible ex-spouses of any age whose retirement benefit is calculated under the minimum formula.
(4) Who is responsible for determining the amount of the COLA? The office of the state actuary (OSA) bases the percentages of the COLAs on the Consumer Price Index. The Index is based on wages earned by urban wage earners and clerical workers in the Seattle-Tacoma-Bremerton, Washington area. OSA provides this information to the department annually.
[Statutory Authority: RCW 41.50.050(5). 08-20-068, § 415-02-350, filed 9/25/08, effective 10/26/08; 08-01-079, § 415-02-350, filed 12/17/07, effective 1/17/08. Statutory Authority: RCW 41.50.050(5), 2.10.170, 41.26.240, 41.26.440, 41.37.160, 41.40.197, 41.40.188 (1)(c), 41.40.640, 41.40.840, 41.35.210, 41.32.489, 41.32.530 (1)(d), 41.32.770, 41.32.845, 43.43.260. 06-18-009, § 415-02-350, filed 8/24/06, effective 9/24/06. Statutory Authority: RCW 41.50.050(5) and chapter 41.45 RCW. 03-06-044, § 415-02-350, filed 2/27/03, effective 4/1/03.]