BILL REQ. #: H-0989.1
| State of Washington | 58th Legislature | 2003 Regular Session |
Read first time 01/31/2003. Referred to Committee on Appropriations.
AN ACT Relating to the Washington state patrol retirement system, plan 1; amending RCW 44.44.040, 41.45.050, 41.45.060, 41.45.020, and 44.44.060; reenacting and amending RCW 41.45.070; adding new sections to chapter 43.43 RCW; creating a new section; and providing an effective date.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1
(1) Establish a board of trustees responsible for the adoption of
actuarial standards to be applied to the plan;
(2) Direct the board to zealously manage the trust funds for the
benefit of the members and beneficiaries of the plan, including
exercising a preference for enhancing plan benefits rather than
decreasing contribution rates;
(3) Exercise fiduciary responsibility in the oversight of those
pension management functions assigned to the board;
(4) Provide effective monitoring of the plan by providing an annual
report to the legislature, to the members and beneficiaries of the
plan, and to the public;
(5) Establish contribution rates for employees and the state of
Washington that will guaranty viability of the plan, subject to the
limitations provided for in this act;
(6) Provide for an annual budget and to pay costs incurred by the
board in performing its functions under this act from the interest
earnings of the trust, as part of the normal cost of the plan; and
(7) Enable the board to retain professional and technical advisors
as necessary for the fulfillment of their statutory responsibilities.
NEW SECTION. Sec. 2
(1) "Member" has the same meaning as that provided in RCW
43.43.120(4) and also includes separated vested members of the plan who
are not currently receiving benefits.
(2) "Plan" means the Washington state patrol retirement system plan
1, covering commissioned officers who first became members of the
system prior to January 1, 2003.
(3) "Actuary" means the actuary employed by the board of trustees.
(4) "State actuary" means the actuary employed under chapter 44.44
RCW.
(5) "Board" means the Washington state patrol retirement system
board of trustees.
(6) "Board member" means a member of the Washington state patrol
retirement system board of trustees.
(7) "Department" means the department of retirement systems.
(8) "Minimum benefits" means those benefits provided for in chapter
43.43 RCW as of July 1, 2004.
(9) "Enrolled actuary" means an actuary who is enrolled under the
employee retirement income security act of 1974 (Subtitle C of Title
III) and who is a member of the society of actuaries or the American
academy of actuaries.
(10) "Increased benefit" means a benefit in addition to the minimum
benefits.
(11) "Trust" means the assets of the Washington state patrol
retirement system.
(12) "Benefits" means the age or service or combination thereof
required for retirement, the level of service benefits, survivorship
benefits, payment options including a deferred retirement option plan,
average final compensation, postretirement cost of living adjustments,
including health care and the elements of compensation. "Benefits"
does not include the classifications of employment eligible to
participate in the plan.
(13) "Actuarially sound" means the plan is sufficiently funded to
meet its projected liabilities and to defray the reasonable expenses of
its operation based upon commonly accepted, sound actuarial principles.
(14) "Beneficiary" has the same meaning as provided in RCW
43.43.120(7).
NEW SECTION. Sec. 3
(a) Three active members of the Washington state patrol retirement
system plan 1 appointed by the president of the Washington state patrol
troopers association;
(b) Two active members of the Washington state patrol retirement
system plan 1 appointed by the chief of the Washington state patrol;
(c) Two retired members of the Washington state patrol retirement
system plan 1 with one member appointed by the chief of the Washington
state patrol and one member appointed by the president of the
Washington state patrol troopers association;
(d) Two members of the house of representatives, one appointed by
the speaker of the house of representatives and one appointed by the
minority leader of the house of representatives; and
(e) Two members of the senate, one appointed by the senate majority
leader and one appointed by the senate minority leader.
(2) The initial retirement system board members shall serve terms
of six, four, and two years, respectively. Thereafter, retirement
system board members serve terms of six years. The remaining board
members serve terms of four years. Board members may be reappointed to
succeeding terms without limitation. Board members shall serve until
their successors are appointed and seated.
(3) In the event of a vacancy on the board, the vacancy shall be
filled in the same manner as prescribed for an initial appointment.
NEW SECTION. Sec. 4
(a) Adopt actuarial tables, assumptions, and cost methodologies in
consultation with the state actuary. The state actuary shall utilize
the aggregate actuarial cost method, or other recognized actuarial cost
method based on a level percentage of payroll, as that term is employed
by the American academy of actuaries. The board may employ an
independent actuary to evaluate or supplement the state actuary's work
for the board. If the independent actuary and the state actuary
cannot agree, they shall appoint a third, independent, enrolled actuary
who shall review the calculations of the actuary retained by the board
and the state actuary. Thereafter, contributions shall be based on the
methodology most closely following that of the third actuary;
(b)(i) Provide for the design and implementation of increased
benefits for members and beneficiaries of the plan, subject to the
contribution limitations under section 6 of this act. An increased
benefit may not be approved by the board until an actuarial cost of the
benefit has been determined by the actuary and contribution rates
adjusted as may be required to maintain the plan on a sound actuarial
basis. Increased benefits as approved by the board shall be presented
to the legislature on January 1st of each year for action during that
legislative session;
(ii) As an alternative to the procedure in (b)(i) of this
subsection, recommend to the legislature changes in the benefits for
members and beneficiaries, without regard to the cost limitations in
section 6(3) of this act. Increased benefits as recommended by the
board shall be presented to the legislature on January 1st of each year
for action during that legislative session;
(c) Retain professional and technical advisors necessary for the
accomplishment of its duties;
(d) Consult with the department for the purpose of improving
benefit administration and member services;
(e) Provide an annual report to the governor and the legislature
setting forth the actuarial funding status of the plan and making
recommendations for improvements in those aspects of retirement
administration directed by the legislature or administered by the
department;
(f) Establish uniform administrative rules and operating policies
in the manner prescribed by law;
(g) Engage administrative staff and acquire office space
independent of, or in conjunction with, the department;
(h) Publish on an annual basis a schedule of increased benefits
together with a summary of the minimum benefits as established by the
legislature which shall constitute the official plan document; and
(i) Be the fiduciary of the plan and discharge the board's duties
solely in the interest of the members and beneficiaries of the plan.
(2) Meetings of the board of trustees shall be conducted as
follows:
(a) All board meetings are open to the public, preceded by timely
public notice;
(b) All actions of the board shall be taken in open public session,
except for those matters which may be considered in executive session
as provided under chapter 42.17 RCW;
(c) The board shall retain minutes of each meeting setting forth
the names of those board members present and absent, and their voting
record on any voted issue; and
(d) The board may establish, with the assistance of the appropriate
office of state government, an internet web site providing for
interactive communication with state government, members and
beneficiaries of the plan, and the public.
(3) A quorum of the board is six board members. All board actions
require six concurring votes.
(4) The decisions of the board shall be made in good faith and are
final, binding, and conclusive on all parties. The decisions of the
board shall be subject to judicial review as provided by law.
(5) The board shall cause an annual budget to be prepared
consistent with the requirements of chapter 43.88 RCW and shall draw
the funding for the budget from the interest earnings of the trust.
Board members shall be reimbursed for travel and education expenses as
provided in RCW 43.03.050 and 43.03.060. The board shall make an
annual report to the governor, legislature, and state auditor setting
forth a summary of the costs and expenditures of the plan for the
preceding year. The board shall also retain the services of an
independent, certified public accountant who shall annually audit the
expenses of the fund and whose report shall be included in the board's
annual report.
NEW SECTION. Sec. 5
(2) The state investment board has the full power to invest,
reinvest, manage, contract, sell, or exchange investment money in the
expense fund. All investment and operating costs associated with the
investment of money shall be paid pursuant to RCW 43.33A.160 and
43.84.160. With the exception of these expenses, the earnings from the
investment of the money shall be retained by the Washington state
patrol retirement system fund.
(3) All investments made by the state investment board shall be
made with the exercise of that degree of judgment and care pursuant to
RCW 43.33A.140 and the investment policy established by the state
investment board.
(4) When appropriate for investment purposes, the state investment
board may commingle money in the expense fund with other funds.
(5) The authority to establish all policies relating to the expense
fund, other than the investment policies as set forth in subsections
(1) through (4) of this section, resides with the Washington state
patrol retirement system board of trustees. With the exception of
expenses of the state investment board set forth in subsection (2) of
this section, disbursements from this expense fund may be made only on
the authorization of the Washington state patrol retirement system
board of trustees, and money in the expense fund may be spent only for
the purposes of defraying the expenses of the board as provided in this
section and in section 4 of this act.
(6) The state investment board shall routinely consult and
communicate with the Washington state patrol retirement system board on
the investment policy, earnings of the trust, and related needs of the
expense fund.
(7) The Washington state patrol retirement system board of trustees
shall administer the expense fund in a manner reasonably designed to be
actuarially sound. The assets of the expense fund must be sufficient
to defray the obligations of the account including the costs of
administration. Money used for administrative expenses is subject to
the allotment of all expenditures pursuant to chapter 43.88 RCW.
However, an appropriation is not required for expenditures.
Administrative expenses include, but are not limited to:
(a) Any start-up costs incurred in establishing the board;
(b) The salaries and expenses of board personnel and staff
including lease payments, travel, and goods and services necessary for
operation of the board;
(c) Audits; and
(d) Other general costs of conducting the business of the board.
(8) The state investment board shall allocate from the Washington
state patrol retirement system expense fund the amount necessary to
cover the expenses of the Washington state patrol retirement system
board of trustees.
(9) With regard to the assets of the expense fund, the state acts
in a fiduciary, not ownership, capacity. Therefore the assets of the
expense fund are not considered state money, common cash, or revenue to
the state.
NEW SECTION. Sec. 6
(2) The minimum benefits shall constitute a contractual obligation
of the state and may not be reduced below the levels in effect on July
1, 2004. The state shall maintain the minimum benefits on a sound
actuarial basis in accordance with the actuarial standards adopted by
the board.
(3) Increased benefits created as provided for in section 4 of this
act may be authorized by the board on a basis not to exceed the
contributions provided for in this section.
(a) In addition to the contributions necessary to maintain the
minimum benefits, for any increased pension benefits provided for by
the board, the employee contribution shall not exceed fifty percent of
the actuarial cost of the benefit. In no instance shall the employee
cost exceed ten percent of covered payroll without the consent of a
majority of the affected employees. Employer contributions shall not
exceed fifty percent of the cost, but in no instance shall the employer
contribution exceed six percent of covered payroll.
(b) State contributions may not be increased above the maximum
provided for in this section without the consent of the legislature.
In the event that the cost of maintaining the increased benefits on a
sound actuarial basis exceeds the aggregate contributions provided for
in this section, the board shall submit to the affected members of the
plan the option of paying the increased costs or of having the
increased benefits reduced to a level sufficient to be maintained by
the aggregate contributions. The reduction of benefits in accordance
with this section shall not be deemed a violation of the contractual
rights of the members, provided that no reduction may result in
benefits being lower than the level of the minimum benefits.
(4) The board shall manage the trust in a manner that maintains
reasonable contributions and administrative costs. Providing
additional benefits to members and beneficiaries is the board's
priority.
Sec. 7 RCW 44.44.040 and 1987 c 25 s 3 are each amended to read
as follows:
The office of the state actuary shall have the following powers and
duties:
(1) Perform all actuarial services for the department of retirement
systems, including all studies required by law. Reimbursement for such
services shall be made to the state actuary pursuant to the provisions
of RCW 39.34.130 as now or hereafter amended.
(2) Advise the legislature and the governor regarding pension
benefit provisions, and funding policies and investment policies of the
state investment board.
(3) Consult with the legislature and the governor concerning
determination of actuarial assumptions used by the department of
retirement systems.
(4) Prepare a report, to be known as the actuarial fiscal note, on
each pension bill introduced in the legislature which briefly explains
the financial impact of the bill. The actuarial fiscal note shall
include: (a) The statutorily required contribution for the biennium
and the following twenty-five years; (b) the biennial cost of the
increased benefits if these exceed the required contribution; and (c)
any change in the present value of the unfunded accrued benefits. An
actuarial fiscal note shall also be prepared for all amendments which
are offered in committee or on the floor of the house of
representatives or the senate to any pension bill. However, a majority
of the members present may suspend the requirement for an actuarial
fiscal note for amendments offered on the floor of the house of
representatives or the senate.
(5) Provide such actuarial services to the legislature as may be
requested from time to time.
(6) Provide staff and assistance to the committee established under
RCW ((46.44.050)) 44.44.050.
(7) Provide actuarial assistance to the Washington state patrol
retirement system board of trustees as provided in sections 4 and 6 of
this act.
Sec. 8 RCW 41.45.050 and 2002 c 26 s 5 are each amended to read
as follows:
(1) Employers of members of the public employees' retirement
system, the teachers' retirement system, the school employees'
retirement system, and the Washington state patrol retirement system
plan 2 shall make contributions to those systems based on the rates
established in RCW 41.45.060((, 41.45.053,)) and 41.45.070.
(2) The state shall make contributions to the law enforcement
officers' and fire fighters' retirement system plan 2 based on the
rates established in RCW 41.45.060((, 41.45.053,)) and 41.45.070. The
state treasurer shall transfer the required contributions each month on
the basis of salary data provided by the department.
(3) The department shall bill employers, and the state shall make
contributions to the law enforcement officers' and fire fighters'
retirement system plan 2, using the combined rates established in RCW
41.45.060((, 41.45.053,)) and 41.45.070 regardless of the level of
appropriation provided in the biennial budget. Any member of an
affected retirement system may, by mandamus or other appropriate
proceeding, require the transfer and payment of funds as directed in
this section.
(4) The contributions received for the public employees' retirement
system shall be allocated between the public employees' retirement
system plan 1 fund and the public employees' retirement system combined
plan 2 and plan 3 fund as follows: The contributions necessary to
fully fund the public employees' retirement system combined plan 2 and
plan 3 employer contribution shall first be deposited in the public
employees' retirement system combined plan 2 and plan 3 fund. All
remaining public employees' retirement system employer contributions
shall be deposited in the public employees' retirement system plan 1
fund.
(5) The contributions received for the teachers' retirement system
shall be allocated between the plan 1 fund and the combined plan 2 and
plan 3 fund as follows: The contributions necessary to fully fund the
combined plan 2 and plan 3 employer contribution shall first be
deposited in the combined plan 2 and plan 3 fund. All remaining
teachers' retirement system employer contributions shall be deposited
in the plan 1 fund.
(6) The contributions received for the school employees' retirement
system shall be allocated between the public employees' retirement
system plan 1 fund and the school employees' retirement system combined
plan 2 and plan 3 fund as follows: The contributions necessary to
fully fund the combined plan 2 and plan 3 employer contribution shall
first be deposited in the combined plan 2 and plan 3 fund. All
remaining school employees' retirement system employer contributions
shall be deposited in the public employees' retirement system plan 1
fund.
(7) The contributions received for the law enforcement officers'
and fire fighters' retirement system plan 2 shall be deposited in the
law enforcement officers' and fire fighters' retirement system plan 2
fund.
Sec. 9 RCW 41.45.060 and 2002 c 26 s 2 are each amended to read
as follows:
(1) The state actuary shall provide actuarial valuation results
based on the economic assumptions and asset value smoothing technique
included in RCW 41.45.035 or adopted by the council under RCW 41.45.030
or 41.45.035.
(2) Not later than September 30, 2002, and every two years
thereafter, consistent with the economic assumptions and asset value
smoothing technique included in RCW 41.45.035 or adopted under RCW
41.45.030 or 41.45.035, the council shall adopt and may make changes
to:
(a) A basic state contribution rate for the law enforcement
officers' and fire fighters' retirement system;
(b) Basic employer contribution rates for the public employees'
retirement system, the teachers' retirement system, and the Washington
state patrol retirement system plan 2 to be used in the ensuing
biennial period; and
(c) A basic employer contribution rate for the school employees'
retirement system for funding both that system and the public
employees' retirement system plan 1.
The contribution rates adopted by the council shall be subject to
revision by the legislature.
(3) The employer and state contribution rates adopted by the
council shall be the level percentages of pay that are needed:
(a) To fully amortize the total costs of the public employees'
retirement system plan 1, the teachers' retirement system plan 1, and
the law enforcement officers' and fire fighters' retirement system plan
1 not later than June 30, 2024, except as provided in subsection
(((5))) (6) of this section;
(b) To also continue to fully fund the public employees' retirement
system plans 2 and 3, the teachers' retirement system plans 2 and 3,
the school employees' retirement system plans 2 and 3, and the law
enforcement officers' and fire fighters' retirement system plan 2 in
accordance with RCW 41.45.061, 41.45.067, and this section; and
(c) For the law enforcement officers' and fire fighters' system
plan 2 the rate charged to employers, except as provided in RCW
41.26.450, shall be thirty percent of the cost of the retirement system
and the rate charged to the state shall be twenty percent of the cost
of the retirement system.
(4) The aggregate actuarial cost method shall be used to calculate
a combined plan 2 and 3 employer contribution rate and a Washington
state patrol retirement system plan 2 contribution rate.
(5) The Washington state patrol retirement system board of trustees
shall adopt contribution rates for the Washington state patrol
retirement system plan 1 as provided in sections 4 and 6 of this act.
(6) The council and the Washington state patrol retirement system
board of trustees shall immediately notify the directors of the office
of financial management and department of retirement systems of the
state and employer contribution rates adopted. The rates shall be
effective for the ensuing biennial period, subject to any legislative
modifications.
(((6))) (7) The director ((of the department of retirement systems
shall collect the rates established in RCW 41.45.053 through June 30,
2003. Thereafter, the director)) shall collect those rates adopted by
the council or the Washington state patrol retirement system board of
trustees. The rates established ((in RCW 41.45.053, or)) by the
council((,)) shall be subject to revision by the council.
Sec. 10 RCW 41.45.070 and 2001 2nd sp.s. c 11 s 16 and 2001 2nd
sp.s. c 11 s 15 are each reenacted and amended to read as follows:
(1) In addition to the basic employer contribution rate established
in RCW 41.45.060 or ((41.45.053)) section 4 or 6 of this act, the
department shall also charge employers of public employees' retirement
system, teachers' retirement system, school employees' retirement
system, or Washington state patrol retirement system members an
additional supplemental rate to pay for the cost of additional
benefits, if any, granted to members of those systems. Except as
provided in subsections (6) and (7) of this section or section 4 of
this act, the supplemental contribution rates required by this section
shall be calculated by the state actuary and shall be charged
regardless of language to the contrary contained in the statute which
authorizes additional benefits.
(2) In addition to the basic state contribution rate established in
RCW 41.45.060 ((or 41.45.053)) for the law enforcement officers' and
fire fighters' retirement system plan 2, the department shall also
establish a supplemental rate to pay for the cost of additional
benefits, if any, granted to members of the law enforcement officers'
and fire fighters' retirement system plan 2. Except as provided in
subsection (6) of this section, this supplemental rate shall be
calculated by the state actuary and the state treasurer shall transfer
the additional required contributions regardless of language to the
contrary contained in the statute which authorizes the additional
benefits.
(3) The supplemental rate charged under this section to fund
benefit increases provided to active members of the public employees'
retirement system plan 1, the teachers' retirement system plan 1, and
Washington state patrol retirement system plan 1, shall be calculated
as the level percentage of all members' pay needed to fund the cost of
the benefit not later than June 30, 2024.
(4) The supplemental rate charged under this section to fund
benefit increases provided to active and retired members of the public
employees' retirement system plan 2 and plan 3, the teachers'
retirement system plan 2 and plan 3, the school employees' retirement
system plan 2 and plan 3, or the law enforcement officers' and fire
fighters' retirement system plan 2, shall be calculated as the level
percentage of all members' pay needed to fund the cost of the benefit,
as calculated under RCW 41.45.060, 41.45.061, or 41.45.067.
(5) The supplemental rate charged under this section to fund
postretirement adjustments which are provided on a nonautomatic basis
to current retirees shall be calculated as the percentage of pay needed
to fund the adjustments as they are paid to the retirees. The
supplemental rate charged under this section to fund automatic
postretirement adjustments for active or retired members of the public
employees' retirement system plan 1 and the teachers' retirement system
plan 1 shall be calculated as the level percentage of pay needed to
fund the cost of the automatic adjustments not later than June 30,
2024.
(6) A supplemental rate shall not be charged to pay for the cost of
additional benefits granted to members pursuant to chapter 340, Laws of
1998.
(7) A supplemental rate shall not be charged to pay for the cost of
additional benefits granted to members pursuant to chapter 41.31A RCW;
section 309, chapter 341, Laws of 1998; or section 701, chapter 341,
Laws of 1998.
Sec. 11 RCW 41.45.020 and 2002 c 26 s 4 are each amended to read
as follows:
As used in this chapter, the following terms have the meanings
indicated unless the context clearly requires otherwise.
(1) "Council" means the pension funding council created in RCW
41.45.100.
(2) "Department" means the department of retirement systems.
(3) "Law enforcement officers' and fire fighters' retirement system
plan 1" and "law enforcement officers' and fire fighters' retirement
system plan 2" means the benefits and funding provisions under chapter
41.26 RCW.
(4) "Public employees' retirement system plan 1," "public
employees' retirement system plan 2," and "public employees' retirement
system plan 3" mean the benefits and funding provisions under chapter
41.40 RCW.
(5) "Teachers' retirement system plan 1," "teachers' retirement
system plan 2," and "teachers' retirement system plan 3" mean the
benefits and funding provisions under chapter 41.32 RCW.
(6) "School employees' retirement system plan 2" and "school
employees' retirement system plan 3" mean the benefits and funding
provisions under chapter 41.35 RCW.
(7) "Washington state patrol retirement system plan 1" means the
retirement benefits provided under chapter 43.43 RCW to persons who
first established membership in that system prior to January 1, 2003.
(8) "Unfunded liability" means the unfunded actuarial accrued
liability of a retirement system.
(9) "Actuary" or "state actuary" means the state actuary employed
under chapter 44.44 RCW.
(10) "State retirement systems" means the retirement systems listed
in RCW 41.50.030.
(11) "Classified employee" means a member of the Washington school
employees' retirement system plan 2 or plan 3 as defined in RCW
41.35.010.
(12) "Teacher" means a member of the teachers' retirement system as
defined in RCW 41.32.010(15).
(13) "Washington state patrol retirement system plan 2" means the
retirement benefits provided under chapter 43.43 RCW to persons who
first established membership in that system on or after January 1,
2003.
Sec. 12 RCW 44.44.060 and 1987 c 25 s 5 are each amended to read
as follows:
The joint committee on pension policy shall have the following
powers and duties:
(1) Study pension issues, develop pension policies for public
employees in state retirement systems other than members of the
Washington state patrol retirement system plan 1, and make
recommendations to the legislature;
(2) Study the financial condition of the state pension systems,
develop funding policies, and make recommendations to the legislature;
and
(3) Appoint or remove the state actuary by a two-thirds vote of the
committee.
NEW SECTION. Sec. 13
NEW SECTION. Sec. 14
NEW SECTION. Sec. 15
NEW SECTION. Sec. 16 CAPTIONS NOT LAW. Captions used in this
act are not any part of the law.
NEW SECTION. Sec. 17
NEW SECTION. Sec. 18