SENATE BILL REPORT

SHB 1366

BYHouse Committee on Ways & Means/Appropriations (originally sponsored by Representatives Hine, Silver, H. Sommers, Walker, Dellwo, Patrick, McLean and Bristow)

Providing for judges retirement.

House Committe on Ways & Means/Appropriations

Senate Committee on Ways & Means

Senate Hearing Date(s):February 25, 1988; February 29, 1988

Majority Report:  Do pass as amended.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bauer, Bluechel, Cantu, Deccio, Fleming, Gaspard, Hayner, Johnson, Lee, Moore, Saling, Smith, Talmadge, Vognild, Warnke, Williams, Wojahn, Zimmerman.

Senate Staff:Charles Langen (786-7715)

                  February 29, 1988

AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 29, 1988

BACKGROUND:

Washington has two retirement systems for judges.  The Judicial Retirement System (JRS, Chapter 2.10 RCW) for all judges first elected or appointed after 1971 and the Judges Retirement Fund (Chapter 2.12) for judges elected or appointed prior to 1971.  These systems cover only superior court judges, and members of the Supreme Court and the Court of Appeals.  All district court judges are members of the Public Employees Retirement System (PERS).

Chapters 2.10 and 2.12 RCW were designed in a manner to encourage judges to stay in service.  In both, a judge may not withdraw his or her contributions upon separation from service and must stay in service for 12 or 18 years to receive a retirement allowance.  The retirement allowance of a JRS (2.10) retiree may also be reduced to offset income from post-retirement employment.

The JRS (2.10) system provides a very generous retirement benefit: 3 percent of the judge's final compensation if the judge had less than 15 years of service and 3.5 percent if the judge had 15 or more years of service, up to a maximum of 75 percent of the judge's final compensation.  The benefit also includes an annual cost-of-living adjustment tied to the consumer price index (CPI) with a 3 percent maximum annual increase.

JRS provides a survivor benefit equal to 50 percent of the judge's retirement allowance (no actuarial reduction) but not less than 25 percent of the judge's final salary.  However, this benefit is provided only to judges who have ten or more years of service and when the surviving spouse has been married to the judge for at least two years.  If the surviving spouse remarries the survivor benefits cease; if she is employed, the benefits may be reduced by the amount of her earnings.

Active members of JRS (2.10) contribute 7.5 percent of their compensation; the remaining cost of the system is paid by the state.  JRS has been funded on a pay-as-you-go basis and as of 1985 had an unfunded liability of almost $40 million.  The 1985 JRS actuarial evaluation indicated that a state contribution rate of 41.30 percent of compensation would be needed to fund both the normal cost and the unfunded liability of the system.

In the Public Employees Retirement System (PERS I and II) and other state retirement systems employee contributions may be withdrawn upon separation from service and members may receive a benefit after five years of service.

PERS allows the member, at the time of retirement, to choose an actuarially reduced allowance which continues through the lifetime of the member's spouse or other beneficiary.  If a PERS member dies before being eligible for retirement, the member's contributions are paid to the surviving spouse or other beneficiary.

Most members of PERS I contribute 6 percent of their compensation and receive a benefit based on 2 percent of their average final compensation (2 year AFC); members who are state elected officials contribute 7.5 percent of their compensation and receive a benefit based on 3 percent of their AFC.  Members of PERS II, TRS II, and LEOFF II contribute one-half the cost of their retirement systems (currently requiring a member contribution of 4.90 percent in PERS II) and receive a benefit based on 2 percent of their AFC (5 year average).

At the time the JRS system was created, the annual salary for a superior court judge was $22,500; as of July 1, 1988, the salary will be $74,500.  The annual compensation for judges is now set by the Washington Citizen's Commission on Salaries for Elected Officials.

Members of PERS first elected or appointed as judges after 1984 have the option of joining JRS or staying in PERS; members who became judges prior to 1984 do not have the option of receiving credit in PERS for their years of service as a judge.

SUMMARY:

1)  The Judicial Retirement System (JRS; Chapter 2.10 RCW) is closed; persons first elected or appointed to Superior Court, the State Supreme Court, or the State Court of Appeals after the effective date of the act will have the option to become members of the Public Employees Retirement System (PERS).

2) Current JRS members have the option to make an irrevocable choice to receive credit in PERS for their years of service as a judge.  In order to exercise this option the member must file a written request with the Department of Retirement Systems (DRS) by December 31, 1989.  Former members of JRS may exercise the option within one year of reentering service as a judge.  The difference between the amount of member contributions made under JRS and the amount which would have been made under PERS are deposited in the member's Judicial Retirement Account (JRA).  Members of PERS whose service in PERS was interrupted by service in JRS, who did not retire in JRS, and who are not active members of JRS as of the effective date of the bill may receive credit in PERS for their service as a judge.

3)  The Judicial Retirement Account (JRA) plan is created.

      a)All judges of the State Supreme court, Court of Appeals and Superior Courts who are members of PERS for their service as a judge shall be members of the plan.

      b)Each member shall contribute 2.5 percent of the member's monthly salary to the members Judicial Retirement Account (JRA); the state will match the member's contribution.  The member's gross income will be reduced, for federal income tax purposes only, by the amount of the member's contribution.

      c)The Administrator for the Courts, under the direction of the board for judicial administration, will invest the money contributed to the member accounts and will administer the plan.  The cost of administering the plan is paid from the earnings on the member accounts.

      d)A member who separates from judicial service for any reason will be able to receive a lump sum distribution of all the contributions in the members account, together with any earnings credited to the account.

4) Benefits provided under JRS are improved in three ways:

      a)The restriction on post retirement earnings is repealed for both retirees and surviving spouses.  However, a retiree shall not be eligible to receive an allowance if performing service (other than up to ninety days of pro tem service per year) for any non federal public employer in the state.

      b)A judge is allowed to chose, prior to December 31, 1988, between the survivor benefits currently provided by JRS and a new set of survivor benefits patterned after those provided in PERS.  The surviving spouse of the judge who chooses the new survivor benefits does not lose the benefits upon remarriage.

      c)The surviving spouse of any judge who died in office after January 1, 1986, but before the effective date of the bill, is allowed to receive a refund of the judge's contributions.

SUMMARY OF PROPOSED SENATE AMENDMENT:

The surviving spouse is allowed to retain the survivor benefit upon remarriage.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested January 15, 1988

Effective Date:The bill takes effect July 1, 1988.

Senate Committee - Testified: Chief Justice Pierson; Representative Hine; Mary McLane, Administrator of the Courts; Jerry Allard, State Attorney