AN ACT Relating to cost-of-living adjustments of retirement benefits; amending RCW 41.32.485, 41.40.198, 41.32.350, and 41.40.330; adding a new section to chapter 41.32 RCW; adding a new section to chapter 41.40 RCW; adding a new section to chapter 41.50 RCW; creating a new section; making an appropriation; providing an effective date; and declaring an emergency.

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

Sec. 1. Section 2, chapter 96, Laws of 1979 ex. sess. as amended by section 2, chapter 306, Laws of 1986 and RCW 41.32.485 are each amended to read as follows:

(1) Notwithstanding any provision of law to the contrary, effective July 1, ((~~1986~~)) 1987, as a cost-of-living adjustment, no beneficiary receiving a retirement allowance pursuant to this chapter shall receive, as the pension portion of that retirement allowance, less than ((~~thirteen~~)) fifteen dollars per month for each year of service creditable to the person whose service is the basis of the pension. Portions of a year shall be treated as fractions of a year and the decimal equivalent shall be multiplied by ((~~thirteen~~)) fifteen dollars. Where the pension payable was adjusted at the time benefit payments to the beneficiary commenced, the minimum pension provided in this section shall be adjusted in a manner consistent with that adjustment.

(2) Notwithstanding any provision of law to the contrary, effective July 1, 1979, the retirement allowance of each beneficiary who either is receiving benefits pursuant to RCW 41.32.520 or 41.32.550 as of December 31, 1978, or commenced receiving a monthly retirement allowance under this chapter as of a date no later than July 1, 1974, shall be permanently increased by a post-retirement adjustment. This adjustment shall be in lieu of any adjustments provided under RCW 41.32.499(6) as of July 1, 1979, or July 1, 1980, for the affected beneficiaries. Such adjustment shall be calculated as follows:

(a) Retirement allowances to which this subsection and subsection (1) of this section are both applicable shall be determined by first applying subsection (1) and then applying this subsection. The department shall determine the total years of creditable service and the total dollar benefit base accrued as of December 31, 1978, except that this determination shall take into account only those beneficiaries to whom this subsection applies;

(b) The department shall multiply the total benefits determined in (a) of this subsection by six percent and divide the dollar value thus determined by the total service determined in (a) of this subsection. The resultant figure shall then be a post-retirement increase factor which shall be applied as specified in (c) of this subsection;

(c) Each beneficiary to whom this subsection applies shall receive an increase which is the product of the factor determined in (b) of this subsection multiplied by the years of creditable service.

(3) The provisions of subsections (1) and (2) of this section shall not be applicable to those receiving benefits pursuant to RCW 41.32.540 or 41.32.760 through 41.32.825.

Sec. 2. Section 1, chapter 96, Laws of 1979 ex. sess. as amended by section 3, chapter 306, Laws of 1986 and RCW 41.40.198 are each amended to read as follows:

(2) The provisions of subsection (1) of this section shall not be applicable to those receiving benefits pursuant to RCW 41.40.220(1), 41.44.170(5), or 41.40.610 through 41.40.740. For persons who served as elected officials and whose accumulated employee contributions and credited interest was less than seven hundred fifty dollars at the time of retirement, the minimum benefit under subsection (1) of this section shall be ten dollars per month for each year of creditable service.

NEW SECTION. Sec. 3. A new section is added to chapter 41.32 RCW to read as follows:

The retirement allowance of each member who retires after July 1, 1987, shall be annually increased by an amount equal to two percent of the retirement allowance, computed at the time of retirement. The initial increase shall be paid on the second anniversary of the date of retirement and annually thereafter.

This section does not apply to persons under RCW 41.32.755 through 41.32.825.

NEW SECTION. Sec. 4. A new section is added to chapter 41.40 RCW to read as follows:

This section does not apply to persons under RCW 41.40.600 through 41.40.740.

Sec. 5. Section 35, chapter 80, Laws of 1947 as last amended by section 6, chapter 189, Laws of 1973 1st ex. sess. and RCW 41.32.350 are each amended to read as follows:

Each year during which he is employed each member shall contribute five percent of his earnable compensation. These contributions shall be placed in the annuity fund, the disability reserve fund and the death benefit fund. A member may make an additional lump sum payment at date of retirement, not to exceed his accumulated contributions, to purchase additional annuity: PROVIDED, That effective July 1, ((~~1974~~)) 1987, the amount of contribution required from each member by this section shall be increased to six and one-half percent of his earnable compensation.

Sec. 6. Section 34, chapter 274, Laws of 1947 as last amended by section 3, chapter 268, Laws of 1986 andRCW 41.40.330 are each amended to read as follows:

(1) Each employee who is a member of the retirement system shall contribute five and one-half percent of his total compensation earnable: PROVIDED, HOWEVER, That a department of retirement systems expense fund contribution of two dollars and fifty cents per annum shall be transferred in semiannual payments of one dollar and twenty-five cents from each employee account balance in the employees' savings fund to the department of retirement systems expense fund, as set forth in this section. On and after July 1, 1973, each employee who is a member of the retirement system shall contribute six percent of his total compensation earnable. Effective January 1, 1987, however, no contributions are required for any calendar month in which the member is not granted service credit. The officer responsible for making up the payroll shall deduct from the compensation of each member, on each and every payroll of such member for each and every payroll period subsequent to the date on which he became a member of the retirement system the contribution as provided by this section.

(2) Any member may, pursuant to regulations formulated from time to time by the board, provide for himself, by means of an increased rate of contribution to his account in the employees' savings fund, an increased prospective retirement allowance pursuant to RCW 41.40.190 and 41.40.185.

(3) The officer responsible for making up the payroll shall deduct from the compensation of each member covered by the provisions of RCW 41.40.190(5) and 41.40.185(4) on each and every payroll of such member for each and every payroll period subsequent to the date on which he thereafter becomes a member of the retirement system, an amount equal to seven and one-half percent of such member's compensation earnable.

NEW SECTION. Sec. 7. A new section is added to chapter 41.50 RCW to read as follows:

(1) The postretirement adjustment trust account is established in the state treasury. The trust account shall consist of all moneys transferred or appropriated to it by law. Notwithstanding RCW 43.84.090, the earnings on the investment of the balances in the trust account shall be credited to the trust account.

(2) The postretirement adjustment trust account shall be funded by an initial appropriation and thereafter by subsequent annual appropriations in the amount necessary to fund benefits provided under this section, as that amount is determined by the state actuary.

(3) Persons eligible to receive postretirement adjustments under this section are those persons who are both (a) eligible for postretirement adjustments under RCW 41.32.485(1) and 41.40.198, and (b) retired prior to the effective date of this section. Postretirement adjustments under this section shall not be paid to any person who has been retired for less than one year.

(4) For the purposes of administering the postretirement adjustment account, the postretirement adjustment board is created within the department of retirement systems. The board shall consist of:

(a) Two members of the public employees' retirement system and two members of the teachers' retirement system who meet the eligibility requirements of subsection (3) of this section, to be appointed by the director of retirement systems. In making these appointments, the director shall consider persons nominated by state-wide organizations representing the members;

(b) One member of the house of representatives appointed by the speaker of the house of representatives;

(d) One member of the state investment board appointed by the state investment board; and

(e) The director of retirement systems and the state actuary, both serving in a nonvoting, ex officio capacity.

(5) Annually, the postretirement adjustment board shall determine the postretirement adjustment that can be paid from the trust account. It is the intent of the legislature that the trust account should be funded at a level that would provide an annual postretirement adjustment to eligible beneficiaries of fifty cents per month per year of service and that, after ten years, the trust account would become self-sustaining until such time as there are no remaining eligible beneficiaries. When there are no longer any remaining eligible beneficiaries, any remaining moneys in the trust account shall be transferred to, and equally divided between, the teachers' retirement fund and the public employees' retirement fund.

NEW SECTION. Sec. 8. The sum of fifty million dollars is transferred from the general fund to the postretirement adjustment trust account for the purposes of this act.

NEW SECTION. Sec. 9. There is appropriated .......... dollars, or so much thereof as may be necessary, from the general fund for the biennium ending June 30, 1989, for the purposes of paying the cost-of-living adjustments provided in sections 1 and 2 of this act. Of this amount, .......... dollars shall be deposited in the teachers' retirement fund and .......... dollars shall be deposited in the public employees' retirement fund.

NEW SECTION. Sec. 10. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect July 1, 1987.