WSR 11-18-018

PERMANENT RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed August 26, 2011, 10:33 a.m. , effective September 26, 2011 ]


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

Purpose: The purpose of this proposal is to amend department WACs to ensure compliance with recent legislation enacted by the Washington state legislature which changes the default investment option for new members of the defined contribution portion of the Plan 3 retirement systems.

Citation of Existing Rules Affected by this Order: Amending WAC 415-111-210 and 415-111-230.

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

Other Authority: RCW 41.34.130, 41.34.060, and 41.34.140.

Adopted under notice filed as WSR 11-15-039 on July 13, 2011.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 2, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 2, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 2, Repealed 0.

Date Adopted: August 26, 2011.

Steve Hill

Director

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