FINAL BILL REPORT

HB 1323

                                  C 192 L 90

BYRepresentatives Hine, Silver, Sayan, D. Sommers, Patrick, McLean, Bristow, H. Sommers, Bowman, Day, Wineberry, Dorn, Dellwo, Crane, Brough, Valle, Rector, Wang, Betrozoff, R. Fisher, Fraser, Basich, O'Brien, Locke, May, P. King, Phillips, Pruitt, Brekke, Appelwick, Jacobsen, Van Luven, Wood and Horn;by request of Joint Committee on Pension Policy

Changing provisions relating to portability of public employment retirement benefits.

House Committe on Appropriations

Senate Committee on Ways & Means

SYNOPSIS AS ENACTED

BACKGROUND:

Most city, county, and state employees in Washington state are members of the Public Employees Retirement System (PERS). However, the cities of Seattle, Tacoma, and Spokane each have a city employee retirement system that covers their employees.

As a general rule, when a public employee moves from a job covered by one retirement system to a job covered by a different retirement system, the employee's retirement service credit is split between the two retirement systems.  For example, a person who works for King County (PERS) and then becomes an employee of the City of Seattle would have retirement service credit in two different systems.  Having credits in two systems may cause the employee problems for two reasons:

1)  If the employee did not work long enough for his or her benefits to vest under one of the systems (generally five years), he or she will receive no retirement benefit from that system; and

2)  Even if the employee has a "vested" benefit, that benefit will be calculated using the compensation that the employee earned while a member of that system.  The compensation earned under that system might be much lower than the compensation earned immediately prior to retirement.

In 1987 and 1988 portability legislation was enacted that allows members of the Public Employees Retirement System (PERS), the Teachers Retirement System (TRS), and the Washington State Patrol Retirement System, to move between those three systems without suffering a significant reduction in their retirement benefits. 

The legislation permits employees to combine their service in those three systems for the purpose of determining retirement eligibility.  (PERS, Plan I and TRS, Plan I both allow members to retire at age 55 with 25 years of service, or at any age with 30 years of service.)  It also allows members to calculate their retirement allowances using the "base salary" earned in any of the four systems.  (Base salary is defined as the salaries or wages earned by a member, excluding any overtime and lump sum payments.)

The portability legislation enacted in 1987 also provided a process by which the three first class city retirement systems (Seattle, Spokane, Tacoma) could petition the Legislature prior to January 1, 1988, for coverage under the legislation.  Each city did petition for such coverage but the Legislature did not take action on those petitions during the 1988 session.

SUMMARY:

The cities of Seattle, Tacoma, and Spokane are provided the option of including their city employee retirement systems under the statute allowing portability between specified public retirement systems.

The cities must make the election by resolution prior to December 1, 1990, and the coverage will begin on January 1, 1991. If all three cities exercise the option by June 1, 1990, the coverage will begin on July 1, 1990.

The three cities are also given the option, on a case by case basis, of allowing newly hired employees who are PERS members to continue their membership in PERS.

The Department of Retirement Systems is required to adopt rules that ensure that the entire added cost incurred as a result of a dual member receiving credit under the portability statute is borne by the city retirement system of which the person is a member.

VOTES ON FINAL PASSAGE:

      House 92   0

      Senate    46     0 (Senate amended)

      House 94   0 (House concurred)

EFFECTIVE:March 26, 1990