SENATE BILL REPORT

SB 5417

BYSenators Johnson, Moore, Nelson, Lee, Bailey, Metcalf, Rasmussen and Talmadge; by request of Joint Committee on Pension Policy

Authorizing cost-of-living adjustments for members of retirement systems.

Senate Committee on Ways & Means

Senate Hearing Date(s):

Senate Staff:Charles Langen (786-7715)

AS OF JANUARY 30, 1989

BACKGROUND:

There is no effective provision for a general automatic cost-of-living adjustment for active or retired members of the Public Employees' Retirement System and the Teachers' Retirement System who were first employed prior to October 1, 1977.  There is provision, however, for an automatic increase in the minimum retirement allowance provision for these members.  This provision allows no more than a 3.0 percent increase in the minimum retirement allowance, based on the increase in the Seattle Consumer Price Index for urban wage earners and clerical workers, all items (CPI-SEA).  Currently, the minimum benefit is $13.82 per month per year of service.

SUMMARY:

Beginning July 1, 1990, and annually thereafter, the Department of Retirement Systems (DRS) shall determine the following information for each retired member or beneficiary: (a) the dollar amount of the retirement allowance received by the retiree on the first day of July in the year the retiree attained age 65; (b) the CPI-SEA for the calendar year prior to the year that the retiree attained age 65 (Index A); the CPI-SEA for the calendar year prior to the date of determination of the COLA (Index B); and (d) the ratio obtained when Index B is divided by Index A.  If the ratio is greater than 1.67, the ratio shall be the annual adjustment to the retirement allowance received by the member at age 65 and shall be applied beginning with the July payment.  In no event, however, shall the annual adjustment (a) produce a retirement allowance which is lower than the retirement allowance received prior to the adjustment; (b) exceed 3.0 percent in the initial annual adjustment; or (c) differ from the previous year's annual adjustment by more than 3.0 percent.

For members who are not retired at age 65, the ratio obtained shall be applied to the initial retirement allowance received by the member.  For a beneficiary of a member who died prior to attaining age 65, the retirement allowance used will be the allowance received by the beneficiary on the first day of July when the member would have attained age 65 and Index A will be CPI-SEA for the calendar year prior to the year the member would have attained age 65.

On July 1, 1989, the minimum pension portion of the retirement allowance is increased to $14.82 per month per year of service, after the application of the new automatic COLA.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested January 27, 1989