FINAL BILL REPORT

SHB 844

                                  C 475 L 87

BYHouse Committee on State Government (originally sponsored by Representatives Belcher, H. Sommers, Holm, Hankins, Lewis, Unsoeld, Peery, Miller, Sayan, Sprenkle, K. Wilson, Locke, Madsen, Hargrove, Rasmussen, Sutherland, Fisher, R. King, Walk, Nelson, Todd, Ebersole, P. King, Brooks, D. Sommers, Allen, Lux, Heavey, Scott, Cole, Pruitt, Wang, Dellwo, Basich and B. Williams)

Authorizing a dependent care plan for state employees.

House Committe on State Government

Rereferred House Committee on Ways & Means/Appropriations

Senate Committee on Governmental Operations

SYNOPSIS AS ENACTED

BACKGROUND:

In 1986, the Department of Personnel and the Higher Education Personnel Board conducted a study of their personnel systems to identify where state law and administrative rules could be changed to help meet state employees' child care needs.

During this study employees expressed interest in a payroll deduction option for child care expenses.

The Internal Revenue Code allows employers to establish a dependent care plan under which employees may deduct from their gross income a monthly sum to be used for dependent care expenses.  This sum is placed in an account from which the employer reimburses an employee for the employee's actual dependent care expenses.  The deduction reduces the gross income of the employee for income tax purposes thereby reducing the amount of employee income tax paid.  The social security contribution of the employer and employee is also reduced.

All dependent care plans must be approved by the Internal Revenue Service.  Such programs are currently in place in Anchorage, Denver, San Antonio, San Diego and the state of Illinois.

SUMMARY:

A salary reduction plan is established under the provisions of the Internal Revenue Code for any state employee choosing to participate.  The plan allows state employees to agree to an amount to be deducted from their salaries which would be deposited in the salary reduction account.  An employee shall be informed of all benefits and reductions that will occur as a result of such election, before their election to participate.  The committee may adopt rules to allow participation by temporary as well as permanent state employees.

The employee's retirement benefit and contribution will continue to be calculated on total compensation received.

The Committee for Deferred Compensation is responsible for formulating, adopting and administering the plan.

Administration expenses are appropriated from the General Fund. Program administration costs may be covered by a fee charged to the participant, from savings realized by the employer due to reductions in social security contributions, from interest earned on the salary reduction account and from unclaimed moneys in the account at the end of each year.

VOTES ON FINAL PASSAGE:

      House 97   0

      Senate    48     0(Senate amended)

      House 98   0(House concurred)

EFFECTIVE:July 26, 1987