SENATE BILL REPORT

HB 1649

BYRepresentatives Sayan, Patrick, H. Sommers, Holland, Basich and D. Sommers 

Revising pension portability provisions.

House Committe on Ways & Means/Appropriations

Senate Committee on Ways & Means

Senate Hearing Date(s):February 26, 1988; February 27, 1988

Majority Report:  Do pass as amended.

      Signed by Senators McDonald Chairman; Craswell, Vice Chairman; Bluechel, Cantu, Deccio, Hayner, Johnson, Lee, Newhouse, Saling, Smith, Zimmerman.

Minority Report:  Do not pass as amended.

      Signed by Senators Bauer, Fleming, Gaspard, Moore, Talmadge, Vognild, Williams, Wojahn.

Senate Staff:Charles Langen (786-7715)

                  February 28, 1988

AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 27, 1988

BACKGROUND:

In 1987 the Legislature enacted ESSB 5150 to allow members of the Public Employees Retirement System (PERS), the Teachers Retirement System (TRS), the Washington State Patrol Retirement System (WSPRS), and the Statewide Cities Employees Retirement System (SCERS) to move between those four systems without suffering a significant reduction in their retirement benefits.  The bill permits persons to combine their service in those four systems for the purpose of determining retirement eligibility.  (PERS, Plan I and TRS, Plan I both allow a member to retire at age 55 with 25 years of service, or at any age with 30 years of service.)  It also allows a member to calculate his or her retirement allowances using the "base salary" earned in any of the four systems.  (Base salary is defined as the salaries or wages earned by a member, excluding any overtime and lump sum payments.)

The Statewide City Employees Retirement System was abolished in 1971; all active members of SCERS became members of PERS at that time and later were allowed to receive credit in PERS for their prior service in SCERS.

ESSB 5150 provides that a person may not be a "dual member" (i.e. may not use the portability benefit) if the person is receiving a disability benefit from PERS, TRS, WSPRS, SCERS, or from one of the city employee retirement systems for Seattle, Tacoma, or Spokane.

ESSB 5150 allows the surviving spouse of a dual member to receive a survivor benefit from each of the dual member's systems, as if the dual member were active in each of the systems at the time of death.  PERS and TRS provide the surviving spouse of a member who has at least ten years of service with a survivor allowance which is based on the member's length of service.  The WSPRS provides the surviving spouse of a member who has any length of service with an allowance equal to 50 percent of the member's salary.

ESSB 5150 includes a "maximum benefit limitation."  The sum of the retirement allowances received under the bill may not exceed the smallest amount the member would have received if all of his or her service had been rendered in any one of the member's systems.  The bill did not, however, provide guidelines for enforcing this limitation.

During the fall of 1987 the Joint Committee on Pension Policy reviewed the provisions of ESSB 5150 and recommended that the language of the bill be clarified, especially in regard to the above mentioned points.  The provisions of ESSB 5150 take effect on July 1, 1988.

SUMMARY:

The bill makes the following changes to ESSB 5150:

1.  Certain definitions which are no longer used are deleted from RCW 41.54.010 and the definition of "director" is edited for clarification.

2. The definition of "dual member" is clarified to exclude any person who is receiving disability benefits from any retirement system administered by the Department of Retirement Systems.

3. References to the city employee retirement systems of Seattle, Tacoma, and Spokane are clarified.

4. The Statewide City Employees Retirement System is removed from the coverage of the bill.

5.  The section which creates the basic portability benefit (RCW 41.54.030) is rewritten to more clearly define the benefit.  The benefit is not modified.

6.  The portability survivor benefit is not made available to former members of the WSPRS.

7. Guidelines are provided for administering the maximum benefit limitation contained in RCW 41.54.070.

8. Each system is authorized to pay a dual member a lump sum payment in lieu of a monthly benefit if the initial monthly benefit would be less than $50.

SUMMARY OF PROPOSED SENATE AMENDMENT:

A new definition of "average base salary" is provided which requires that average compensation used be derived from the highest 60 months and is not to include authorized leaves of absence.

The dual member must be vested in at least one system in order to exercise the portability benefit.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

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

Senate Committee - Testified: Karen Davis, WEA