WSR 16-09-053 PROPOSED RULES DEPARTMENT OF RETIREMENT SYSTEMS [Filed April 15, 2016, 3:07 p.m.]
Original Notice.
Preproposal statement of inquiry was filed as WSR 16-05-080.
Title of Rule and Other Identifying Information: New section WAC 415-02-115 How is separation determined for retirement eligibility?
Hearing Location(s): Department of Retirement Systems, Conference Room 115, 6835 Capitol Boulevard S.E., Tumwater, WA 98502, on Wednesday, May 25, 2016, at 10:00 a.m.
Date of Intended Adoption: May 25, 2016.
Submit Written Comments to: Jilene Siegel, Department of Retirement Systems, P.O. Box 48380, Olympia, WA 98504-8380, e-mail jilenes@drs.wa.gov, fax (360) 753-5397, by May 24, 2016, 5:00 p.m.
Assistance for Persons with Disabilities: Contact Jilene Siegel by May 23, 2016, TTY (866) 377-8895 or (360) 586-5450.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: This rule will clarify how the department determines whether a member has separated from service or employment, as required by state laws and Internal Revenue Service interpretations.
Statutory Authority for Adoption: RCW 41.50.050(5).
Rule is not necessitated by federal law, federal or state court decision.
Name of Agency Personnel Responsible for Drafting: Jilene Siegel, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7291; and Implementation: Seth Miller, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7304.
No small business economic impact statement has been prepared under chapter 19.85 RCW. Not applicable. These rules do not impact small businesses and are not being submitted by the state board of education.
A cost-benefit analysis is not required under RCW 34.05.328. The department of retirement systems is not listed in RCW 34.05.328 as required to prepare a cost-benefit analysis.
April 15, 2016
Jilene Siegel
Rules Coordinator
NEW SECTION
WAC 415-02-115 How is separation determined for retirement eligibility?
(1) Have I separated from service? All retirement plans administered by the department of retirement systems require a separation from service before you are eligible to begin receiving retirement benefits. This is consistent with Internal Revenue Service (IRS) requirements for distributions from qualified retirement plans. In accordance with the IRS interpretation, you have separated from service only when you have ended the employment relationship without any reasonable expectation between you and your employer that you will return to work for the same employer in any capacity (including in an eligible or ineligible position or as an independent contractor).
(2) How will the department determine if separation from service occurred? The department will examine the facts and circumstances on a case-by-case basis to determine whether separation occurred. No single factor is determinative. Factors to be considered may include, without limitation, the following:
(a) Was there a prior agreement between you and your employer that you would return to work for that employer? If there was an understanding between you and your employer that you would perform services for that employer at a later date, you have not separated from service. Such understanding may be written or unwritten; it may be contractual or noncontractual in nature.
(b) How long was your absence? If your absence from work was less than thirty days, the department will presume that separation did not occur unless the employer provides enough information to disprove the presumption. An absence from work longer than thirty days is not sufficient proof that separation did occur if other factors indicate that an agreement existed for you to return to work for the same employer.
(c) Did your employer conduct a competitive hiring process to fill your vacated position?
(d) Were your actions and your employer's actions consistent with the expectation that your absence from work was total and permanent? For example: Was access to the employer's facilities, computer systems, and your personal e-mail and voice mail accounts terminated? Were your leave accruals cashed out? Did you remove all of your personal belongings from the employer's premises?
(3) If I terminate from my position with an understanding that I will return to service with the same employer in an ineligible position or as an independent contractor, will I have separated from service? No. If, at the time of your termination, there was an understanding between you and your employer that you would return to work for that employer in any capacity, including in an ineligible position or as an independent contractor, you have not separated from service and are not eligible to retire.
(4) What happens if I begin to receive retirement benefits and then it is determined that separation from service did not occur? If you begin to receive retirement benefits without a valid separation from service, you have received a benefit overpayment that must be repaid to the department pursuant to RCW 41.50.130 and/or 41.50.139.
(5) May I contest the department's decision? If the department determines, based on a review of the circumstances, that you did not separate from service, you may petition for review under chapter 415-04 WAC.
(6) Examples:
(a) Example 1. Mary has met the age and service requirements for retirement eligibility. Aaron is hired to fill the position she will be leaving. Mary submits her retirement application and leaves her job. Shortly thereafter, Aaron resigns and leaves abruptly, causing a vacancy at a critical time. After a separation of only three weeks, Mary returns to perform the work until the position can be filled again. Has a separation occurred?
Yes, if there are no other facts to the contrary, Mary separated from service and is eligible to retire. At the time of her termination, neither Mary nor her employer expected that she would return to employment. However, if Mary returns to work before thirty days have passed, this may cause her monthly retirement benefit to be reduced based on the requirements of her plan.
(b) Example 2. Robert is leaving his position as a police officer. Before leaving, he agrees to return to work for the same employer in a capacity that is not eligible for membership in the law enforcement officers' and firefighters' retirement system (LEOFF). He will begin his new position following a six week absence. Has a separation occurred?
No, Robert did not separate from service because there was an agreement that he would return to work for the same employer. Without a valid separation from service, Robert is not eligible to begin receiving LEOFF retirement benefits.
(7) Is there a difference between "separation from service" and "separation from employment"? Some of the retirement plans require "separation from service" in order to receive a monthly benefit. Others require "separation from employment." The department interprets these two statutory terms identically for purposes of eligibility for retirement. In this rule the term "separation from service" refers both to:
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