HOUSE BILL REPORT
ESSB 5150
As Amended by the House
BYSenate Committee on Ways & Means (originally sponsored by Senators Gaspard, Johnson, Vognild, Warnke, Saling, Nelson, Lee, Garrett, von Reichbauer and Moore)
Providing for the portability of public pension benefits.
House Committe on Ways & Means/Appropriations
Majority Report: Do pass with amendments. (15)
Signed by Representatives Locke, Chair; Belcher, Braddock, Brekke, Bristow, Ebersole, Grant, Grimm, Hine, McMullen, Niemi, Peery, Sayan, H. Sommers and Sprenkle.
House Staff:Randy Acker (786-7153)
AS PASSED HOUSE APRIL 9, 1987
BACKGROUND:
State and local government employees are presently covered under 17 different retirement systems created by state law. Most are also covered under Social Security and some are members of private retirement plans. These systems include:
a) The Judicial Retirement System (Ch. 2.10 RCW) and the Judges' Retirement System (Ch. 2.12 RCW) for superior and appellate court judges;
b) The higher education supplementation benefit (Ch. 28B.10 RCW) for faculty;
c) The "pre-LEOFF" retirement systems (Ch. 41.16, 41.18 and 41.20 RCW) and LEOFF, Plans I and II for law enforcement officers and firefighters;
d) The city retirement systems in Seattle, Spokane, and Tacoma (created pursuant to Ch 41.28 RCW) and the State-Wide City Employees' Retirement System (SWCERS) (Ch 41.44 RCW; merged into PERS in 1972) for city employees not in PERS;
e) The Washington State Patrol Retirement System (Ch 43.43 RCW) for commissioned officers of the state patrol;
f) The Teachers' Retirement System, Plans I and II, (Ch 41.32 RCW) for certificated school staff; and
g) The Public Employees' Retirement System, Plans I and II (Ch 41.40 RCW) for local and state employees who are not members of one of the systems in (a) through (f).
As a general rule, when a public employee moves from a job covered by one retirement system to a job covered by a different retirement system, the employee's retirement service credit is split between the two retirement systems. For example, a person who works as a teacher's aide for four years (PERS) and then becomes a teacher (TRS) would have service credit in both systems. This is a problem for two reasons:
1) If the employee did not work long enough to vest (generally 5 years) under one of the systems, he or she will receive no retirement benefit from that system; and
2) Even if the employee has a "vested" benefit, that benefit will be calculated using the employee's compensation while a member of that system, which might be much lower than the compensation earned immediately prior to retirement.
Over the years, the legislature has modified the various retirement systems in limited ways so as to address the above problems. A few examples include: a PERS member elected or appointed as a judge has been given the option to stay in PERS (1984 change); certain persons employed as educational staff associates have been allowed the option of being members of either PERS or TRS (1984); members of SWCERS have been allowed to transfer their SWCERS credit to PERS (1984); and certain members of the WSPRS have been given credit in that system for service credit they had in PERS (1986).
SUMMARY:
A person who retires with service in two or more of the retirement systems covered by the bill: (1) may use the "base salary" received in the last system to calculate the benefit earned in a prior system; (2) and may combine the years of service in two or more systems in determining his or her eligibility for retirement.
For example, a member may have 8 years service in PERS I where the average final compensation (AFC) for that period is $8,000, and 22 years in TRS I where the AFC is $25,000. Both systems have the same benefits formula: service x AFC x 2.0%. Without portability, the member would receive an annual benefit of $1,280 from PERS (8 x $8,000 x 2.0%) and $11,000 (22 x $25,000 x 2.0%) from TRS for a total benefit of $12,280. With the portability benefit, the member would receive annual benefits of $4,000 from PERS (8 x $15,000 x 2.0%) and $11,000 from TRS for a total benefit of $15,000.
The member in the example would also be able to combine the 8 years service in PERS I with the 22 years service in TRS I to qualify for retirement with thirty years service. The benefit for elected officials in PERS I would continue to be based on a 3% formula.
An elected official who is a member of TRS I may make an irrevocable election to become a member of PERS I for all previous and future periods of service.
An elected official who could have become a member of PERS I but did not act prior to October 1, 1977 may elect to do so prior to June 30, 1988 subject to the terms and provisions of RCW 41.40.120(3).
The retirement systems covered by the bill are the Public Employees Retirement System, Plans I and II (PERS; Ch 41.40 RCW), the Teacher's Retirement System, Plans I and II (TRS; Ch 41.32 RCW), the Washington State Patrol Retirement (WSPRS, Ch 43.43 RCW), and the State-Wide City Employees Retirement System (SWCERS, Ch 41.44 RCW; merged into PERS in 1972). A member who has withdrawn contributions from a previous system has two years, or prior to retirement, which ever occurs first, to restore the contributions and service in the previous system.
A process is provided by which the three first class city retirement systems created pursuant to Chapter 41.28 RCW (Seattle, Spokane, Tacoma) may petition the legislature prior to January 1, 1988 for coverage under the provisions of the bill.
In order to be a "dual member" who qualifies for the benefit provided by the bill, a person must be a member of two or more of the affected retirement systems after July 1, 1988, must never have retired for service, and must not be receiving disability benefits from a prior system.
Each system from which a benefit is received will pay its portion of the benefits and any deductions from the retirement allowance authorized by that system will be made according to the provisions of that system. Each system will pay any post-retirement adjustments based on the payments made by that system. Upon the death of a dual member, such death shall be considered to have occurred while in active service in each system in which membership was held and the surviving spouse shall receive the survivorship benefit such spouse is eligible to receive from each system.
The total benefit is to be neither less than would have been received absent portability nor greater than the smallest benefit which could be received if all service were in any single system in which membership is held.
The benefits provided under section one through seven of the act may be altered or abolished by the legislature prior to a member's retirement.
The act takes effect on July 1, 1988 except for section five which takes effect July 1, 1987.
Fiscal Note: Requested April 6, 1987.
Effective Date:The bill takes effect on July 1, 1988.
House Committee ‑ Testified For: Karen Davis, Washington Education Association; and Mark Brown, Washington Federation of State Employees.
House Committee - Testified Against: None Presented.
House Committee - Testimony For: People who provide public service should not be penalized in terms of their retirement benefits just because they change jobs.
House Committee - Testimony Against: None Presented.