CERTIFICATION OF ENROLLMENT

 

             ENGROSSED SUBSTITUTE SENATE BILL 6167

 

 

                    Chapter 11, Laws of 2001

 

                         (partial veto)

 

                        57th Legislature

                  2001 Second Special Session

 

 

RETIREMENT SYSTEMS--ACTUARIAL FUNDING

 

 

 

EFFECTIVE DATE:  7/1/01 - Except sections 2, 3, 4, 8, 13, 14, and 16, which become effective 3/1/02.

 

Passed by the Senate June 8, 2001

  YEAS 26   NAYS 16

 

 

               BRAD OWEN

President of the Senate

 

Passed by the House June 21, 2001

  YEAS 51   NAYS 36

             CERTIFICATE

 

I, Tony M. Cook, Secretary of the Senate of the State of Washington, do hereby certify that the attached is  ENGROSSED SUBSTITUTE SENATE BILL 6167 as passed by the Senate and the House of Representatives on the dates hereon set forth.

 

 

              FRANK CHOPP

Speaker of the

      House of Representatives

            TONY M. COOK

                            Secretary

 

 

 

             CLYDE BALLARD

Speaker of the

      House of Representatives

 

 

Approved June 26, 2001, with the exception of section 18, which is vetoed.Place Style On Codes above, and Style Off Codes below.    

                                FILED          

 

 

           June 26, 2001 - 11:49 a.m.

 

 

 

              GARY LOCKE

Governor of the State of Washington

                 Secretary of State

                 State of Washington


          _______________________________________________

 

               ENGROSSED SUBSTITUTE SENATE BILL 6167

          _______________________________________________

 

                     Passed Legislature - 2001

 

State of Washington      57th Legislature     2001 Regular Session

 

By Senate Committee on Ways & Means (originally sponsored by Senators Brown, Snyder, Spanel and B. Sheldon)

 

READ FIRST TIME 03/30/01.

Ensuring sound actuarial funding of the state retirement systems.    


    AN ACT Relating to actuarial funding of state retirement systems; amending RCW 41.45.010, 41.45.010, 41.45.020, 41.45.030, 41.45.050, 41.45.050, 41.45.061, 41.45.067, 41.45.070, 41.45.080, and 41.45.120; reenacting and amending RCW 41.45.020, 41.45.060, 41.45.061, and 41.45.070; adding new sections to chapter 41.45 RCW; decodifying RCW 41.45.0602; providing effective dates; providing an expiration date; and declaring an emergency.

 

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

 

    Sec. 1.  RCW 41.45.010 and 1998 c 341 s 401 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' retirement system, chapter 41.32 RCW; the law enforcement officers' and fire fighters' retirement systems, chapters 41.26 and 41.26A RCW; the school employees' retirement system, chapter 41.35 RCW; and the Washington state patrol retirement system, chapter 43.43 RCW.

    The legislature finds that the funding status of the state retirement systems has improved dramatically since 1989.  Because of the big reduction in unfunded pension liabilities, it is now prudent to adjust the long-term economic assumptions that are used in the actuarial studies conducted by the state actuary.  The legislature finds that it is reasonable to increase the salary growth assumption in light of Initiative Measure No. 732, to increase the investment return assumption in light of the asset allocation policies and historical returns of the state investment board, and to reestablish June 30, 2024, as the target date to achieve full funding of all liabilities in the public employees' retirement system plan 1 and the teachers' retirement system plan 1.

    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 2, 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 as provided by law;

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

    (3) To ensure the actuarial funding of the restated law enforcement officers' and fire fighters' retirement system defined benefit plan, and provide for additional state funding if unfunded liabilities accrue in the future;

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

    (((4))) (5) To fund, to the extent feasible, benefit increases for plan 1 members and all benefits for plan 2 and 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. 2.  RCW 41.45.010 and 2000 c 247 s 501 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' retirement system, chapter 41.32 RCW; the law enforcement officers' and fire fighters' retirement systems, chapters 41.26 and 41.26A RCW; the school employees' retirement system, chapter 41.35 RCW; and the Washington state patrol retirement system, chapter 43.43 RCW.

    The legislature finds that the funding status of the state retirement systems has improved dramatically since 1989.  Because of the big reduction in unfunded pension liabilities, it is now prudent to adjust the long-term economic assumptions that are used in the actuarial studies conducted by the state actuary.  The legislature finds that it is reasonable to increase the salary growth assumption in light of Initiative Measure No. 732, to increase the investment return assumption in light of the asset allocation policies and historical returns of the state investment board, and to reestablish June 30, 2024, as the target date to achieve full funding of all liabilities in the public employees' retirement system plan 1 and the teachers' retirement system plan 1.

    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 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 as provided by law;

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

    (3) To ensure the actuarial funding of the restated law enforcement officers' and fire fighters' retirement system defined benefit plan, and provide for additional state funding if unfunded liabilities accrue in the future;

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

    (((4))) (5) To fund, to the extent feasible, benefit increases for plan 1 members and all benefits for plan 2 and 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. 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" means the pension funding council created in RCW 41.45.100.

    (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" means the benefits and funding provisions under chapter 41.26 RCW.

    (4) "Restated law enforcement officers' and fire fighters' retirement system defined benefit plan" means the benefits and funding provisions under chapter 41.26A RCW.

    (5) "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))) (6) "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))) (7) "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))) (8) "Washington state patrol retirement system" means the retirement benefits provided under chapter 43.43 RCW.

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

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

    (((10))) (11) "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) "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" means the pension funding council created in RCW 41.45.100.

    (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" means the benefits and funding provisions under chapter 41.26 RCW.

    (4) "Restated law enforcement officers' and fire fighters' retirement system defined benefit plan" means the benefits and funding provisions under chapter 41.26A RCW.

    (5) "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))) (6) "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))) (7) "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))) (8) "Washington state patrol retirement system" means the retirement benefits provided under chapter 43.43 RCW.

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

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

    (((10))) (11) "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) "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)) April 1, ((1995)) 2004, and every ((two)) four years thereafter, the state actuary shall submit to the council information regarding the experience and financial condition of each state retirement system.  The council shall review this and such other information as it may require.

    (2) By ((December)) May 31, ((1995)) 2004, and every ((two)) four years thereafter, the council, by affirmative vote of ((five)) four councilmembers, ((shall)) may adopt changes to 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)) established in section 6 of this actAny changes adopted by the council shall be subject to revision by the legislature.

    The council shall ((work)) consult with the ((department of retirement systems, the state actuary,)) economic and revenue forecast supervisor and the executive director of the state investment board, and shall consider long-term historical averages, in ((developing)) reviewing possible changes to the economic assumptions.

    (3) The assumptions ((adopted)) and the asset value smoothing technique established in section 6 of this act, as modified in the future by the council or legislature, shall be used by the state actuary in conducting all actuarial studies of the state retirement systems, including actuarial fiscal notes under RCW 44.44.040.  The assumptions shall also be used for the administration of benefits under the retirement plans listed in RCW 41.45.020, pursuant to timelines and conditions established by department rules.

 

    NEW SECTION.  Sec. 6.  A new section is added to chapter 41.45 RCW to read as follows:

    (1) Beginning July 1, 2001, the following long-term economic assumptions shall be used by the state actuary for the purposes of RCW 41.45.030:

    (a) The growth in inflation assumption shall be 3.5 percent;

    (b) The growth in salaries assumption, exclusive of merit or longevity increases, shall be 4.5 percent;

    (c) The investment rate of return assumption shall be 8 percent; and

    (d) The growth in system membership assumption shall be 1.25 percent for the public employees' retirement system, the school employees' retirement system, and the law enforcement officers' and fire fighters' retirement system.  The assumption shall be .90 percent for the teachers' retirement system.

    (2) Beginning with actuarial studies done after July 1, 2001, changes to plan asset values that vary from the long-term investment rate of return assumption shall be recognized over a four-year period.  Beginning April 1, 2004, the council, by affirmative vote of four councilmembers, may adopt changes to this asset value smoothing technique.  Any changes adopted by the council shall be subject to revision by the legislature.

 

    Sec. 7.  RCW 41.45.050 and 1998 c 341 s 403 are each amended to read as follows:

    (1) Employers of members of the public employees' retirement system, the teachers' retirement system, the school 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, section 9 of this act, and 41.45.070.

    (2) The state shall make contributions to the law enforcement officers' and fire fighters' retirement system plan 2 based on the rates established in RCW 41.45.060, section 9 of this act, 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 state shall ensure the systematic actuarial funding of the restated law enforcement officers' and fire fighters' retirement system defined benefit plan in the manner provided by chapter 41.26A RCW.

    (4) The department shall bill employers, and the state shall make contributions to the law enforcement officers' and fire fighters' retirement system plan 2, using the combined rates established in RCW 41.45.060, section 9 of this act, and 41.45.070 regardless of the level of ((pension funding)) appropriation 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))) (5) The contributions received for the public employees' retirement system shall be allocated between the public employees' retirement system plan 1 fund and public employees' retirement system plan 2 fund as follows:  The contributions necessary to fully fund the public employees' retirement system plan 2 employer contribution required by RCW 41.40.650 shall first be deposited in the public employees' retirement system plan 2 fund.  All remaining public employees' retirement system employer contributions shall be deposited in the public employees' retirement system plan 1 fund.

    (((5))) (6) The contributions received for the teachers' retirement system shall be allocated between the plan 1 fund and the combined plan 2 and plan 3 fund as follows:  The contributions necessary to fully fund the combined plan 2 and plan 3 employer contribution shall first be deposited in the combined plan 2 and plan 3 fund.  All remaining teachers' retirement system employer contributions shall be deposited in the plan 1 fund.

    (((6))) (7) The contributions received for the school employees' retirement system shall be allocated between the public employees' retirement system plan 1 fund and the school employees' retirement system combined plan 2 and plan 3 fund as follows:  The contributions necessary to fully fund the combined plan 2 and plan 3 employer contribution shall first be deposited in the combined plan 2 and plan 3 fund.  All remaining school employees' retirement system employer contributions shall be deposited in the public employees' retirement system plan 1 fund.

    (((7))) (8) The contributions received ((under RCW 41.26.450)) for the law enforcement officers' and fire fighters' retirement system plan 2 shall be ((allocated between the law enforcement officers' and fire fighters' retirement system plan 1 and the law enforcement officers' and fire fighters' retirement system plan 2 fund as follows:  The contributions necessary to fully fund the law enforcement officers' and fire fighters' retirement system plan 2 employer contributions shall be first)) deposited in the law enforcement officers' and fire fighters' retirement system plan 2 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 1 fund.))

 

    Sec. 8.  RCW 41.45.050 and 2000 c 247 s 503 are each amended to read as follows:

    (1) Employers of members of the public employees' retirement system, the teachers' retirement system, the school 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, section 9 of this act, and 41.45.070.

    (2) The state shall make contributions to the law enforcement officers' and fire fighters' retirement system plan 2 based on the rates established in RCW 41.45.060, section 9 of this act, 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 state shall ensure the systematic actuarial funding of the restated law enforcement officers' and fire fighters' retirement system defined benefit plan in the manner provided by chapter 41.26A RCW.

    (4) The department shall bill employers, and the state shall make contributions to the law enforcement officers' and fire fighters' retirement system plan 2, using the combined rates established in RCW 41.45.060, section 9 of this act, and 41.45.070 regardless of the level of ((pension funding)) appropriation 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))) (5) The contributions received for the public employees' retirement system shall be allocated between the public employees' retirement system plan 1 fund and the public employees' retirement system combined plan 2 and plan 3 fund as follows:  The contributions necessary to fully fund the public employees' retirement system combined plan 2 and plan 3 employer contribution shall first be deposited in the public employees' retirement system combined plan 2 and plan 3 fund.  All remaining public employees' retirement system employer contributions shall be deposited in the public employees' retirement system plan 1 fund.

    (((5))) (6) The contributions received for the teachers' retirement system shall be allocated between the plan 1 fund and the combined plan 2 and plan 3 fund as follows:  The contributions necessary to fully fund the combined plan 2 and plan 3 employer contribution shall first be deposited in the combined plan 2 and plan 3 fund.  All remaining teachers' retirement system employer contributions shall be deposited in the plan 1 fund.

    (((6))) (7) The contributions received for the school employees' retirement system shall be allocated between the public employees' retirement system plan 1 fund and the school employees' retirement system combined plan 2 and plan 3 fund as follows:  The contributions necessary to fully fund the combined plan 2 and plan 3 employer contribution shall first be deposited in the combined plan 2 and plan 3 fund.  All remaining school employees' retirement system employer contributions shall be deposited in the public employees' retirement system plan 1 fund.

    (((7))) (8) The contributions received ((under RCW 41.45.060, 41.45.061, and 41.45.067)) for the law enforcement officers' and fire fighters' retirement system plan 2 shall be ((allocated between the law enforcement officers' and fire fighters' retirement system plan 1 and the law enforcement officers' and fire fighters' retirement system plan 2 fund as follows:  The contributions necessary to fully fund the law enforcement officers' and fire fighters' retirement system plan 2 employer contributions shall be first)) deposited in the law enforcement officers' and fire fighters' retirement system plan 2 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 1 fund.))

 

    NEW SECTION.  Sec. 9.  A new section is added to chapter 41.45 RCW to read as follows:

    (1) The basic employer and state contribution rates, and plan 2 member contribution rates, are changed to reflect the 1999 combined actuarial valuation studies conducted by the office of the state actuary, adjusted solely for the changes in the long-term economic assumptions contained in section 6 of this act, and for the reestablishment of the June 30, 2024, target date for funding all plan 1 liabilities.

    Beginning July 1, 2001, the following employer contribution rates shall be charged:

    (a) 1.54 percent for the public employees' retirement system; and

    (b) 2.70 percent for the law enforcement officers' and fire fighters' retirement system plan 2.

    (2) Beginning July 1, 2001, the basic state contribution rate for the law enforcement officers' and fire fighters' retirement system plan 2 shall be 1.80 percent.

    (3) Beginning September 1, 2001, the following employer contribution rates shall be charged:

    (a) 1.54 percent for the school employees' retirement system; and

    (b) 2.75 percent for the teachers' retirement system.

    (4) Beginning July 1, 2001, the following member contribution rates shall be charged:

    (a) 0.88 percent for the public employees' retirement system plan 2; and

    (b) 4.50 percent for the law enforcement officers' and fire fighters' retirement system plan 2.

    (5) Beginning September 1, 2001, the following member contribution rates shall be charged:

    (a) 0.88 percent for the school employees' retirement system plan 2; and

    (b) 1.23 percent for the teachers' retirement system plan 2.

    (6) The contribution rates in this section shall be collected through June 30, 2003.

 

    Sec. 10.  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 economic assumptions and asset value smoothing technique included in section 6 of this act or adopted by the council under RCW 41.45.030 or section 6 of this act.

    (2) Not later than September 30, ((1998)) 2002, and every two years thereafter, consistent with the economic assumptions and asset value smoothing technique included in section 6 of this act or adopted under RCW 41.45.030 or section 6 of this act, the council shall adopt and may make changes to:

    (a) A basic state contribution rate for the law enforcement officers' and fire fighters' retirement system plan 2;

    (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 both that system and 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.))  The contribution rates adopted by the council shall be subject to revision by the legislature.

    (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 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 shall immediately notify the directors of the office of financial management and department of retirement systems of the state and employer contribution rates adopted.  The rates shall be effective for the ensuing biennial period, subject to any legislative modifications.

    (((7))) (6) The director of the department of retirement systems shall collect the rates established in section 9 of this act through June 30, 2003.  Thereafter, the director shall collect those rates adopted by the council.  The rates established in section 9 of this act, or by the council, shall be subject to revision by the council.

 

    NEW SECTION.  Sec. 11.  RCW 41.45.0602 is decodified.

 

    Sec. 12.  RCW 41.45.061 and 2000 c 230 s 2 are each amended to read as follows:

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

    (a) Beginning September 1, 1997, except as provided in (b) of this subsection, the employee contribution rate shall not exceed the employer plan 2 and 3 rates adopted under RCW 41.45.060, section 9 of this act, and 41.45.070 for the teachers' retirement system;

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

    (c) In addition, the employee contribution rate for plan 2 shall not be increased as a result of any distributions pursuant to section 309, chapter 341, Laws of 1998 and RCW 41.31A.020.

    (2) The required contribution rate for members of the school employees' retirement system plan 2 shall equal the school employees' retirement system employer plan 2 and 3 contribution rate adopted under RCW 41.45.060, section 9 of this act, and 41.45.070, except as provided in subsection (3) of this section.

    (3) The employee contribution rate for plan 2 shall not be increased as a result of any distributions pursuant to RCW 41.31A.020 and 41.31A.030.

    (4) The required plan 2 and 3 contribution rates for employers shall be adopted in the manner described in RCW 41.45.060, section 9 of this act, and RCW 41.45.070.

 

    Sec. 13.  RCW 41.45.061 and 2000 c 247 s 506 and 2000 c 230 s 2 are each reenacted and amended to read as follows:

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

    (a) Beginning September 1, 1997, except as provided in (b) of this subsection, the employee contribution rate shall not exceed the employer plan 2 and 3 rates adopted under RCW 41.45.060, section 9 of this act, and 41.45.070 for the teachers' retirement system;

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

    (c) In addition, the employee contribution rate for plan 2 shall not be increased as a result of any distributions pursuant to section 309, chapter 341, Laws of 1998 and RCW 41.31A.020.

    (2) The required contribution rate for members of the school employees' retirement system plan 2 shall equal the school employees' retirement system employer plan 2 and 3 contribution rate adopted under RCW 41.45.060, section 9 of this act, and 41.45.070, except as provided in subsection (5) of this section.

    (3) The required contribution rate for members of the public employees' retirement system plan 2 shall be set at the same rate as the employer combined plan 2 and plan 3 rate.

    (4) The required contribution rate for members of the law enforcement officers' and fire fighters' retirement system plan 2 shall be set at fifty percent of the cost of the retirement system.

    (5) The employee contribution rates for plan 2 under subsections (3) and (4) of this section shall not include any increase as a result of any distributions pursuant to RCW 41.31A.020 and 41.31A.030.

    (6) The required plan 2 and 3 contribution rates for employers shall be adopted in the manner described in RCW 41.45.060, section 9 of this act, and 41.45.070.

 

    Sec. 14.  RCW 41.45.067 and 2000 c 247 s 507 are each amended to read as follows:

    (1) 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.

    (2) The director shall notify all employers of any pending adjustment in the required contribution rate and such pending adjustment in the required contribution rate and any increase shall be announced at least thirty days prior to the effective date of the change.

    (3) Members' contributions required by RCW 41.45.060 and 41.45.061 shall be deducted from the members' compensation 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.

    (4) The state's contribution required for the law enforcement officers' and fire fighters' retirement system plan 2 shall be transferred to the appropriate fund from the total contributions transferred by the state treasurer under RCW ((41.45.060 and 41.45.070)) 41.45.050.

 

    Sec. 15.  RCW 41.45.070 and 1998 c 340 s 10 and 1998 c 341 s 406 are each reenacted and amended to read as follows:

    (1) In addition to the basic employer contribution rate established in RCW 41.45.060 or section 9 of this act, the department shall also charge employers of public employees' retirement system, teachers' retirement system, school 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.  Except as provided in subsection (6) and (7) of this section, 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 or section 9 of this act for the law enforcement officers' and fire fighters' retirement system plan 2, 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 plan 2.  Except as provided in subsection (6) of this section, 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 1, the teachers' retirement system plan 1, ((the law enforcement officers' and fire fighters' retirement system plan 1,)) 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 2, the teachers' retirement system plan 2 and plan 3, the school employees' retirement system plan 2 and plan 3, or the law enforcement officers' and fire fighters' retirement system plan 2, 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 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 1 and the teachers' retirement system plan 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.

    (6) A supplemental rate shall not be charged to pay for the cost of additional benefits granted to members pursuant to chapter 340, Laws of 1998.

    (7) A supplemental rate shall not be charged to pay for the cost of additional benefits granted to members pursuant to chapter 41.31A RCW; section 309, chapter 341, Laws of 1998; or section 701, chapter 341, Laws of 1998.

 

    Sec. 16.  RCW 41.45.070 and 2000 c 247 s 505 are each amended to read as follows:

    (1) In addition to the basic employer contribution rate established in RCW 41.45.060 or section 9 of this act, the department shall also charge employers of public employees' retirement system, teachers' retirement system, school 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.  Except as provided in subsections (6) and (7) of this section, 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 or section 9 of this act for the law enforcement officers' and fire fighters' retirement system plan 2, 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 plan 2.  Except as provided in subsection (6) of this section, 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 1, the teachers' retirement system plan 1, ((the law enforcement officers' and fire fighters' retirement system plan 1,)) 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 2 and plan 3, the teachers' retirement system plan 2 and plan 3, the school employees' retirement system plan 2 and plan 3, or the law enforcement officers' and fire fighters' retirement system plan 2, shall be calculated as the level percentage of all members' pay needed to fund the cost of the benefit, as calculated under RCW 41.45.060, 41.45.061, or 41.45.067.

    (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 1 and the teachers' retirement system plan 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.

    (6) A supplemental rate shall not be charged to pay for the cost of additional benefits granted to members pursuant to chapter 340, Laws of 1998.

    (7) A supplemental rate shall not be charged to pay for the cost of additional benefits granted to members pursuant to chapter 41.31A RCW; section 309, chapter 341, Laws of 1998; or section 701, chapter 341, Laws of 1998.

 

    Sec. 17.  RCW 41.45.080 and 1989 c 273 s 8 are each amended to read as follows:

    In addition to the basic and supplemental employer contributions required by RCW 41.45.060, section 9 of this act, and 41.45.070, the department may also require additional employer contributions as provided by law.

 

    *Sec. 18.  RCW 41.45.120 and 1998 c 283 s 4 are each amended to read as follows:

    (1) ((A pension funding work group is hereby created.  The work group shall consist of one staff member selected by the executive head or chairperson of each of the following agencies or committees:

    (a) Department of retirement systems;

    (b) Office of financial management;

    (c) State investment board;

    (d) Ways and means committee of the senate;

    (e) Appropriations committee of the house of representatives; and

(f) Economic and revenue forecast council.

    (2) The state actuary shall make available to the work group information related to economic assumptions and contribution rates.

    (3))) The ((pension funding work group)) office of the state actuary shall provide staff support to the pension funding council((.  Meetings of the pension funding work group may be called by any member of the group for the purpose of assisting the pension funding council, reviewing actuarial valuations of the state retirement systems, reviewing economic assumptions, or for any other purpose which may assist the pension funding council)).  The council may also retain independent actuarial advice, to be retained with the assistance of the department, and paid by the department from the fund established in RCW 41.50.110.

    (((4))) (2) Recommendations from both affected employee and employer groups will be actively sought during the ((work group)) council review process.  The ((work group)) council shall conduct an open public meeting on ((these recommendations)) any proposed changes to contribution rates or long-term economic assumptionsThis public meeting is subject to the requirements of RCW 41.32.020.

*Sec. 18 was vetoed.  See message at end of chapter.

 

    NEW SECTION.  Sec. 19.  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.

 

    NEW SECTION.  Sec. 20.  Sections 1, 7, and 18 of this act expire March 1, 2002.

 

    NEW SECTION.  Sec. 21.  Sections 2, 3, 4, 8, 13, 14, and 16 of this act take effect March 1, 2002.

 

    NEW SECTION.  Sec. 22.  Except under section 21 of this act, this act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2001.


    Passed the Senate June 8, 2001.

    Passed the House June 21, 2001.

Approved by the Governor June 26, 2001, with the exception of certain items that were vetoed.

    Filed in Office of Secretary of State June 26, 2001.


 

    Note:  Governor's explanation of partial veto is as follows:

 

    "I am returning herewith, without my approval as to section 18, Engrossed Substitute Senate Bill No. 6167 entitled:

 

"AN ACT Relating to actuarial funding of state retirement systems;"

 

    This bill establishes long-term economic assumptions and contribution rates for the state pension funds.  These are matters of great concern to both working and retired members of the retirement systems and for the state as a whole.  Implementing these assumptions requires a high level of expertise and appropriate input from those with the experience and skills to ensure the credibility and accountability of the process.

 

    Section 18 would have abolished the pension funding work group entirely, and transferred staffing responsibility to the state actuary.  This approach would have reduced the amount of expertise and input available and would have eroded confidence in the reliability of the pension system.

 

    I agree with members of the Legislature that the current process could be better, and am willing to work with them on another solution.

 

    For these reasons, I have vetoed section 18 of Engrossed Substitute Senate Bill No. 6167.

 

    With the exception of section 18, Engrossed Substitute Senate Bill No. 6167 is approved."