SENATE BILL REPORT

HB 1323

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

Senate Hearing Date(s):February 23, 1990

Majority Report:  Do pass as amended.

      Signed by McDonald, Chairman; Craswell, Vice Chairman; Amondson, Bailey, Bauer, Bluechel, Cantu, Fleming, Gaspard, Johnson, Lee, Matson, Moore, Newhouse, Niemi, Owen, Smith, Talmadge, Warnke, Williams, Wojahn.

Senate Staff:Michael Groesch (786-7715)

                  February 24, 1990

AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 23, 1989

BACKGROUND:

Most city, county, and state employees in Washington State are members of the Public Employees Retirement Systems (PERS).  However, the cities of Seattle, Tacoma, and Spokane each have a city employee retirement system that covers their general 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.  This is a problem for two reasons:

      (1)If the employee did not work long enough to vest (generally five years) under one of the systems, 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 employee's compensation while a member of that system, which might be much lower than the compensation earned immediately prior to retirement.

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

Employees are permitted to combine their service in those three systems for the purpose of determining retirement eligibility.  (PERS, Plan I and TRS, Plan I both allow a member to retire at age 55 with 25 years of service, or at any age with 30 years of service.)  It also allows a member to calculate his or her 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 provisions of the chapter.  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 portability provisions currently in statute.

The election must be made by resolution prior to December 1, 1989, and the coverage will begin on January 1, 1990.  If all three cities exercise the option by June 1, 1989, the coverage will begin on July 1, 1989.

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.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Effective Date:The bill contains an emergency clause and takes effect July 1, 1989.

SUMMARY OF PROPOSED SENATE AMENDMENT:

Members of the State-wide City Employees Retirement System (SWCERS) are provided portability with PERS, TRS and WSPRS.

Corrections are made to extend the dates by which the cities may elect to participate in the portability provisions.  The resolution must be made prior to December 1, 1990, and 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 Department of Retirement Systems will develop rules which will require the respective cities to absorb the entire additional costs of the portability provisions.

Senate Committee - Testified: No one