SENATE BILL REPORT

SB 6201

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Majority Report: Do pass.

Signed by Senators Hill, Chair; Baumgartner, Vice Chair; Honeyford, Capital Budget Chair; Hargrove, Ranking Member; Keiser, Assistant Ranking Member on the Capital Budget; Ranker, Assistant Ranking Member on the Operating Budget; Bailey, Becker, Billig, Braun, Conway, Dammeier, Fraser, Frockt, Hasegawa, Hatfield, Hewitt, Kohl-Welles, Padden, Parlette, Rivers, Schoesler and Tom.

Background: Members of Plan 2 of the Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF 2) are eligible for a retirement allowance at age 53 that is equal to 2 percent times the member's years of service times the member's average final compensation. Members of LEOFF 2, the Teachers Retirement System (TRS), Public Employees Retirement System (PERS), School Employees Retirement System (SERS), and Public Safety Employees Retirement System (PSERS) may add up to five years of service credit for the calculation of their retirement allowance by paying the actuarial equivalent value of the increase in the member's benefit. Subject to rules adopted by the Department of Retirement Systems (DRS), the payment can be made with a lump sum payment, with an eligible or direct rollover, or a trustee-to-trustee transfer from an eligible retirement plan.

Many members of LEOFF 2, TRS, PERS, SERS, and PSERS also participate in employer-sponsored tax-deferred savings plans established under sections 401(a), 403(b), and 457 of the federal Internal Revenue Code. Members of Plan 3 of TRS, PERS, and SERS may convert some or all of the funds in their member accounts to a life annuity administered by DRS.

Summary of Bill: Members of LEOFF 2 may purchase an optional actuarially equivalent life annuity from the LEOFF 2 fund with a minimum payment of $25,000. The payment may be made through an eligible or direct rollover, or trustee-to-trustee transfer from a tax-qualified plan offered by a governmental employer.

DRS must adopt rules regarding eligible rollovers and transfers to ensure they comply with federal requirements and that the rollovers and transfers are conditioned on the receipt of information needed by DRS to determine their eligibility for tax-free treatment under federal tax law.

Staff Summary of Public Testimony: PRO: Most LEOFF 2 members are not covered in Social Security for their LEOFF service. This bill will increase their ability to provide themselves a secure, life-long retirement income by letting them use their tax-deferred savings to purchase an additional actuarially equivalent annuity from the LEOFF 2 retirement fund. Most of the administrative structure needed to implement this option is already in place; DRS would incur only a small, one-time programming expense as a result of this bill.