BILL REQ. #:  S-1896.1 

READ FIRST TIME 03/01/13.   

     AN ACT Relating to creating a defined contribution retirement plan option for public employees; amending RCW 41.04.440, 41.04.445, 41.04.450, 41.50.030, and 43.33A.190; reenacting and amending RCW 41.50.110; 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 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 defined contribution retirement plan act.

NEW SECTION.  Sec. 102   The legislature recognizes the need for public employees, public safety 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 provide a defined contribution retirement plan option 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   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (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 internal revenue code, but excludes nonmoney maintenance compensation and lump sum or other payments for deferred annual sick leave, unused accumulated vacation leave, 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)(a) "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.
     (b) Except as otherwise specifically provided in this chapter, "employer" does not include a government contractor. For purposes of this subsection, a "government contractor" is any entity, including a partnership, limited liability company, for-profit or nonprofit corporation, or person, that provides services pursuant to a contract with an employer. The determination whether an employer-employee relationship has been established is not based on the relationship between a government contractor and an employer, but is based solely on the relationship between a government contractor's employee and an employer under this chapter.
     (8) "Ineligible position" means any position that does not conform with the requirements set forth in subsection (5) 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 204 of this act.
     (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.
     (19) "Transferable plan" means the plans 2 and plans 3 of the retirement systems established under chapters 41.32, 41.34, 41.35, 41.37, and 41.40 RCW.

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 plan, 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:
     (1) All regularly compensated employees and appointive and elective officials who:
     (a) Are eligible for membership in plan 2 or plan 3 of the retirement systems established under chapters 41.32, 41.35, 41.37, or 41.40 RCW;
     (b) First become employed by an employer on or after July 1, 2014; and
     (c) Who make an irrevocable choice to become a member of the system, or become a member by default, as provided in subsection (3) of this section. However, individuals may not participate in another defined contribution pension plan qualified under section 401 of the internal revenue code, or an annuity or retirement plan under chapter 28B.10 RCW, in addition to being a member of the retirement system for the same period of employment with an employer.
     (2) All regularly compensated employees and appointive and elective officials employed by an employer who first established service in a transferable plan prior to July 1, 2014, and who made an irrevocable choice to transfer into the system as provided in section 205 of this act.
     (3)(a) All individuals who meet the requirements of subsection (1) of this section have a period of ninety days to make an irrevocable choice to either become a member of the public employees' savings plan or to instead elect to become a member, if eligible, of plan 2 or plan 3 of a retirement system established under chapters 41.32, 41.35, 41.37, and 41.40 RCW. If an individual does not make a choice to become a member of plan 2 or plan 3 of the state defined benefit retirement system for which he or she is eligible under the rules of that system, the individual will become a member of the public employees savings plan.
     (b) For administrative efficiency, until a member makes a choice or becomes a public employees savings plan member by default, as provided in (a) of this subsection, the member shall be reported to the department in plan 2 of the state defined benefit retirement system listed in (a) of this subsection for which they are eligible, with member and employer contributions. Upon becoming a member of the public employees' savings plan, all member accumulated contributions will be credited to the member's account in the public employees' savings plan, subject to the vesting requirements in section 206 of this act.

NEW SECTION.  Sec. 205   (1) Between January 1, 2015, and July 1, 2015, every member of a transferable plan employed by an employer in an eligible position has a one-time and irrevocable option to transfer to the public employees' savings plan. Members electing this option must transfer service from each transferable plan in which the member has established service credit.
     (2) Service in each transferable plan for which a transferring member has established service credit will be transferred to the public employees' savings plan on July 1, 2015. This service applies to the eligibility for vesting in employer matching contributions as provided in section 206 of this act.
     (3) Retirement benefits in each transferable plan for which a transferring member has established service credit will be transferred to the public employees' savings plan and credited to member accounts in the public employees' savings plan as follows:
     (a) Plan 2 members' accumulated contributions from each transferable plan 2 will be transferred on July 1, 2015, including all accrued interest as of the transfer date;
     (b) Plan 3 members' member accounts from each transferable plan 3 will be transferred on July 1, 2015;
     (c) An additional transfer payment from each transferable plan will be credited to qualified members' accounts in the public employees' savings plan on July 1, 2017. The transfer payment represents the employer provided portion of the member's accrued retirement benefit and is equal to the actuarial equivalent value of the member's accrued retirement benefit on June 30, 2015, as determined by the director in consultation with the state actuary, less any amounts transferred under (a) of this subsection. In no event may the additional transfer payment result in a decrease in the value of a member's account;
     (d) For purposes of determining the actuarial equivalent value of the accrued benefit transferred under (c) of this subsection, the department shall include both expected future salary increases and expected future service credit for benefit eligibility purposes. However, only service credit earned as of June 30, 2015, shall be used to determine the portion of the present value of future benefits that the transferring member has accrued at the date of the transfer;
     (e) The additional transfer payment provided under (c) of this subsection must be increased with regular interest, as determined by the director, for the period of time between the transfer date and the date of the additional transfer payment;
     (f) To qualify for the transfer payment provided under (c) of this subsection, a transferring member must remain employed by an employer in an eligible position through July 1, 2017;
     (g) Members are fully vested in each amount transferred under (a), (b), (c), and (e) of this subsection when the amount is credited to the member's account in the public employees' savings plan.
     (4) Members transferring to the public employees' savings plan forfeit all service and benefits from all transferable plans and may not reestablish membership in any transferable plan.
     (5) The department shall notify potentially eligible members of their option to transfer to the public employees' savings plan and shall provide estimates of the amounts potentially available for transfer to their member accounts.

NEW SECTION.  Sec. 206   (1) A member shall contribute five percent of his or her compensation earnable until age thirty-five, and seven and one-half percent thereafter.
     (2) The employer of a member shall contribute an amount equal to eighty percent of the contributions made by a member.
     (3) Members with less than five years of service are not vested in employer contributions to member accounts and the earnings on those contributions. Once members have attained five years of service, they become fully vested in the employer contributions and the earnings on those contributions. Members do not have any right to receive employer contributions or the earnings on those contributions in which they are not vested.
     (4) Contributions shall begin the first day of the pay cycle in which the employee becomes a member.

NEW SECTION.  Sec. 207   In addition to contributions made to members' accounts, employers shall make contributions to the unfunded actuarial accrued liability in plan 1 of the teachers' retirement system and plan 1 of the public employees' retirement system 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) on earnable compensation paid to teachers as defined in RCW 41.32.010.
     (2) School districts and educational 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) on earnable compensation paid to classified employees as defined in RCW 41.35.010.
     (3) Employers other than school districts and educational 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. 208   (1) Members may self-direct their investments as set forth in section 209 of this act and RCW 43.33A.190. If a member does not select investments, the member's account shall be invested in the default investment option of the retirement strategy fund that is closest to the retirement target date of the member. "Retirement strategy fund" means one of several diversified asset allocation portfolios managed by investment advisors under contract to the state investment board. The asset mix of the portfolios adjusts over time depending on a target retirement date.
     (2) The department shall adopt rules that will allow members the option to roll over moneys from other tax qualified accounts into their public employees' savings plan member account. This option is subject to internal revenue service requirements for favorable tax qualification. The department is not required to allow all roll-overs that may be permitted under internal revenue service regulations.

NEW SECTION.  Sec. 209   (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 208 of this act and this section. In carrying out this authority the state investment board, after consultation with the department, 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 defined contribution funds.
     (ii) The state investment board has sole responsibility for contracting with outside investment firms to provide investment management for the defined contribution 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. 210   (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 no 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 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:
     (a) Any amount identified as owing to an obligee upon withdrawal pursuant to a court order filed under RCW 41.50.670; and
     (b) Any employer contributions and the earnings on those contributions in which the member is not vested as provided for in section 206 of this act.
     (5) Upon any distribution from a member account under this section, any employer contributions and the earnings on those contributions in which the member is not vested as provided for in section 206 of this act are forfeited by the member. Amounts forfeited under this subsection will be credited, under rules developed by the department, to the employer who made the contributions.
     (6) The department shall adopt rules providing members and survivors an option to purchase, using funds in the member's account, an annuity from a state-administered fund. The offering of this option is subject to favorable tax determination by the internal revenue service.

NEW SECTION.  Sec. 211   (1) Subject to subsections (2) and (3) of this section, the right of a person to an annuity or any other right accrued or accruing to any person under the provisions of this chapter, the various funds created by this chapter, and all moneys and investments and income thereof, are 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, whether the same be in actual possession of the person or be deposited or loaned and shall be unassignable.
     (2)(a) This section does not prohibit a beneficiary of an annuity from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions and which has been approved for deduction in accordance with rules that may be adopted by the state health care authority and/or the department. This section does not prohibit a beneficiary of an annuity from authorizing deductions therefrom for payment of dues and other membership fees to any retirement association or organization the membership of which is composed of retired public employees, if a total of three hundred or more of such retired employees have authorized such deduction for payment to the same retirement association or organization.
     (b) This section does not prohibit a beneficiary of an annuity from authorizing deductions from that allowance for charitable purposes on the same terms as employees and public officers under RCW 41.04.035 and 41.04.036.
     (3) 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 of retirement systems 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. 212   (1) The retirement plan created by this chapter must be administered so as to comply with the 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. 213   (1) A state board, commission, or 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 209 (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 209 (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 209(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 209(2) of this act.

NEW SECTION.  Sec. 214   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. 215   Sections 201 through 214 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 215 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 215 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 215 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 215 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 215 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 215 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 chapters 41.34, and 41.--- (the new chapter created in section 215 of this act) 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 under the subchapter heading "plan 3" to read as follows:
     (1) All teachers who first become employed by an employer in an eligible position on or after July 1, 2014, must make an irrevocable choice to become a member of either the teacher's retirement system, or the public employees' savings plan established under chapter 41.--- RCW (the new chapter created in section 215 of this act). If the employee does not make a choice to become a member of the teachers' retirement system, he or she becomes a member of the public employees' savings plan.
     (2) The system choice provided in this section only applies to employees who are eligible for membership in both retirement systems under the rules of the systems. This section does not confer retirement system membership on an employee who is not otherwise eligible.

NEW SECTION.  Sec. 305   A new section is added to chapter 41.35 RCW under the subchapter heading "plan 3" to read as follows:
     (1) All classified employees who first become employed by an employer in an eligible position on or after July 1, 2014, must make an irrevocable choice to become a member of either the school employees' retirement system, or the public employees' savings plan established under chapter 41.--- RCW (the new chapter created in section 215 of this act). If the employee does not make a choice to become a member of the school employees' retirement system, he or she becomes a member of the public employees' savings plan.
     (2) The system choice provided in this section only applies to employees who are eligible for membership in both retirement systems under the rules of the systems. This section does not confer retirement system membership on an employee who is not otherwise eligible.

NEW SECTION.  Sec. 306   A new section is added to chapter 41.37 RCW to read as follows:
     (1) All public safety employees who first become employed by an employer in an eligible position on or after July 1, 2014, must make an irrevocable choice to become a member of either the public safety employees' retirement system, or the public employees' savings plan established under chapter 41.--- RCW (the new chapter created in section 215 of this act). If the employee does not make a choice to become a member of the school employees' retirement system, he or she becomes a member of the public employees' savings plan.
     (2) The system choice provided in this section only applies to employees who are eligible for membership in both retirement systems under the rules of the systems. This section does not confer retirement system membership on an employee who is not otherwise eligible.

NEW SECTION.  Sec. 307   A new section is added to chapter 41.40 RCW under the subchapter heading "plan 3" to read as follows:
     (1) All employees who first become employed by an employer in an eligible position on or after July 1, 2014, must make an irrevocable choice to become a member of either the public employees' retirement system, or the public employees' savings plan established under chapter 41.--- RCW (the new chapter created in section 215 of this act). If the employee does not make a choice to become a member of the public employees' retirement system, he or she becomes a member of the public employees' savings plan.
     (2) The system choice provided in this section only applies to employees who are eligible for membership in both retirement systems under the rules of the systems. This section does not confer retirement system membership on an employee who is not otherwise eligible.

Sec. 308   RCW 41.50.030 and 2011 1st sp.s. c 47 s 20 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 collection of employer contributions and initial prefunding of the higher education retirement plan supplemental benefits, also referred to as the annuity or retirement income plans created under chapter 28B.10 RCW.
     (7) The department shall administer the Washington public employees' savings plan created in chapter 41.--- RCW (the new chapter created in section 215 of this act).

Sec. 309   RCW 41.50.110 and 2011 1st sp.s. c 50 s 936 and 2011 1st sp.s. c 47 s 22 are each reenacted and 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, 28B.10, 41.26, 41.32, 41.40, 41.34, 41.35, 41.37, 41.--- (the new chapter created in section 215 of this act), 43.43, 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 28B.10.400, 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 28B.10.400, 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))) (4) shall be paid pursuant to subsection (1) of this section.
     (7) During the 2009-2011 and 2011-2013 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 209 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   This act takes effect July 1, 2014.

NEW SECTION.  Sec. 402   The benefits provided pursuant to this act are not provided to employees as a matter of contractual right prior to July 1, 2014. The legislature retains the right to alter or abolish these benefits at any time prior to July 1, 2014.