SENATE BILL REPORT
ESSB 5150
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
Senate Hearing Date(s):February 9, 1987; February 18, 1987
Majority Report: That Substitute Senate Bill No. 5150 be substituted therefor, and the substitute bill do pass.
Signed by Senators McDermott, Chairman; Gaspard, Vice Chairman; Bauer, Bluechel, Deccio, Fleming, Kreidler, Rasmussen, Rinehart, Talmadge, Warnke, Williams, Wojahn.
Senate Staff:Charles Langen (786-7715)
April 10, 1987
House Committe on Ways & Means
AS PASSED SENATE, MARCH 10, 1987
BACKGROUND:
In the past, 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 current compensation.
SUMMARY:
Provision is made to reflect the appropriate compensation earned over a member's public service in the State of Washington in the several service retirement benefits to which a member may be entitled. The affected retirement systems are the Judicial Retirement System, Judges' Retirement System, Firemen's Relief and Pensions - 1947 Act, Firemen's Relief and Pensions - 1955 Act, Police Relief and Pensions in First Class Cities, Law Enforcement Officers' and Fire Fighters' Retirement System, Public Employees' Retirement System, State-wide City Employees' Retirement System, and State Patrol Retirement System. The First Class Cities of Seattle, Spokane and Tacoma may choose to be included under this benefit by adopting a resolution by the city's legislative body following a public hearing. Excluded are those retirement systems established by each institution of higher education for faculty and certain other employees except that service within such systems may be used to determine eligibility for retirement.
The compensation used in determining the final benefit is divided into two categories: (a) "current system average final compensation," where the compensation or an average final compensation (AFC) is the highest of either the compensation or AFC as determined in the current system or the compensation or AFC from the "base salary" (i.e., salary and wages for personal services, excluding overtime and other enumerated compensation or lump sum payments, earned over the member's career); and (b) "prior system average final compensation," where the compensation or AFC is determined from wither the compensation or AFC of the prior system or the base salary, whichever produces the highest benefit.
Members who have never had membership under the judicial retirement plans or Tier I, Public Employees' Retirement System (PERS I) as an elected or appointed official under Articles II and III of the Constitution of the State of Washington or RCW 48.02.010, the benefit provided is the sum of: (a) The service benefit received under the current system using the current system AFC; and (b) the sum of the respective service benefits received under prior systems as a result of multiplying AFC by the percentage factor and the service earned.
A member may have 8 years service in PERS I where the AFC for that period is $8,000, and 22 years in TRS I where the AFC is $25,000. Both systems have the same benefit formula: Service X AFC X 2.0%. Without portability the member would receive an annual benefit of $1,280 from PERS (8 X $8,000 X 2.0%) and $11,000 (22 X $25,000 X 2.0%) from TRS for a total benefit of $12,280. With the portability benefit, the member would receive an annual benefit of $4,000 from PERS (8 X $25,000 X 2.0%) and $11,000 from TRS for a total benefit of $15,000.
Members of the judicial retirement plans or elected or appointed officials under Articles II and III of the Constitution of the State of Washington or RCW 48.02.010, the benefit is the sum of (a) the product of this service computed pursuant to the judicial plans or PERS I, and (b) the sum of all other service.
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 January 1, 1988, and shall not retire based on service from any prior system. Eligibility to receive the portability benefit requires that the dual member meet the requirement for retirement of any system in which membership is held. The combined service of the member may be used to establish eligibility.
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.
Upon the death of a dual member, such death shall be considered to have occurred while in active service in each system in which membership was held and the surviving spouse shall receive the survivorship benefit such spouse is eligible to receive from each system.
The total benefit is to be neither less than would have been received absent portability nor greater than the benefit which could be received if all service were in any single system in which membership is held.
The Legislature retains the rights to deny the establishment of any new dual membership status at any time. This disclaimer sunsets on June 30, 1992.
The provisions on estoppel of membership when retired are amended to include dual members.
A permanent 16 member bicameral, bipartisan joint committee on public retirement is established. Its general function is to monitor and study past and future legislative actions or proposals and make recommendations based on these activities. During the period of July 1, 1987 and June 30, 1989, however, it is to periodically review the implementation and effect of portability.
The act shall be null and void in its entirety unless $6,354,000 is appropriated in 1987-1989 biennium to the Department of Retirement Systems, of which $554,000 is to be from the Retirement System Expense Fund, to initiate and implement this act.
Appropriation: (A) $554,000 -- Department of Retirement System expense fund; (B) $5.8 million -- general fund
Fiscal Note: available
Effective Date:(1) Estoppel amendatory language and appropriation take effect immediately; (2) remainder of the act takes effect January 1, 1988.
Appointments by Legislature Required: The Joint Committee on Public Retirement is to consist of 16 members, eight of which are to be appointed by the President of the Senate equally divided among the caucuses of the Senate, and eight of which are to be appointed by the Speaker of the House of Representatives equally divided among the caucuses of the House of Representatives.
Senate Committee - Testified: Honorable Doug Sutherland, Mayor, Tacoma; Dr. Robert Hollister, Director, Department of Retirement Systems; Jerry Allard, State Actuary
HOUSE AMENDMENT:
The affected retirement systems are limited to TRS, PERS, SWCERS, and WSPRS. City retirement systems under Chapter 41.28 RCW may petition to be included; additional legislative approval would be required. Provisions are added relating to portability of service for elected officials who are members of TRS and allowing an elected official's decision under RCW 41.40.120(3) to joint PERS to be given retroactive effect.
The Legislature retains the right to modify or abolish the benefit provided in the future.
The sections which established a joint committee on public retirement and which made the act null and void unless $6,354,000 was appropriated in the 1987-89 biennium to the Department of Retirement Systems are deleted.
An effective date of July 1, 1988 instead of January 1, 1988 is provided.