SENATE BILL REPORT
SB 5150
BYSenators 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)
February 20, 1987
AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 18, 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, Retirement of Personnel in Certain First Class Cities (Seattle, Spokane and Tacoma), Teachers' Retirement System, Public Employees' Retirement System, State-wide City Employees' Retirement System, and State Patrol Retirement System. Excluded are those retirement systems established by each institution of higher education for faculty and certain other employees.
There are two categories of average final compensation (AFC): (1) "current system average final compensation," the compensation or AFC calculation of the system in which membership is held at retirement; (2) "prior system average final compensation," the compensation or AFC used in any prior system in which membership is held. The compensation used to determine the prior system AFC is that which produces the greater benefit selected from either the (a) compensation earned in a prior system, or (b) "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).
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.
When the member terminates employment and is eligible under the current system, such member may commence receiving the portability benefit.
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.
Survivorship benefits are provided as follows:
(a)If a deceased member had prior service in systems providing survivor benefits based on the salary received at the time of death (Judicial Retirement System, Judges' Retirement System, Law Enforcement Officers' and Fire Fighters' Retirement System, and State Patrol Retirement System), the surviving spouse shall receive the same benefit from these systems as would have been received if the member had retired from service.
(b)In all other instances, the surviving spouse will receive the same benefit the member would have received if the member were active in the prior system at the time of death.
The portability benefit shall not result in a total benefit less than would have been received absent portability.
The portability benefit is not to be construed as establishing a contractual right and the benefit may be revised or withdrawn by the Legislature as it deems necessary. 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.
An appropriation is provided to the Department of Retirement Systems to initiate and administer the implementation of this act.
Appropriation: $554,000 -- Department of Retirement System expense fund
Fiscal Note: requested
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.
EFFECT OF PROPOSED SUBSTITUTE:
Except for the following changes, the Summary remains the same:
Service in higher educational retirement systems may be used solely for establishing eligibility for retirement.
The compensation used in the current system average final compensation is either the compensation of the current system or from the base salary, whichever produces the higher benefit.
Eligibility for the portability benefit requires that the dual member meet the requirements of any system in which membership is held. The combined service of the member may be used to establish eligibility.
The survivor benefit for all systems is the same benefit the survivor would have received if the member were active in each of the systems at the time of death.
The Legislature retains the right to deny the establishment of any new dual membership status at any time. The sunset of this disclaimer remains June 30, 1992.
Not only is the total benefit to be no less than would have been received absent portability, the total benefit may not be more than could be received if all service were in a single system in which membership is held.
First class city retirement systems of Seattle, Spokane and Tacoma are given the option to be covered under the portability benefit. The city legislative body must hold a public hearing on a resolution to seek admittance and then adopt the resolution by a majority of those elected to that body. These cities may exercise the option prior to the effective date of the bill.
Senate Committee - Testified: Honorable Doug Sutherland, Mayor, Tacoma; Dr. Robert Hollister, Director, Department of Retirement Systems; Jerry Allard, State Actuary