HOUSE BILL REPORT

HB 844

BYRepresentatives 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

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (9)

     Signed by Representatives H. Sommers, Chair; Peery, Vice Chair; Baugher, Chandler, Hankins, O'Brien, Sayan, Taylor and Walk.

House Staff:Pam Madson (786-7135)

Rereferred House Committee on Ways & Means/Appropriations

Majority Report:     The substitute bill by Committee on State Government and as further amended by Committee on Ways & Means/Appropriations be substituted therefor and the substitute bill do pass.  (22)

     Signed by Representatives Locke, Chair; Allen, Belcher, Braddock, Brekke, Bristow, Ebersole, Fuhrman, Grant, Grimm, Hine, Holland, McLean, McMullen, Nealey, Niemi, Peery, Sayan, Silver, H. Sommers, Sprenkle and B. Williams.

House Staff:    Randy Acker (786-7153)

AS REPORTED BY COMMITTEE ON WAYS & MEANS/APPROPRIATIONS

MARCH 7, 1987

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.

Interest was expressed during this study by employees 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:

SUBSTITUTE BILL AS AMENDED:  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 a dependent care account.

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.

Initial administration expenses are appropriated from the general fund. Program administration costs may be covered by a fee charged to the participant and from savings realized by the employer due to reductions in social security contributions.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The Salary Reduction Plan Committee is deleted and the existing Committee for Deferred Compensation is utilized for administration of the program.  The salary redirection plan is renamed the salary reduction plan. Any salary reduction shall be included in computing retirement benefits and contributions.  The State Investment Board responsibilities are deleted.

AMENDED BILL COMPARED TO SUBSTITUTE:  The appropriation is removed.

CHANGES PROPOSED BY COMMITTEE ON WAYS & MEANS/APPROPRIATIONS:  The appropriation is removed.

Fiscal Note:    Requested March 2, 1987.

House Committee ‑ Testified For:     (State Government)  Representative Jennifer Belcher, prime sponsor; Joyce Turner, Governor's Office; Susan Johnson, Service Employees International Union; Pat Thibaudeau, Washington Women United; Mark Brown, Washington Federation of State Employees; and Jane Field, Washington Public Employees Association.

(Ways & Means/Appropriations)  None Presented.

House Committee - Testified Against: (State Government)  None Presented.

(Ways & Means/Appropriations)  None Presented.

House Committee - Testimony For:     (State Government)  The Governor's Task Force on Child Care supported legislation that directed the state of Washington as an employer to do what it could to support the child care needs of its employees.  This program enhances the employee's ability to meet child and dependent care needs by reducing their tax burden and supporting their ability to provide affordable dependent (child and adult) care.  The state benefits by saving money based on paying less in payroll taxes for each participating employee and by increased employee morale.

The program utilizes an existing state agency (the Committee for Deferred Compensation) that has the expertise to deal with salary deferral and also has employee input on the Committee.

The State can serve as an example for other employers in addressing the dependent care of their employees.

(Ways & Means/Appropriations)  None Presented.

House Committee - Testimony Against: (State Government)  None Presented.

(Ways & Means/Appropriations)  None Presented.