SENATE BILL REPORT

HB 1559

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

Providing for termination of membership in the teachers' retirement system.

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:

When Plan II of the Teachers' Retirement System was enacted in 1977 no provision was made for termination of membership from the system.  Withdrawal of contributions terminates benefits but does not terminate membership.  As a consequence, a Plan II member who separates from service and withdraws contributions and later returns to substitute teaching, must make contributions because of continued membership in the plan.

Legislation enacted in 1986 provided that employee or employer contributions are not required for any month in which service credit is not earned.  Substitute teachers who do not earn service credit may withdraw any contribution made for the month.  This creates a cycle of contributions and withdrawals.

Under the Federal Tax Reform Act of 1986 a 10 percent tax penalty is levied on most refunds made to an employee who is under age 59- 1/2.

Under TRS Plan I a minimum of ninety days or the equivalent of ninety days of employment during a fiscal year is required to establish membership.

SUMMARY:

Teachers' Retirement System Plan II membership is terminated when a member has separated from service and contributions are withdrawn.  Former members may reestablish membership under the same criteria used by a Plan I member.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

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

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