BILL REQ. #:  H-1477.5 

Read first time 02/08/2007.   Referred to Committee on Appropriations.

     AN ACT Relating to gain-sharing benefits and increasing contributions towards unfunded pension liabilities; amending RCW 41.31.020, 41.31A.020, 41.32.835, and 41.35.610; adding a new section to chapter 41.45 RCW; decodifying RCW 41.31A.030 and 41.31A.040; providing effective dates; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 41.31.020 and 1998 c 340 s 2 are each amended to read as follows:
     (1) The gain-sharing increase amount shall be the amount of increase, rounded to the nearest cent, that can be fully funded in actuarial present value by the amount of extraordinary investment gains, if any. The amount of extraordinary investment gains shall be calculated as follows:
     (a) One-half of the sum of the value of the net assets held in trust for pension benefits in the teachers' retirement system plan 1 fund and the public employees' retirement system plan 1 fund at the close of the previous state fiscal year;
     (b) Multiplied by the amount which the compound average of investment returns on those assets over the previous four state fiscal years exceeds ((ten)) fourteen percent.
     (2) The gain-sharing increase amount for July 1998, as provided for in RCW 41.31.010, is ten cents.

Sec. 2   RCW 41.31A.020 and 2003 c 294 s 4 are each amended to read as follows:
     (1) On January 1, 2004, and on January 1st of even-numbered years thereafter, the member account of a person meeting the requirements of this section shall be credited by the extraordinary investment gain amount.
     (2) The following persons, if hired prior to July 1, 2007, shall be eligible for the benefit provided in subsection (1) of this section:
     (a) Any member of the teachers' retirement system plan 3, the Washington school employees' retirement system plan 3, or the public employees' retirement system plan 3 who earned service credit during the twelve-month period from September 1st to August 31st immediately preceding the distribution and had a balance of at least one thousand dollars in their member account on August 31st of the year immediately preceding the distribution; or
     (b) Any person in receipt of a benefit pursuant to RCW 41.32.875, 41.35.680, or 41.40.820; or
     (c) Any person who is a retiree pursuant to RCW 41.34.020(8) and who:
     (i) Completed ten service credit years; or
     (ii) Completed five service credit years, including twelve service months after attaining age fifty-four; or
     (d) Any teacher who is a retiree pursuant to RCW 41.34.020(8) and who has completed five service credit years by July 1, 1996, under plan 2 and who transferred to plan 3 under RCW 41.32.817; or
     (e) Any classified employee who is a retiree pursuant to RCW 41.34.020(8) and who has completed five service credit years by September 1, 2000, and who transferred to plan 3 under RCW 41.35.510; or
     (f) Any public employee who is a retiree pursuant to RCW 41.34.020(8) and who has completed five service credit years by March 1, 2002, and who transferred to plan 3 under RCW 41.40.795; or
     (g) Any person who had a balance of at least one thousand dollars in their member account on August 31st of the year immediately preceding the distribution and who:
     (i) Completed ten service credit years; or
     (ii) Completed five service credit years, including twelve service months after attaining age fifty-four; or
     (h) Any teacher who had a balance of at least one thousand dollars in their member account on August 31st of the year immediately preceding the distribution and who has completed five service credit years by July 1, 1996, under plan 2 and who transferred to plan 3 under RCW 41.32.817; or
     (i) Any classified employee who had a balance of at least one thousand dollars in their member account on August 31st of the year immediately preceding the distribution and who has completed five service credit years by September 1, 2000, and who transferred to plan 3 under RCW 41.35.510; or
     (j) Any public employee who had a balance of at least one thousand dollars in their member account on August 31st of the year immediately preceding the distribution and who has completed five service credit years by March 1, 2002, and who transferred to plan 3 under RCW 41.40.795.
     (3) The extraordinary investment gain amount shall be calculated as follows:
     (a) One-half of the sum of the value of the net assets held in trust for pension benefits in the teachers' retirement system combined plan 2 and 3 fund, the Washington school employees' retirement system combined plan 2 and 3 fund, and the public employees' retirement system combined plan 2 and 3 fund at the close of the previous state fiscal year not including the amount attributable to member accounts;
     (b)(i) Through January 1, 2008, multiplied by the amount which the compound average of investment returns on those assets over the previous four state fiscal years exceeds ten percent;
     (ii) On and after January 2, 2008, multiplied by the amount which the compound average of investment returns on those assets over the previous four state fiscal years exceeds fourteen percent;
     (c) Multiplied by the proportion of:
     (i) The sum of the service credit on August 31st of the previous year of all persons eligible for the benefit provided in subsection (1) of this section; to
     (ii) The sum of the service credit on August 31st of the previous year of:
     (A) All persons eligible for the benefit provided in subsection (1) of this section;
     (B) Any person who earned service credit in the teachers' retirement system plan 2, the Washington school employees' retirement system plan 2, or the public employees' retirement system plan 2 during the twelve-month period from September 1st to August 31st immediately preceding the distribution;
     (C) Any person in receipt of a benefit pursuant to RCW 41.32.765, 41.35.420, or 41.40.630; and
     (D) Any person with five or more years of service in the teachers' retirement system plan 2, the Washington school employees' retirement system plan 2, or the public employees' retirement system plan 2;
     (d) Divided proportionally among persons eligible for the benefit provided in subsection (1) of this section on the basis of their service credit total on August 31st of the previous year.
     (4) The legislature reserves the right to amend or repeal this section in the future and no member or beneficiary has a contractual right to receive this distribution not granted prior to that time.

Sec. 3   RCW 41.32.835 and 1995 c 239 s 105 are each amended to read as follows:
     (1) All teachers who first become employed by an employer in an eligible position on or after ((July 1, 1996, shall be members of plan 3)) the effective date of this section, shall have a period of ninety days to make an irrevocable choice to become a member of plan 2 or plan 3. At the end of ninety days, if the member has not made a choice to become a member of plan 2, he or she becomes a member of plan 3.
     (2) For administrative efficiency, until a member elects to become a member of plan 3, or becomes a member of plan 3 by default under subsection (1) of this section, the member shall be reported to the department in plan 2, with member and employer contributions. Upon becoming a member of plan 3 by election or by default, all service credit shall be transferred to the member's plan 3 defined benefit, and all employee accumulated contributions shall be transferred to the member's plan 3 defined contribution account.

Sec. 4   RCW 41.35.610 and 1998 c 341 s 202 are each amended to read as follows:
     (1) All classified employees who first become employed by an employer in an eligible position on or after ((September 1, 2000, shall be members of plan 3)) the effective date of this section, shall have a period of ninety days to make an irrevocable choice to become a member of plan 2 or plan 3. At the end of ninety days, if the member has not made a choice to become a member of plan 2, he or she becomes a member of plan 3.
     (2) For administrative efficiency, until a member elects to become a member of plan 3, or becomes a member of plan 3 by default under subsection (1) of this section, the member shall be reported to the department in plan 2, with member and employer contributions. Upon becoming a member of plan 3 by election or by default, all service credit shall be transferred to the member's plan 3 defined benefit, and all employee accumulated contributions shall be transferred to the member's plan 3 defined contribution account.

NEW SECTION.  Sec. 5   A new section is added to chapter 41.45 RCW to read as follows:
     (1) The rates established in this section shall be collected in addition to the rates established pursuant to RCW 41.45.062, 41.45.0621, and 41.45.070.
     (2) Beginning September 1, 2007, a 1.25 percent contribution is established as part of the basic state and employer contribution rate for the teachers' retirement system, to be used for the sole purpose of amortizing the unfunded accrued actuarial liability in the teachers' retirement system plan 1.
     (3) Beginning September 1, 2007, a 0.67 percent contribution is established as part of the basic state and employer contribution rate for the school employees' retirement system, to be used for the sole purpose of amortizing the unfunded accrued actuarial liability in the public employees' retirement system plan 1.
     (4) Beginning July 1, 2007, a 0.67 percent contribution is established as part of the basic state and employer contribution rate for the public employees' retirement system and the public safety employees' retirement system, to be used for the sole purpose of amortizing the unfunded accrued actuarial liability in the public employees' retirement system plan 1.
     (5) The contribution rates in this section shall be collected through June 30, 2011, for the public employees' retirement system and the public safety employees' retirement system, through August 31, 2011, for the school employees' retirement system, and through August 31, 2010, for the teachers' retirement system.

NEW SECTION.  Sec. 6   RCW 41.31A.030 and 41.31A.040 are decodified.

NEW SECTION.  Sec. 7   (1) Sections 2 and 5 of this act are necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and take effect July 1, 2007.
     (2) Section 1 of this act takes effect January 2, 2008.