Brief Description: Providing benefits to certain disabled members of the law enforcement officers' and fire fighters' retirement system plan 2.

Sponsors: Senators Murray, Parlette, Carlson, Roach, Kohl-Welles and Rasmussen; by request of LEOFF Plan 2 Retirement Board.

Hearing Date:

Staff: David Pringle (786-7310).

Background:

Members of the Law Enforcement Officers' and Fire Fighters' Retirement System, Plan 2 (LEOFF 2) are eligible for a retirement allowance of 2 percent of average final salary for each year of service credit earned at age 53. Members of LEOFF Plan 2 may apply for early retirement beginning at age 50; however the member's benefit is reduced by 3 percent per year below age 53 if the member has 20 or more years of service, and fully actuarially reduced if the member has less than 20 years of service.

If a member becomes disabled for any reason, LEOFF 2 offers two benefits. First, a member may receive a retirement allowance based on the 2 percent of average final salary formula that is actuarially reduced from age 53 to the age at disability. This actuarial reduction is about 8 percent per year, so a member leaving service by disability at age 48 would receive a reduction of about 40 pecent.

A member with 10 or more years of service who leaves employment in LEOFF 2 may request a refund of 150 percent of the member's accumulated contributions. A member with less than 10 years of service may request 100 percent of the member's contributions. In either case, a member who requests a refund of contributions is ineligible for a disability or service retirement allowance.

If a duty-related disability retirement allowance is based on a member's age and years of service at disability, then it is paid subject to federal income tax. In contrast, to the extent that a duty-related disability retirement allowance is not based on age or years of service, it may qualify for favorable tax treatment.

Summary of Bill:

A member of LEOFF 2 who leaves service as a result of a line of duty disablity is entitled to withdraw 150 percent of accumulated member contributions. This withdrawal benefit is not subject to federal income tax.

A member of LEOFF 2 who leaves service as a result of a line of duty disablity is also eligible to receive a retirement allowance of at least 10 percent of final average salary. If the two percent per year of service disability benefit, actuarially reduced for the difference between age 53 and age at retirement, results in a greater benefit than the minimum 10 percent, the member receives the greater benefit. The first 10 percent of the line-duty disability benefit is not subject to federal income tax.

The line-duty disability benefit applies to all LEOFF 2 members disabled in the line of duty on or after January 1, 2001.

Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.