BILL REQ. #:  S-3785.1 

Read first time 01/18/10.   Referred to Committee on Ways & Means.

     AN ACT Relating to creating the Washington voluntary retirement accounts program; amending RCW 43.33A.070; reenacting and amending RCW 43.84.092; and adding new sections to chapter 41.50 RCW.

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

NEW SECTION.  Sec. 1   The legislature finds that small and medium sized businesses find it difficult to offer retirement plans because of the complexity and costs. Businesses offering retirement plans have a better ability to recruit and retain employees. The Washington voluntary retirement accounts program provides a simple and cost-effective way for employers to offer an important employee benefit. The legislature also finds that many workers do not have access to an employment-based retirement plan. Workers who are unable to build up pensions and savings risk living on low incomes in their old age and are more likely to become dependent on state services. The Washington voluntary retirement accounts program provides a simple and inexpensive way for workers to save for retirement.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this subchapter unless the context clearly requires otherwise.
     (1) "Director" means the director of retirement systems.
     (2) "Enrollee" means any worker in this state that is enrolled in the program.
     (3) "Participating employer" means any private employer, with a place of business in this state, and with employees that have enrolled in the program.
     (4) "Program" means the Washington voluntary retirement accounts program created under section 3 of this act.
     (5) "Qualified employee" means those workers that are defined by the federal internal revenue service to be eligible to participate in a specific retirement plan.

NEW SECTION.  Sec. 3   The Washington voluntary retirement accounts program is created. The director is responsible for the implementation and operation of the program, directly or by contract. Sections 4 through 6 of this act may not be implemented until appropriate federal and/or philanthropic funds for start-up have been secured for deposit into the Washington voluntary retirement accounts program administrative account. Once start-up funding has been expended, program implementation and operation is paid through fees on enrollee's accounts. Funds from the department of retirement systems expense account may not be used to administer the program or to obtain program funding.

NEW SECTION.  Sec. 4   Prior to the enrollment of any private sector worker or employer in the program, the director shall design a plan for the operation of the program. The program consists of a two-tier system with one or more of the following: SIMPLE IRA-type program or other internal revenue service approved employer plan, open to any employer employing one hundred or fewer qualified employees who choose to participate for their employees, and workplace-based individual retirement accounts open to all workers. The director shall then seek approval if necessary from the federal internal revenue service to offer the plans and accounts to Washington employers and workers on a tax-qualified basis. The plans and accounts must include the option for enrollees to roll pretax contributions into an individual retirement account or another eligible retirement plan after ceasing participation in the program. A range of investment options must be provided to meet the needs of investors with various levels of risk tolerance and various ages. Funds offered should cover a range of investment options from low risk to high risk and include options for those who do not wish to actively manage their investments. The state investment board shall provide investment options for participants to choose from, and shall establish an investment plan for participants who choose not to self-direct investments.

NEW SECTION.  Sec. 5   Enrollment in the program is not an entitlement and must not result in expenditures that exceed the amount available in the Washington voluntary retirement accounts program administrative account. If it appears that continued enrollment will result in expenditures exceeding the amount available for a particular fiscal year, the director may freeze new enrollments in the program and establish a waiting list of eligible workers, or reduce enrollments.

NEW SECTION.  Sec. 6   Following the design and approval of the program under section 4 of this act, the director shall adopt all rules necessary for the implementation and operation of the program. Rules shall be written to comply with federal standards and may incorporate federal recommendations that are in the best interests of enrollees and the operations of the plan. As part of the rule development process, the director shall consult with employers, workers, private sector retirement plan administrators and providers, and any other individuals or entities the director determines relevant to the development of an effective and efficient method for operating the program.

NEW SECTION.  Sec. 7   (1) The Washington voluntary retirement accounts program principal account is created in the state treasury and must be administered in compliance with applicable federal law and as set forth in this section. The department may make arrangements with financial institutions to serve as trustees or custodians of Washington voluntary retirement accounts as may be required or advisable to comply with applicable federal law and to provide for the efficient implementation and administration of the program.
     (2) The contributions elected by participating employees in accordance with section 4 of this act must be paid into the Washington voluntary retirement accounts program principal account and must be sufficient to cover costs of administration and staffing in addition to such other amounts as may be determined by the director. The account may only be used to carry out the purposes of this subchapter.
     (3) All moneys in the Washington voluntary retirement accounts program principal account and the Washington voluntary retirement accounts program administrative account, all property and rights purchased therewith, and all income attributable thereto, is held in trust by the state investment board, as set forth under RCW 43.33A.030, for the exclusive benefit of the Washington voluntary retirement accounts program participants and their beneficiaries, and, notwithstanding any other provision of this or related acts, must be held separate from other types of funds to the extent required by federal law. Neither the participating employee, nor the participant's beneficiary or beneficiaries, nor any other designee, has any right to commute, sell, assign, transfer, or otherwise convey the right to receive any payments under the program. These payments and rights are nonassignable and nontransferable. Account balances are not subject to attachment, garnishment, or execution and are not transferable by operation of law in event of bankruptcy or insolvency, except to the extent otherwise required by law.
     (4) The state investment board has the full power to invest moneys in the Washington voluntary retirement accounts program principal account and the Washington voluntary retirement accounts program administrative account in accordance with RCW 43.84.150, 43.33A.140, and this subchapter, and cumulative investment directions received under this subchapter. All investment and operating costs of the state investment board associated with the investment of the program assets must be paid under RCW 43.33A.160 and 43.84.160. With the exception of these expenses, one hundred percent of all earnings from these investments shall accrue directly to the Washington voluntary retirement accounts program principal account.
     (5)(a) No state board, commission, or agency, or any officer, employee, or member thereof is liable for any loss or deficiency resulting from participant investments selected under this subchapter.
     (b) The state investment board, or any officer, employee, or member thereof is not liable for any loss or deficiency resulting from reasonable efforts to implement investment directions under this subchapter.
     (6) The Washington voluntary retirement accounts program administrative account is created in the state treasury. Federal appropriations or philanthropic grants received specifically for this program must be deposited into the Washington voluntary retirement accounts program administrative account. Expenses of the department pertaining to the Washington voluntary retirement accounts program including staffing and administrative expenses shall be paid out of the Washington voluntary retirement accounts program administrative account. Any excess balances credited to this account over administrative expenses disbursed from this account shall be transferred to the Washington voluntary retirement accounts program principal account at such time and in such amounts as may be determined by the director with the approval of the director of financial management. Any deficiency into the Washington voluntary retirement accounts program administrative account caused by an excess of administrative expenses disbursed from this account shall be transferred to this account from the Washington voluntary retirement accounts program principal account.
     (7)(a)(i) The director shall keep or cause to be kept full and adequate accounts and records of the assets of each individual participant, obligations, transactions, and affairs of the program. The department shall account for and report on the investment of program assets or may enter into an agreement with the state investment board for accounting and reporting.
     (ii) The director's duties related to individual participant accounts include conducting the activities of trade instruction, settlement activities, and direction of cash movement and related wire transfers with the custodian bank and outside investment firms.
     (iii) The director has sole responsibility for contracting with any recordkeepers for individual participant accounts and shall manage the performance of recordkeepers under those contracts. In establishing contracts, the director shall give consideration to contracts that assign primary liability for all tort and contract actions to the contractor. In establishing the contracts, the department shall assume secondary liability and joint and several liability must be preserved. When considering a contract that assigns primary liability to the contractor, the director shall determine the potential liability and the costs and benefits of adding the liability considerations in this subsection (7)(a)(iii) to contract language.
     (b) The director may contract with private-sector financial services firms to enroll eligible private-sector individuals and workers in the Washington voluntary retirement accounts program. The director may establish contracts with financial services firms for this function.
     (c)(i) The director's duties under (a)(ii) of this subsection do not limit the authority of the state investment board to conduct its responsibilities for asset management and balancing of program funds.
     (ii) The state investment board has sole responsibility for contracting with outside investment firms to provide investment management for program funds and shall manage the performance of investment managers under those contracts. In establishing contracts, the state investment board shall give consideration to contracts that assign primary liability for all tort and contract actions to the contractor. In establishing the contracts, the state investment board shall assume secondary liability and joint and several liability must be preserved. When considering a contract that assigns primary liability to the contractor, the state investment board shall determine the potential liability and the costs and benefits of adding the liability considerations in this subsection (7)(c)(ii) to contract language.
     (d) The state treasurer shall designate and define the terms of engagement for the custodial banks.

Sec. 8   RCW 43.33A.070 and 1981 c 3 s 7 are each amended to read as follows:
     No member of the state investment board is liable for the negligence, default, or failure of any other person or other member of the board to perform the duties of the member's office and no member of the board shall be considered or held to be an insurer of the funds or assets of any of the trust and retirement funds, including funds or assets of the voluntary retirement accounts program, nor is any nonvoting member liable for actions performed with the exercise of reasonable diligence within the scope of the member's authorized activities as a member of the board.

Sec. 9   RCW 43.84.092 and 2009 c 479 s 31, 2009 c 472 s 5, and 2009 c 451 s 8 are each reenacted and amended to read as follows:
     (1) All earnings of investments of surplus balances in the state treasury shall be deposited to the treasury income account, which account is hereby established in the state treasury.
     (2) The treasury income account shall be utilized to pay or receive funds associated with federal programs as required by the federal cash management improvement act of 1990. The treasury income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for refunds or allocations of interest earnings required by the cash management improvement act. Refunds of interest to the federal treasury required under the cash management improvement act fall under RCW 43.88.180 and shall not require appropriation. The office of financial management shall determine the amounts due to or from the federal government pursuant to the cash management improvement act. The office of financial management may direct transfers of funds between accounts as deemed necessary to implement the provisions of the cash management improvement act, and this subsection. Refunds or allocations shall occur prior to the distributions of earnings set forth in subsection (4) of this section.
     (3) Except for the provisions of RCW 43.84.160, the treasury income account may be utilized for the payment of purchased banking services on behalf of treasury funds including, but not limited to, depository, safekeeping, and disbursement functions for the state treasury and affected state agencies. The treasury income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for payments to financial institutions. Payments shall occur prior to distribution of earnings set forth in subsection (4) of this section.
     (4) Monthly, the state treasurer shall distribute the earnings credited to the treasury income account. The state treasurer shall credit the general fund with all the earnings credited to the treasury income account except:
     The following accounts and funds shall receive their proportionate share of earnings based upon each account's and fund's average daily balance for the period: The aeronautics account, the aircraft search and rescue account, the budget stabilization account, the capitol building construction account, the Cedar River channel construction and operation account, the Central Washington University capital projects account, the charitable, educational, penal and reformatory institutions account, the cleanup settlement account, the Columbia river basin water supply development account, the common school construction fund, the county arterial preservation account, the county criminal justice assistance account, the county sales and use tax equalization account, the data processing building construction account, the deferred compensation administrative account, the deferred compensation principal account, the department of licensing services account, the department of retirement systems expense account, the developmental disabilities community trust account, the drinking water assistance account, the drinking water assistance administrative account, the drinking water assistance repayment account, the Eastern Washington University capital projects account, the education construction fund, the education legacy trust account, the election account, the energy freedom account, the energy recovery act account, the essential rail assistance account, The Evergreen State College capital projects account, the federal forest revolving account, the ferry bond retirement fund, the freight congestion relief account, the freight mobility investment account, the freight mobility multimodal account, the grade crossing protective fund, the public health services account, the health system capacity account, the personal health services account, the high capacity transportation account, the state higher education construction account, the higher education construction account, the highway bond retirement fund, the highway infrastructure account, the highway safety account, the high occupancy toll lanes operations account, the industrial insurance premium refund account, the judges' retirement account, the judicial retirement administrative account, the judicial retirement principal account, the local leasehold excise tax account, the local real estate excise tax account, the local sales and use tax account, the medical aid account, the mobile home park relocation fund, the motor vehicle fund, the motorcycle safety education account, the multimodal transportation account, the municipal criminal justice assistance account, the municipal sales and use tax equalization account, the natural resources deposit account, the oyster reserve land account, the pension funding stabilization account, the perpetual surveillance and maintenance account, the public employees' retirement system plan 1 account, the public employees' retirement system combined plan 2 and plan 3 account, the public facilities construction loan revolving account beginning July 1, 2004, the public health supplemental account, the public transportation systems account, the public works assistance account, the Puget Sound capital construction account, the Puget Sound ferry operations account, the Puyallup tribal settlement account, the real estate appraiser commission account, the recreational vehicle account, the regional mobility grant program account, the resource management cost account, the rural arterial trust account, the rural Washington loan fund, the site closure account, the small city pavement and sidewalk account, the special category C account, the special wildlife account, the state employees' insurance account, the state employees' insurance reserve account, the state investment board expense account, the state investment board commingled trust fund accounts, the state patrol highway account, the state route number 520 corridor account, the supplemental pension account, the Tacoma Narrows toll bridge account, the teachers' retirement system plan 1 account, the teachers' retirement system combined plan 2 and plan 3 account, the tobacco prevention and control account, the tobacco settlement account, the transportation 2003 account (nickel account), the transportation equipment fund, the transportation fund, the transportation improvement account, the transportation improvement board bond retirement account, the transportation infrastructure account, the transportation partnership account, the traumatic brain injury account, the tuition recovery trust fund, the University of Washington bond retirement fund, the University of Washington building account, the urban arterial trust account, the volunteer firefighters' and reserve officers' relief and pension principal fund, the volunteer firefighters' and reserve officers' administrative fund, the Washington fruit express account, the Washington judicial retirement system account, the Washington law enforcement officers' and firefighters' system plan 1 retirement account, the Washington law enforcement officers' and firefighters' system plan 2 retirement account, the Washington public safety employees' plan 2 retirement account, the Washington school employees' retirement system combined plan 2 and 3 account, the Washington state health insurance pool account, the Washington state patrol retirement account, the Washington State University building account, the Washington State University bond retirement fund, the Washington voluntary retirement accounts program administrative account, the Washington voluntary retirement accounts program principal account, the water pollution control revolving fund, and the Western Washington University capital projects account. Earnings derived from investing balances of the agricultural permanent fund, the normal school permanent fund, the permanent common school fund, the scientific permanent fund, and the state university permanent fund shall be allocated to their respective beneficiary accounts. All earnings to be distributed under this subsection (4) shall first be reduced by the allocation to the state treasurer's service fund pursuant to RCW 43.08.190.
     (5) In conformance with Article II, section 37 of the state Constitution, no treasury accounts or funds shall be allocated earnings without the specific affirmative directive of this section.

NEW SECTION.  Sec. 10   Private employers shall provide employees with the opportunity to enroll in the program, including providing for payroll deductions for those employees that enroll in the program. Employers with employees enrolled in the program are authorized to contract with the enrolled employees to defer or contribute a portion of the enrolled employees' compensation, in accordance with the program rules.

NEW SECTION.  Sec. 11   The director shall report biennially to the relevant committees of the legislature on the effectiveness and efficiency of the program, including the levels of enrollment, the financial status of the program, and the retirement savings levels of participating enrollees.

NEW SECTION.  Sec. 12   If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state, the conflicting part of this act is inoperative solely to the extent of the conflict and with respect to the agencies directly affected, and this finding does not affect the operation of the remainder of this act in its application to the agencies concerned. Rules adopted under this act must meet federal requirements that are a necessary condition to the receipt of federal funds by the state.

NEW SECTION.  Sec. 13   Sections 1 through 7 and 10 through 12 of this act are each added to chapter 41.50 RCW under the new subchapter heading "Washington voluntary retirement accounts program."