BILL REQ. #:  S-2475.2 

Read first time 03/25/11.   Referred to Committee on Ways & Means.

     AN ACT Relating to public employee pension reform; amending RCW 41.04.440, 41.04.445, 41.04.450, 41.50.030, 41.50.110, and 43.33A.190; adding a new section to chapter 41.32 RCW; adding a new section to chapter 41.35 RCW; adding a new section to chapter 41.37 RCW; adding a new section to chapter 41.40 RCW; adding a new section to chapter 41.04 RCW; adding a new chapter to Title 41 RCW; creating new sections; and providing an effective date.

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

NEW SECTION.  Sec. 101   This act may be known and cited as the public employee pension reform act.

NEW SECTION.  Sec. 102   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 do not outlive their savings.

NEW SECTION.  Sec. 201   This chapter applies only to members of the Washington public employees' savings plan created under this chapter.

NEW SECTION.  Sec. 202   As used in this chapter, unless a different meaning is clearly required by the context:
     (1) "Accumulated contributions" means the sum of all contributions standing to the credit of a member in the member's individual account, together with the earnings thereon.
     (2)(a) "Compensation earnable" means salaries or wages earned by a member during a payroll period for personal services, including overtime payments, and shall include wages and salaries deferred under provisions established pursuant to sections 403(b), 414(h), and 457 of the United States internal revenue code, but excludes nonmoney maintenance compensation and lump sum or other payments for deferred annual sick leave, unused accumulated vacation, unused accumulated annual leave, or any form of severance pay.
     (b) "Compensation earnable" also includes the following actual or imputed payments, which are not paid for personal services:
     (i) Retroactive payments to an individual by an employer on reinstatement of the employee in a position, or payments by an employer to an individual in lieu of reinstatement in a position which are awarded or granted as the equivalent of the salary or wage which the individual would have earned during a payroll period is considered compensation earnable to the extent provided in this subsection (2), and the individual shall receive the equivalent service credit;
     (ii) Assault pay only as authorized by RCW 27.04.100, 72.01.045, and 72.09.240;
     (iii) Compensation that a member would have received but for a disability occurring in the line of duty only as authorized by RCW 41.40.038;
     (iv) Compensation that a member receives due to participation in the leave sharing program only as authorized by RCW 41.04.650 through 41.04.670; and
     (v) Compensation that a member receives for being in standby status. For the purposes of this section, a member is in standby status when not being paid for time actually worked and the employer requires the member to be prepared to report immediately for work, if the need arises, although the need may not arise.
     (3) "Department" means the department of retirement systems created in chapter 41.50 RCW.
     (4) "Director" means the director of the department.
     (5) "Eligible position" means:
     (a) Any position that, as defined by the employer, normally requires five or more months of service a year for which regular compensation for at least seventy hours is earned by the occupant thereof. For purposes of this chapter, an employer may not define "position" in such a manner that an employee's monthly work for that employer is divided into more than one position; and
     (b) Any position occupied by an elected official or person appointed directly by the governor, or appointed by the chief justice of the supreme court under RCW 2.04.240(2) or 2.06.150(2), for which compensation is paid.
     (6) "Employee" or "employed" means a person who is providing services for compensation to an employer, unless the person is free from the employer's direction and control over the performance of work. The department shall adopt rules and interpret this subsection consistent with common law.
     (7) "Employer" means every branch, department, agency, commission, board, and office of the state, and any political subdivision and municipal corporation of the state admitted into the retirement system, including public agencies created pursuant to RCW 35.63.070, 36.70.060, and 39.34.030.
     (8) "Ineligible position" means any position that does not conform with the requirements set forth in subsection (7) of this section.
     (9) "Leave of absence" means the period of time a member is authorized by the employer to be absent from service without being separated from membership.
     (10) "Member" means any employee included in the membership of the retirement system, as provided for in section 203 of this act. RCW 41.26.045 does not prohibit a person otherwise eligible for membership in the retirement system from establishing membership effective when he or she first entered an eligible position.
     (11) "Member account" or "member's account" means the sum of the contributions and earnings on behalf of the member.
     (12) "Regular interest" means the rate the director determines.
     (13) "Retirement system" means the Washington public employees' savings plan created in this chapter.
     (14) "Separation from service" occurs when a person has terminated all employment with an employer. Separation from service or employment does not occur, and if claimed by an employer or employee may be a violation of RCW 41.40.055, when an employee and employer have a written or oral agreement to resume employment with the same employer following termination. Mere expressions or inquiries about postretirement employment by an employer or employee that do not constitute a commitment to reemploy the employee after retirement are not an agreement under this subsection.
     (15)(a) "Service" means periods of employment by a member in an eligible position or positions for one or more employers for which compensation earnable is paid. Time spent in standby status, whether compensated or not, is not service.
     (b) Service in any state elective position is service.
     (16) "State actuary" or "actuary" means the person appointed pursuant to RCW 44.44.010(2).
     (17) "State elective position" means any position held by any person elected or appointed to statewide office or elected or appointed as a member of the legislature.
     (18) "State treasurer" means the treasurer of the state of Washington.

NEW SECTION.  Sec. 203   A public employees' savings plan is hereby created for the employees of the state of Washington and its political subdivisions. The administration and management of the savings system, the responsibility for making effective the provisions of this chapter, and the authority to make all rules and regulations necessary therefor are hereby vested in the department. All such rules and regulations shall be governed by the provisions of chapter 34.05 RCW. The retirement system created in this chapter shall be known as the Washington public employees' savings plan.

NEW SECTION.  Sec. 204   Membership in the retirement system consists of all regularly compensated employees and appointive and elective officials of employers, as defined in this chapter, with the following exceptions:
     (1) Persons in ineligible positions;
     (2) Employees of the legislature except the officers thereof elected by the members of the senate and the house of representatives and legislative committees, unless membership of the employees is authorized by the committee;
     (3) Persons holding elective offices or persons appointed directly by the governor. However, these persons have the option of applying for membership during periods of employment. Persons holding or who have held elective offices or persons appointed by the governor who are members in the retirement system and who have, prior to becoming members, previously held an elective office, and did not at the start of their initial or successive terms of office exercise their option to become members, may apply for membership to be effective during their term or terms of office. All contributions submitted by the employee under this subsection must be placed in the employee's individual account and be treated as any other contribution made by the employee;
     (4) Employees holding membership in, or receiving pension benefits under, any retirement plan operated wholly or in part by an agency of the state or political subdivision thereof, or who are by reason of their current employment contributing to or otherwise establishing the right to receive benefits from such a retirement plan, except as follows:
     (a) In any case where the retirement system has in existence an agreement with another retirement system in connection with exchange of service credit or an agreement whereby members can retain service credit in more than one system, such an employee is allowed membership rights should the agreement so provide;
     (b) An employee is allowed membership if otherwise eligible while receiving survivor's benefits;
     (c) An employee may not be excluded from membership pursuant to this subsection solely on account of: (i) Membership in the plan created under chapter 2.14 RCW; or (ii) enrollment under the relief and compensation provisions or the pension provisions of the volunteer fire fighters' relief and pension fund under chapter 41.24 RCW;
     (d) Except as provided in RCW 41.40.109, an employee may not be excluded from membership pursuant to this subsection solely on account of participation in a defined contribution pension plan qualified under section 401 of the internal revenue code;
     (5) Patient and inmate help in state charitable, penal, and correctional institutions;
     (6) Members of a state veterans' home or state soldiers' home;
     (7) Persons employed by an institution of higher learning or community college, primarily as an incident to and in furtherance of their education or training, or the education or training of a spouse;
     (8) Employees of an institution of higher learning or community college during the period of service necessary to establish eligibility for membership in the retirement plans operated by that institution;
     (9) Persons rendering professional services to an employer on a fee, retainer, or contract basis or when the income from these services is less than fifty percent of the gross income received from the person's practice of a profession;
     (10) Persons appointed by the liquor control board as contract liquor store managers;
     (11) Employees of a labor guild, association, or organization. However, elective officials and employees of a labor guild, association, or organization which qualifies as an employer within this chapter have the option of applying for membership;
     (12) Retirement system retirees. However, following reemployment in an eligible position, a retiree may elect to prospectively become a member of the retirement system if otherwise eligible;
     (13) Persons employed by or appointed or elected as an official of a first-class city that has its own retirement system, but any member elected or appointed to an elective office has the option of continuing as a member of the retirement system under this chapter in lieu of becoming a member of the city system. A member who elects to continue as a member of the retirement system under this chapter shall pay the appropriate member contributions and the city shall pay the employer contributions at the rates prescribed by this chapter. Any city that becomes an employer as defined in RCW 41.40.010 as the result of an individual's election under this subsection is not required to have all employees covered for retirement under this chapter. Nothing in this subsection prohibits a city of the first class with its own retirement system from: (a) Transferring all of its current employees to the retirement system established under this chapter, or (b) allowing newly hired employees the option of continuing coverage under the retirement system established by this chapter;
     (14) Employees who (a) are not citizens of the United States, (b) do not reside in the United States, and (c) perform duties outside of the United States;
     (15) Employees who (a) are not citizens of the United States, (b) are not covered by chapter 41.48 RCW, (c) are not excluded from membership under this chapter or chapter 41.04 RCW, (d) are residents of this state, and (e) make an irrevocable election to be excluded from membership, in writing, which is submitted to the director within thirty days after employment in an eligible position;
     (16) Employees who are citizens of the United States and who reside and perform duties for an employer outside of the United States. However, unless otherwise excluded under this chapter or chapter 41.04 RCW, the employee may apply for membership (a) within thirty days after employment in an eligible position and membership service credit shall be granted from the first day of membership service, and (b) after the thirty-day period in (a) of this subsection, but membership service credit shall be granted only if payment is made for the noncredited membership service under RCW 41.50.165(2), otherwise service is credited from the date of application;
     (17) The city manager or chief administrative officer of a city or town, other than a retiree, who serves at the pleasure of an appointing authority. These persons have the option of applying for membership within thirty days from date of appointment to their positions.
     Persons serving in these positions who have not opted for membership within the specified thirty days, may do so by paying the contributions required for the period from the date of their appointment to the date of acceptance into membership;
     (18) Persons serving as: (a) The chief administrative officer of a public utility district as defined in RCW 54.16.100; (b) the chief administrative officer of a port district formed under chapter 53.04 RCW; or (c) the chief administrative officer of a county who serves at the pleasure of an appointing authority. These persons have the option of applying for membership within thirty days from the date of appointment to their positions.
     Persons serving in these positions who have not opted for membership within the specified thirty days, may do so at a later date by paying the contributions for the period from the date of their appointment to the date of acceptance into membership;
     (19) Persons enrolled in state-approved apprenticeship programs, authorized under chapter 49.04 RCW, and who are employed by local governments to earn hours to complete the apprenticeship programs, if the employee is a member of a union-sponsored retirement plan and is making contributions to such a retirement plan or if the employee is a member of a Taft-Hartley retirement plan;
     (20) Persons employed exclusively as trainers or trainees in resident apprentice training programs operated by housing authorities authorized under chapter 35.82 RCW, if (a) the trainer or trainee is a member of a union-sponsored retirement plan and is making contributions to such a retirement plan, or (b) the employee is a member of a Taft-Hartley retirement plan.

NEW SECTION.  Sec. 205   (1) A member shall contribute five percent of his or her compensation earnable until age thirty-five, seven and one-half percent after a member's thirty-fifth birthday until age fifty-five, and ten percent after the member's fifty-fifth birthday.
     (2) The employer of a member shall contribute an amount equal to the contributions made by a member, up to a maximum of six percent of the member's compensation earnable.
     (3) Contributions shall begin the first day of the pay cycle in which the employee becomes a member.

NEW SECTION.  Sec. 206   In addition to contributions made to members' accounts, employers shall make contributions as follows:
     (1) School districts and educational service districts shall contribute to plan 1 of the teachers' retirement system the amounts specified in RCW 41.45.060(8) (b) and (c);
     (2) Employers other than school districts and education service districts shall contribute to plan 1 of the public employees' retirement system the amounts specified in RCW 41.45.060(6) (b) and (c).

NEW SECTION.  Sec. 207   (1) Except as provided in subsection (3) of this section, the member's account shall be invested by the state investment board in the same portfolio as that of the public employees' retirement system combined plan 2 and 3 fund under RCW 41.50.075(3). In order to reduce transaction costs and address liquidity issues, based upon recommendations of the state investment board, the department may require members to provide up to ninety days' notice prior to moving funds from the state investment board portfolio to self-directed investment options provided under subsection (3) of this section.
     (2) The state investment board shall declare monthly unit values for the portfolios or funds, or portions thereof, utilized under subsection (1) of this section. The declared values shall be an approximation of portfolio or fund values, based on internal procedures of the state investment board. Such declared unit values and internal procedures shall be in the sole discretion of the state investment board. The state investment board may delegate any of the powers and duties under this subsection, including discretion, pursuant to RCW 43.33A.030. Member accounts shall be credited by the department with a rate of return based on changes to such unit values.
     (3) Members may elect to self-direct their investments as set forth in section 209 of this act and RCW 43.33A.190.

NEW SECTION.  Sec. 208   (1) The state investment board has the full authority to invest all self-directed investment moneys in accordance with RCW 43.84.150 and 43.33A.140, and cumulative investment directions received pursuant to section 207 of this act and this section. In carrying out this authority the state investment board, after consultation with the department regarding any recommendations made pursuant to RCW 41.50.088(1)(b), shall provide a set of options for members to choose from for self-directed investment.
     (2) All investment and operating costs of the state investment board associated with making self-directed investments shall be paid by members and recovered under procedures agreed to by the department and the state investment board pursuant to the principles set forth in RCW 43.33A.160 and 43.84.160. All other expenses caused by self-directed investment shall be paid by the member in accordance with rules established by the department. With the exception of these expenses, all earnings from self-directed investments shall accrue to the member's account.
     (3)(a)(i) The department shall keep or cause to be kept full and adequate accounts and records of each individual member's account. The department shall account for and report on the investment of defined contribution assets or may enter into an agreement with the state investment board for such accounting and reporting under this chapter.
     (ii) The department'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 department has sole responsibility for contracting with any recordkeepers for individual participant accounts and shall manage the performance of recordkeepers under those contracts.
     (b)(i) The department'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 the deferred compensation funds.
     (ii) The state investment board has sole responsibility for contracting with outside investment firms to provide investment management for the deferred compensation funds and shall manage the performance of investment managers under those contracts.
     (c) The state treasurer shall designate and define the terms of engagement for the custodial banks.

NEW SECTION.  Sec. 209   (1) If the member terminates employment, the balance in the member's account may be distributed in accordance with an option selected by the member either as a lump sum or pursuant to other options authorized by the department.
     (2) If the member dies while in service, the balance of the member's account may be distributed in accordance with an option selected by the member either as a lump sum or pursuant to other options authorized by the department. The distribution is as follows:
     (a) The distribution shall be made to the person or persons the member nominated by written designation duly executed and filed with the department;
     (b) If there is designated person or persons still living at the time of the member's death, the balance of the member's account in the retirement system, less any amount identified as owing to an obligee upon withdrawal of the account balance pursuant to a court order filed under RCW 41.50.670, shall be paid to the member's surviving spouse as if in fact the spouse had been nominated by written designation;
     (c) If there is no surviving spouse, then to the person or persons, trust, or organization as the member has nominated by written designation duly executed and filed with the department; or
     (d) If there is no designated person or persons still living at the time of the member's death, then to the member's legal representatives.
     (3) If a member has a terminal illness and terminates from employment, the member may choose to have the balance in the member's account distributed as a lump sum payment based on the most recent valuation in order to expedite the distribution. The department shall make this payment within ten working days after receipt of notice of termination of employment, documentation verifying the terminal illness, and an application for payment.
     (4) The distribution under subsections (1) through (3) of this section is less any amount identified as owing to an obligee upon withdrawal pursuant to a court order filed under RCW 41.50.670.

NEW SECTION.  Sec. 210   (1) Subject to subsection (2) of this section, the right of a person to accumulated contributions, annuities, or any other right accrued or accruing to any person under this chapter is hereby exempt from any state, county, municipal, or other local tax, and is not subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever, and is unassignable.
     (2) Subsection (1) of this section does not prohibit the department from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order issued by the department, (e) a court order directing the department to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.

NEW SECTION.  Sec. 211   (1) The retirement plan created by this chapter must be administered so as to comply with the federal internal revenue code, Title 26 U.S.C., and specifically with plan qualification requirements imposed on governmental plans by section 401(a) of the internal revenue code.
     (2) Any section or provision of this chapter which is susceptible to more than one construction must be interpreted in favor of the construction most likely to satisfy requirements imposed by section 401(a) of the internal revenue code.
     (3) If any section or provision of this chapter is found to be in conflict with the plan qualification requirements for governmental plans in section 401(a) of the internal revenue code, the conflicting part of this chapter is hereby inoperative solely to the extent of the conflict, and such finding does not affect the operation of the remainder of this chapter.

NEW SECTION.  Sec. 212   (1) A state board or commission, agency, or any officer, employee, or member thereof is not liable for any loss or deficiency resulting from member investments selected or required pursuant to section 208 (1) or (3) of this act.
     (2) Neither the department, nor director or any employee, nor the state investment board, nor any officer, employee, or member thereof is liable for any loss or deficiency resulting from reasonable efforts to implement investment directions pursuant to section 208 (1) or (3) of this act.
     (3) The state investment board, or any officer, employee, or member thereof is not liable with respect to any declared monthly unit valuations or crediting of rates of return, or any other exercise of powers or duties, including discretion, under section 208(2) of this act.
     (4) The department, or any officer or employee thereof, is not liable for crediting rates of return which are consistent with the state investment board's declaration of monthly unit valuations pursuant to section 208(2) of this act.

NEW SECTION.  Sec. 213   For the purposes of this chapter, the terms spouse, marriage, marital, husband, wife, widow, widower, next of kin, and family apply equally to state registered domestic partnerships or individuals in state registered domestic partnerships as well as to marital relationships and married persons, and references to dissolution of marriage apply equally to state registered domestic partnerships that have been terminated, dissolved, or invalidated, to the extent that such interpretation does not conflict with federal law. When necessary to implement chapter 521, Laws of 2009, gender-specific terms such as husband and wife used in any statute, rule, or other law are gender neutral, and applicable to individuals in state registered domestic partnerships.

NEW SECTION.  Sec. 214   Sections 201 through 213 of this act constitute a new chapter in Title 41 RCW.

Sec. 301   RCW 41.04.440 and 2007 c 492 s 3 are each amended to read as follows:
     (1) The sole purpose of RCW 41.04.445 and 41.04.450 is to allow the members of the retirement systems created in chapters 2.10, 2.12, 41.26, 41.32, 41.35, 41.37, 41.40, 41.34, 41.--- (the new chapter created in section 214 of this act), and 43.43 RCW to enjoy the tax deferral benefits allowed under 26 U.S.C. 414(h). Chapter 227, Laws of 1984 does not alter in any manner the provisions of RCW 41.45.060, 41.45.061, and 41.45.067 which require that the member contribution rates shall be set so as to provide fifty percent of the cost of the respective retirement plans.
     (2) Should the legislature revoke any benefit allowed under 26 U.S.C. 414(h), no affected employee shall be entitled thereafter to receive such benefit as a matter of contractual right.

Sec. 302   RCW 41.04.445 and 2007 c 492 s 4 are each amended to read as follows:
     (1) This section applies to all members who are:
     (a) Judges under the retirement system established under chapter 2.10, 2.12, or 2.14 RCW;
     (b) Employees of the state under the retirement system established by chapter 41.32, 41.37, 41.40, 41.--- (the new chapter created in section 214 of this act), or 43.43 RCW;
     (c) Employees of school districts under the retirement system established by chapter 41.32 ((or)), 41.40, or 41.--- (the new chapter created in section 214 of this act) RCW, except for substitute teachers as defined by RCW 41.32.010;
     (d) Employees of educational service districts under the retirement system established by chapter 41.32 ((or)), 41.40, or 41.--- (the new chapter created in section 214 of this act) RCW; or
     (e) Employees of community college districts under the retirement system established by chapter 41.32 ((or)), 41.40, or 41.--- (the new chapter created in section 214 of this act) RCW.
     (2) Only for compensation earned after the effective date of the implementation of this section and as provided by section 414(h) of the federal internal revenue code, the employer of all the members specified in subsection (1) of this section shall pick up only those member contributions as required under:
     (a) RCW 2.10.090(1);
     (b) RCW 2.12.060;
     (c) RCW 2.14.090;
     (d) RCW 41.32.263;
     (e) RCW 41.32.350;
     (f) RCW 41.40.330 (1) and (3);
     (g) RCW 41.45.061 and 41.45.067;
     (h) RCW 41.34.070; and
     (i) ((RCW 43.43.300; and
     (j))) RCW 41.34.040.
     (3) Only for the purposes of federal income taxation, the gross income of the member shall be reduced by the amount of the contribution to the respective retirement system picked up by the employer.
     (4) All member contributions to the respective retirement system picked up by the employer as provided by this section, plus the accrued interest earned thereon, shall be paid to the member upon the withdrawal of funds or lump-sum payment of accumulated contributions as provided under the provisions of the retirement systems.
     (5) At least forty-five days prior to implementing this section, the employer shall provide:
     (a) A complete explanation of the effects of this section to all members; and
     (b) Notification of such implementation to the director of the department of retirement systems.

Sec. 303   RCW 41.04.450 and 2007 c 492 s 5 are each amended to read as follows:
     (1) Employers of those members under chapters 41.26, 41.34, 41.35, 41.37, 41.--- (the new chapter created in section 214 of this act), and 41.40 RCW who are not specified in RCW 41.04.445 may choose to implement the employer pick up of all member contributions without exception under RCW 41.26.080(1)(a), 41.26.450, 41.40.330(1), 41.45.060, 41.45.061, and 41.45.067 and chapter 41.34 RCW. If the employer does so choose, the employer and members shall be subject to the conditions and limitations of RCW 41.04.445 (3), (4), and (5) and 41.04.455.
     (2) An employer exercising the option under this section may later choose to withdraw from and/or reestablish the employer pick up of member contributions only once in a calendar year following forty-five days prior notice to the director of the department of retirement systems.

NEW SECTION.  Sec. 304   A new section is added to chapter 41.32 RCW to read as follows:
     This chapter applies only to persons who become members before the effective date of this section.

NEW SECTION.  Sec. 305   A new section is added to chapter 41.35 RCW to read as follows:
     This chapter applies only to persons who become members before the effective date of this section.

NEW SECTION.  Sec. 306   A new section is added to chapter 41.37 RCW to read as follows:
     This chapter applies only to persons who become members before the effective date of this section.

NEW SECTION.  Sec. 307   A new section is added to chapter 41.40 RCW to read as follows:
     This chapter applies only to persons who become members before the effective date of this section.

Sec. 308   RCW 41.50.030 and 2004 c 242 s 42 are each amended to read as follows:
     (1) As soon as possible but not more than one hundred and eighty days after March 19, 1976, there is transferred to the department of retirement systems, except as otherwise provided in this chapter, all powers, duties, and functions of:
     (a) The Washington public employees' retirement system;
     (b) The Washington state teachers' retirement system;
     (c) The Washington law enforcement officers' and firefighters' retirement system;
     (d) The Washington state patrol retirement system;
     (e) The Washington judicial retirement system; and
     (f) The state treasurer with respect to the administration of the judges' retirement fund imposed pursuant to chapter 2.12 RCW.
     (2) On July 1, 1996, there is transferred to the department all powers, duties, and functions of the deferred compensation committee.
     (3) The department shall administer chapter 41.34 RCW.
     (4) The department shall administer the Washington school employees' retirement system created under chapter 41.35 RCW.
     (5) The department shall administer the Washington public safety employees' retirement system created under chapter 41.37 RCW.
     (6) The department shall administer the Washington public employees' savings plan created in chapter 41.--- RCW (the new chapter created in section 214 of this act).

Sec. 309   RCW 41.50.110 and 2009 c 564 s 924 are each amended to read as follows:
     (1) Except as provided by RCW 41.50.255 and subsection (6) of this section, all expenses of the administration of the department, the expenses of administration of the retirement systems, and the expenses of the administration of the office of the state actuary created in chapters 2.10, 2.12, 41.26, 41.32, 41.40, 41.34, 41.35, 41.37, 43.43, 41.--- (the new chapter created in section 214 of this act), and 44.44 RCW shall be paid from the department of retirement systems expense fund.
     (2) In order to reimburse the department of retirement systems expense fund on an equitable basis the department shall ascertain and report to each employer, as defined in RCW 41.26.030, 41.32.010, 41.35.010, 41.37.010, section 202 of this act, or 41.40.010, the sum necessary to defray its proportional share of the entire expense of the administration of the retirement system that the employer participates in during the ensuing biennium or fiscal year whichever may be required. Such sum is to be computed in an amount directly proportional to the estimated entire expense of the administration as the ratio of monthly salaries of the employer's members bears to the total salaries of all members in the entire system. It shall then be the duty of all such employers to include in their budgets or otherwise provide the amounts so required.
     (3) The department shall compute and bill each employer, as defined in RCW 41.26.030, 41.32.010, 41.35.010, 41.37.010, section 202 of this act, or 41.40.010, at the end of each month for the amount due for that month to the department of retirement systems expense fund and the same shall be paid as are its other obligations. Such computation as to each employer shall be made on a percentage rate of salary established by the department. However, the department may at its discretion establish a system of billing based upon calendar year quarters in which event the said billing shall be at the end of each such quarter.
     (4) The director may adjust the expense fund contribution rate for each system at any time when necessary to reflect unanticipated costs or savings in administering the department.
     (5) An employer who fails to submit timely and accurate reports to the department may be assessed an additional fee related to the increased costs incurred by the department in processing the deficient reports. Fees paid under this subsection shall be deposited in the retirement system expense fund.
     (a) Every six months the department shall determine the amount of an employer's fee by reviewing the timeliness and accuracy of the reports submitted by the employer in the preceding six months. If those reports were not both timely and accurate the department may prospectively assess an additional fee under this subsection.
     (b) An additional fee assessed by the department under this subsection shall not exceed fifty percent of the standard fee.
     (c) The department shall adopt rules implementing this section.
     (6) Expenses other than those under RCW 41.34.060(3) shall be paid pursuant to subsection (1) of this section.
     (7) During the 2007-2009 and 2009-2011 fiscal biennia, the legislature may transfer from the department of retirement systems' expense fund to the state general fund such amounts as reflect the excess fund balance of the fund.

Sec. 310   RCW 43.33A.190 and 2000 c 247 s 701 are each amended to read as follows:
     Pursuant to RCW 41.34.130 and section 208 of this act, the state investment board shall invest all self-directed investment moneys under the public employees' savings plan, the teachers' retirement system plan 3, the school employees' retirement system plan 3, and the public employees' retirement system plan 3 with full power to establish investment policy, develop investment options, and manage self-directed investment funds.

NEW SECTION.  Sec. 401   A new section is added to chapter 41.04 RCW to read as follows:
     After the effective date of this section, any change in the benefits provided in the retirement systems specified in chapter 41.32, 41.35, 41.37, or 41.40 RCW, or in the Washington public employees' savings plan under chapter 41.--- RCW (the new chapter created in section 214 of this act), that is expected to result in a net increase in required employer contributions to the retirement systems over either a two-year or a twenty-five year period may only be enacted by a supermajority of at least sixty percent of the members in both the house of representatives and the senate.

NEW SECTION.  Sec. 402   Sections 201 through 310 of this act take effect January 1, 2013.