SENATE BILL REPORT

SB 6594

BYSenators Johnson, Saling, Moore, Niemi, Nelson, Bauer, Rasmussen, Patrick and Smith; by request of Joint Committee on Pension Policy

Changing provisions relating to the department of retirement systems.

Senate Committee on Ways & Means

Senate Hearing Date(s):February 1, 1990; February 5, 1990

Majority Report:     That Substitute Senate Bill No. 6594 be substituted therefor, and the substitute bill do pass.

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

Senate Staff:Michael Groesch (786-7715)

                February 6, 1990

AS REPORTED BY COMMITTEE ON WAYS & MEANS, FEBRUARY 5, 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:

Beginning in 1991, 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 administrators may not revise their contracts retroactively.

EFFECT OF PROPOSED SUBSTITUTE:

The date by which the department must provide previous year service credit information is delayed until October 1993.

The bill is null and void if the appropriations act does not provide specific funding.

Appropriation:  unspecified

Revenue:   none

Fiscal Note:    available

Senate Committee - Testified:   George Northcroft, Director, Department of Retirement Systems; Maureen Westguard, Director Operations, Department of Retirement Systems; Chuck Langen, Office of State Actuary