BILL REQ. #:  S-1772.1 

Read first time 02/18/09.   Referred to Committee on Ways & Means.

     AN ACT Relating to developing a defined contribution retirement system for public employees, teachers, and school employees; and creating new sections.

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

NEW SECTION.  Sec. 1   The legislature recognizes the need for public employees, teachers, and school employees to have a secure and viable retirement benefit, not only for their own financial protection, but also so that public funds are spent prudently for their intended purpose. The legislature also recognizes the need for public employers and taxpayers to have consistent and predictable pension funding obligations in support of employee retirement benefits. Therefore, it is the intent of the legislature to design a defined contribution pension system for new public employees, teachers, and school employees that uses best practices of defined contribution plans to provide opportunity and flexibility to accrue a viable retirement benefit, while providing stable funding requirements for public employers and taxpayers. These best practices include minimizing the investment risk borne by the participants, whether through lack of investment knowledge or lack of access to the full variety of investment classes, and providing a distribution option that would ensure participants would not outlive their savings.

NEW SECTION.  Sec. 2   The office of the state actuary, with the assistance and support of the department of retirement systems, shall develop a legislative proposal in bill draft form that would implement a mandatory defined contribution retirement system. This proposal, and accompanying supporting documentation detailing the provisions of the proposal, shall be delivered to the fiscal committees of the senate and the house of representatives no later than December 1, 2009. The proposal shall include the following:
     (1) The system shall require participation by all employees hired after December 31, 2011, that would otherwise be required to establish membership for the first time in the public employees' retirement system, the teachers' retirement system, and the school employees' retirement system. Once membership in the new system is established, participants shall contribute to this system for all future periods of eligible public employment.
     (2) The system shall provide optional participation to those employees hired after December 31, 2011 that would otherwise have had the option to establish membership for the first time in the public employees' retirement system, the teachers' retirement system, and the school employees' retirement system.
     (3) The provisions of the system will not apply to members, former members, and retirees of the public employees' retirement system, the school employees' retirement system, and the teachers' retirement system.
     (4) The system shall be designed to qualify as a defined contribution pension plan under internal revenue code.
     (5) The system shall require a participant to contribute five percent of his or her salary until the end of the month during which his or her thirty-fifth birthday occurs, and seven and one-half percent thereafter. At any time following the month during which his or her fifty-fifth birthday occurs, a participant may elect to increase the rate to ten percent.
     (6) Each participant shall have a contractual right to an employer contribution of the same percentage of salary as the participant, up to a maximum of six percent of salary.
     (7) The system shall be considered a retirement system or retirement benefit for purposes of RCW 41.80.020.
     (8) The system shall provide investment options to participants for their contributions that include but are not limited to: A fund managed by the state investment board similar to the funds established under RCW 41.50.075; and funds similar to those offered to members of plan 3 under RCW 41.34.130, including retirement strategy or life-cycle funds.
     (9) The system shall provide distribution options to participants for their accumulated contributions and investment earnings that include but are not limited to purchasing an insurance-provided life annuity.
     (10) The health care authority shall administer and make available to participants life insurance and long-term disability insurance products.
     (11) The system shall have an implementation date of January 1, 2012.