FINAL BILL REPORT

SSB 5150

                                  C 192 L 87

BYSenate Committee on Ways & Means (originally sponsored by  Senators Gaspard, Johnson, Vognild, Warnke, Saling, Nelson, Lee, Garrett, von Reichbauer and Moore)

Providing for the portability of public pension benefits.

Senate Committee on Ways & Means

House Committe on Ways & Means

SYNOPSIS AS ENACTED

BACKGROUND:

Legislation has been enacted providing for transfer of service from one state retirement system to another under limited criteria.  Other than through such legislation, a public service career may be completed with the retirement benefit received from the earlier system not reflecting the career compensation.

SUMMARY:

Benefits earned in the following Washington retirement systems are to reflect the portability benefit:  Teachers'; Public Employees; State-wide City Employees'; First Class Cities (Seattle, Spokane and Tacoma); and State Patrol.  Excluded are retirement systems for judges, police and fire and those systems established by institutions of higher education for faculty and certain other employees.  The first class cities must, by resolution, request coverage prior to January 1, 1988, and the Legislature must enact legislation granting such coverage.

Two new categories of average final compensation (AFC) are created:  (1) The "prior system average final compensation" is the AFC used to calculate the benefit in any prior system in which membership is held.  The prior system AFC is calculated using either (a) the compensation earned in the prior system, or (b) the "base salary" (i.e., salary and wages for personal services, excluding overtime lump sum payments and other enumerated compensation) of the current system, whichever produces the greater benefit.  (2) The "current system average final compensation" is the AFC used to calculate the benefit in the system in which membership is held at retirement and consists of either the AFC used in the current system or the base salary from a prior system, whichever produces the higher benefit.

The portability benefit provided is the sum of:  (a) The service benefit received under the current system using the current system AFC; and (b) service benefit(s) received under prior systems determined by multiplying the prior system AFC by the percentage factor and the service earned.

For example, a member may have 8 years service in PERS I with the AFC for that period at $8,000, and 22 years in TRS I with the AFC at $25,000.  Both systems have the same benefit formula: Service X AFC X 2.0%.  Without portability the member would receive a total annual benefit of $12,280 comprised of $1,280 from PERS (8 X $8,000 X 2.0%) and $11,000 (22 X $25,000 X 2.0%) from TRS.  With the portability benefit, the member would receive a total annual benefit of $15,000 comprised of $4,000 from PERS (8 X $25,000 X 2.0%) and $11,000 from TRS.

To be eligible for the portability benefit the person must be a dual member (hold membership in two or more retirement systems) on or after July 1, 1988, and not retired based on service from any prior system.

When the member terminates employment and is eligible for service retirement under any system in which membership is held, such member may commence receiving the portability benefit.  If, however, the member would not be eligible to receive a service retirement absent portability, the service retirement allowance will be actuarially reduced from the earliest age the combined services would have made the member eligible.  This actuarial reduction may be avoided by deferring receipt of the allowance until fully eligible.

If a member has withdrawn contributions from a prior system, a restoration period is provided.  This period is two years from either the date of establishing dual membership or prior to retirement, whichever occurs first.

Each system from which a benefit is received will pay its portion of the benefit and any deductions from the retirement allowance authorized by that system will be made according to the provisions of that system.  Each system will pay any post-retirement adjustments based on the payments made by that system.

The surviving spouse of a dual member will receive the same benefit the member would have received if the member were active at the time of death in the prior system in which membership is held.

The portability benefit shall neither result in a total benefit less than would have been received absent portability, nor be more than the benefit which would would have been received if all service were in a single system in which membership is held.

The portability benefit is not to be construed as a matter of a contractual right and the benefit may be altered or abolished by the Legislature at any time prior to a member's retirement.

The provisions on estoppel of membership when retired are amended to exclude dual members.

Language is added to clarify PERS I eligibility.

VOTES ON FINAL PASSAGE:

      Senate    34    14

      House 93   0 (House amended)

      Senate    39    10 (Senate concurred)

EFFECTIVE:July 1, 1987 (Section 5)

            July 1, 1988