HOUSE BILL REPORT
HB 1269
As Reported by House Committee On:
Appropriations
Title: An act relating to permitting members of the law enforcement officers' and fire fighters' retirement system plan 2 to make a one-time purchase of additional service credit.
Brief Description: Permitting members of the law enforcement officers' and fire fighters' retirement system plan 2 to make a one-time purchase of additional service credit.
Sponsors: Representatives Conway, Curtis, Simpson, Hinkle, Upthegrove, Moeller, Morrell, Green, O'Brien, P. Sullivan, Kenney, McDonald, Campbell, Chase, B. Sullivan, Ormsby, Kilmer, McCoy, Jarrett, Wallace, Serben and Strow; by request of LEOFF Plan 2 Retirement Board.
Brief History:
Appropriations: 2/3/05, 2/7/05 [DP].
Brief Summary of Bill |
|
|
|
HOUSE COMMITTEE ON APPROPRIATIONS
Majority Report: Do pass. Signed by 27 members: Representatives Sommers, Chair; Fromhold, Vice Chair; Alexander, Ranking Minority Member; Anderson, Assistant Ranking Minority Member; McDonald, Assistant Ranking Minority Member; Bailey, Buri, Clements, Cody, Conway, Darneille, Dunshee, Haigh, Hinkle, Hunter, Kagi, Kenney, Kessler, Linville, McDermott, McIntire, Miloscia, Pearson, Priest, Schual-Berke, Talcott and Walsh.
Staff: David Pringle (786-7310).
Background:
A vested member of the Law Enforcement Officers' and Fire Fighters' Retirement System
(LEOFF 2) may retire with an unreduced benefit at age 53. At retirement in LEOFF 2 a
member receives 2 percent of the member's final average salary for each year of credited
service.
Beginning at age 50, a member of LEOFF 2 may apply for early retirement after 20 years of
service. A member who applies for early retirement has his or her benefit reduced by 3
percent per year for each year that the member is retiring prior to age 53.
Members of LEOFF 2 generally have the opportunity to participate in deferred compensation
plans. These plans permit an individual to place a portion of salary into a special account
prior to being subject to payroll tax reductions. The Department of Retirement Systems
(DRS) operates a deferred compensation program consistent with the federal tax
requirements of 26 United States Code section 457, commonly called a "457 Plan", in which
employees of the state, counties, municipalities and other political subdivisions may
participate. Some school districts and local governments may also participate in other
deferred compensation-type plans commonly referred to as "403(b)" or "401(k)" plans.
Individuals may also be able to deposit funds into accounts with preferential tax treatment
such as Individual Retirement Accounts (IRAs).
In recent years, changes in federal law have liberalized the rules on the transfer of funds
between tax-deferred accounts, including governmental defined benefit pension plans like the
LEOFF 2 and deferred compensation accounts such as 457, 403(b), and 401(k) plans. Many
state and local government pension plans have subsequently provided the opportunity for
members to transfer funds, including funds from tax-deferred accounts, into these plans to
add up to five years of service credit to a member's defined benefit.
The 2004 Legislature enacted House Bill 2535, which provided the opportunity for members
of the Public Employees' Retirement System and the School Employees' Retirement Systems
Plans 2 and 3 to purchase up to five years of additional service credit at the time of
retirement. The cost of the additional service credit is the actuarial equivalent value of the
resulting increase in the member's benefit.
Summary of Bill:
A LEOFF 2 member who applies for retirement may, at the time of retirement, file an
application with DRS to purchase up to five years of additional service credit. The cost of
the additional service credit is the actuarial equivalent value of the resulting increase in the
member's benefit.
The member may pay all or part of the cost of the additional service credit with an eligible
transfer from a qualified retirement plan. The DRS must adopt rules to ensure that all
purchases and transfers comply with the requirements of the federal Internal Revenue Code
and regulations. Additional purchased service credit is not regular membership service
credit, and may not be used to qualify a LEOFF 2 member for early retirement prior to
completion of 20 years of credited service.
Appropriation: None.
Fiscal Note: Available.
Effective Date: The bill takes effect July 1, 2006.
Testimony For: This bill is very similar to a bill that the committee heard last week relating to the Teachers' Retirement System. I think that bill was well received by the committee, and I hope that this one will be also.
Testimony Against: None.
Persons Testifying: Steve Nelsen, LEOFF 2 Retirement Board.