BILL REQ. #:  H-2080.1 

Read first time 03/04/2003.   Referred to Committee on Appropriations.

     AN ACT Relating to implementing Initiative Measure No. 790; amending RCW 44.44.040 and 41.45.060; reenacting and amending RCW 41.45.061 and 41.45.070; adding new sections to chapter 41.26 RCW; creating new sections; providing an effective date; and declaring an emergency.

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

NEW SECTION.  Sec. 1   The law enforcement officers' and fire fighters' plan 2 retirement board established in section 4, chapter 2, Laws of 2003 has the following duties and powers in addition to any other duties or powers authorized or required by law. The board:
     (1) Shall employ staff as necessary to implement the purposes of chapter 2, Laws of 2003. Staff must be state employees under Title 41 RCW;
     (2) Shall adopt an annual budget as provided in section 5, chapter 2, Laws of 2003. Expenses of the board are paid from the expense fund created in section 5 of this act;
     (3) May make, execute, and deliver contracts, conveyances, and other instruments necessary to exercise and discharge its powers and duties;
     (4) May contract for all or part of the services necessary for the management and operation of the board with other state or nonstate entities authorized to do business in the state; and
     (5) May contract with actuaries, auditors, and other consultants as necessary to carry out its responsibilities.

Sec. 2   RCW 44.44.040 and 1987 c 25 s 3 are each amended to read as follows:
     The office of the state actuary shall have the following powers and duties:
     (1) Perform all actuarial services for the department of retirement systems, including all studies required by law. Reimbursement for such services shall be made to the state actuary pursuant to the provisions of RCW 39.34.130 as now or hereafter amended.
     (2) Advise the legislature and the governor regarding pension benefit provisions, and funding policies and investment policies of the state investment board.
     (3) Consult with the legislature and the governor concerning determination of actuarial assumptions used by the department of retirement systems.
     (4) Prepare a report, to be known as the actuarial fiscal note, on each pension bill introduced in the legislature which briefly explains the financial impact of the bill. The actuarial fiscal note shall include: (a) The statutorily required contribution for the biennium and the following twenty-five years; (b) the biennial cost of the increased benefits if these exceed the required contribution; and (c) any change in the present value of the unfunded accrued benefits. An actuarial fiscal note shall also be prepared for all amendments which are offered in committee or on the floor of the house of representatives or the senate to any pension bill. However, a majority of the members present may suspend the requirement for an actuarial fiscal note for amendments offered on the floor of the house of representatives or the senate.
     (5) Provide such actuarial services to the legislature as may be requested from time to time.
     (6) Provide staff and assistance to the committee established under RCW ((46.44.050)) 44.44.050.
     (7) Provide actuarial assistance to the law enforcement officers' and fire fighters' plan 2 retirement board as provided in chapter 2, Laws of 2003. Reimbursement for services shall be made to the state actuary under RCW 39.34.130 and section 5(5), chapter 2, Laws of 2003.

Sec. 3   RCW 41.45.060 and 2002 c 26 s 2 are each 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 RCW 41.45.035 or adopted by the council under RCW 41.45.030 or 41.45.035.
     (2) Not later than September 30, 2002, and every two years thereafter, consistent with the economic assumptions and asset value smoothing technique included in RCW 41.45.035 or adopted under RCW 41.45.030 or 41.45.035, 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 1;
     (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.
     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, and the law enforcement officers' and fire fighters' retirement system plan 1 not later than June 30, 2024, except as provided in subsection (((5))) (6) of this section; and
     (b) To also continue to fully fund the public employees' retirement system plans 2 and 3, the teachers' retirement system plans 2 and 3, and 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 and a Washington state patrol retirement system contribution rate.
     (5) The law enforcement officers' and fire fighters' plan 2 retirement board shall adopt contributions rates for the law enforcement officers' and fire fighters' retirement system plan 2 as provided in chapter 2, Laws of 2003.
     (6) The council and the law enforcement officers' and fire fighters' plan 2 retirement 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. The rates shall be effective for the ensuing biennial period, subject to any legislative modifications.
     (((6) The director of the department of retirement systems shall collect the rates established in RCW 41.45.053 through June 30, 2003. Thereafter,)) (7) The director shall collect those rates adopted by the council or the law enforcement officers' and fire fighters' plan 2 retirement board. The rates established ((in RCW 41.45.053, or)) by the council((, shall be)) are subject to revision by the council.

Sec. 4   RCW 41.45.061 and 2001 2nd sp.s. c 11 s 13, 2001 2nd sp.s. c 11 s 12, and 2001 c 180 s 1 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((, 41.45.053,)) 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((, 41.45.053,)) and 41.45.070, except as provided in subsection (3) of this section.
     (3) The member contribution rate for the school employees' retirement system plan 2 shall be increased by fifty percent of the contribution rate increase caused by any plan 2 benefit increase passed after September 1, 2000.
     (4) 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.
     (5) 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)) as provided in chapter 2, Laws of 2003.
     (6) 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.
     (7) The required plan 2 and 3 contribution rates for employers shall be adopted in the manner described in RCW 41.45.060((, 41.45.053,)) and 41.45.070.

NEW SECTION.  Sec. 5   (1) A law enforcement officers' and fire fighters' retirement system plan 2 expense fund is created within the law enforcement officers' and fire fighters' retirement system plan 2 fund.
     (2) The state investment board has the full power to invest, reinvest, manage, contract, sell, or exchange money in the expense fund. The state investment board is authorized to adopt investment policies for the money in the expense fund. All investment and operating costs associated with the investment of money shall be paid pursuant to RCW 43.33A.160 and 43.84.160. With the exception of these expenses, the earnings from the investment of the money shall be retained by the law enforcement officers' and fire fighters' retirement system plan 2 fund.
     (3) All investments made by the investment board shall be made with the exercise of that degree of judgment and care pursuant to RCW 43.33A.140 and the investment policy established by the state investment board.
     (4) When appropriate for investment purposes, the state investment board may commingle money in the expense fund with other funds.
     (5) The authority to establish all policies relating to the expense fund, other than the investment policies established by the state investment board as set forth in subsections (2) through (4) of this section, resides with the law enforcement officers' and fire fighters' plan 2 retirement board. With the exception of investments by, and expenses of, the state investment board set forth in subsection (2) of this section, disbursements from this expense fund may be made only on the authorization of the law enforcement officers' and fire fighters' plan 2 retirement board, and money in the expense fund may be spent only for the purposes of defraying the expenses of the law enforcement officers' and fire fighters' plan 2 retirement board as provided in section 5, chapter 2, Laws of 2003.
     (6) The state investment board shall routinely consult and communicate with the law enforcement officers' and fire fighters' plan 2 retirement board on the investment policy, earnings of the trust, and related needs of the expense fund.
     (7) The law enforcement officers' and fire fighters' plan 2 retirement board shall administer the expense fund in a manner reasonably designed to be sound. The assets of the expense fund must be sufficient to defray the obligations of the fund including the costs of administration. Money used for administrative expenses is subject to the allotment of all expenditures pursuant to chapter 43.88 RCW. However, an appropriation is not required for expenditures. Administrative expenses include, but are not limited to, the salaries and expenses of law enforcement officers' and fire fighters' plan 2 retirement board personnel including lease payments, travel, and goods and services necessary for operation of the board, audits, and other general costs of conducting the business of the board.
     (8) The state investment board shall allocate from the law enforcement officers' and fire fighters' retirement system plan 2 fund to the expense fund the amount necessary to cover the expenses of the law enforcement officers' and fire fighters' plan 2 retirement board.

Sec. 6   RCW 41.45.070 and 2001 2nd sp.s. c 11 s 16 and 2001 2nd sp.s. c 11 s 15 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 41.45.053)), 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 41.45.053)) 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)) law enforcement officers' and fire fighters' plan 2 retirement board under chapter 2, Laws of 2003 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, 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, or chapter 2, Laws of 2003.
     (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.

NEW SECTION.  Sec. 7   All expenses of the department and the office of the state actuary related to the implementation of chapter 2, Laws of 2003 shall be reimbursed under RCW 39.34.130.

NEW SECTION.  Sec. 8   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. 9   This act is intended to facilitate the operation of chapter 2, Laws of 2003 and shall be liberally construed to achieve that purpose.

NEW SECTION.  Sec. 10   Sections 1, 5, and 7 of this act are each added to chapter 41.26 RCW and codified with the subchapter heading of "plan 2 governance."

NEW SECTION.  Sec. 11   In the event a final judicial decision renders Initiative Measure No. 790 unenforceable, in whole or in part, making this act or parts of this act unnecessary, unreasonable, or impossible to implement, the director of retirement systems shall adopt rules as necessary to implement chapters 41.26 and 41.45 RCW as they existed on November 1, 2002. The director shall prepare and submit corrective legislation to the legislature.

NEW SECTION.  Sec. 12   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, 2003.