SENATE BILL REPORT

HB 3

BYRepresentatives Hine, H. Sommers, Patrick, Sayan, Holland, Silver, Barnes and P. King 

Revising provisions relating to overpayment of retirement benefits.

House Committe on Ways & Means/Appropriations

Senate Committee on Ways & Means

Senate Hearing Date(s):March 23, 1987

Majority Report:  Do pass.

      Signed by Senators McDermott, Chairman; Gaspard, Vice Chairman; Bauer, Cantu, Craswell, Deccio, Kreidler, McDonald, Moore, Owen, Rasmussen, Rinehart, Talmadge, Vognild, Warnke, Williams, Wojahn, Zimmerman.

Senate Staff:Charles Langen (786-7715)

                  March 30, 1987

AS REPORTED BY COMMITTEE ON WAYS & MEANS, MARCH 23, 1987

BACKGROUND:

The Department of Retirement Systems (DRS) is required to recover from retirees or beneficiaries, any pension overpayments resulting from errors appearing in the records of the state's retirement systems.

(1) The Public Employees Retirement System Plan I (PERS I) provides that a retiree who returns to work for a PERS employer automatically becomes an active member of PERS (earning service credit, etc.) and immediately ceases to receive his or her retirement payments.  The Teachers' Retirement System Plan I (TRS I) allows a retiree to work up to 75 days per school year without having his or her pension reduced.  PERS Plan II and TRS Plan II both make a retiree ineligible for a pension while the retiree is employed by any non-federal public employer in the state.

When a public employer hires a PERS or TRS retiree in an eligible position but does not inform DRS of that fact, some or all of the pension payments made to the retiree while so employed may be "overpayments" which DRS may not learn of until much later.  When the overpayments are discovered, DRS is required to recover them from the retiree.  It is the employer's duty to report the retiree's new status to DRS, but the penalty for failing to report falls on the retiree.

(2) TRS I authorizes an actuarially reduced retirement allowance for the surviving spouse or dependent of a TRS I member who dies before retirement.  The Legislature provided an increase in the minimum TRS retirement allowance beginning July 1, 1979; that increase, however, was to be appropriately reduced for persons receiving actuarially reduced allowances.

In July 1986 DRS discovered that the 1979 increase in the minimum retirement allowance had been granted to certain surviving beneficiaries without the full actuarial reduction required.  Approximately 46 persons are affected.

SUMMARY:

(1) When a public employer covered by a state retirement system hires a retiree but fails to report the hiring, the employer, not the retiree is required to reimburse the pension system for any overpayments.

The employer's potential liability for such overpayment is limited to a maximum of $5,000 for each year, up to a maximum of 3 years.

Only Department of Retirement Systems (DRS) recovery actions commencing after January 1, 1986 are affected; employees are billed only for overpayments made after that date.

(2) DRS shall not recover from surviving beneficiaries of TRS members who died in service any pension overpayment caused by the application of the 1979 cost-of-living adjustment, nor shall such benefits be reduced.

Fiscal Note:      available

Senate Committee - Testified: Sheryl Wilson, Assistant Director, Department of Retirement Systems