H-318                _______________________________________________

                                                      HOUSE BILL NO. 3

                        _______________________________________________

State of Washington                              50th Legislature                              1987 Regular Session

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

Prefiled with Chief Clerk 1/8/87.  Read first time 1/12/87 and referred to Committee on Ways & Means.

AN ACT Relating to retirement overpayments; amending RCW 41.50.130; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

        Sec. 1.  Section 1, chapter 13, Laws of 1982 and RCW 41.50.130 are each amended to read as follows:

          (1) The director may at any time correct errors appearing in the records of the retirement systems listed in RCW 41.50.030.  Should any error in such records result in any member or beneficiary receiving more or less than he or she would have been entitled to had the records been correct, the director, subject to the conditions set forth in ((subsection (2) of)) this section, shall adjust the payment in such a manner that the benefit to which such member or beneficiary was correctly entitled shall be paid in accordance with the following:

          (a) In the case of underpayments to a member or beneficiary, the retirement system shall correct all future payments from the point of error detection, and shall compute the additional payment due for the allowable prior period which shall be paid in a lump sum by the appropriate retirement system.

          (b) In the case of overpayments to a member or beneficiary, the retirement system shall adjust the payment in such a manner that the benefit to which such member or beneficiary was correctly entitled shall be reduced by an amount equal to the actuarial equivalent of the amount of overpayment.  Alternatively the member shall have the option of repaying the overpayment in a lump sum within ninety days of notification and receive the proper benefit in the future.  In the case of overpayments to a member or beneficiary resulting from actual fraud on the part of the member or beneficiary, the benefits shall be adjusted to reflect the full amount of such overpayment, plus interest at the maximum rate allowed under RCW 19.52.020(1) as it was in effect the first month the overpayment occurred.

          (2) (((a))) Except ((as provided in subsection (2)(b) of this section)) in the case of actual fraud, in the case of overpayments to a member or beneficiary, the benefits shall be adjusted to reflect only the amount of overpayments made within three years of discovery of the error, notwithstanding any provision to the contrary in chapter 4.16 RCW.

          (((b) In the case of underpayments or overpayments to a member or beneficiary resulting from actual fraud on the part of the member or beneficiary, the benefits shall be adjusted to reflect the full amount of such underpayment or overpayment, plus interest at the rate that was specified in RCW 4.56.110 for each year that the overpayment or underpayment occurred.

          (c))) (3) (a) In the case of overpayments which result from the failure of an employer to report properly to the department the employment of a retiree, the employer shall, upon receipt of a billing from the department, pay into the appropriate retirement system the amount of the overpayment plus interest as determined by the director.  However, except in the case of actual fraud, the overpayments charged to the employer under this subsection shall not exceed five thousand dollars for each year of overpayments received by a retiree.  The retiree's benefits upon reretirement shall not be reduced because of such overpayment except as necessary to recapture contributions required for periods of employment.

(b) The provision of this subsection regarding the reduction of retirees' benefits shall apply to recovery actions commenced on or after January 1, 1986, even though the overpayments resulting from retiree employment were discovered by the department prior to that date.  The provisions of this subsection regarding the billing of employers for overpayments shall apply to overpayments made after January 1, 1986.

(4) Except in the case of actual fraud, no monthly benefit shall be reduced by more than fifty percent of the member's or beneficiary's corrected benefit.

          (((3))) (5) Except as provided in subsection (2)(((a))) of this section, obligations of employers or members until paid to the department shall constitute a debt from the employer or member to the department, recovery of which shall not be barred by laches or statutes of limitation.

NEW SECTION. Sec. 2.     The director of the department of retirement systems shall not recover from surviving beneficiaries of members who died in service any pension overpayment based on the application of section 2, chapter 96, Laws of 1979 ex. sess., nor shall such benefits be reduced.