WSR 11-15-039

PROPOSED RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed July 13, 2011, 10:51 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 11-11-033.

Title of Rule and Other Identifying Information: WAC 415-111-210 Investment program election and 415-111-230 Self-directed investment program allocation.

Hearing Location(s): Department of Retirement Systems, 6835 Capitol Boulevard, Conference Room 115, Tumwater, WA, on August 23, 2011, at 2:00 p.m.

Date of Intended Adoption: August 26, 2011.

Submit Written Comments to: Ken Goolsby, Rules Coordinator, Department of Retirement Systems, P.O. Box 48380, Olympia, WA 98504-8380, e-mail rules@drs.wa.gov, fax (360) 753-5397, by 5:00 p.m. on August 23, 2011.

Assistance for Persons with Disabilities: Contact Ken Goolsby, rules coordinator, by August 12, 2011, 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 Washington state legislature has enacted legislation which changes the default investment option for new members of the defined contribution portion of the Plan 3 retirement systems.

Reasons Supporting Proposal: The amended rules ensure compliance with HB 1625 from the 2011 legislative session, signed into law on April 15, 2011.

Statutory Authority for Adoption: Chapters 41.32, 41.34, 41.35, 41.50 RCW.

Statute Being Implemented: RCW 41.34.130, 41.34.060, and 41.34.140.

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: Shawn Merchant, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7303; and Enforcement: Jennifer Dahl, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7219.

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 13, 2011

Ken Goolsby

Rules Coordinator

OTS-4158.1


AMENDATORY SECTION(Amending WSR 01-01-059, filed 12/12/00, effective 1/12/01)

WAC 415-111-210   Investment program election.   (1) You must choose between two investment programs:

(a) The total allocation portfolio, managed by the Washington state investment board((, and a)); and

(b) The self-directed investment program. You may contribute to only one of these programs at a time. However, you may maintain accounts in both investment programs and transfer money between investment programs.

((Pursuant to)) Under WAC 415-111-110, you bear the responsibility for completing the correct form for making an investment program election and submitting it to your employer as directed on the form.

(((1))) (2) Where do I get the form to make my election? Your employer must provide the appropriate form to elect an investment program if you are enrolling into Plan 3, transferring from Plan 2 to Plan 3, or changing your investment program.

(((2))) (3) When do I have to choose an investment program? If you are a new member or are reenrolling, you must select one of the investment programs (the total allocation portfolio or the self-directed investment program) within ninety calendar days from your date of hire in an eligible position. However, if you are transferring from Plan 2 to Plan 3, you must select an investment program when you transfer. The ninety-day period does not apply to a member transferring from Plan 2 to Plan 3.

If ((it is determined)) we discover and determine you should be reported into Plan 3 membership retroactively, the ninety-day period starts from the date ((it is discovered, as determined by the department,)) you are notified that you should have been reported.

(((3))) (4) What happens if I do not make an investment program election? You will be assigned to the default investment program described in subsection (((4))) (5) of this section, if:

(a) You are a new ((employee)) member or changing your employer and do not make an investment program election within the ninety-day election period described in subsection (((2))) (3) of this section; or

(b) You are transferring from Plan 2 to Plan 3 and do not make an investment program election at the time of transfer.

(((4))) (5) What is the default investment program? The default investment program is the ((total allocation portfolio of the Washington state investment board)) self-directed investment program. See WAC 415-111-230.

(((5))) (6) Can I change my investment program? Once you have made an initial investment election or been directed into the default program, you may change your investment program at any time by submitting the appropriate form to your employer.

[Statutory Authority: Chapters 41.32, 41.34, 41.35, 41.50 RCW. 01-01-059, 415-111-210, filed 12/12/00, effective 1/12/01.]

OTS-4159.1


AMENDATORY SECTION(Amending WSR 08-18-058, filed 9/2/08, effective 10/3/08)

WAC 415-111-230   Self-directed investment program allocation.   This section applies ((only)) to members who ((elect)) invest in 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 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)) contributions, 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 if you previously participated in the self-directed investment program. 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,))


Example: After participating in the self-directed program, Linda terminates employment. Subsequently, she is reemployed and elects to participate in the self-directed investment program again. She does not provide an allocation. Linda's previous allocation was:
Allocation to fund #1 10%
Allocation to fund #2 40%
Allocation to fund #3 50%
Total Allocation 100%

Fund #2 is no longer available. Linda's future contributions will be allocated as follows:
Allocation to fund #1 10%
Allocation to Default Fund 40%
Allocation to fund #3 50%
Total Allocation 100%

(b) All of your ((investment)) money will be invested in the default fund if you do not meet the conditions in (a) of this subsection.


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 ((Target Date)) Retirement Strategy Fund that assumes ((your current age is)) you will retire at age 65.


Example: Samantha was born in 1983. She will turn age 65 in 2048. The Retirement Strategy Fund closest to her age-65 retirement target date is the 2050 Retirement Strategy Fund. If Samantha does not establish an allocation per subsection (3) of this section, her money will be invested in the 2050 Retirement Strategy Fund.

(5) ((May)) Can 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. 08-18-058, 415-111-230, filed 9/2/08, effective 10/3/08; 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