WSR 10-14-112

PERMANENT RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed July 7, 2010, 8:36 a.m. , effective August 7, 2010 ]


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

Purpose: These rules were amended and created to implement ESHB 2680, passed by the 2006 legislature, and HB 3024, passed by the 2008 legislature. These bills set criteria for teachers' retirement system (TRS) plans 2 and 3 members to purchase TRS service credit for teaching in another state or for the federal government.

Citation of Existing Rules Affected by this Order: Amending WAC 415-112-290 and 415-112-295.

Statutory Authority for Adoption: RCW 41.50.050(5).

Other Authority: RCW 41.32.065 and 41.32.300.

Adopted under notice filed as WSR 10-10-071 on April 30, 2010.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 1, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 2, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 1, Amended 2, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 1, Amended 2, Repealed 0.

Date Adopted: July 6, 2010.

Steve Hill

Director

OTS-3215.1


AMENDATORY SECTION(Amending WSR 05-12-042, filed 5/25/05, effective 6/25/05)

WAC 415-112-290   May I purchase Plan 1 service credit for out-of-state teaching?   (1) ((Do I qualify to purchase service credit for out-of-state teaching?)) As a Plan 1 member, you may establish service credit for teaching out-of-state, which includes teaching out of the country, only if:

(a) ((Plan 1. If you are a Plan 1 member, you may establish service credit for teaching out-of-state, which includes teaching out of the country, only if:

(i))) You were on an official leave of absence granted by your employer when you provided the service; and

(((ii))) (b) You returned to public school service in Washington state.

(((b) Plans 2 and 3. If you are a Plan 2 or 3 member, you may not purchase service credit for out-of-state teaching.))

(2) ((As a Plan 1 member, how do I apply to purchase service credit for out-of-state teaching?)) To establish such service credit, you must submit the following to the department within the time limits set in RCW 41.32.310:

(a) Proof of your out-of-state service;

(b) Proof of your official leave of absence; and

(c) Payment of contributions.

(3) ((What is the maximum amount of service credit I may purchase? If you meet the requirements in this section,)) You may establish a maximum of four years of service credit for teaching out-of-state. Except that, ((at the time of retirement,)) you may not ((have)) qualify for retirement by counting more years of service credit for out-of-state teaching than for Washington state service, unless you established the out-of-state service credit prior to July 2, 1947.

[Statutory Authority: RCW 41.50.050(5) and 41.32.300. 05-12-042, 415-112-290, filed 5/25/05, effective 6/25/05. Statutory Authority: RCW 41.50.050. 99-14-008, 415-112-290, filed 6/24/99, effective 7/25/99. Statutory Authority: RCW 41.50.050(6) and 41.50.090. 78-03-023 (Order IV), 415-112-290, filed 2/15/78. Formerly WAC 462-20-055.]

OTS-3216.1


NEW SECTION
WAC 415-112-292   May I purchase TRS Plan 2 or Plan 3 service credit for public education experience gained by teaching out-of-state or for the federal government?   If you earned service credit for teaching out-of-state or for the federal government, you may be eligible to purchase that public education experience as TRS service credit. The public education claimed must have been covered by a retirement or pension plan and must have been as a teacher, as defined by that retirement or pension plan.

(1) Do I qualify to purchase TRS service credit for public education experience outside of the state of Washington? You are eligible to purchase service credit under this section if you meet all the following requirements at the time of purchase:

(a) You are employed in a TRS Plan 2 or Plan 3 eligible position;

(b) You have at least two years of TRS service credit;

(c) You earned the education experience service credit by teaching in a public school in another state within the United States or with the United States federal government;

(d) The service was covered by a state, political subdivision of a state, or federal retirement plan;

(e) You are not receiving a benefit from the other system; and

(f) You are not eligible for an unreduced benefit from the other system.

(2) Do I qualify to purchase public education experience service credit if I am a substitute teacher? You may purchase service credit under this section if your employer is currently reporting you as an active substitute teacher and you meet the requirements in subsection (1)(b) through (f) of this section.

(3) If I purchase TRS service credit for public education experience, how may it be used? The service credit you purchase under this section will be treated the same as service credit you earn in TRS. It will be used in the calculation of your retirement allowance, to qualify for retirement or early retirement, and to meet the Plan 3 ten-year vesting requirement.

(4) What is the cost of the service credit? You must pay the actuarial value of the resulting increase in your retirement allowance. The following formula is used to calculate the cost:


Average earnings1 x Years of service credit being purchased x Factor 1 = Cost

EXAMPLE: Will is an active TRS Plan 2 member, age sixty-one, with seventeen years of service credit. If he was eligible to retire, his annual AFC would be $50,000. He would like to purchase three years and six months of service credit for his public education experience. The cost is calculated as follows:

$50,000 x 3.5 x .2151 = $37,642.50

The cost for Will to purchase his service credit is $37,642.50. Factor 1 from the actuarial table in WAC 415-02-370(3) is .2151. This is determined by finding the difference between Will's age at the time of purchase (sixty-one) and age sixty-five; the difference is forty-eight months (four years). From the table, Factor 1 for forty-eight months is .2151.

(5) How much TRS service credit may I purchase for out-of-state or federal public education experience? If you meet the requirements in this section, you may purchase up to seven years (eighty-four months) of TRS service credit. You may purchase service credit in one-month increments but may not purchase a partial month of service credit.

(6) May I purchase some service credit now and some at a later date? No, you may not purchase some service credit now and some at a later date. You have one opportunity to purchase service credit under this section. You may purchase service credit from more than one retirement system provided you purchase it at the same time.

(7) How do I purchase the service credit? To purchase TRS Plan 2 or Plan 3 service credit for out-of-state or federal public education experience, you must do the following:

(a) You must complete an application provided by the department.

(i) You must complete, sign, and forward the application to your former retirement system(s).

(ii) Your former retirement system(s) must verify your service credit according to the instructions on the application.

(iii) If you are purchasing service credit from more than one retirement system, each retirement system must verify your service on a separate application.

(iv) Upon receipt of your properly completed application, the department will bill you for the service credit using the formula in subsection (4) of this section; the department will set a due date for the payment.

(b) You must make payment in full by the due date. If your payment is not received by the due date, your bill will become null and void. You may request a new bill from the department at a later date and it will reflect factors in effect at that time.

(i) You may make direct payment with either a personal or cashier's check. It may be possible to transfer funds from another eligible retirement account to pay your bill. However, DRS cannot accept funds in excess of the cost to make your purchase. You are advised to check with the administrator of your account to see if you can transfer those dollars.

(ii) Your employer may, at its option, pay some or all of the cost of the service credit.

(iii) If you are a Plan 2 member, your payment will be placed in your member account.

(iv) If you are a Plan 3 member, fifty percent of your payment will be placed in your defined contribution account and fifty percent will be placed in the trust fund from which your retirement allowance will be paid.

(8) Do I need to give up my right to a benefit from my previous retirement system for the service credit I purchase in TRS? No, you do not need to give up your right to a benefit from your previous retirement system for the service credit you purchase in TRS. At the time you purchase TRS service credit, you only need to prove that you are not currently receiving a benefit from your previous system and that you are not currently eligible for an unreduced benefit. Your previous retirement system will be required to verify this information on your application.

(9) May I purchase public education experience service credit to add to my TRS service credit and also use out-of-state teaching service credit to qualify for early retirement? Yes, you may purchase public education experience to add to your TRS service credit and/or use out-of-state teaching to qualify for early retirement. However, you may not use the same out-of-state service for both programs. Please see WAC 415-112-295. For example, if you have seven years of eligible out-of-state service credit, you may purchase five years to increase your TRS service credit and use the remaining two years to qualify for early retirement.


1Up to sixty months of service credit will be used in determining your average earnings; for this formula, average earnings is the amount your average final compensation (AFC) would be if you retired on the date of the service credit purchase.

[]

OTS-3217.1


AMENDATORY SECTION(Amending WSR 06-18-006, filed 8/24/06, effective 9/24/06)

WAC 415-112-295   May I use (("unpurchased")) out-of-state teaching service credit to determine eligibility for retirement?   See RCW 41.32.065. (1) If you earned service credit in an out-of-state retirement system that covers teachers in public schools and do not purchase that service credit, you may use it ((solely)) to qualify for retirement.

(2) If you use (("unpurchased")) out-of-state service credit to qualify for retirement, your retirement benefit:

(a) Will be based solely on your years of service credit in the Washington teachers' retirement system (TRS); and

(b) Will be actuarially reduced according to the age you would have been eligible to retire if you had not counted your out-of-state service credit. ((See RCW 41.32.065.

(3) You may also be eligible to purchase a limited amount of service credit for out-of-state teaching under this chapter.))


Example: Jane is ((a member of TRS Plan 1. She has five years of out-of-state service credit as a public school teacher and twenty-five years of service credit in TRS Plan 1. She is eligible to retire from TRS Plan 1 with thirty years of service credit; however, her retirement benefit will be based solely on her twenty-five years of TRS service credit.)) fifty-eight years old with twenty-four years of TRS Plan 1 service credit. She has one year of service credit in an out-of-state retirement system that covers public school teachers. A TRS Plan 1 member is eligible to retire at age fifty-five with twenty-five years of service credit. Jane may add her twenty-four years of TRS service credit with her one year of out-of-state service credit to qualify for retirement under this provision.

Jane's retirement benefit will be based solely on her twenty-four years of TRS Plan 1 service credit. If she retires at age fifty-eight, her benefit will be reduced by an early retirement factor. The early retirement factor, .8270, is based on the difference between her actual retirement age (age fifty-eight) and the earliest age she could have received an unreduced benefit based on her twenty-four years of TRS service credit (age sixty). Jane's average final compensation (AFC) is $5,500 and her benefit will be calculated as follows:

2% x years of service credit x AFC x factor
2% x 24 x $5,500 x .8270 = $2,183.28

[Statutory Authority: RCW 41.50.050(5), 41.32.065. 06-18-006, 415-112-295, filed 8/24/06, effective 9/24/06.]

Washington State Code Reviser's Office