SENATE BILL REPORT

HB 1558

BYRepresentatives Sayan and Grimm; by request of Department of Retirement Systems

Revising provisions relating to teachers' retirement options.

House Committe on Ways & Means/Appropriations

Senate Committee on Ways & Means

Senate Hearing Date(s):February 25, 1988; February 26, 1988

Majority Report:  Do pass.

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

Senate Staff:Charles Langen (786-7715)

                  February 26, 1988

AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 26, 1988

BACKGROUND:

A member of the Teachers' Retirement System Plan I is eligible to receive a service retirement allowance equal to 2 percent of his or her average final compensation times the number of years of service.  Average final compensation is figured over the two highest consecutive years of employment.  Members receive this maximum retirement allowance throughout life unless they chose one of four options which are calculated so as to be actuarially equivalent to each other.  These options include the following:

Option 1.  If a member dies before receiving the present value of accumulated contributions at the time of retirement, the unpaid balance is paid to the member's estate or person designated by the member.

Option 2.  The member receives a reduced retirement allowance which upon his or her death is continued throughout the life of, and is paid to, the person designated by the member.

Option 3.  The member receives a reduced retirement allowance, which upon his or her death is reduced by one half and continued throughout the life of, and paid too, the person designated by the member.

Option 4.  Members may add an annual cost-of- living-adjustment (COLA) to the retirement allowance provided by any of the first three options.  The COLA, indexed to the Consumer Price Index (Seattle), may not exceed 3 percent.  The cost of the COLA is offset by making an actuarial reduction in the amount of the member's retirement allowance.  This option was added through legislation passed during the 1987 session.  The legislation passed in 1987 did not allow the COLA option to be applied to the maximum retirement benefit.

SUMMARY:

The cost-of- living-adjustment (COLA) option available to members of Teachers' Retirement System Plan I can be applied to the maximum retirement benefit.  The calculated retirement allowance with the COLA will be actuarially equivalent to the maximum retirement allowance.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Effective Date:The bill takes effect June 30, 1988.

Senate Committee - Testified: Dr. Robert Hollister, Department of Retirement Systems; Jerry Allard, State Actuary