HOUSE BILL REPORT

HB 2642

BYRepresentatives Sayan, McLean, Hine, D. Sommers, H. Sommers, Silver and Spanel;by request of Joint Committee on Pension Policy

Changing provisions relating to the department of retirement systems.

House Committe on Appropriations

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (23)

      Signed by Representatives Locke, Chair; Grant, Vice Chair; H. Sommers, Vice Chair; Silver, Ranking Republican Member; Youngsman, Assistant Ranking Republican Member; Appelwick, Belcher, Bowman, Brekke, Dorn, Doty, Hine, Inslee, May, McLean, Nealey, Padden, Peery, Rust, Sprenkle, Valle, Wang and Wineberry.

Minority Report:  Do not pass.  (1)

      Signed by Representative Ferguson.

House Staff:Randy Acker (786-7153)

AS REPORTED BY COMMITTEE ON APPROPRIATIONS FEBRUARY 1, 1990

BACKGROUND:

Four problem areas exist within the administration of state run retirement systems.

First, there are no provisions in current law requiring the Department of Retirement Systems (DRS) to apprise a member of the amount of service credit earned by the member.  This has caused problems because the amount of service credit that a member thinks he or she has and the amount that the member actually has credited are sometimes different.

Second, DRS currently has statutory authority to assess participating employers with an expense fund contribution.  It does not, however, have a mechanism to assess a fee to employers commensurate with the additional administrative expenses caused when those employers submit delinquent or inaccurate reports.

Third, an annual expense fund fee of $2.50 is assessed against the contributions of members of the Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF) and the Public Employees Retirement System Plan I (PERS I), but not against the members of other state run retirement systems.  The assessment does not represent additional revenue to the expense fund but is instead a transfer from the trust fund to the expense fund.  This transfer of funds generates administrative costs that do not result in a benefit to the member or to the system.

Finally, there are no provisions regulating the ending dates of K-12 school administrator contracts, or prohibiting retroactive revisions of those contracts.  This lack of regulation has led to some abuses of the system by administrators who alter the ending date of, or retroactively revise, their contracts in their final year of service.  This inflates the administrator's average final compensation, thereby increasing his or her monthly pension.

SUMMARY:

SUBSTITUTE BILL:  Beginning in 1993, DRS is required to annually notify each member of each retirement system of the member's yearly accrual of service credit.  DRS is required to annually notify members of the retirement systems of their total service credit on the following timetable:  persons within five years of being eligible to retire are to receive annual notice of total service credit beginning 1991; all other members will begin receiving such notice in 1993.

DRS is authorized to assess an additional fee to employers who submit late or inaccurate data.  DRS is to adopt rules implementing a system where it reviews an employer's reporting performance every six months and determines whether the employer should be assessed an additional fee.

The member expense fund assessment in LEOFF and PERS I is repealed.

K- 12 school administrator contracts are required to end no later than June 30 of the expiration year, except that a contract entered into after June 30 may expire in the same year it was entered into. Further, K-12 administrator's may not revise their contracts retroactively.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The timetable for department notification is modified so that notification for all members has to begin no later than October 1, 1993 instead of during 1991.  An appropriation is specified.

Appropriation:    $2,042,000 from the Retirement Systems Expense Fund.

Fiscal Note:      Requested January 5, 1990.

House Committee ‑ Testified For:    Representative Lorraine Hine; Senator Stan Johnson; Representative Jean Silver; Donn Fountain, Washington Association of School Administrators; and Bob Fisher, Washington Education Association.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    The procedures established in this bill will greatly improve the accuracy of employment records and the resulting benefit calculations.  In the long run it is a real money saver since it is far easier to audit employment records on a year to year basis than it is to verify employment back over 25 or 30 years. This bill helps clarify benefit calculations for school administrators.

House Committee - Testimony Against:      None.