BP BHEAD INT S [atlas:bill]

AN ACT Relating to the Washington educational employees' retirement system; amending RCW 41.32.010, 41.32.044, 41.32.065, 41.32.067, 41.32.780, 41.32.812, 41.32.817, 41.32.835, 41.32.8401, 41.32.875, 41.34.060, 41.45.010, 41.45.020, 41.45.050, 41.45.060, 41.45.061, 41.45.070, 41.45.070, 41.50.030, 41.50.075, 41.50.080, 41.50.086, 41.50.200, 41.50.205, 41.50.215, 41.50.230, 41.50.240, and 43.33A.020; reenacting and amending RCW 41.40.010; adding a new section to chapter 41.32 RCW; adding a new section to chapter 41.40 RCW; adding new sections to chapter 41.45 RCW; adding a new section to chapter 41.54 RCW; creating a new section; decodifying RCW 41.32.032 and 41.50.132; repealing RCW 41.32.020 and 41.32.818; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature recognizes that teachers and school district employees share the same educational work environment. This shared workplace should provide similar retirement benefits for both types of public employees.

It is the intent of the legislature to achieve that goal by transferring the membership of classified school employees in the public employees' retirement system plan 2, to the teachers' retirement system plan 2. The transfer of membership to the teachers' retirement system plan 2 is not intended to cause a diminution or expansion of benefits for affected members. It is enacted solely to provide public employees working under the same conditions with the same options for retirement planning.

As members of the teachers' retirement system plan 3, classified employees will have the same opportunity to transfer to the teachers' retirement system plan 3 as their certificated coworkers. The ability to transfer to the teachers' retirement system plan 3 offers members a new public retirement system that balances flexibility with stability; provides increased employee control of investments and responsible protection of the public's investment in employee benefits; and encourages the pursuit of public sector careers without creating barriers to other public or private sector employment.

Sec. 2. RCW 41.32.010 and 1996 c 39 s 1 are each amended to read as follows:

As used in this chapter, unless a different meaning is plainly required by the context:

(1)(a) "Accumulated contributions" for plan ((I)) 1 members, means the sum of all regular annuity contributions and, except for the purpose of withdrawal at the time of retirement, any amount paid under RCW 41.50.165(2) with regular interest thereon.

(b) "Accumulated contributions" for plan ((II)) 2 members, means the sum of all contributions standing to the credit of a member in the member's individual account, including any amount paid under RCW 41.50.165(2), together with the regular interest thereon.

(2) "Actuarial equivalent" means a benefit of equal value when computed upon the basis of such mortality tables and regulations as shall be adopted by the director and regular interest.

(3) "Annuity" means the moneys payable per year during life by reason of accumulated contributions of a member.

(4) "Member reserve" means the fund in which all of the accumulated contributions of members are held.

(5)(a) "Beneficiary" for plan ((I)) 1 members, means any person in receipt of a retirement allowance or other benefit provided by this chapter.

(b) "Beneficiary" for plan ((II)) 2 and plan ((~~III~~)) 3 members, means any person in receipt of a retirement allowance or other benefit provided by this chapter resulting from service rendered to an employer by another person.

(6) "Contract" means any agreement for service and compensation between a member and an employer.

(7) "Creditable service" means membership service plus prior service for which credit is allowable. This subsection shall apply only to plan ((I)) 1 members.

(8) "Dependent" means receiving one‑half or more of support from a member.

(9) "Disability allowance" means monthly payments during disability. This subsection shall apply only to plan ((I)) 1 members.

(10)(a) "Earnable compensation" for plan ((I)) 1 members, means:

(i) All salaries and wages paid by an employer to an employee member of the retirement system for personal services rendered during a fiscal year. In all cases where compensation includes maintenance the employer shall fix the value of that part of the compensation not paid in money.

(ii) "Earnable compensation" for plan ((I)) 1 members also includes the following actual or imputed payments, which are not paid for personal services:

(A) Retroactive payments to an individual by an employer on reinstatement of the employee in a position, or payments by an employer to an individual in lieu of reinstatement in a position which are awarded or granted as the equivalent of the salary or wages which the individual would have earned during a payroll period shall be considered earnable compensation and the individual shall receive the equivalent service credit.

(B) If a leave of absence, without pay, is taken by a member for the purpose of serving as a member of the state legislature, and such member has served in the legislature five or more years, the salary which would have been received for the position from which the leave of absence was taken shall be considered as compensation earnable if the employee's contribution thereon is paid by the employee. In addition, where a member has been a member of the state legislature for five or more years, earnable compensation for the member's two highest compensated consecutive years of service shall include a sum not to exceed thirty‑six hundred dollars for each of such two consecutive years, regardless of whether or not legislative service was rendered during those two years.

(iii) For members employed less than full time under written contract with a school district, or community college district, in an instructional position, for which the member receives service credit of less than one year in all of the years used to determine the earnable compensation used for computing benefits due under RCW 41.32.497, 41.32.498, and 41.32.520, the member may elect to have earnable compensation defined as provided in RCW 41.32.345. For the purposes of this subsection, the term "instructional position" means a position in which more than seventy‑five percent of the member's time is spent as a classroom instructor (including office hours), a librarian, or a counselor. Earnable compensation shall be so defined only for the purpose of the calculation of retirement benefits and only as necessary to insure that members who receive fractional service credit under RCW 41.32.270 receive benefits proportional to those received by members who have received full‑time service credit.

(iv) "Earnable compensation" does not include:

(A) Remuneration for unused sick leave authorized under RCW 41.04.340, 28A.400.210, or 28A.310.490;

(B) Remuneration for unused annual leave in excess of thirty days as authorized by RCW 43.01.044 and 43.01.041.

(b) "Earnable compensation" for plan ((II)) 2 and plan ((~~III~~)) 3 members, means salaries or wages earned by a member during a payroll period for personal services, including overtime payments, and shall include wages and salaries deferred under provisions established pursuant to sections 403(b), 414(h), and 457 of the United States Internal Revenue Code, but shall exclude lump sum payments for deferred annual sick leave, unused accumulated vacation, unused accumulated annual leave, or any form of severance pay.

"Earnable compensation" for plan ((II)) 2 and plan ((~~III~~)) 3 members also includes the following actual or imputed payments which, except in the case of (b)(ii)(B) of this subsection, are not paid for personal services:

(i) Retroactive payments to an individual by an employer on reinstatement of the employee in a position or payments by an employer to an individual in lieu of reinstatement in a position which are awarded or granted as the equivalent of the salary or wages which the individual would have earned during a payroll period shall be considered earnable compensation, to the extent provided above, and the individual shall receive the equivalent service credit.

(ii) In any year in which a member serves in the legislature the member shall have the option of having such member's earnable compensation be the greater of:

(A) The earnable compensation the member would have received had such member not served in the legislature; or

(B) Such member's actual earnable compensation received for ((~~teaching~~)) nonlegislative service and legislative service combined. Any additional contributions to the retirement system required because compensation earnable under (b)(ii)(A) of this subsection is greater than compensation earnable under (b)(ii)(B) of this subsection shall be paid by the member for both member and employer contributions.

(11) "Employer" means the state of Washington, the school district, an educational service district, or any agency of the state of Washington by which the member is paid.

(12) "Fiscal year" means a year which begins July 1st and ends June 30th of the following year.

(13) "Former state fund" means the state retirement fund in operation for teachers under chapter 187, Laws of 1923, as amended.

(14) "Local fund" means any of the local retirement funds for teachers operated in any school district in accordance with the provisions of chapter 163, Laws of 1917 as amended.

(15) "Member" means any ((~~teacher~~)) educational employee included in the membership of the retirement system. Also, any other employee of the public schools who, on July 1, 1947, had not elected to be exempt from membership and who, prior to that date, had by an authorized payroll deduction, contributed to the member reserve.

(16) "Membership service" means service rendered subsequent to the first day of eligibility of a person to membership in the retirement system: PROVIDED, That where a member is employed by two or more employers the individual shall receive no more than one service credit month during any calendar month in which multiple service is rendered. The provisions of this subsection shall apply only to plan ((I)) 1 members.

(17) "Pension" means the moneys payable per year during life from the pension reserve.

(18) "Pension reserve" is a fund in which shall be accumulated an actuarial reserve adequate to meet present and future pension liabilities of the system and from which all pension obligations are to be paid.

(19) "Prior service" means service rendered prior to the first date of eligibility to membership in the retirement system for which credit is allowable. The provisions of this subsection shall apply only to plan ((I)) 1 members.

(20) "Prior service contributions" means contributions made by a member to secure credit for prior service. The provisions of this subsection shall apply only to plan ((I)) 1 members.

(21) "Public school" means any institution or activity operated by the state of Washington or any instrumentality or political subdivision thereof employing teachers, except the University of Washington and Washington State University.

(22) "Regular contributions" means the amounts required to be deducted from the compensation of a member and credited to the member's individual account in the member reserve. This subsection shall apply only to plan ((I)) 1 members.

(23) "Regular interest" means such rate as the director may determine.

(24)(a) "Retirement allowance" for plan ((I)) 1 members, means monthly payments based on the sum of annuity and pension, or any optional benefits payable in lieu thereof.

(b) "Retirement allowance" for plan ((II)) 2 and plan ((~~III~~)) 3 members, means monthly payments to a retiree or beneficiary as provided in this chapter.

(25) "Retirement system" means the Washington educational employees' retirement system, which consists of the Washington state teachers' retirement system plan 1, the educational employees' retirement system plan 2, and the educational employees' retirement system plan 3.

(26)(a) "Service" for plan ((I)) 1 members means the time during which a member has been employed by an employer for compensation.

(i) If a member is employed by two or more employers the individual shall receive no more than one service credit month during any calendar month in which multiple service is rendered.

(ii) As authorized by RCW 28A.400.300, up to forty-five days of sick leave may be creditable as service solely for the purpose of determining eligibility to retire under RCW 41.32.470.

(iii) As authorized in RCW 41.32.065, service earned in an out-of-state retirement system that covers teachers in public schools may be applied solely for the purpose of determining eligibility to retire under RCW 41.32.470.

(b) "Service" for plan ((II)) 2 and plan ((~~III~~)) 3 members, means periods of employment by a member for one or more employers for which earnable compensation is earned subject to the following conditions:

(i) A member employed in an eligible position or as a substitute shall receive one service credit month for each month of September through August of the following year if he or she earns earnable compensation for eight hundred ten or more hours during that period and is employed during nine of those months, except that a member may not receive credit for any period prior to the member's employment in an eligible position except as provided in RCW 41.32.812 and 41.50.132;

(ii) If a member is employed either in an eligible position or as a substitute teacher for nine months of the twelve month period between September through August of the following year but earns earnable compensation for less than eight hundred ten hours but for at least six hundred thirty hours, he or she will receive one‑half of a service credit month for each month of the twelve month period;

(iii) All other members in an eligible position or as a substitute teacher shall receive service credit as follows:

(A) A service credit month is earned in those calendar months where earnable compensation is earned for ninety or more hours;

(B) A half-service credit month is earned in those calendar months where earnable compensation is earned for at least seventy hours but less than ninety hours; and

(C) A quarter-service credit month is earned in those calendar months where earnable compensation is earned for less than seventy hours.

(iv) Any person who is a member of the ((~~teachers'~~)) educational employees' retirement system and who is elected or appointed to a state elective position may continue to be a member of the retirement system and continue to receive a service credit month for each of the months in a state elective position by making the required member contributions.

(v) When an individual is employed by two or more employers the individual shall only receive one month's service credit during any calendar month in which multiple service for ninety or more hours is rendered.

(vi) As authorized by RCW 28A.400.300, up to forty-five days of sick leave may be creditable as service solely for the purpose of determining eligibility to retire under RCW 41.32.470. For purposes of plan ((II)) 2 and plan ((~~III~~)) 3 "forty-five days" as used in RCW 28A.400.300 is equal to two service credit months. Use of less than forty-five days of sick leave is creditable as allowed under this subsection as follows:

(A) Less than eleven days equals one-quarter service credit month;

(B) Eleven or more days but less than twenty-two days equals one-half service credit month;

(D) More than twenty-two days but less than thirty-three days equals one and one-quarter service credit month;

(E) Thirty-three or more days but less than forty-five days equals one and one-half service credit month.

(vii) As authorized in RCW 41.32.065, service earned in an out-of-state retirement system that covers teachers in public schools may be applied solely for the purpose of determining eligibility to retire under RCW 41.32.470.

(viii) The department shall adopt rules implementing this subsection.

(27) "Service credit year" means an accumulation of months of service credit which is equal to one when divided by twelve.

(28) "Service credit month" means a full service credit month or an accumulation of partial service credit months that are equal to one.

(29) "Teacher" means any person qualified to teach who is engaged by a public school in an instructional, administrative, or supervisory capacity. The term includes state, educational service district, and school district superintendents and their assistants and all employees certificated by the superintendent of public instruction; and in addition thereto any full time school doctor who is employed by a public school and renders service of an instructional or educational nature.

(30) "Average final compensation" for plan ((II)) 2 and plan ((~~III~~)) 3 members, means the member's average earnable compensation of the highest consecutive sixty service credit months prior to such member's retirement, termination, or death. Periods constituting authorized leaves of absence may not be used in the calculation of average final compensation except under RCW 41.32.810(2).

(31) "Retiree" means any person in receipt of a retirement allowance or other benefit provided by this chapter resulting from service rendered to an employer while a member. A person is in receipt of a retirement allowance as defined in subsection (24) of this section or other benefit as provided by this chapter when the department mails, causes to be mailed, or otherwise transmits the retirement allowance warrant.

(32) "Department" means the department of retirement systems created in chapter 41.50 RCW.

(33) "Director" means the director of the department.

(34) "State elective position" means any position held by any person elected or appointed to state‑wide office or elected or appointed as a member of the legislature.

(35) "State actuary" or "actuary" means the person appointed pursuant to RCW 44.44.010(2).

(36) "Substitute teacher" means:

(a) A teacher who is hired by an employer to work as a temporary teacher, except for teachers who are annual contract employees of an employer and are guaranteed a minimum number of hours; or

(b) Teachers who either (i) work in ineligible positions for more than one employer or (ii) work in an ineligible position or positions together with an eligible position.

(37)(a) "Eligible position" for plan ((II)) 2 members from June 7, 1990, through September 1, 1991, means a position which normally requires two or more uninterrupted months of creditable service during September through August of the following year.

(b) "Eligible position" for plan ((II)) 2 and plan ((~~III~~)) 3 on and after September 1, 1991, means a position that, as defined by the employer, normally requires five or more months of at least seventy hours of earnable compensation during September through August of the following year.

(c) For purposes of this chapter an employer shall not define "position" in such a manner that an employee's monthly work for that employer is divided into more than one position.

(d) The elected position of the superintendent of public instruction is an eligible position.

(38) "Plan I" or "plan 1" means the teachers' retirement system, plan ((I)) 1 providing the benefits and funding provisions covering persons who first became members of the system prior to October 1, 1977.

(39) "Plan II" or "plan 2" means the ((~~teachers'~~)) educational employees' retirement system, plan ((II)) 2 providing the benefits and funding provisions covering persons who first became members of the system on and after October 1, 1977, and prior to July 1, 1996.

(40) "Plan III" or "plan 3" means the ((~~teachers'~~)) educational employees' retirement system, plan ((~~III~~)) 3 providing the benefits and funding provisions covering persons who first become members of the system on and after July 1, 1996, or who transfer under RCW 41.32.817.

(41) "Index" means, for any calendar year, that year's annual average consumer price index, Seattle, Washington area, for urban wage earners and clerical workers, all items compiled by the bureau of labor statistics, United States department of labor.

(42) "Index A" means the index for the year prior to the determination of a postretirement adjustment.

(43) "Index B" means the index for the year prior to index A.

(44) "Index year" means the earliest calendar year in which the index is more than sixty percent of index A.

(45) "Adjustment ratio" means the value of index A divided by index B.

(46) "Annual increase" means, initially, fifty-nine cents per month per year of service which amount shall be increased each July 1st by three percent, rounded to the nearest cent.

(47) "Member account" or "member's account" for purposes of plan ((~~III~~)) 3 means the sum of the contributions and earnings on behalf of the member in the defined contribution portion of plan ((~~III~~)) 3.

(48) "Classified employee" means a noncertificated employee of a school district, educational service district, the state school for the blind, or the state school for the deaf.

(49) "Educational employee" means all employees, including substitute teachers, of a school district, educational service district, the state school for the blind, or the state school for the deaf.

Sec. 3. RCW 41.32.044 and 1973 2nd ex.s. c 32 s 5 are each amended to read as follows:

A retired ((~~teacher~~)) educational employee upon returning to service in the public schools of Washington may elect to again become a member of the retirement system: PROVIDED, That if such a retired ((~~teacher~~)) educational employee elects to be restored to membership he or she must establish two full years of service credit before ((~~he will be~~)) becoming eligible to retire under the provision of a formula other than the one in effect at the time of ((~~his~~)) previous retirement: PROVIDED FURTHER, That where any such right to again retire is exercised to become effective before a member has established two full years of service credit ((he)) the member may elect to retire only under the provisions of the formula in effect at the time of ((~~his~~)) previous retirement: AND PROVIDED FURTHER, That this section shall not apply to any individual who has returned to service and is presently in service on ((~~the effective date of this 1973 amendatory act~~)) September 27, 1973.

Sec. 4. RCW 41.32.065 and 1991 c 278 s 1 are each amended to read as follows:

A ((~~member~~)) teacher may elect under this section to apply service credit earned in an out-of-state retirement system that covers teachers in public schools solely for the purpose of determining the time at which the member may retire. The benefit shall be actuarially reduced to recognize the difference between the age a ((~~member~~)) teacher would have first been able to retire based on service in the state of Washington and the ((~~member's~~)) teacher's retirement age.

Sec. 5. RCW 41.32.067 and 1992 c 212 s 13 are each amended to read as follows:

A ((~~member~~)) teacher may purchase additional benefits subject to the following:

(1) The ((~~member~~)) teacher shall pay all reasonable administrative and clerical costs; and

(2) The ((~~member~~)) teacher shall make a member reserve contribution to be actuarially converted to a monthly benefit at the time of retirement.

Sec. 6. RCW 41.32.780 and 1991 c 35 s 67 are each amended to read as follows:

The following persons shall be members of the Washington educational employees' retirement system plan 2 and shall be governed by the provisions of RCW 41.32.755 through 41.32.825:

(1) All teachers who become employed by an employer in an eligible position on or after October 1, 1977, ((~~shall be members of the retirement system and shall be governed by the provisions of RCW 41.32.755 through 41.32.825~~)) and prior to July 1, 1996;

(2) All classified employees who are transferred to the retirement system under section 15 of this act; and

(3) All members who are not in an eligible position on July 1, 1998, and who subsequently become employed in an eligible position.

Sec. 7. RCW 41.32.812 and 1994 c 197 s 21 are each amended to read as follows:

The department of retirement systems shall credit at least one-half service credit month for each month of each school year, as defined by RCW 28A.150.040, from October 1, 1977, through December 31, 1986, to a ((~~member of the teachers' retirement system plan II~~)) teacher who was employed by an employer, as defined by RCW 41.32.010, under a contract for half-time employment as determined by the department for such school year and from whose compensation contributions were paid by the employee or picked up by the employer. Any withdrawn contributions shall be restored under RCW 41.32.500(1) or 41.50.165 prior to crediting any service.

Sec. 8. RCW 41.32.817 and 1996 c 39 s 2 are each amended to read as follows:

(1) Every plan ((II)) 2 member employed by an employer in an eligible position may make an irrevocable option to transfer to plan ((~~III~~)) 3.

(2) Any plan ((II)) 2 member who is a substitute teacher may make an irrevocable option to transfer to plan ((~~III~~)) 3 at the time the member purchases substitute service credit pursuant to RCW 41.32.013, pursuant to time lines and procedures established by the department.

(3) Any plan ((~~II member~~)) 2 teacher, other than a substitute teacher, who wishes to transfer to plan ((~~III~~)) 3 after December 31, 1997, may transfer during the month of January in any following year, provided that the member earns service credit for that month.

(4) Any plan 2 classified employee who wishes to transfer to plan 3 after December 31, 1999, may transfer during the month of January in any following year, provided that the member earns service credit for that month.

(5) All service credit in plan ((II)) 2 shall be transferred to the defined benefit portion of plan ((~~III~~)) 3.

((~~(5)~~)) (6) The accumulated contributions in plan ((II)) 2 less fifty percent of any contributions made pursuant to RCW 41.50.165(2) shall be transferred to the member's account in the defined contribution portion established in chapter 41.34 RCW, pursuant to procedures developed by the department and subject to RCW 41.34.090. Contributions made pursuant to RCW 41.50.165(2) that are not transferred to the member's account shall be transferred to the fund created in RCW 41.50.075(2), except that interest earned on all such contributions shall be transferred to the member's account.

((~~(6)~~)) (7) The legislature reserves the right to discontinue the right to transfer under this section.

((~~(7)~~)) (8) Anyone previously retired from plan ((II)) 2 is prohibited from transferring to plan ((~~III~~)) 3.

Sec. 9. RCW 41.32.835 and 1995 c 239 s 105 are each amended to read as follows:

(1) All teachers who first become employed by an employer in an eligible position on or after July 1, 1996, shall be members of plan ((~~III~~)) 3.

(2) All classified employees who first become employed by an employer in an eligible position on or after July 1, 1998, shall be members of plan 3.

Sec. 10. RCW 41.32.8401 and 1996 c 39 s 8 are each amended to read as follows:

(1) ((~~Anyone~~)) Any teacher who requests to transfer under RCW 41.32.817 before January 1, 1998, and establishes service credit for January 1998, shall have their member account increased by ((~~twenty~~)) forty percent of:

(a) Plan ((II)) 2 accumulated contributions as of January 1, 1996, less fifty percent of any payments made pursuant to RCW 41.50.165(2); or

(b) All amounts withdrawn after January 1, 1996, which are completely restored before January 1, 1998.

(2) Substitute teachers shall receive the additional payment provided in subsection (1) of this section if they:

(a) Establish service credit for January 1998; and

(b) Establish any service credit from July 1996 through December 1997; and

(3) If a ((~~member~~)) teacher who requests to transfer dies before January 1, 1998, the additional payment provided by this section shall be paid to the member's estate, or the person or persons, trust, or organization the member nominated by written designation duly executed and filed with the department.

(4) The legislature reserves the right to modify or discontinue the right to ((~~an incentive~~)) a transfer payment under this section for any plan ((II)) 2 members who have not previously transferred to plan ((~~III~~)) 3.

Sec. 11. RCW 41.32.875 and 1996 c 39 s 6 are each amended to read as follows:

(1) NORMAL RETIREMENT. (a) Any member who is at least age sixty-five and who has:

((~~(a)~~)) (i) Completed ten service credit years; or

((~~(b)~~)) (ii) Completed five service credit years, including twelve service credit months after attaining age fifty-four; ((or))

shall be eligible to retire and receive a retirement allowance computed according to RCW 41.32.840.

((~~(c)~~)) (b) Any teacher who has completed five service credit years by July 1, 1996, under plan ((II)) 2 and who transferred to plan ((~~III~~)) 3 under RCW 41.32.817; and any classified employee who has completed five service credit years by July 1, 1998, and who transferred to plan 3 under RCW 41.32.817;

shall be eligible to retire and to receive a retirement allowance computed according to the provisions of RCW 41.32.840.

(2) EARLY RETIREMENT. Any member who has attained at least age fifty-five and has completed at least ten years of service shall be eligible to retire and to receive a retirement allowance computed according to the provisions of RCW 41.32.840, except that a member retiring pursuant to this subsection shall have the retirement allowance actuarially reduced to reflect the difference in the number of years between age at retirement and the attainment of age sixty-five.

NEW SECTION. Sec. 12. A new section is added to chapter 41.32 RCW to read as follows:

(1) Any classified employee who requests to transfer under RCW 41.32.817 before January 1, 2000, and establishes service credit for January 2000, shall have their member account increased by forty percent of:

(a) Plan 2 accumulated contributions as of . . . ., less fifty percent of any payments made pursuant to RCW 41.50.165(2); or

(b) All amounts withdrawn after . . . ., which are completely restored before . . . ..

(2) If a classified employee who requests to transfer dies before January 1, 2000, the additional payment provided by this section shall be paid to the member's estate, or the person or persons, trust, or organization the member nominated by written designation duly executed and filed with the department.

(3) The legislature reserves the right to modify or discontinue the right to the transfer payment under this section for any plan 2 members who have not previously transferred to plan 3.

Sec. 13. RCW 41.34.060 and 1996 c 39 s 15 are each amended to read as follows:

(1) Except as provided in subsection (2) of this section, the member's account shall be invested by the state investment board. All contributions under this subsection shall be invested in the same portfolio as that of the ((~~teachers'~~)) educational employees' retirement system combined plan ((II)) 2 and ((~~III~~)) 3 fund under RCW 41.50.075(2).

(2) Members may elect to self-direct their investments as authorized by the board, other than as provided in subsection (1) of this section. Expenses caused by self-directed investment shall be paid by the member in accordance with rules established by the board under RCW 41.50.088.

Sec. 14. RCW 41.40.010 and 1995 c 345 s 10, 1995 c 286 s 1, and 1995 c 244 s 3 are each reenacted and amended to read as follows:

As used in this chapter, unless a different meaning is plainly required by the context:

(1) "Retirement system" means the public employees' retirement system provided for in this chapter.

(2) "Department" means the department of retirement systems created in chapter 41.50 RCW.

(3) "State treasurer" means the treasurer of the state of Washington.

(4)(a) "Employer" for plan ((I)) 1 members, means every branch, department, agency, commission, board, and office of the state, any political subdivision or association of political subdivisions of the state admitted into the retirement system, and legal entities authorized by RCW 35.63.070 and 36.70.060 or chapter 39.34 RCW; and the term shall also include any labor guild, association, or organization the membership of a local lodge or division of which is comprised of at least forty percent employees of an employer (other than such labor guild, association, or organization) within this chapter. The term may also include any city of the first class that has its own retirement system.

(b) "Employer" for plan ((II)) 2 members, means every branch, department, agency, commission, board, and office of the state, and any political subdivision and municipal corporation of the state admitted into the retirement system, including public agencies created pursuant to RCW 35.63.070, 36.70.060, and 39.34.030; except that after June 30, 1998, school districts, educational service districts, the state school for the blind, and the state school for the deaf will no longer be employers for the public employees' retirement system plan 2.

(5) "Member" means any employee included in the membership of the retirement system, as provided for in RCW 41.40.023. RCW 41.26.045 does not prohibit a person otherwise eligible for membership in the retirement system from establishing such membership effective when he or she first entered an eligible position.

(6) "Original member" of this retirement system means:

(a) Any person who became a member of the system prior to April 1, 1949;

(b) Any person who becomes a member through the admission of an employer into the retirement system on and after April 1, 1949, and prior to April 1, 1951;

(c) Any person who first becomes a member by securing employment with an employer prior to April 1, 1951, provided the member has rendered at least one or more years of service to any employer prior to October 1, 1947;

(d) Any person who first becomes a member through the admission of an employer into the retirement system on or after April 1, 1951, provided, such person has been in the regular employ of the employer for at least six months of the twelve-month period preceding the said admission date;

(e) Any member who has restored all contributions that may have been withdrawn as provided by RCW 41.40.150 and who on the effective date of the individual's retirement becomes entitled to be credited with ten years or more of membership service except that the provisions relating to the minimum amount of retirement allowance for the member upon retirement at age seventy as found in RCW 41.40.190(4) shall not apply to the member;

(f) Any member who has been a contributor under the system for two or more years and who has restored all contributions that may have been withdrawn as provided by RCW 41.40.150 and who on the effective date of the individual's retirement has rendered five or more years of service for the state or any political subdivision prior to the time of the admission of the employer into the system; except that the provisions relating to the minimum amount of retirement allowance for the member upon retirement at age seventy as found in RCW 41.40.190(4) shall not apply to the member.

(7) "New member" means a person who becomes a member on or after April 1, 1949, except as otherwise provided in this section.

(8)(a) "Compensation earnable" for plan ((I)) 1 members, means salaries or wages earned during a payroll period for personal services and where the compensation is not all paid in money, maintenance compensation shall be included upon the basis of the schedules established by the member's employer.

(i) "Compensation earnable" for plan ((I)) 1 members also includes the following actual or imputed payments, which are not paid for personal services:

(A) Retroactive payments to an individual by an employer on reinstatement of the employee in a position, or payments by an employer to an individual in lieu of reinstatement in a position which are awarded or granted as the equivalent of the salary or wage which the individual would have earned during a payroll period shall be considered compensation earnable and the individual shall receive the equivalent service credit;

(B) If a leave of absence is taken by an individual for the purpose of serving in the state legislature, the salary which would have been received for the position from which the leave of absence was taken, shall be considered as compensation earnable if the employee's contribution is paid by the employee and the employer's contribution is paid by the employer or employee;

(D) Compensation that a member would have received but for a disability occurring in the line of duty only as authorized by RCW 41.40.038;

(E) Compensation that a member receives due to participation in the leave sharing program only as authorized by RCW 41.04.650 through 41.04.670; and

(F) Compensation that a member receives for being in standby status. For the purposes of this section, a member is in standby status when not being paid for time actually worked and the employer requires the member to be prepared to report immediately for work, if the need arises, although the need may not arise. Standby compensation is regular salary for the purposes of RCW 41.50.150(2).

(ii) "Compensation earnable" does not include:

(A) Remuneration for unused sick leave authorized under RCW 41.04.340, 28A.400.210, or 28A.310.490;

(B) Remuneration for unused annual leave in excess of thirty days as authorized by RCW 43.01.044 and 43.01.041.

(b) "Compensation earnable" for plan ((II)) 2 members, means salaries or wages earned by a member during a payroll period for personal services, including overtime payments, and shall include wages and salaries deferred under provisions established pursuant to sections 403(b), 414(h), and 457 of the United States Internal Revenue Code, but shall exclude nonmoney maintenance compensation and lump sum or other payments for deferred annual sick leave, unused accumulated vacation, unused accumulated annual leave, or any form of severance pay.

"Compensation earnable" for plan ((II)) 2 members also includes the following actual or imputed payments, which are not paid for personal services:

(i) Retroactive payments to an individual by an employer on reinstatement of the employee in a position, or payments by an employer to an individual in lieu of reinstatement in a position which are awarded or granted as the equivalent of the salary or wage which the individual would have earned during a payroll period shall be considered compensation earnable to the extent provided above, and the individual shall receive the equivalent service credit;

(ii) In any year in which a member serves in the legislature, the member shall have the option of having such member's compensation earnable be the greater of:

(A) The compensation earnable the member would have received had such member not served in the legislature; or

(B) Such member's actual compensation earnable received for nonlegislative public employment and legislative service combined. Any additional contributions to the retirement system required because compensation earnable under ((~~(b)(ii)(B)~~)) (b)(ii)(A) of this subsection is greater than compensation earnable under ((~~(b)(ii)(A)~~)) (b)(ii)(B) of this subsection shall be paid by the member for both member and employer contributions;

(iii) Assault pay only as authorized by RCW 27.04.100, 72.01.045, and 72.09.240;

(iv) Compensation that a member would have received but for a disability occurring in the line of duty only as authorized by RCW 41.40.038;

(v) Compensation that a member receives due to participation in the leave sharing program only as authorized by RCW 41.04.650 through 41.04.670; and

(vi) Compensation that a member receives for being in standby status. For the purposes of this section, a member is in standby status when not being paid for time actually worked and the employer requires the member to be prepared to report immediately for work, if the need arises, although the need may not arise. Standby compensation is regular salary for the purposes of RCW 41.50.150(2).

(9)(a) "Service" for plan ((I)) 1 members, except as provided in RCW 41.40.088, means periods of employment in an eligible position or positions for one or more employers rendered to any employer for which compensation is paid, and includes time spent in office as an elected or appointed official of an employer. Compensation earnable earned in full time work for seventy hours or more in any given calendar month shall constitute one service credit month except as provided in RCW 41.40.088. Compensation earnable earned for less than seventy hours in any calendar month shall constitute one-quarter service credit month of service except as provided in RCW 41.40.088. Only service credit months and one-quarter service credit months shall be counted in the computation of any retirement allowance or other benefit provided for in this chapter. Any fraction of a year of service shall be taken into account in the computation of such retirement allowance or benefits. Time spent in standby status, whether compensated or not, is not service.

(i) Service by a state employee officially assigned by the state on a temporary basis to assist another public agency, shall be considered as service as a state employee: PROVIDED, That service to any other public agency shall not be considered service as a state employee if such service has been used to establish benefits in any other public retirement system.

(ii) An individual shall receive no more than a total of twelve service credit months of service during any calendar year. If an individual is employed in an eligible position by one or more employers the individual shall receive no more than one service credit month during any calendar month in which multiple service for seventy or more hours is rendered.

(iii) A school district employee may count up to forty-five days of sick leave as creditable service solely for the purpose of determining eligibility to retire under RCW 41.40.180 as authorized by RCW 28A.400.300. For purposes of plan ((I)) 1 "forty-five days" as used in RCW 28A.400.300 is equal to two service credit months. Use of less than forty-five days of sick leave is creditable as allowed under this subsection as follows:

(A) Less than twenty-two days equals one-quarter service credit month;

(B) Twenty-two days equals one service credit month;

(b) "Service" for plan ((II)) 2 members, means periods of employment by a member in an eligible position or positions for one or more employers for which compensation earnable is paid. Compensation earnable earned for ninety or more hours in any calendar month shall constitute one service credit month except as provided in RCW 41.40.088. Compensation earnable earned for at least seventy hours but less than ninety hours in any calendar month shall constitute one-half service credit month of service. Compensation earnable earned for less than seventy hours in any calendar month shall constitute one-quarter service credit month of service. Time spent in standby status, whether compensated or not, is not service.

Any fraction of a year of service shall be taken into account in the computation of such retirement allowance or benefits.

(i) Service in any state elective position shall be deemed to be full time service, except that persons serving in state elective positions who are members of the ((~~teachers'~~)) educational employees' retirement system or law enforcement officers' and fire fighters' retirement system at the time of election or appointment to such position may elect to continue membership in the ((~~teachers'~~)) educational employees' retirement system or law enforcement officers' and fire fighters' retirement system.

(ii) A member shall receive a total of not more than twelve service credit months of service for such calendar year. If an individual is employed in an eligible position by one or more employers the individual shall receive no more than one service credit month during any calendar month in which multiple service for ninety or more hours is rendered.

(iii) Up to forty-five days of sick leave may be creditable as service solely for the purpose of determining eligibility to retire under RCW 41.40.180 as authorized by RCW 28A.400.300. For purposes of plan ((II)) 2 "forty-five days" as used in RCW 28A.400.300 is equal to two service credit months. Use of less than forty-five days of sick leave is creditable as allowed under this subsection as follows:

(A) Less than eleven days equals one-quarter service credit month;

(B) Eleven or more days but less than twenty-two days equals one-half service credit month;

(D) More than twenty-two days but less than thirty-three days equals one and one-quarter service credit month;

(E) Thirty-three or more days but less than forty-five days equals one and one-half service credit month.

(10) "Service credit year" means an accumulation of months of service credit which is equal to one when divided by twelve.

(11) "Service credit month" means a month or an accumulation of months of service credit which is equal to one.

(12) "Prior service" means all service of an original member rendered to any employer prior to October 1, 1947.

(13) "Membership service" means:

(a) All service rendered, as a member, after October 1, 1947;

(b) All service after October 1, 1947, to any employer prior to the time of its admission into the retirement system for which member and employer contributions, plus interest as required by RCW 41.50.125, have been paid under RCW 41.40.056 or 41.40.057;

(c) Service not to exceed six consecutive months of probationary service rendered after April 1, 1949, and prior to becoming a member, in the case of any member, upon payment in full by such member of the total amount of the employer's contribution to the retirement fund which would have been required under the law in effect when such probationary service was rendered if the member had been a member during such period, except that the amount of the employer's contribution shall be calculated by the director based on the first month's compensation earnable as a member;

(d) Service not to exceed six consecutive months of probationary service, rendered after October 1, 1947, and before April 1, 1949, and prior to becoming a member, in the case of any member, upon payment in full by such member of five percent of such member's salary during said period of probationary service, except that the amount of the employer's contribution shall be calculated by the director based on the first month's compensation earnable as a member.

(14)(a) "Beneficiary" for plan ((I)) 1 members, means any person in receipt of a retirement allowance, pension or other benefit provided by this chapter.

(b) "Beneficiary" for plan ((II)) 2 members, means any person in receipt of a retirement allowance or other benefit provided by this chapter resulting from service rendered to an employer by another person.

(15) "Regular interest" means such rate as the director may determine.

(16) "Accumulated contributions" means the sum of all contributions standing to the credit of a member in the member's individual account, including any amount paid under RCW 41.50.165(2), together with the regular interest thereon.

(17)(a) "Average final compensation" for plan ((I)) 1 members, means the annual average of the greatest compensation earnable by a member during any consecutive two year period of service credit months for which service credit is allowed; or if the member has less than two years of service credit months then the annual average compensation earnable during the total years of service for which service credit is allowed.

(b) "Average final compensation" for plan ((II)) 2 members, means the member's average compensation earnable of the highest consecutive sixty months of service credit months prior to such member's retirement, termination, or death. Periods constituting authorized leaves of absence may not be used in the calculation of average final compensation except under RCW 41.40.710(2).

(18) "Final compensation" means the annual rate of compensation earnable by a member at the time of termination of employment.

(19) "Annuity" means payments for life derived from accumulated contributions of a member. All annuities shall be paid in monthly installments.

(20) "Pension" means payments for life derived from contributions made by the employer. All pensions shall be paid in monthly installments.

(21) "Retirement allowance" means the sum of the annuity and the pension.

(22) "Employee" means any person who may become eligible for membership under this chapter, as set forth in RCW 41.40.023.

(23) "Actuarial equivalent" means a benefit of equal value when computed upon the basis of such mortality and other tables as may be adopted by the director.

(24) "Retirement" means withdrawal from active service with a retirement allowance as provided by this chapter.

(25) "Eligible position" means:

(a) Any position that, as defined by the employer, normally requires five or more months of service a year for which regular compensation for at least seventy hours is earned by the occupant thereof. For purposes of this chapter an employer shall not define "position" in such a manner that an employee's monthly work for that employer is divided into more than one position;

(b) Any position occupied by an elected official or person appointed directly by the governor for which compensation is paid.

(26) "Ineligible position" means any position which does not conform with the requirements set forth in subsection (25) of this section.

(27) "Leave of absence" means the period of time a member is authorized by the employer to be absent from service without being separated from membership.

(28) "Totally incapacitated for duty" means total inability to perform the duties of a member's employment or office or any other work for which the member is qualified by training or experience.

(29) "Retiree" means any person in receipt of a retirement allowance or other benefit provided by this chapter resulting from service rendered to an employer while a member. A person is in receipt of a retirement allowance as defined in subsection (21) of this section or other benefit as provided by this chapter when the department mails, causes to be mailed, or otherwise transmits the retirement allowance warrant.

(30) "Director" means the director of the department.

(31) "State elective position" means any position held by any person elected or appointed to state-wide office or elected or appointed as a member of the legislature.

(32) "State actuary" or "actuary" means the person appointed pursuant to RCW 44.44.010(2).

(33) "Plan I" or "plan 1" means the public employees' retirement system, plan ((I)) 1 providing the benefits and funding provisions covering persons who first became members of the system prior to October 1, 1977.

(34) "Plan II" or "plan 2" means the public employees' retirement system, plan ((II)) 2 providing the benefits and funding provisions covering persons who first became members of the system on and after October 1, 1977.

(35) "Index" means, for any calendar year, that year's annual average consumer price index, Seattle, Washington area, for urban wage earners and clerical workers, all items, compiled by the bureau of labor statistics, United States department of labor.

(36) "Index A" means the index for the year prior to the determination of a postretirement adjustment.

(37) "Index B" means the index for the year prior to index A.

(38) "Index year" means the earliest calendar year in which the index is more than sixty percent of index A.

(39) "Adjustment ratio" means the value of index A divided by index B.

(40) "Annual increase" means, initially, fifty-nine cents per month per year of service which amount shall be increased each July 1st by three percent, rounded to the nearest cent.

NEW SECTION. Sec. 15. A new section is added to chapter 41.40 RCW to read as follows:

(1) Effective July 1, 1998, the membership of all plan 2 members currently employed in eligible positions in a school district, educational service district, state school for the blind, or state school for the deaf and all plan 2 service credit for such members, is transferred to the Washington educational employees' retirement system plan 2.

(2) Plan 2 members who have withdrawn their member contributions for prior plan 2 service may restore contributions and service credit to the Washington educational employees' retirement system plan 2 as provided under RCW 41.32.825.

(3) The membership and previous service credit of a plan 2 member not employed in an eligible position on July 1, 1998, will be transferred to the Washington educational employees' retirement system plan 2 when he or she becomes employed in an eligible position.

(4) Plan 2 members not employed in an eligible position on July 1, 1998, who have withdrawn their member contributions for prior plan 2 service may restore contributions and service credit to the Washington educational employees' retirement system plan 2 as provided under RCW 41.32.825.

Sec. 16. RCW 41.45.010 and 1995 c 239 s 305 are each amended to read as follows:

It is the intent of the legislature to provide a dependable and systematic process for funding the benefits provided to members and retirees of the public employees' retirement system, chapter 41.40 RCW; the ((~~teachers'~~)) educational employees' retirement system, chapter 41.32 RCW; the law enforcement officers' and fire fighters' retirement system, chapter 41.26 RCW; and the Washington state patrol retirement system, chapter 43.43 RCW.

The funding process established by this chapter is intended to achieve the following goals:

(1) To continue to fully fund the public employees' retirement system plan ((II)) 2, the ((~~teachers'~~)) educational employees' retirement system plans ((II)) 2 and ((~~III~~)) 3, and the law enforcement officers' and fire fighters' retirement system plan II as provided by law;

(2) To fully amortize the total costs of the public employees' retirement system plan ((I)) 1, the teachers' retirement system plan ((I)) 1, and the law enforcement officers' and fire fighters' retirement system plan I not later than June 30, 2024;

(3) To establish predictable long-term employer contribution rates which will remain a relatively constant proportion of the future state budgets; and

(4) To fund, to the extent feasible, benefit increases for plan ((I)) 1 members and all benefits for plan ((II)) 2 and ((~~III~~)) 3 members over the working lives of those members so that the cost of those benefits are paid by the taxpayers who receive the benefit of those members' service.

Sec. 17. RCW 41.45.020 and 1995 c 239 s 306 are each amended to read as follows:

As used in this chapter, the following terms have the meanings indicated unless the context clearly requires otherwise.

(1) "Council" means the economic and revenue forecast council created in RCW 82.33.010.

(2) "Department" means the department of retirement systems.

(3) "Law enforcement officers' and fire fighters' retirement system plan I" and "law enforcement officers' and fire fighters' retirement system plan II" mean the benefits and funding provisions under chapter 41.26 RCW.

(4) "Public employees' retirement system plan ((I)) 1" and "public employees' retirement system plan ((II)) 2" mean the benefits and funding provisions under chapter 41.40 RCW.

(5) "Teachers' retirement system plan ((I)) 1," "((~~teachers'~~)) educational employees' retirement system plan ((II)) 2," and "((~~teachers'~~)) educational employees' retirement system plan ((~~III~~)) 3" mean the benefits and funding provisions under chapter 41.32 RCW.

(6) "Washington state patrol retirement system" means the retirement benefits provided under chapter 43.43 RCW.

(7) "Unfunded liability" means the unfunded actuarial accrued liability of a retirement system.

(8) "Actuary" or "state actuary" means the state actuary employed under chapter 44.44 RCW.

(9) "State retirement systems" means the retirement systems listed in RCW 41.50.030.

(10) "Classified employee" means a member of the educational employees' retirement system plan 2 or plan 3 as defined in RCW 41.32.010(48).

(11) "Teacher" means a member of the educational employees' retirement system as defined in RCW 41.32.010(29).

Sec. 18. RCW 41.45.050 and 1995 c 239 s 308 are each amended to read as follows:

(1) Employers of members of the public employees' retirement system, the ((~~teachers'~~)) educational employees' retirement system, and the Washington state patrol retirement system shall make contributions to those systems based on the rates established in RCW 41.45.060 and 41.45.070.

(2) The state shall make contributions to the law enforcement officers' and fire fighters' retirement system based on the rates established in RCW 41.45.060 and 41.45.070. The state treasurer shall transfer the required contributions each month on the basis of salary data provided by the department.

(3) The department shall bill employers, and the state shall make contributions to the law enforcement officers' and fire fighters' retirement system, using the combined rates established in RCW 41.45.060 and 41.45.070 regardless of the level of pension funding provided in the biennial budget. Any member of an affected retirement system may, by mandamus or other appropriate proceeding, require the transfer and payment of funds as directed in this section.

(4) The contributions received for the public employees' retirement system shall be allocated between the public employees' retirement system plan ((I)) 1 fund and public employees' retirement system plan ((II)) 2 fund as follows: The contributions necessary to fully fund the public employees' retirement system plan ((II)) 2 employer contribution required by RCW 41.40.650 shall first be deposited in the public employees' retirement system plan ((II)) 2 fund. All remaining public employees' retirement system employer contributions shall be deposited in the public employees' retirement system plan ((I)) 1 fund.

(5) The contributions received for the ((~~teachers'~~)) educational employees' retirement system shall be allocated between ((~~the plan I fund and the combined plan II and plan III~~)) funds as follows:

(a) The contributions necessary to fully fund the combined plan ((II)) 2 and plan ((~~III~~)) 3 employer contribution shall first be deposited in the combined plan ((II)) 2 and plan ((~~III~~)) 3 fund.

(b) Employer contributions to the public employees' retirement system plan 1 shall continue to be made at the same rate as if classified employees remained in the public employees' retirement system plan 2.

(c) All remaining ((~~teachers'~~)) educational employees' retirement system employer contributions shall be deposited in the teachers' retirement system plan ((I)) 1 fund.

(6) The contributions received under RCW 41.26.450 for the law enforcement officers' and fire fighters' retirement system shall be allocated between the law enforcement officers' and fire fighters' retirement system plan I and the law enforcement officers' and fire fighters' retirement system plan II fund as follows: The contributions necessary to fully fund the law enforcement officers' and fire fighters' retirement system plan II employer contributions shall be first deposited in the law enforcement officers' and fire fighters' retirement system plan II fund. All remaining law enforcement officers' and fire fighters' retirement system employer contributions shall be deposited in the law enforcement officers' and fire fighters' retirement system plan I fund.

Sec. 19. RCW 41.45.060 and 1995 c 239 s 309 are each amended to read as follows:

(1) The state actuary shall provide actuarial valuation results based on the assumptions adopted under RCW 41.45.030.

(2) Not later than September 30, 1996, and every two years thereafter, consistent with the assumptions adopted under RCW 41.45.030, the council shall adopt both: (a) A basic state contribution rate for the law enforcement officers' and fire fighters' retirement system; and (b) basic employer contribution rates for the public employees' retirement system plan ((I)) 1, the teachers' retirement system plan ((I)) 1, and the Washington state patrol retirement system to be used in the ensuing biennial period.

(3) The employer and state contribution rates adopted by the council shall be the level percentages of pay that are needed:

(a) To fully amortize the total costs of the public employees' retirement system plan ((I)) 1, the teachers' retirement system plan ((I)) 1, the law enforcement officers' and fire fighters' retirement system plan I, and the unfunded liability of the Washington state patrol retirement system not later than June 30, 2024; and

(b) To also continue to fully fund the public employees' retirement system plan ((II)) 2, the ((~~teachers'~~)) educational employees' retirement system plans ((II)) 2 and ((~~III~~)) 3, and the law enforcement officers' and fire fighters' retirement system plan II in accordance with RCW 41.40.650, 41.26.450, and this section.

(4) The aggregate actuarial cost method shall be used to calculate a combined plan ((II)) 2 and ((~~III~~)) 3 employer contribution rate.

(5) The council shall immediately notify the directors of the office of financial management and department of retirement systems of the state and employer contribution rates adopted.

(6) The director of the department of retirement systems shall collect those rates adopted by the council.

Sec. 20. RCW 41.45.061 and 1995 c 239 s 311 are each amended to read as follows:

(1) The required contribution rate for ((~~members~~)) teachers of the plan ((~~II teachers'~~)) 2 educational employees' retirement system shall be fixed at the rates in effect on July 1, 1996, subject to the following:

(a) Beginning September 1, ((~~1998~~)) 1997, except as provided in (b) of this subsection, the employee contribution rate shall not exceed the employer plan ((II)) 2 and ((~~III~~)) 3 rates adopted under RCW 41.45.060 and 41.45.070 for the ((~~teachers'~~)) educational employees' retirement system;

(b) In addition, the employee contribution rate for plan ((II)) 2 shall be increased by fifty percent of the contribution rate increase caused by any plan ((II)) 2 benefit increase passed after July 1, 1996.

(2) The required contribution rate for classified members of the plan 2 educational employees' retirement system shall be the same as the public employees' retirement system plan 2 employee rate, subject to the following:

(a) Any change to the public employees' retirement system plan 2 rate due to benefit increases shall not be included; and

(b) The rate shall be increased by fifty percent of the contribution rate increase caused by any plan 2 benefit increase affecting classified plan 2 members.

(3) The required plan ((II)) 2 and ((~~III~~)) 3 contribution rates for employers shall be adopted in the manner described in RCW 41.45.060.

Sec. 21. RCW 41.45.070 and 1995 c 239 s 310 are each amended to read as follows:

(1) In addition to the basic employer contribution rate established in RCW 41.45.060, the department shall also charge employers of public employees' retirement system, ((~~teachers'~~)) educational employees' retirement system, or Washington state patrol retirement system members an additional supplemental rate to pay for the cost of additional benefits, if any, granted to members of those systems. The supplemental contribution rates required by this section shall be calculated by the state actuary and shall be charged regardless of language to the contrary contained in the statute which authorizes additional benefits.

(2) In addition to the basic state contribution rate established in RCW 41.45.060 for the law enforcement officers' and fire fighters' retirement system the department shall also establish a supplemental rate to pay for the cost of additional benefits, if any, granted to members of the law enforcement officers' and fire fighters' retirement system. This supplemental rate shall be calculated by the state actuary and the state treasurer shall transfer the additional required contributions regardless of language to the contrary contained in the statute which authorizes the additional benefits.

(3) The supplemental rate charged under this section to fund benefit increases provided to active members of the public employees' retirement system plan ((I)) 1, the teachers' retirement system plan ((I)) 1, the law enforcement officers' and fire fighters' retirement system plan I, and Washington state patrol retirement system, shall be calculated as the level percentage of all members' pay needed to fund the cost of the benefit not later than June 30, 2024.

(4) The supplemental rate charged under this section to fund benefit increases provided to active and retired members of the public employees' retirement system plan ((II)) 2, the ((~~teachers'~~)) educational employees' retirement system plan ((II)) 2 and plan ((~~III~~)) 3, or the law enforcement officers' and fire fighters' retirement system plan II, shall be calculated as the level percentage of all members' pay needed to fund the cost of the benefit, as calculated under RCW 41.40.650((~~, 41.32.775,~~)) or 41.26.450, respectively.

(5) The supplemental rate charged under this section to fund postretirement adjustments which are provided on a nonautomatic basis to current retirees shall be calculated as the percentage of pay needed to fund the adjustments as they are paid to the retirees. The supplemental rate charged under this section to fund automatic postretirement adjustments for active or retired members of the public employees' retirement system plan ((I)) 1 and the teachers' retirement system plan ((I)) 1 shall be calculated as the level percentage of pay needed to fund the cost of the automatic adjustments not later than June 30, 2024.

NEW SECTION. Sec. 22. A new section is added to chapter 41.45 RCW to read as follows:

Until September 2001, the employer contribution rate charged on the salaries of classified employees shall be the same as the employer contribution rate adopted for the public employees' retirement system under RCW 41.45.060 and include the supplemental rate under RCW 41.45.070.

After September 2001, the employer contribution rate shall be calculated under RCW 41.45.060.

Sec. 23. RCW 41.45.070 and 1995 c 239 s 310 are each amended to read as follows:

NEW SECTION. Sec. 24. A new section is added to chapter 41.45 RCW to read as follows:

Educational employees' retirement system plan 2 and 3 classified employees' salaries will be included in calculation of the contribution rate necessary to fund the public employees' retirement system benefits.

Sec. 25. RCW 41.50.030 and 1995 c 239 s 316 are each amended to read as follows:

(1) As soon as possible but not more than one hundred and eighty days after March 19, 1976, there is transferred to the department of retirement systems, except as otherwise provided in this chapter, all powers, duties, and functions of:

(a) The Washington public employees' retirement system;

(b) The Washington state ((~~teachers'~~)) educational employees' retirement system;

(d) The Washington state patrol retirement system;

(e) The Washington judicial retirement system; and

(f) The state treasurer with respect to the administration of the judges' retirement fund imposed pursuant to chapter 2.12 RCW.

(2) On July 1, 1996, there is transferred to the department all powers, duties, and functions of the deferred compensation committee.

(3) The department shall administer chapter 41.34 RCW.

Sec. 26. RCW 41.50.075 and 1996 c 39 s 16 are each amended to read as follows:

(1) Two funds are hereby created and established in the state treasury to be known as the Washington law enforcement officers' and fire fighters' system plan I retirement fund, and the Washington law enforcement officers' and fire fighters' system plan II retirement fund which shall consist of all moneys paid into them in accordance with the provisions of this chapter and chapter 41.26 RCW, whether such moneys take the form of cash, securities, or other assets. The plan I fund shall consist of all moneys paid to finance the benefits provided to members of the law enforcement officers' and fire fighters' retirement system plan I, and the plan II fund shall consist of all moneys paid to finance the benefits provided to members of the law enforcement officers' and fire fighters' retirement system plan II.

(2) All of the assets of the Washington state ((~~teachers'~~)) educational employees' retirement system shall be credited according to the purposes for which they are held, to two funds to be maintained in the state treasury, namely, the teachers' retirement system plan ((I)) 1 fund and the ((~~teachers'~~)) educational employees' retirement system combined plan ((II)) 2 and ((~~III~~)) 3 fund. The plan ((I)) 1 fund shall consist of all moneys paid to finance the benefits provided to members of the Washington state teachers' retirement system plan ((I)) 1, and the combined plan ((II)) 2 and ((~~III~~)) 3 fund shall consist of all moneys paid to finance the benefits provided to members of the Washington state ((~~teachers'~~)) educational employees' retirement system plan ((II)) 2 and ((~~III~~)) 3.

(3) There is hereby established in the state treasury two separate funds, namely the public employees' retirement system plan ((I)) 1 fund and the public employees' retirement system plan ((II)) 2 fund. The plan ((I)) 1 fund shall consist of all moneys paid to finance the benefits provided to members of the public employees' retirement system plan ((I)) 1, and the plan ((II)) 2 fund shall consist of all moneys paid to finance the benefits provided to members of the public employees' retirement system plan ((II)) 2.

Sec. 27. RCW 41.50.080 and 1981 c 3 s 34 are each amended to read as follows:

The state investment board shall provide for the investment of all funds of the Washington public employees' retirement system, the ((~~teachers'~~)) educational employees' retirement system, the Washington law enforcement officers' and fire fighters' retirement system, the Washington state patrol retirement system, the Washington judicial retirement system, and the judges' retirement fund, pursuant to RCW 43.84.150, and may sell or exchange investments acquired in the exercise of that authority.

Sec. 28. RCW 41.50.086 and 1995 c 239 s 301 are each amended to read as follows:

(1) The employee retirement benefits board is created within the department of retirement systems.

(2) The board shall be composed of eight members appointed by the governor and one ex officio member as follows:

(a) Three members representing the public employees' retirement system: One retired, two active. The members shall be appointed from a list of nominations submitted by organizations representing each category. The initial term of appointment shall be two years for the retired member, one year for one active member, and three years for the remaining active member.

(b) Three members representing the ((~~teachers'~~)) educational employees' retirement system: One retired, two active. The members shall be appointed from a list of nominations submitted by organizations representing each category. The initial term of appointment shall be one year for the retired member, two years for one active member, and three years for the remaining active member.

(c) Two members with experience in defined contribution plan administration. The initial term for these members shall be two years for one member and three years for the remaining member.

(d) The director of the department shall serve ex officio and shall be the chair of the board.

(3) After the initial appointments, members shall be appointed to three-year terms.

(4) The board shall meet at least quarterly during the calendar year, at the call of the chair.

(5) Members of the board shall serve without compensation but shall receive travel expenses as provided for in RCW 43.03.050 and 43.03.060. Such travel expenses shall be reimbursed by the department from the retirement system expense fund.

(6) The board shall adopt rules governing its procedures and conduct of business.

(7) The actuary shall perform all actuarial services for the board and provide advice and support.

(8) The state investment board shall provide advice and support to the board.

Sec. 29. RCW 41.50.200 and 1992 c 212 s 2 are each amended to read as follows:

In the records of the ((~~teachers'~~)) educational employees' retirement system the teachers' retirement system plan ((I)) 1 fund shall be subdivided into the member reserve, the pension reserve, and other funds as may from time to time be created by the director for the purpose of the internal accounting record. The director may adopt rules creating or deleting funds as he or she deems necessary.

Sec. 30. RCW 41.50.205 and 1991 c 35 s 33 are each amended to read as follows:

The department shall keep a record of all its proceedings, which shall be open to public inspection. It shall publish annually a report showing the fiscal transactions of the Washington state ((~~teachers'~~)) educational employees' retirement system for the preceding school year; the amount of the accumulated cash and securities of the system, and the last balance sheet showing the financial condition of the system by means of an actuarial valuation of the assets and liabilities of the retirement system.

Sec. 31. RCW 41.50.215 and 1992 c 212 s 6 are each amended to read as follows:

From interest and other earnings on the moneys of the Washington state ((~~teachers'~~)) educational employees' retirement system((~~, and except as otherwise provided in RCW 41.32.499,~~)) at the close of each fiscal year the department shall make an allowance of regular interest on the balance which was on hand at the beginning of the fiscal year in each of the ((~~teachers'~~)) educational employees' retirement system funds as they may deem advisable; however, no interest shall be credited to the expense fund.

Sec. 32. RCW 41.50.230 and 1991 c 35 s 51 are each amended to read as follows:

On or before a date specified by the department in each month every employer shall file a report with the department on a form provided, stating the name of the employer and with respect to each employee who is a member or who is required to become a member of the Washington state ((~~teachers'~~)) educational employees' retirement system: (1) The full name, (2) the earnable compensation paid, (3) the employee's contribution to the retirement system, and (4) other information as the department shall require.

Sec. 33. RCW 41.50.240 and 1977 ex.s. c 293 s 17 are each amended to read as follows:

The person responsible for making up the payroll shall transmit promptly to the department at the end of each and every payroll period a copy of the original payroll voucher or such other payroll report as the department may require showing thereon all deductions for contributions for the ((~~teachers'~~)) educational employees' retirement system made from the earnable compensation of a member of the ((~~teachers'~~)) educational employees' retirement system together with warrants or checks covering the total of such deductions. The department shall place such moneys into the proper funds established in this chapter.

NEW SECTION. Sec. 34. A new section is added to chapter 41.54 RCW to read as follows:

For purposes of calculating retirement benefits under this chapter, classified members of the educational employees' retirement system plan 2, employed in two or more public employees' retirement system positions on the effective date of this act may include compensation earnable from their nonschool district position.

Sec. 35. RCW 43.33A.020 and 1985 c 195 s 1 are each amended to read as follows:

There is hereby created the state investment board to consist of fourteen members to be appointed as provided in this section.

(1) One member who is an active member of the public employees' retirement system and has been an active member for at least five years. This member shall be appointed by the governor, subject to confirmation by the senate, from a list of nominations submitted by organizations representing active members of the system. The initial term of appointment shall be one year.

(2) One member who is an active member of the law enforcement officers' and fire fighters' retirement system and has been an active member for at least five years. This member shall be appointed by the governor, subject to confirmation by the senate, from a list of nominations submitted by organizations representing active members of the system. The initial term of appointment shall be two years.

(3) One member who is an active member of the ((~~teachers'~~)) educational employees' retirement system and has been an active member for at least five years. This member shall be appointed by the superintendent of public instruction subject to confirmation by the senate. The initial term of appointment shall be three years.

(4) The state treasurer or the assistant state treasurer if designated by the state treasurer.

(5) A member of the state house of representatives. This member shall be appointed by the speaker of the house of representatives.

(6) A member of the state senate. This member shall be appointed by the president of the senate.

(7) One member who is a retired member of a state retirement system shall be appointed by the governor, subject to confirmation by the senate. The initial term of appointment shall be three years.

(8) The director of the department of labor and industries.

(9) The director of the department of retirement systems.

(10) Five nonvoting members appointed by the state investment board who are considered experienced and qualified in the field of investments.

The legislative members shall serve terms of two years. The initial legislative members appointed to the board shall be appointed no sooner than January 10, 1983. The position of a legislative member on the board shall become vacant at the end of that member's term on the board or whenever the member ceases to be a member of the senate or house of representatives from which the member was appointed.

After the initial term of appointment, all other members of the state investment board, except ex officio members, shall serve terms of three years and shall hold office until successors are appointed. Members' terms, except for ex officio members, shall commence on January 1 of the year in which the appointments are made.

Members may be reappointed for additional terms. Appointments for vacancies shall be made for the unexpired terms in the same manner as the original appointments. Any member may be removed from the board for cause by the member's respective appointing authority.

NEW SECTION. Sec. 36. The following acts or parts of acts are each repealed:

(1) RCW 41.32.020 and 1947 c 80 s 2; and

(2) RCW 41.32.818 and 1996 c 39 s 3 & 1995 c 239 s 304.

NEW SECTION. Sec. 37. RCW 41.32.032 and 41.50.132 are decodified.

NEW SECTION. Sec. 38. This act takes effect July 1, 1998.