SENATE BILL REPORT

ESHB 844

BYHouse Committee on State Government (originally sponsored by Representatives Belcher, H. Sommers, Holm, Hankins, Lewis, Unsoeld, Peery, Miller, Sayan, Sprenkle, K. Wilson, Locke, Madsen, Hargrove, Rasmussen, Sutherland, Fisher, R. King, Walk, Nelson, Todd, Ebersole, P. King, Brooks, D. Sommers, Allen, Lux, Heavey, Scott, Cole, Pruitt, Wang, Dellwo, Basich and B. Williams)

Authorizing a dependent care plan for state employees.

House Committe on State Government

Rereferred House Committee on Ways & Means/Appropriations

Senate Committee on Governmental Operations

Senate Hearing Date(s):March 31, 1987

Majority Report:     Do pass as amended.

     Signed by Senators Halsan, Chairman; Garrett, Vice Chairman; DeJarnatt, Zimmerman.

Senate Staff:Barbara Howard (786-7410); Eugene Green (786-7405)

                March 31, 1987

AS REPORTED BY COMMITTEE ON GOVERNMENTAL OPERATIONS, MARCH 31, 1987

BACKGROUND:

In 1986 the Department of Personnel and the Higher Education Personnel Board conducted a study of their personnel systems to identify where state law and administrative rules could be changed to help meet state employees' child care needs.

Interest was expressed during this study by employees in a payroll deduction option for child care expenses.

The Internal Revenue Code allows employers to establish a dependent care plan under which employees may deduct from their gross income a monthly sum to be used for dependent care expenses.  This sum is placed in an account from which the employer reimburses an employee for the employee's actual dependent care expenses.  The deduction reduces the gross income of the employee for income tax purposes thereby reducing the amount of employee income tax paid.  The social security contribution of the employer and employee is also reduced.

All dependent care plans must be approved by the Internal Revenue Service.  Such programs are currently in place in Anchorage, Denver, San Antonio, San Diego, and the State of Illinois.

SUMMARY:

A salary reduction plan is established under the provisions of the Internal Revenue Code for any state employee choosing to participate.  The plan allows state employees to agree to an amount to be deducted from their salaries which would be deposited in a dependent care account.  An employee shall be informed of all benefits and reductions that will occur as a result of such election, before his or her election to participate.

The employee's retirement benefit and contribution will continue to be calculated on total compensation received.

The Committee for Deferred Compensation is responsible for formulating, adopting and administering the plan.

Initial administration expenses are appropriated from the general fund. Program administration costs may be covered by a fee charged to the participant and from savings realized by the employer due to reductions in social security contributions.

SUMMARY OF PROPOSED SENATE AMENDMENT:

The basic provisions of the plan are maintained.  Several technical amendments include striking references to "dependent care accounts," which could have been interpreted as requiring a separate account for each individual participant.  Instead, accounting procedures are to be established within the overall salary reduction account.

Sources of funds for administration of the plan are enumerated positively instead of negatively.  Another change allows payments from the account only for programmatic expenses and not administrative expenses.  Coverage of temporary employees is to be determined by rule of the Deferred Compensation Committee.

Fiscal Note:    available

Senate Committee - Testified:   Jim McIntire, Office of the Governor; Mark Brown, WFSE; Jane Field, WPEA