(1) No person shall sell any liquor to any person apparently under the influence of liquor.

       (2) No person who is apparently under the influence of liquor may purchase or consume liquor on any premises licensed by the board.

       (a) A violation of this subsection is a civil infraction punishable by a fine of not more than five hundred dollars.

       (b) A defendant's intoxication may not be used as a defense in a civil action under this subsection.

       (c) Until July 1, 2000, every establishment licensed under RCW 66.24.330 or 66.24.420 shall conspicuously post in the establishment notice of the prohibition against the purchase or consumption of liquor under this subsection.

       NEW SECTION. Sec. 2. This act takes effect July 1, 1998.", and the same are herewith transmitted.

TIMOTHY A. MARTIN, Chief Clerk

MOTION

      Senator Roach moved that the Senate refuse to concur in the House amendment to Substitute Senate Bill No. 5582 and requests of the House a conference thereon.

      Debate ensued.

      The President declared the question before the Senate to be the motion by Senator Roach that the Senate refuse to concur in the House amendment to Substitute Senate Bill No. 5582 and requests of the House a conference thereon.

      The motion by Senator Roach carried and the Senate refuses to concur in the House amendment to Substitute Senate Bill No. 5582 and requests of the House a conference thereon.

APPOINTMENT OF CONFERENCE COMMITTEE

      The President appointed as members of the Conference Committee on Substitute Senate Bill No. 5582 and the House amendment(s) thereon: Senators Zarelli, Kline and Stevens.

MOTION

      On motion of Senator Johnson, the Conference Committee appointments were confirmed.

MESSAGE FROM THE HOUSE

March 4, 1998

MR. PRESIDENT:

      The House has passed SECOND SUBSTITUTE SENATE BILL NO. 6168 with the following amendment(s):

       On page 4, line 27, after “in” strike “chapter 70.114A RCW” and insert “subsection (4) of this section”

       On page 5, beginning on line 7, strike all of subsection (4) and insert the following:

       “(4) For the purpose of this section, “temporary worker housing” means a place, area, or piece of land where sleeping places or housing sites are provided by an employer for his or her employees or by another person, including a temporary worker housing operator, who is providing such accommodations for employees, for temporary, seasonal occupancy, and includes "labor camps" under RCW 70.54.110.”

       On page 6, after line 9, insert the following:

       “NEW SECTION. Sec. 8. A new section is added to chapter 43.330 RCW to read as follows:

       (1) The department of community, trade, and economic development shall work with the advisory group established in subsection (2) of this section, to review proposals and make prioritized funding recommendations to the funding approval board that oversees the distribution of housing trust fund grants and loans to be used for the development, maintenance, and operation of housing for low-income farm workers.

       (2) A farm worker housing advisory group representing growers, farm workers, and other interested parties shall be formed to assist the department in the review and priority funding recommendations under this section.”

       Renumber the remaining section consecutively and correct the title of the bill., and the same are herewith transmitted.

TIMOTHY A. MARTIN, Chief Clerk

MOTION

      Senator Morton moved that the Senate refuse to concur in the House amendments to Second Substitute Senate Bill No. 6168 and requests of the House a conference thereon.

      Debate ensued.

      The President declared the question before the Senate to be the motion by Senator Morton that the Senate refuse to concur in the House amendments to Second Substitute Senate Bill No. 6168 and requests of the House a conference thereon.

      The motion by Senator Morton carried and the Senate refuses to concur in the House amendments to Second Substitute Senate Bill No. 6168 and requests of the House a conference thereon.

APPOINTMENT OF CONFERENCE COMMITTEE

      The President appointed as members of the Conference Committee on Second Substitute Senate Bill No. 6168 and the House amendment(s) thereto: Senators Morton, Prentice and Deccio.

MOTION

      On motion of Senator Johnson, the Conference Committee appointments were confirmed.

MOTION

      On motion of Senator Hale, Senator Benton was excused.

MESSAGE FROM THE HOUSE

March 4, 1998

MR. PRESIDENT:

      The House has passed SUBSTITUTE SENATE BILL NO. 6306 with the following amendment(s):

       Strike everything after the enacting clause and insert the following:

       "NEW SECTION. Sec. 1. The legislature recognizes that teachers and school district employees share the same educational work environment and academic calendar.

       It is the intent of the legislature to achieve similar retirement benefits for all educational employees by transferring the membership of classified school employees in the public employees' retirement system plan II to the Washington school employees' retirement system plan II. The transfer of membership to the Washington school employees' retirement system plan II is not intended to cause a diminution or expansion of benefits for affected members. It is enacted solely to provide public employees working under the same conditions with the same options for retirement planning.

       As members of the Washington school employees' retirement system plan II, classified employees will have the same opportunity to transfer to the Washington school employees' retirement system plan III as their certificated coworkers. The ability to transfer to the Washington school employees' retirement system plan III offers members a new public retirement system that balances flexibility with stability; provides increased employee control of investments and responsible protection of the public's investment in employee benefits; and encourages the pursuit of public sector careers without creating barriers to other public or private sector employment.

       NEW SECTION. Sec. 2. The definitions in this section apply throughout this chapter, unless the context clearly requires otherwise:

       (1) "Retirement system" means the Washington school employees' retirement system provided for in this chapter.

       (2) "Department" means the department of retirement systems created in chapter 41.50 RCW.

       (3) "State treasurer" means the treasurer of the state of Washington.

       (4) "Employer," for plan II and plan III members, means a school district or an educational service district.

       (5) "Member" means any employee included in the membership of the retirement system, as provided for in section 4 of this act.

       (6)(a) "Compensation earnable" for plan II and plan III members, means salaries or wages earned by a member during a payroll period for personal services, including overtime payments, and shall include wages and salaries deferred under provisions established pursuant to sections 403(b), 414(h), and 457 of the United States internal revenue code, but shall exclude nonmoney maintenance compensation and lump sum or other payments for deferred annual sick leave, unused accumulated vacation, unused accumulated annual leave, or any form of severance pay.

       (b) "Compensation earnable" for plan II and plan III members also includes the following actual or imputed payments, which are not paid for personal services:

       (i) Retroactive payments to an individual by an employer on reinstatement of the employee in a position, or payments by an employer to an individual in lieu of reinstatement, which are awarded or granted as the equivalent of the salary or wage which the individual would have earned during a payroll period shall be considered compensation earnable to the extent provided in this subsection, and the individual shall receive the equivalent service credit;

       (ii) In any year in which a member serves in the legislature, the member shall have the option of having such member's compensation earnable be the greater of:

       (A) The compensation earnable the member would have received had such member not served in the legislature; or

       (B) Such member's actual compensation earnable received for nonlegislative public employment and legislative service combined. Any additional contributions to the retirement system required because compensation earnable under (b)(ii)(A) of this subsection is greater than compensation earnable under this (b)(ii)(B) of this subsection shall be paid by the member for both member and employer contributions;

       (iii) Assault pay only as authorized by RCW 27.04.100, 72.01.045, and 72.09.240;

       (iv) Compensation that a member would have received but for a disability occurring in the line of duty only as authorized by RCW 41.40.038;

       (v) Compensation that a member receives due to participation in the leave sharing program only as authorized by RCW 41.04.650 through 41.04.670; and

       (vi) Compensation that a member receives for being in standby status. For the purposes of this section, a member is in standby status when not being paid for time actually worked and the employer requires the member to be prepared to report immediately for work, if the need arises, although the need may not arise.

       (7) "Service" for plan II and plan III members, means periods of employment by a member in an eligible position or positions for one or more employers for which compensation earnable is paid. Compensation earnable earned for ninety or more hours in any calendar month shall constitute one service credit month except as provided in section 19 of this act. Compensation earnable earned for at least seventy hours but less than ninety hours in any calendar month shall constitute one-half service credit month of service. Compensation earnable earned for less than seventy hours in any calendar month shall constitute one-quarter service credit month of service. Time spent in standby status, whether compensated or not, is not service.

       Any fraction of a year of service shall be taken into account in the computation of such retirement allowance or benefits.

       (a) Service in any state elective position shall be deemed to be full-time service.

       (b) A member shall receive a total of not more than twelve service credit months of service for such calendar year. If an individual is employed in an eligible position by one or more employers the individual shall receive no more than one service credit month during any calendar month in which multiple service for ninety or more hours is rendered.

       (c) For purposes of plan II and III "forty-five days" as used in RCW 28A.400.300 is equal to two service credit months. Use of less than forty-five days of sick leave is creditable as allowed under this subsection as follows:

       (i) Less than eleven days equals one-quarter service credit month;

       (ii) Eleven or more days but less than twenty-two days equals one-half service credit month;

       (iii) Twenty-two days equals one service credit month;

       (iv) More than twenty-two days but less than thirty-three days equals one and one-quarter service credit month; and

       (v) Thirty-three or more days but less than forty-five days equals one and one-half service credit month.

       (8) "Service credit year" means an accumulation of months of service credit which is equal to one when divided by twelve.

       (9) "Service credit month" means a month or an accumulation of months of service credit which is equal to one.

       (10) "Membership service" means all service rendered as a member.

       (11) "Beneficiary" for plan II and plan III members means any person in receipt of a retirement allowance or other benefit provided by this chapter resulting from service rendered to an employer by another person.

       (12) "Regular interest" means such rate as the director may determine.

       (13) "Accumulated contributions" means the sum of all contributions standing to the credit of a member in the member's individual account, including any amount paid under RCW 41.50.165(2), together with the regular interest thereon.

       (14) "Average final compensation" for plan II and plan III members means the member's average compensation earnable of the highest consecutive sixty months of service credit months prior to such member's retirement, termination, or death. Periods constituting authorized leaves of absence may not be used in the calculation of average final compensation except under RCW 41.40.710(2).

       (15) "Final compensation" means the annual rate of compensation earnable by a member at the time of termination of employment.

       (16) "Annuity" means payments for life derived from accumulated contributions of a member. All annuities shall be paid in monthly installments.

       (17) "Pension" means payments for life derived from contributions made by the employer. All pensions shall be paid in monthly installments.

       (18) "Retirement allowance" for plan II and plan III members means monthly payments to a retiree or beneficiary as provided in this chapter.

       (19) "Employee" or "employed" means a person who is providing services for compensation to an employer, unless the person is free from the employer's direction and control over the performance of work. The department shall adopt rules and interpret this subsection consistent with common law.

       (20) "Actuarial equivalent" means a benefit of equal value when computed upon the basis of such mortality and other tables as may be adopted by the director.

       (21) "Retirement" means withdrawal from active service with a retirement allowance as provided by this chapter.

       (22) "Eligible position" means any position that, as defined by the employer, normally requires five or more months of service a year for which regular compensation for at least seventy hours is earned by the occupant thereof. For purposes of this chapter an employer shall not define "position" in such a manner that an employee's monthly work for that employer is divided into more than one position.

       (23) "Ineligible position" means any position which does not conform with the requirements set forth in subsection (22) of this section.

       (24) "Leave of absence" means the period of time a member is authorized by the employer to be absent from service without being separated from membership.

       (25) "Totally incapacitated for duty" means total inability to perform the duties of a member's employment or office or any other work for which the member is qualified by training or experience.

       (26) "Retiree" means any person who has begun accruing a retirement allowance or other benefit provided by this chapter resulting from service rendered to an employer while a member.

       (27) "Director" means the director of the department.

       (28) "State elective position" means any position held by any person elected or appointed to state-wide office or elected or appointed as a member of the legislature.

       (29) "State actuary" or "actuary" means the person appointed pursuant to RCW 44.44.010(2).

       (30) "Plan II" means the Washington school employees' retirement system plan II providing the benefits and funding provisions covering persons who first became members of the public employees' retirement system on and after October 1, 1977 and transferred to the Washington school employees' retirement system under section 113 of this act.

       (31) "Plan III" means the Washington school employees' retirement system plan III providing the benefits and funding provisions covering persons who first became members of the system on and after September 1, 2000, or who transfer from plan II under section 114 of this act.

       (32) "Index" means, for any calendar year, that year's annual average consumer price index, Seattle, Washington area, for urban wage earners and clerical workers, all items, compiled by the bureau of labor statistics, United States department of labor.

       (33) "Index A" means the index for the year prior to the determination of a postretirement adjustment.

       (34) "Index B" means the index for the year prior to index A.

       (35) "Adjustment ratio" means the value of index A divided by index B.

       (36) "Separation from service" occurs when a person has terminated all employment with an employer.

       (37) "Member account" or "member's account" for purposes of plan III means the sum of the contributions and earnings on behalf of the member in the defined contribution portion of plan III.

       (38) "Classified employee" means an employee of a school district or an educational service district who is not eligible for membership in the teachers' retirement system established under chapter 41.32 RCW.

       NEW SECTION. Sec. 3. A retirement system is hereby created for the employees of school districts or educational service districts. The administration and management of the retirement system, the responsibility for making effective the provisions of this chapter, and the authority to make all rules necessary therefor are hereby vested in the department. All such rules shall be governed by the provisions of chapter 34.05 RCW. This retirement system shall be known as the Washington school employees' retirement system.

       NEW SECTION. Sec. 4. Membership in the retirement system shall consist of all regularly compensated classified employees and appointive and elective officials of employers, as defined in this chapter, with the following exceptions:

       (1) Persons in ineligible positions;

       (2)(a) Persons holding elective offices or persons appointed directly by the governor: PROVIDED, That such persons shall have the option of applying for membership during such periods of employment: AND PROVIDED FURTHER, That any persons holding or who have held elective offices or persons appointed by the governor who are members in the retirement system and who have, prior to becoming such members, previously held an elective office, and did not at the start of such initial or successive terms of office exercise their option to become members, may apply for membership to be effective during such term or terms of office, and shall be allowed to establish the service credit applicable to such term or terms of office upon payment of the employee contributions therefor by the employee with interest as determined by the director and employer contributions therefor by the employer or employee with interest as determined by the director: AND PROVIDED FURTHER, That all contributions with interest submitted by the employee under this subsection shall be placed in the employee's individual account in the employee's savings fund and be treated as any other contribution made by the employee, with the exception that any contributions submitted by the employee in payment of the employer's obligation, together with the interest the director may apply to the employer's contribution, shall not be considered part of the member's annuity for any purpose except withdrawal of contributions;

       (b) A member holding elective office who has elected to apply for membership pursuant to (a) of this subsection and who later wishes to be eligible for a retirement allowance shall have the option of ending his or her membership in the retirement system. A member wishing to end his or her membership under this subsection must file on a form supplied by the department a statement indicating that the member agrees to irrevocably abandon any claim for service for future periods served as an elected official. A member who receives more than fifteen thousand dollars per year in compensation for his or her elective service, adjusted annually for inflation by the director, is not eligible for the option provided by this subsection (2)(b);

       (3) Retirement system retirees: PROVIDED, That following reemployment in an eligible position, a retiree may elect to prospectively become a member of the retirement system if otherwise eligible;

       (4) Persons enrolled in state-approved apprenticeship programs, authorized under chapter 49.04 RCW, and who are employed by employers to earn hours to complete such apprenticeship programs, if the employee is a member of a union-sponsored retirement plan and is making contributions to such a retirement plan or if the employee is a member of a Taft-Hartley retirement plan;

       (5) Persons rendering professional services to an employer on a fee, retainer, or contract basis or when the income from these services is less than fifty percent of the gross income received from the person's practice of a profession;

       (6) Employees who (a) are not citizens of the United States, (b) do not reside in the United States, and (c) perform duties outside of the United States;

       (7) Employees who (a) are not citizens of the United States, (b) are not covered by chapter 41.48 RCW, (c) are not excluded from membership under this chapter or chapter 41.04 RCW, (d) are residents of this state, and (e) make an irrevocable election to be excluded from membership, in writing, which is submitted to the director within thirty days after employment in an eligible position;

       (8) Employees who are citizens of the United States and who reside and perform duties for an employer outside of the United States: PROVIDED, That unless otherwise excluded under this chapter or chapter 41.04 RCW, the employee may apply for membership (a) within thirty days after employment in an eligible position and membership service credit shall be granted from the first day of membership service, and (b) after this thirty-day period, but membership service credit shall be granted only if payment is made for the noncredited membership service under RCW 41.50.165(2), otherwise service shall be from the date of application.

       NEW SECTION. Sec. 5. Any person who has been employed in a nonelective position for at least nine months and who has made member contributions required under this chapter throughout such period, shall be deemed to have been in an eligible position during such period of employment.

       NEW SECTION. Sec. 6. Within thirty days after his or her employment or his or her acceptance into membership each employee or appointive or elective official shall submit to the department a statement of his or her name and such other information as the department shall require. Compliance with the provisions set forth in this section shall be considered to be a condition of employment and failure by an employee to comply may result in separation from service.

       NEW SECTION. Sec. 7. (1)(a) If a retiree enters employment with an employer sooner than one calendar month after his or her accrual date, the retiree's monthly retirement allowance will be reduced by five and one-half percent for every eight hours worked during that month. This reduction will be applied each month until the retiree remains absent from employment with an employer for one full calendar month.

       (b) The benefit reduction provided in (a) of this subsection will accrue for a maximum of one hundred sixty hours per month. Any benefit reduction over one hundred percent will be applied to the benefit the retiree is eligible to receive in subsequent months.

       (2) A retiree who has satisfied the break in employment requirement of subsection (1) of this section, may work up to five months per calendar year in an eligible position without suspension of his or her benefit.

       (3) If the retiree opts to reestablish membership under section 4 of this act, he or she terminates his or her retirement status and becomes a member. Retirement benefits shall not accrue during the period of membership and the individual shall make contributions and receive membership credit. Such a member shall have the right to again retire if eligible in accordance with section 103 or 209 of this act. However, if the right to retire is exercised to become effective before the member has rendered two uninterrupted years of service, the retirement formula and survivor options the member had at the time of the member's previous retirement shall be reinstated.

       NEW SECTION. Sec. 8. Those members subject to this chapter who became disabled in the line of duty and who received or are receiving benefits under Title 51 RCW or a similar federal workers' compensation program shall receive or continue to receive service credit subject to the following:

       (1) No member may receive more than one month's service credit in a calendar month.

       (2) No service credit under this section may be allowed after a member separates or is separated without leave of absence.

       (3) Employer contributions shall be paid by the employer at the rate in effect for the period of the service credited.

       (4) Employee contributions shall be collected by the employer and paid to the department at the rate in effect for the period of service credited.

       (5) Contributions shall be based on the regular compensation which the member would have received had the disability not occurred. If contribution payments are made retroactively, interest shall be charged at the rate set by the director on both employee and employer contributions. No service credit shall be granted until the employee contribution has been paid.

       (6) The service and compensation credit shall not be granted for a period to exceed twelve consecutive months.

       (7) Should the legislature revoke the service credit authorized under this section or repeal this section, no affected employee is entitled to receive the credit as a matter of contractual right.

       NEW SECTION. Sec. 9. The deductions from the compensation of members, provided for in section 104 of this act, shall be made notwithstanding that the minimum compensation provided for by law for any member shall be reduced thereby. Every member shall be deemed to consent and agree to the deductions made and provided for in this chapter and receipt in full for his or her salary or compensation, and payment, less the deductions, shall be a full and complete discharge and acquittance of all claims and demands whatsoever for the services rendered by the person during the period covered by the payment, except as to benefits provided for under this chapter.

       NEW SECTION. Sec. 10. (1) The director shall report to each employer the contribution rates required for the ensuing biennium or fiscal year, whichever is applicable.

       (2) Beginning September 1, 1990, the amount to be collected as the employer's contribution shall be computed by applying the applicable rates established in chapter 41.45 RCW to the total compensation earnable of employer's members as shown on the current payrolls of the employer. Each employer shall compute at the end of each month the amount due for that month and the same shall be paid as are its other obligations.

       (3) In the event of failure, for any reason, of an employer other than a political subdivision of the state to have remitted amounts due for membership service of any of the employer's members rendered during a prior biennium, the director shall bill such employer for such employer's contribution together with such charges as the director deems appropriate in accordance with RCW 41.50.120. Such billing shall be paid by the employer as, and the same shall be, a proper charge against any moneys available or appropriated to such employer for payment of current biennial payrolls.

       NEW SECTION. Sec. 11. (1) Subject to subsections (2) and (3) of this section, the right of a person to a pension, an annuity, or retirement allowance, any optional benefit, any other right accrued or accruing to any person under the provisions of this chapter, the various funds created by this chapter, and all moneys and investments and income thereof, are hereby exempt from any state, county, municipal, or other local tax, and shall not be subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law whatsoever, and shall be unassignable.

       (2) This section does not prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of premiums due on any group insurance policy or plan issued for the benefit of a group comprised of public employees of the state of Washington or its political subdivisions and which has been approved for deduction in accordance with rules that may be adopted by the state health care authority and/or the department. This section also does not prohibit a beneficiary of a retirement allowance from authorizing deductions therefrom for payment of dues and other membership fees to any retirement association or organization the membership of which is composed of retired public employees, if a total of three hundred or more of such retired employees have authorized such deduction for payment to the same retirement association or organization.

       (3) Subsection (1) of this section does not prohibit the department from complying with (a) a wage assignment order for child support issued pursuant to chapter 26.18 RCW, (b) an order to withhold and deliver issued pursuant to chapter 74.20A RCW, (c) a notice of payroll deduction issued pursuant to RCW 26.23.060, (d) a mandatory benefits assignment order issued by the department, (e) a court order directing the department of retirement systems to pay benefits directly to an obligee under a dissolution order as defined in RCW 41.50.500(3) which fully complies with RCW 41.50.670 and 41.50.700, or (f) any administrative or court order expressly authorized by federal law.

       NEW SECTION. Sec. 12. A member shall not receive a disability retirement benefit under section 105 or 210 of this act if the disability is the result of criminal conduct by the member committed after April 21, 1997.

       NEW SECTION. Sec. 13. Any person who knowingly makes any false statements, or falsifies or permits to be falsified any record or records of this retirement system in any attempt to defraud the retirement system as a result of such act, is guilty of a gross misdemeanor.

       NEW SECTION. Sec. 14. (1) Any person who was a member of the state-wide city employees' retirement system governed by chapter 41.44 RCW and who was never reemployed by an employer as defined in RCW 41.40.010 and who is employed by an employer as defined in section 2 of this act, may, in a writing filed with the director, elect to:

       (a) Transfer to this retirement system all service currently credited under chapter 41.44 RCW;

       (b) Reestablish and transfer to this retirement system all service which was previously credited under chapter 41.44 RCW but which was canceled by discontinuance of service and withdrawal of accumulated contributions as provided in RCW 41.44.190. The service may be reestablished and transferred only upon payment by the member to the employees' savings fund of this retirement system of the amount withdrawn plus interest thereon from the date of withdrawal until the date of payment at a rate determined by the director. No additional payments are required for service credit described in this subsection if already established under this chapter; and

       (c) Establish service credit for the initial period of employment not to exceed six months, prior to establishing membership under chapter 41.44 RCW, upon payment in full by the member of the total employer's contribution to the benefit account fund of this retirement system that would have been made under this chapter when the initial service was rendered. The payment shall be based on the first month's compensation earnable as a member of the state-wide city employees' retirement system and as defined in RCW 41.44.030(13). However, a person who has established service credit under RCW 41.40.010(13) (c) or (d) shall not establish additional credit under this subsection nor may anyone who establishes credit under this subsection establish any additional credit under RCW 41.40.010(13) (c) or (d). No additional payments are required for service credit described in this subsection if already established under this chapter.

       (2) The written election must be filed and the payments must be completed in full within one year after employment by an employer.

       (3) Upon receipt of the written election and payments required by subsection (1) of this section from any retiree described in subsection (1) of this section, the department shall recompute the retiree's allowance in accordance with this section and shall pay any additional benefit resulting from such recomputation retroactively to the date of retirement from the system governed by this chapter.

       (4) Any person who was a member of the state-wide city employees' retirement system under chapter 41.44 RCW and also became a member of the public employees' retirement system established under chapter 41.40 RCW or the Washington school employees' retirement system established under this chapter, and did not make the election under RCW 41.40.058 or subsection (1) of this section because he or she was not a member of the public employees' retirement system prior to July 27, 1987, or did not meet the time limitations of RCW 41.40.058 or subsection (2) of this section, may elect to do any of the following:

       (a) Transfer to this retirement system all service currently credited under chapter 41.44 RCW;

       (b) Reestablish and transfer to this retirement system all service that was previously credited under chapter 41.44 RCW but was canceled by discontinuance of service and withdrawal of accumulated contributions as provided in RCW 41.44.190; and

       (c) Establish service credit for the initial period of employment not to exceed six months, prior to establishing membership under chapter 41.44 RCW.

       To make the election or elections, the person must pay the amount required under RCW 41.50.165(2) prior to retirement from this retirement system.

       NEW SECTION. Sec. 15. Any person aggrieved by any decision of the department affecting his or her legal rights, duties, or privileges must, before he or she appeals to the courts, file with the director by mail or personally within sixty days from the day the decision was communicated to the person, a notice for a hearing before the director's designee. The notice of hearing shall set forth in full detail the grounds upon which the person considers the decision unjust or unlawful and shall include every issue to be considered by the department, and it must contain a detailed statement of facts upon which the person relies in support of the appeal. These persons shall be deemed to have waived all objections or irregularities concerning the matter on which the appeal is taken, other than those specifically set forth in the notice of hearing or appearing in the records of the retirement system.

       NEW SECTION. Sec. 16. Following its receipt of a notice for hearing in accordance with section 15 of this act, a hearing shall be held by the director or a duly authorized representative, in the county of the residence of the claimant at a time and place designated by the director. Such hearing shall be conducted and governed in all respects by the provisions of chapter 34.05 RCW.

       NEW SECTION. Sec. 17. Judicial review of any final decision and order by the director is governed by the provisions of chapter 34.05 RCW.

       NEW SECTION. Sec. 18. No bond of any kind shall be required of a claimant appealing to the superior court, the court of appeals, or the supreme court from a finding of the department affecting the claimant's right to retirement or disability benefits.

       NEW SECTION. Sec. 19. (1) Except for any period prior to the member's employment in an eligible position, a plan II or plan III member who is employed by a school district or districts or an educational service district:

       (a) Shall receive a service credit month for each month of the period from September through August of the following year if he or she is employed in an eligible position, earns compensation earnable for eight hundred ten hours or more during that period, and is employed during nine months of that period;

       (b) If a member in an eligible position for each month of the period from September through August of the following year does not meet the hours requirements of (a) of this subsection, the member is entitled to one-half service credit month for each month of the period if he or she earns earnable compensation for at least six hundred thirty hours but less than eight hundred ten hours during that period, and is employed nine months of that period;

       (c) In all other instances, a member in an eligible position is entitled to service credit months as follows:

       (i) One service credit month for each month in which compensation is earned for ninety or more hours;

       (ii) One-half service credit month for each month in which compensation is earned for at least seventy hours but less than ninety hours; and

       (iii) One-quarter service credit month for each month in which compensation is earned for less than seventy hours.

       (2) The department shall adopt rules implementing this section.

       NEW SECTION. Sec. 20. RCW 43.01.044 shall not result in any increase in retirement benefits. The rights extended to state officers and employees under RCW 43.01.044 are not intended to and shall not have any effect on retirement benefits under this chapter.

       NEW SECTION. Sec. 21. (1) The annual compensation taken into account in calculating retiree benefits under this system shall not exceed the limits imposed by section 401(a)(17) of the federal internal revenue code for qualified trusts.

       (2) The department shall adopt rules as necessary to implement this section.

       NEW SECTION. Sec. 22. Beginning July 1, 1979, and every year thereafter, the department shall determine the following information for each retired member or beneficiary whose retirement allowance has been in effect for at least one year:

       (1) The original dollar amount of the retirement allowance;

       (2) The index for the calendar year prior to the effective date of the retirement allowance, to be known as "index A";

       (3) The index for the calendar year prior to the date of determination, to be known as "index B"; and

       (4) The ratio obtained when index B is divided by index A.

       The value of the ratio obtained shall be the annual adjustment to the original retirement allowance 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 original retirement allowance;

       (b) Exceed three percent in the initial annual adjustment; or

       (c) Differ from the previous year's annual adjustment by more than three percent.

       For the purposes of this section, "index" means, for any calendar year, that year's average consumer price index--Seattle, Washington area for urban wage earners and clerical workers, all items, compiled by the bureau of labor statistics, United States department of labor.

       NEW SECTION. Sec. 23. (1) Upon retirement for service as prescribed in section 103 or 209 of this act or retirement for disability under section 105 or 210 of this act, a member shall elect to have the retirement allowance paid pursuant to one of the following options, calculated so as to be actuarially equivalent to each other.

       (a) Standard allowance. A member electing this option shall receive a retirement allowance payable throughout such member's life. However, if the retiree dies before the total of the retirement allowance paid to such retiree equals the amount of such retiree's accumulated contributions at the time of retirement, then the balance shall be paid to the member's estate, or such person or persons, trust, or organization as the retiree shall have nominated by written designation duly executed and filed with the department; or if there be no such designated person or persons still living at the time of the retiree's death, then to the surviving spouse; or if there be neither such designated person or persons still living at the time of death nor a surviving spouse, then to the retiree's legal representative.

       (b) The department shall adopt rules that allow a member to select a retirement option that pays the member a reduced retirement allowance and upon death, such portion of the member's reduced retirement allowance as the department by rule designates shall be continued throughout the life of and paid to a person nominated by the member by written designation duly executed and filed with the department at the time of retirement. The options adopted by the department shall include, but are not limited to, a joint and one hundred percent survivor option and a joint and fifty percent survivor option.

       (2)(a) A member, if married, must provide the written consent of his or her spouse to the option selected under this section, except as provided in (b) of this subsection. If a member is married and both the member and the member's spouse do not give written consent to an option under this section, the department shall pay a joint and fifty percent survivor benefit calculated to be actuarially equivalent to the benefit options available under subsection (1) of this section unless spousal consent is not required as provided in (b) of this subsection.

       (b) If a copy of a dissolution order designating a survivor beneficiary under RCW 41.50.790 has been filed with the department at least thirty days prior to a member's retirement:

       (i) The department shall honor the designation as if made by the member under subsection (1) of this section; and

       (ii) The spousal consent provisions of (a) of this subsection do not apply.

       NEW SECTION. Sec. 24. (1) Except as provided in section 7 of this act, no retiree under the provisions of plan II shall be eligible to receive such retiree's monthly retirement allowance if he or she is employed in an eligible position as defined in section 2 of this act, RCW 41.40.010 or 41.32.010, or as a law enforcement officer or fire fighter as defined in RCW 41.26.030, except that a retiree who ends his or her membership in the retirement system pursuant to RCW 41.40.023(3)(b) is not subject to this section if the retiree's only employment is as an elective official.

       (2) If a retiree's benefits have been suspended under this section, his or her benefits shall be reinstated when the retiree terminates the employment that caused his or her benefits to be suspended. Upon reinstatement, the retiree's benefits shall be actuarially recomputed pursuant to the rules adopted by the department.

       (3) The department shall adopt rules implementing this section.

       NEW SECTION. Sec. 25. Sections 1 through 24 of this act apply to members of plan II and plan III.

       NEW SECTION. Sec. 101. A member of the retirement system shall receive a retirement allowance equal to two percent of such member's average final compensation for each service credit year of service.

       NEW SECTION. Sec. 102. (1) The director may pay a member eligible to receive a retirement allowance or the member's beneficiary, subject to the provisions of subsection (5) of this section, a lump sum payment in lieu of a monthly benefit if the initial monthly benefit computed in accordance with section 101 of this act would be less than fifty dollars. The lump sum payment shall be the greater of the actuarial equivalent of the monthly benefits or an amount equal to the individual's accumulated contributions plus accrued interest.

       (2) A retiree or a beneficiary, subject to the provisions of subsection (5) of this section, who is receiving a regular monthly benefit of less than fifty dollars may request, in writing, to convert from a monthly benefit to a lump sum payment. If the director approves the conversion, the calculation of the actuarial equivalent of the total estimated regular benefit will be computed based on the beneficiary's age at the time the benefit initially accrued. The lump sum payment will be reduced to reflect any payments received on or after the initial benefit accrual date.

       (3) Persons covered under the provisions of RCW 41.40.625 or subsection (1) of this section may upon returning to member status reinstate all previous service by depositing the lump sum payment received, with interest as computed by the director, within two years of returning to service or prior to reretiring, whichever comes first. In computing the amount due, the director shall exclude the accumulated value of the normal payments the member would have received while in beneficiary status if the lump sum payment had not occurred.

       (4) If a member fails to meet the time limitations under subsection (3) of this section, reinstatement of all previous service will occur if the member pays the amount required under RCW 41.50.165(2). The amount, however, shall exclude the accumulated value of the normal payments the member would have received while in beneficiary status if the lump sum payment had not occurred.

       (5) Only persons entitled to or receiving a service retirement allowance under section 101 of this act or an earned disability allowance under section 105 of this act qualify for participation under this section.

       (6) It is the intent of the legislature that any member who receives a settlement under this section shall be deemed to be retired from this system.

       NEW SECTION. Sec. 103. (1) NORMAL RETIREMENT. Any member with at least five service credit years who has attained at least age sixty-five shall be eligible to retire and to receive a retirement allowance computed according to the provisions of section 101 of this act.

       (2) EARLY RETIREMENT. Any member who has completed at least twenty service credit years and has attained age fifty-five shall be eligible to retire and to receive a retirement allowance computed according to the provisions of section 101 of this act, except that a member retiring pursuant to this subsection shall have the retirement allowance actuarially reduced to reflect the difference in the number of years between age at retirement and the attainment of age sixty-five.

       NEW SECTION. Sec. 104. The required contribution rates to the retirement system for both members and employers shall be established by the director from time to time as may be necessary upon the advice of the state actuary. The state actuary shall use the aggregate actuarial cost method to calculate contribution rates. The employer contribution rate calculated under this section shall be used only for the purpose of determining the amount of employer contributions to be deposited in the plan II fund from the total employer contributions collected under section 10 of this act.

       Contribution rates required to fund the costs of the retirement system shall always be equal for members and employers, except as herein provided. Any adjustments in contribution rates required from time to time for future costs shall likewise be shared equally by the members and employers.

       Any increase in the contribution rate required as the result of a failure of an employer to make any contribution required by this section shall be borne in full by the employer not making the contribution.

       The director shall notify all employers of any pending adjustment in the required contribution rate and such increase shall be announced at least thirty days prior to the effective date of the change.

       Members contributions required by this section shall be deducted from the members compensation earnable each payroll period. The members contribution and the employers contribution shall be remitted directly to the department within fifteen days following the end of the calendar month during which the payroll period ends.

       NEW SECTION. Sec. 105. (1) A member of the retirement system who becomes totally incapacitated for continued employment by an employer as determined by the department upon recommendation of the department shall be eligible to receive an allowance under the provisions of sections 101 through 112 of this act. The member shall receive a monthly disability allowance computed as provided for in section 101 of this act and shall have this allowance actuarially reduced to reflect the difference in the number of years between age at disability and the attainment of age sixty-five.

       Any member who receives an allowance under the provisions of this section shall be subject to comprehensive medical examinations as required by the department. If these medical examinations reveal that a member has recovered from the incapacitating disability and the member is offered reemployment by an employer at a comparable compensation, the member shall cease to be eligible for the allowance.

       (2) If the recipient of a monthly retirement allowance under this section dies before the total of the retirement allowance paid to the recipient equals the amount of the accumulated contributions at the date of retirement, then the balance shall be paid to the member's estate, or the person or persons, trust, or organization as the recipient has nominated by written designation duly executed and filed with the director, or, if there is no designated person or persons still living at the time of the recipient's death, then to the surviving spouse, or, if there is no designated person or persons still living at the time of his or her death nor a surviving spouse, then to his or her legal representative.

       NEW SECTION. Sec. 106. Any member or beneficiary eligible to receive a retirement allowance under the provisions of section 103, 105, or 107 of this act shall be eligible to commence receiving a retirement allowance after having filed written application with the department.

       (1) Retirement allowances paid to members under the provisions of section 103 of this act shall accrue from the first day of the calendar month immediately following such member's separation from employment.

       (2) Retirement allowances paid to vested members no longer in service, but qualifying for such an allowance pursuant to section 103 of this act, shall accrue from the first day of the calendar month immediately following such qualification.

       (3) Disability allowances paid to disabled members under the provisions of section 105 of this act shall accrue from the first day of the calendar month immediately following such member's separation from employment for disability.

       (4) Retirement allowances paid as death benefits under the provisions of section 107 of this act shall accrue from the first day of the calendar month immediately following the member's death.

       NEW SECTION. Sec. 107. (1) Except as provided in RCW 11.07.010, if a member or a vested member who has not completed at least ten years of service dies, the amount of the accumulated contributions standing to such member's credit in the retirement system at the time of such member's death, less any amount identified as owing to an obligee upon withdrawal of accumulated contributions pursuant to a court order filed under RCW 41.50.670, shall be paid to the member's estate, or such person or persons, trust, or organization as the member shall have nominated by written designation duly executed and filed with the department. If there be no such designated person or persons still living at the time of the member's death, such member's accumulated contributions standing to such member's credit in the retirement system, less any amount identified as owing to an obligee upon withdrawal of accumulated contributions pursuant to a court order filed under RCW 41.50.670, shall be paid to the member's surviving spouse as if in fact such spouse had been nominated by written designation, or if there be no such surviving spouse, then to such member's legal representatives.

       (2) If a member who is eligible for retirement or a member who has completed at least ten years of service dies, the surviving spouse or eligible child or children shall elect to receive either:

       (a) A retirement allowance computed as provided for in section 103 of this act, actuarially reduced by the amount of any lump sum benefit identified as owing to an obligee upon withdrawal of accumulated contributions pursuant to a court order filed under RCW 41.50.670 and actuarially adjusted to reflect a joint and one hundred percent survivor option under section 23 of this act and if the member was not eligible for normal retirement at the date of death a further reduction as described in section 103 of this act; if a surviving spouse who is receiving a retirement allowance dies leaving a child or children of the member under the age of majority, then such child or children shall continue to receive an allowance in an amount equal to that which was being received by the surviving spouse, share and share alike, until such child or children reach the age of majority; if there is no surviving spouse eligible to receive an allowance at the time of the member's death, such member's child or children under the age of majority shall receive an allowance, share and share alike, calculated as herein provided making the assumption that the ages of the spouse and member were equal at the time of the member's death; or

       (b) The member's accumulated contributions, less any amount identified as owing to an obligee upon withdrawal of accumulated contributions pursuant to a court order filed under RCW 41.50.670.

       (3) If a member who is eligible for retirement or a member who has completed at least ten years of service dies and is not survived by a spouse or an eligible child, then the accumulated contributions standing to the member's credit, less any amount identified as owing to an obligee upon withdrawal of accumulated contributions pursuant to a court order filed under RCW 41.50.670, shall be paid:

       (a) To a person or persons, estate, trust, or organization as the member shall have nominated by written designation duly executed and filed with the department; or

       (b) If there is no such designated person or persons still living at the time of the member's death, then to the member's legal representatives.

       NEW SECTION. Sec. 108. (1) A member who is on a paid leave of absence authorized by a member's employer shall continue to receive service credit as provided for under the provisions of sections 101 through 112 of this act.

       (2) A member who receives compensation from an employer while on an authorized leave of absence to serve as an elected official of a labor organization, and whose employer is reimbursed by the labor organization for the compensation paid to the member during the period of absence, may also be considered to be on a paid leave of absence. This subsection shall only apply if the member's leave of absence is authorized by a collective bargaining agreement that provides that the member retains seniority rights with the employer during the period of leave. The compensation earnable reported for a member who establishes service credit under this subsection may not be greater than the salary paid to the highest paid job class covered by the collective bargaining agreement.

       (3) Except as specified in subsection (4) of this section, a member shall be eligible to receive a maximum of two years service credit during a member's entire working career for those periods when a member is on an unpaid leave of absence authorized by an employer. Such credit may be obtained only if:

       (a) The member makes both the plan II employer and member contributions plus interest as determined by the department for the period of the authorized leave of absence within five years of resumption of service or prior to retirement whichever comes sooner; or

       (b) If not within five years of resumption of service but prior to retirement, pay the amount required under RCW 41.50.165(2).

       The contributions required under (a) of this subsection shall be based on the average of the member's compensation earnable at both the time the authorized leave of absence was granted and the time the member resumed employment.

       (4) A member who leaves the employ of an employer to enter the armed forces of the United States shall be entitled to retirement system service credit for up to five years of military service. This subsection shall be administered in a manner consistent with the requirements of the federal uniformed services employment and reemployment rights act.

       (a) The member qualifies for service credit under this subsection if:

       (i) Within ninety days of the member's honorable discharge from the United States armed forces, the member applies for reemployment with the employer who employed the member immediately prior to the member entering the United States armed forces; and

       (ii) The member makes the employee contributions required under section 104 of this act within five years of resumption of service or prior to retirement, whichever comes sooner; or

       (iii) Prior to retirement and not within ninety days of the member's honorable discharge or five years of resumption of service the member pays the amount required under RCW 41.50.165(2).

       (b) Upon receipt of member contributions under (a)(ii) of this subsection, the department shall establish the member's service credit and shall bill the employer for its contribution required under section 104 of this act for the period of military service, plus interest as determined by the department.

       (c) The contributions required under (a)(ii) of this subsection shall be based on the compensation the member would have earned if not on leave, or if that cannot be estimated with reasonable certainty, the compensation reported for the member in the year prior to when the member went on military leave.

       NEW SECTION. Sec. 109. A member who separates or has separated after having completed at least five years of service may remain a member during the period of such member's absence from service for the exclusive purpose only of receiving a retirement allowance under the provisions of section 103 of this act if such member maintains the member's accumulated contributions intact.

       NEW SECTION. Sec. 110. A member who ceases to be an employee of an employer except by service or disability retirement may request a refund of the member's accumulated contributions. The refund shall be made within ninety days following the receipt of the request and notification of termination through the contribution reporting system by the employer; except that in the case of death, an initial payment shall be made within thirty days of receipt of request for such payment and notification of termination through the contribution reporting system by the employer. A member who files a request for refund and subsequently enters into employment with another employer prior to the refund being made shall not be eligible for a refund. The refund of accumulated contributions shall terminate all rights to benefits under sections 101 through 112 of this act.

       NEW SECTION. Sec. 111. (1) A member, who had left service and withdrawn the member's accumulated contributions, shall receive service credit for such prior service if the member restores all withdrawn accumulated contributions together with interest since the time of withdrawal as determined by the department.

       The restoration of such funds must be completed within five years of the resumption of service or prior to retirement, whichever occurs first.

       (2) If a member fails to meet the time limitations of subsection (1) of this section, the member may receive service credit destroyed by the withdrawn contributions if the amount required under RCW 41.50.165(2) is paid.

       NEW SECTION. Sec. 112. Sections 101 through 111 and 114 of this act apply only to plan II members.

       NEW SECTION. Sec. 113. A new section is added to chapter 41.40 RCW to read as follows: