HOUSE BILL REPORT

HB 1323

As Amended by the Senate

BYRepresentatives Hine, Silver, Sayan, D. Sommers, Patrick, McLean, Bristow, H. Sommers, Bowman, Day, Wineberry, Dorn, Dellwo, Crane, Brough, Valle, Rector, Wang, Betrozoff, R. Fisher, Fraser, Basich, O'Brien, Locke, May, P. King, Phillips, Pruitt, Brekke, Appelwick, Jacobsen, Van Luven, Wood and Horn;by request of Joint Committee on Pension Policy

Changing provisions relating to portability of public employment retirement benefits.

House Committe on Appropriations

Majority Report:  Do pass. (20)

      Signed by Representatives Locke, Chair; H. Sommers, Vice Chair; Silver, Ranking Republican Member; Youngsman, Assistant Ranking Republican Member; Appelwick, Bowman, Brekke, Dorn, Doty, Ebersole, Ferguson, Hine, May, Nealey, Peery, Rust, Sayan, Spanel, Sprenkle and Valle.

House Staff:Randy Acker (786-7136)

AS PASSED HOUSE JANUARY 10, 1990

BACKGROUND:

Most city, county, and state employees in Washington state are members of the Public Employees Retirement Systems (PERS). However, the cities of Seattle, Tacoma, and Spokane each have a city employee retirement system that covers their general employees.

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 for King County, (PERS) and then becomes an employee of the City of Seattle, would have retirement service credit in two different systems.  This is a problem for two reasons:

1)  If the employee did not work long enough to vest (generally five 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.

In 1987 and 1988 legislation was enacted which allows members of the Public Employees Retirement System (PERS), the Teachers Retirement System (TRS), and the Washington State Patrol Retirement System (WSPRS), to move between those three systems without suffering a significant reduction in their retirement benefits. 

Employees are permitted to combine their service in those three systems for the purpose of determining retirement eligibility.  (PERS, Plan I and TRS, Plan I both allow a member to retire at age 55 with 25 years of service, or at any age with 30 years of service.)  It also allows a member to calculate his or her retirement allowances using the "base salary" earned in any of the four systems.  (Base salary is defined as the salaries or wages earned by a member, excluding any overtime and lump sum payments.)

The portability legislation enacted in 1987 also provided a process by which the three first class city retirement systems (Seattle, Spokane, Tacoma) could petition the Legislature prior to January 1, 1988 for coverage under the provisions of the Chapter.  Each city did petition for such coverage but the Legislature did not take action on those petitions during the 1988 session.

SUMMARY:

The cities of Seattle, Tacoma, and Spokane are provided the option of including their city employee retirement systems under the portability provisions currently in statute.

The election must be made by resolution prior to December 1, 1989, and the coverage will begin on January 1, 1990. If all three cities exercise the option by June 1, 1989, the coverage will begin on July 1, 1989.

The three cities are also given the option, on a case by case basis, of allowing newly hired employees who are PERS members to continue their membership in PERS.

EFFECT OF SENATE AMENDMENTS:  The cities of Seattle, Tacoma, and Spokane have until December 1, 1990 to elect to include their city employee retirement systems under the portability provisions.  The effective date is January 1, 1991 for each city that elects to participate.  If all three cities adopt resolutions to participate prior to June 1, 1990 this chapter becomes effective July 1, 1990.  The Department of Retirement Systems is required to adopt rules that ensure that the entire added cost incurred as a result of a dual member receiving credit under the portability statute is borne by the city retirement system that the person is a member of.  The emergency clause is changed so that the bill takes effect immediately.

Fiscal Note:      Available.

Effective Date:The bill contains an emergency clause and takes effect July 1, 1989.

House Committee ‑ Testified For:    Sam Kinville, Washington State Council of City and County Employees.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    This bill will allow employees to move between the state retirement systems and the retirement systems of Spokane, Seattle and Tacoma without suffering a significant reduction in their pension benefits.

House Committee - Testimony Against:      None.

VOTE ON FINAL PASSAGE:

      Yeas 92; Excused 5

Excused:    Representatives Belcher, Bowman, Dellwo, Hine, Mr. Speaker