H-1621.2 _______________________________________________
HOUSE BILL 2185
_______________________________________________
State of Washington 57th Legislature 2001 Regular Session
By Representatives Cooper, Delvin, Romero, Hunt, Reardon, D. Schmidt, Rockefeller, Linville and Edwards
Read first time 02/22/2001. Referred to Committee on Appropriations.
AN ACT Relating to creating the state pension board; amending RCW 41.45.020, 41.45.030, 41.45.090, 41.40.650, and 41.26.450; reenacting and amending RCW 41.45.020 and 41.45.060; adding new sections to chapter 41.45 RCW; adding new sections to chapter 41.50 RCW; repealing RCW 41.45.100, 41.45.110, and 41.45.120; decodifying RCW 41.45.0602; providing an effective date; and providing an expiration date.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1. It is the intent of the legislature to articulate the fiduciary responsibilities of the trustees and others who oversee the public retirement systems. The legislature also intends to promote effective monitoring of public retirement systems by requiring regular and significant disclosure of the financial and actuarial status of the systems to participants and their beneficiaries and to the public.
NEW SECTION. Sec. 2. (1)(a) The state pension board is created and consists of the following members:
(i) Four representatives of active members of the state retirement system appointed by the governor for staggered three-year terms with initial appointments of one, two, and three years;
(ii) Two representatives of retired members of the state retirement system appointed by the governor for staggered three-year terms with initial appointments of two and three years, with no two members from the same system;
(iii) The director of the department of retirement systems, the director of financial management, and the executive director of the state investment board;
(iv) Four members of the legislature, with one member each representing the two largest caucuses in the senate and house of representatives, appointed by the president of the senate and the speaker of the house of representatives; and
(v) Two members representing local governments, appointed by the governor.
(b) The board shall establish policies and procedures for its internal management, including an independent audit every two years.
(2) The board shall provide open and balanced review of state pension policy issues, and establish state retirement system contribution rates and the long-term assumptions used in developing those rates.
(a) The board shall set pension contribution rates as set forth in chapter 41.45 RCW.
(b) The board shall advise and recommend proposed changes in pension policy and legislation to the legislature.
(c) The board shall advise the department of retirement systems on the preparation of the summary level and consolidated annual financial report.
(d) The board shall appoint an actuary to advise the board.
(3) The board shall from time to time make written recommendations to the legislature concerning deficiencies, conflicts, or obsolete provisions in, and need for reorganization or revision of, the statutes governing pension policy, and shall prepare for submission to the legislature, legislation for the correction or removal of those deficiencies, conflicts, or obsolete provisions, or to otherwise improve the form or substance of any portion of the statute law of this state as the public interest or the administration of pension policy may require.
(4)The board shall discharge its duties:
(a) Solely in the interest of the participants and beneficiaries;
(b) Impartially, taking into account any differing interests of participants and beneficiaries; and
(c) In accordance with a good faith interpretation of the law governing the retirement systems.
(5) The director of retirement systems shall provide staff and equipment as necessary.
Sec. 3. RCW 41.45.020 and 1998 c 341 s 402 and 1998 c 283 s 1 are each reenacted and 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"))
"Board" means the state pension ((funding council))
board created in ((RCW 41.45.100)) section 2 of this act.
(2) "Department" means the department of retirement systems.
(3) "Law enforcement officers' and fire fighters' retirement system plan 1" and "law enforcement officers' and fire fighters' retirement system plan 2" mean the benefits and funding provisions under chapter 41.26 RCW.
(4) "Public employees' retirement system plan 1" and "public employees' retirement system plan 2" mean the benefits and funding provisions under chapter 41.40 RCW.
(5) "Teachers' retirement system plan 1," "teachers' retirement system plan 2," and "teachers' retirement system plan 3" mean the benefits and funding provisions under chapter 41.32 RCW.
(6) "School employees' retirement system plan 2" and "school employees' retirement system plan 3" mean the benefits and funding provisions under chapter 41.35 RCW.
(7) "Washington state patrol retirement system" means the retirement benefits provided under chapter 43.43 RCW.
(8) "Unfunded liability" means the unfunded actuarial accrued liability of a retirement system.
(9) "Actuary" or "state actuary" means the state actuary employed under chapter 44.44 RCW.
(10) "State retirement systems" means the retirement systems listed in RCW 41.50.030.
(11) (("Work
group" means the pension funding work group created in RCW 41.45.120.
(12))) "Classified employee" means a member
of the Washington school employees' retirement system plan 2 or plan 3 as
defined in RCW 41.35.010.
(((13))) (12)
"Teacher" means a member of the teachers' retirement system as
defined in RCW 41.32.010(15).
Sec. 4. RCW 41.45.020 and 2000 c 247 s 502 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"))
"Pension board" means the state pension ((funding
council)) board created in ((RCW 41.45.100)) section 2 of
this act.
(2) "Department" means the department of retirement systems.
(3) "Law enforcement officers' and fire fighters' retirement system plan 1" and "law enforcement officers' and fire fighters' retirement system plan 2" mean the benefits and funding provisions under chapter 41.26 RCW.
(4) "Public employees' retirement system plan 1," "public employees' retirement system plan 2," and "public employees' retirement system plan 3" mean the benefits and funding provisions under chapter 41.40 RCW.
(5) "Teachers' retirement system plan 1," "teachers' retirement system plan 2," and "teachers' retirement system plan 3" mean the benefits and funding provisions under chapter 41.32 RCW.
(6) "School employees' retirement system plan 2" and "school employees' retirement system plan 3" mean the benefits and funding provisions under chapter 41.35 RCW.
(7) "Washington state patrol retirement system" means the retirement benefits provided under chapter 43.43 RCW.
(8) "Unfunded liability" means the unfunded actuarial accrued liability of a retirement system.
(9) "Actuary" or "state actuary" means the state actuary employed under chapter 44.44 RCW.
(10) "State retirement systems" means the retirement systems listed in RCW 41.50.030.
(11) (("Work
group" means the pension funding work group created in RCW 41.45.120.
(12))) "Classified employee" means a member
of the Washington school employees' retirement system plan 2 or plan 3 as
defined in RCW 41.35.010.
(((13))) (12)
"Teacher" means a member of the teachers' retirement system as
defined in RCW 41.32.010(15).
Sec. 5. RCW 41.45.030 and 1995 c 233 s 1 are each amended to read as follows:
(1) Beginning ((September
1, 1995)) on the effective date of this section, and every two years
thereafter, the state actuary shall submit to the ((council)) board
information regarding the experience and financial condition of each state
retirement system. The ((council)) board shall review this and
such other information as it may require.
(2) By December 31, ((1995))
2003, and every two years thereafter, the ((council)) board,
by affirmative vote of ((five councilmembers)) eight board members,
shall adopt the following long-term economic assumptions:
(a) Growth in system membership;
(b) Growth in salaries, exclusive of merit or longevity increases;
(c) Growth in inflation; and
(d) Investment rate of return.
The ((council)) board
shall ((work with the department of retirement systems, the state actuary,
and the executive director of the state investment board, and shall))
consider long-term historical averages, in developing the economic assumptions.
(3) The assumptions
adopted by the ((council)) board shall be used by the state
actuary in conducting all actuarial studies of the state retirement systems.
Sec. 6. RCW 41.45.060 and 2000 2nd sp.s. c 1 s 905 and 2000 c 247 s 504 are each reenacted and 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, 1998)) December 31, 2001, and every two years thereafter,
consistent with the assumptions adopted under RCW 41.45.030, the ((council))
pension board shall adopt and may make changes to:
(a) A basic state contribution rate for the law enforcement officers' and fire fighters' retirement system;
(b) Basic employer contribution rates for the public employees' retirement system, the teachers' retirement system, and the Washington state patrol retirement system to be used in the ensuing biennial period; and
(c) A basic employer contribution rate for the school employees' retirement system for funding the public employees' retirement system plan 1.
((For the 1999-2001
fiscal biennium, the rates adopted by the council shall be effective for the
period designated in section 902, chapter 1, Laws of 2000 2nd sp. sess. and RCW
41.45.0602.))
(3) The employer and
state contribution rates adopted by the ((council)) pension board
shall be the level percentages of pay that are needed:
(a) To fully amortize the total costs of the public employees' retirement system plan 1, the teachers' retirement system plan 1, the law enforcement officers' and fire fighters' retirement system plan 1, and the unfunded liability of the Washington state patrol retirement system not later than June 30, 2024, except as provided in subsection (5) of this section;
(b) To also continue to fully fund the public employees' retirement system plans 2 and 3, the teachers' retirement system plans 2 and 3, the school employees' retirement system plans 2 and 3, and the law enforcement officers' and fire fighters' retirement system plan 2 in accordance with RCW 41.45.061, 41.45.067, and this section; and
(c) For the law enforcement officers' and fire fighters' system plan 2 the rate charged to employers, except as provided in RCW 41.26.450, shall be thirty percent of the cost of the retirement system and the rate charged to the state shall be twenty percent of the cost of the retirement system.
(4) The aggregate actuarial cost method shall be used to calculate a combined plan 2 and 3 employer contribution rate.
(5) An amount equal to the amount of extraordinary investment gains as defined in RCW 41.31.020 shall be used to shorten the amortization period for the public employees' retirement system plan 1 and the teachers' retirement system plan 1.
(6) The ((council))
pension board shall immediately notify the directors of the office of
financial management and department of retirement systems of the state and
employer contribution rates adopted.
(7) The director of the
department of retirement systems shall collect those rates adopted by the ((council))
pension board.
NEW SECTION. Sec. 7. The following acts or parts of acts are each repealed:
(1) RCW 41.45.100 (Pension funding council--Created) and 1998 c 283 s 2;
(2) RCW 41.45.110 (Pension funding council--Audits required) and 1998 c 283 s 3; and
(3) RCW 41.45.120 (Pension funding work group) and 1998 c 283 s 4.
NEW SECTION. Sec. 8. RCW 41.45.0602 (Washington state patrol basic employer contribution rate) is decodified.
Sec. 9. RCW 41.45.090 and 1998 c 283 s 7 are each amended to read as follows:
The department shall
collect and keep in convenient form such data as shall be necessary for an
actuarial valuation of the assets and liabilities of the state retirement
systems, and for making an actuarial investigation into the mortality, service,
compensation, and other experience of the members and beneficiaries of those
systems. The department and state actuary shall enter into a memorandum of
understanding regarding the specific data the department will collect, when it
will be collected, and how it will be maintained. The department shall notify
the ((state actuary)) pension board of any changes it makes, or
intends to make, in the collection and maintenance of such data.
At least once in each
six-year period, the state actuary shall conduct an actuarial experience study
of the mortality, service, compensation and other experience of the members and
beneficiaries of each state retirement system, and into the financial condition
of each system. The results of each investigation shall be filed with the
department, the office of financial management, the budget writing committees
of the Washington house of representatives and senate, and the pension ((funding
council)) board. Upon the basis of such actuarial investigation the
department, with approval of the pension board, shall adopt such tables,
schedules, factors, and regulations as are deemed necessary in the light of the
findings of the actuary or the pension board for the proper operation of
the state retirement systems.
Sec. 10. RCW 41.40.650 and 1989 c 273 s 24 are each amended to read as follows:
The required
contribution rates to the retirement system for both members and employers
shall be established by the ((director)) state pension board from
time to time as may be necessary ((upon the advice of the state actuary.
The state actuary shall use the aggregate actuarial cost method to calculate
contribution rates)). The employer contribution rate calculated under this
section shall be used only for the purpose of determining the amount of
employer contributions to be deposited in the plan 2 fund from the total
employer contributions collected under RCW 41.40.048.
Contribution rates required to fund the costs of the retirement system shall always be equal for members and employers, except as herein provided. Effective January 1, 1987, however, no member or employer contributions are required for any calendar month in which the member is not granted service credit. Any adjustments in contribution rates required from time to time for future costs shall likewise be shared equally by the members and employers.
Any increase in the contribution rate required as the result of a failure of an employer to make any contribution required by this section shall be borne in full by the employer not making the contribution.
The director shall notify all employers of any pending adjustment in the required contribution rate and such increase shall be announced at least thirty days prior to the effective date of the change.
Members contributions required by this section shall be deducted from the members compensation earnable each payroll period. The members contribution and the employers contribution shall be remitted directly to the department within fifteen days following the end of the calendar month during which the payroll period ends.
Sec. 11. RCW 41.26.450 and 1996 c 38 s 3 are each amended to read as follows:
(1) The required
contribution rates to the plan 2 system for members, employers, and the state
of Washington shall be established by the ((director)) state pension
board from time to time as may be necessary ((upon the advice of the
state actuary. The state actuary shall use the aggregate actuarial cost method
to calculate contribution rates)).
(2) Except as provided in subsection (3) of this section, the member, the employer and the state shall each contribute the following shares of the cost of the retirement system:
Member 50%
Employer 30%
State 20%
(3) Port districts established under Title 53 RCW and institutions of higher education as defined in RCW 28B.10.016 shall contribute both the employer and state shares of the cost of the retirement system for any of their employees who are law enforcement officers. Institutions of higher education shall contribute both the employer and the state shares of the cost of the retirement system for any of their employees who are fire fighters.
(4) Effective January 1, 1987, however, no member or employer contributions are required for any calendar month in which the member is not granted service credit.
(5) Any adjustments in contribution rates required from time to time for future costs shall likewise be shared proportionally by the members, employers, and the state.
(6) Any increase in the contribution rate required as the result of a failure of the state or of an employer to make any contribution required by this section shall be borne in full by the state or by that employer not making the contribution.
(7) The director shall notify all employers of any pending adjustment in the required contribution rate and such increase shall be announced at least thirty days prior to the effective date of the change.
(8) Members' contributions required by this section shall be deducted from the members basic salary each payroll period. The members contribution and the employers contribution shall be remitted directly to the department within fifteen days following the end of the calendar month during which the payroll period ends. The state's contribution required by this section shall be transferred to the plan 2 fund from the total contributions transferred by the state treasurer under RCW 41.45.060 and 41.45.070.
NEW SECTION. Sec. 12. A new section is added to chapter 41.50 RCW to read as follows:
The department of retirement systems, under direction of the state pension board, is to produce a summary level and consolidated annual financial report with the focus of presenting information about the status of the various retirement plans to active and retired members, policy makers, and other interested parties. Information included in the report is to be provided by the office of the state actuary, any actuary advising the pension board, the state investment board, and the department of retirement systems. The department shall consult with the state investment board and the office of the state actuary during the preparation of this report. The report shall be concise and understandable as determined by the users of this information. The department shall meet with the active and retired members of the retirement systems in order to ensure the usability of the report. In addition, the department shall give annual notice of report review and then accept and consider input on the style and substance of the report from interested parties.
NEW SECTION. Sec. 13. A new section is added to chapter 41.50 RCW to read as follows:
Beginning in 2001 and every four years thereafter, the department of retirement systems, under the direction of the state pension board, shall convene a task force comprised of representatives of the department of retirement systems, the office of the state actuary, the state investment board, the office of financial management, and the office of the state auditor. This task force shall review all the major reports prepared by state agencies concerning the state retirement systems and examine the best practices from other states. The goals of the task force are to determine what information needs to be reported and to seek ways to: Promote more effective monitoring of the public retirement systems, streamline reporting, become more efficient in the production and distribution of the information, minimize redundancies and confusion, and maximize the public's investment in these reports. The task force shall report by the end of October in each year the task force is convened to the state pension board with their recommendations for changing and consolidating these reports. Any changes in current state law that may be required to accomplish these recommendations shall be noted.
NEW SECTION. Sec. 14. Sections 1 and 2 of this act are each added to chapter 41.45 RCW.
NEW SECTION. Sec. 15. Sections 3, 10, and 11 of this act expire March 1, 2002.
NEW SECTION. Sec. 16. Section 4 of this act takes effect March 1, 2002.
NEW SECTION. Sec. 17. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.
--- END ---