WSR 97-13-058

PROPOSED RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[Filed June 16, 1997, 4:50 p.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 97-09-047.

Title of Rule: Member charge for self-directed investment expenses.

Purpose: To adopt rules governing the assessment of expenses for teachers' retirement system plan 3 members who wish to avail themselves of the self-directed investment options authorized by the Employee Retirement Benefits Board.

Statutory Authority for Adoption: RCW 41.50.088, 41.32.060.

Statute Being Implemented: RCW 41.34.060.

Summary: Details Employee Retirement Benefits Board procedure for setting expense billing rate for teachers' retirement system plan 3 members who elect to self-direct the investment of their accounts.

Reasons Supporting Proposal: Teachers' retirement system plan 3 members have expressed interest in being able to self-direct the investment of their accounts. RCW 41.34.060 requires that individual members pay the expenses associated with self-directed investment. RCW 41.34.060 also requires the board to adopt rules describing how expenses are determined and how those charges will be assessed against members. The rules proposed with this filing were adopted as emergency rules in order to allow the board to offer the self-directed options effective April 1, 1997. Adopting the rules as permanent rules will assure that the board can continue to offer self-directed options to teachers' retirement system plan 3 members after the expiration date of the emergency rules.

Name of Agency Personnel Responsible for Drafting: Paul Neal, 1025 East Union Avenue, Olympia, WA, (360) 709-4747; Implementation and Enforcement: David Ward, 1025 East Union Avenue, Olympia, WA, (360) 586-0036.

Name of Proponent: Department of Retirement Systems, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: The proposed rule details Employee Retirement Benefits Board procedure for setting expense billing rate for teachers' retirement system plan 3 members who elect to self-direct the investment of their accounts. Teachers' retirement system plan 3 members have expressed interest in being able to self-direct the investment of their accounts. RCW 41.34.060 requires that individual members pay the expenses associated with self-directed investment. RCW 41.34.060 also requires the board to adopt rules describing how expenses are determined and how those charges will be assessed against members. The rules proposed in this filing were adopted as emergency rules in order to allow the board to offer the self-directed options effective April 1, 1997. Adopting the rules as permanent rules will assure that the board can continue to offer self-directed options to teachers' retirement system plan 3 members after the expiration date of the emergency rules.

Proposal does not change existing rules.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The rules apply to public employers and employees participating in the retirement systems administered by the Department of Retirement Systems. No private businesses are affected by the rules, therefore, no small business economic impact statement is required.

Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption. The Department of Retirement Systems is not one of the agencies that this provision applies to. The Department of Retirement Systems does not opt to voluntarily bring itself within the coverage of those rules.

Hearing Location: Boardroom, 2nd Floor, 1025 East Union Avenue, Olympia, WA 98504-8380, on July 23, 1997, at 11:00 [-] noon.

Assistance for Persons with Disabilities: Contact Paul Neal by July 18, 1997, TDD (360) 586-5450, or (360) 709-4747.

Submit Written Comments to: Paul Neal, P.O. Box 48380, Olympia, WA 98504-8380, FAX (360) 753-3166.

Date of Intended Adoption: July 28, 1997.

June 16, 1997

Paul Neal

Rules Coordinator

NEW SECTION

WAC 415-200-030 Teachers' retirement system plan III external administrators. The employee retirement benefits board may obtain external investment management services to assist with the provision of self-direct investment options. External administrator and investment management services will be obtained through competitive procurement processes to ensure teachers' retirement system plan III members receive quality services and competitive pricing. The department of retirement systems may select external administrators to assist with the administration of the defined contribution portion of the teachers' retirement system plan III established under chapter 41.34 RCW.

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NEW SECTION

WAC 415-200-040 Self-directed investment--Expenses paid by members. RCW 41.34.060 allows members of the teachers' retirement system plan III to elect to self-direct their investments using options approved by the employee retirement benefits board. Members electing to self-direct their investments must pay the expenses caused by the self-directed investment program.

(1) Assessment of member expenses for self-directed investment. Each month, the third-party administrator will allocate self-directed investment expenses to each participating member. The expenses allocated to members shall include:

(a) External third party administrator costs;

(b) External investment manager and consultant costs; and

(c) State investment board investment management operating expenses, in the case of investment options provided through the state investment board.

Each category of expense shall be expressed in terms of basis points. A basis point is equal to one-hundredth of one percent. The administrator will determine the participating member's monthly fee by multiplying the average monthly value of each participating member's self-directed account assets by the basis points for each expense category.

(2) Adoption of expense charge. The expense charges used to calculate self-directed investment fees for participating members shall be established in a memorandum of understanding, interagency agreement, and/or contract. Each expense charge shall be reviewed and approved at a regularly scheduled meeting of the employee retirement benefits board, with opportunity for public testimony. No expense charge may be included in a memorandum of understanding, interagency agreement, and/or contract until such charge has been approved by the employee retirement benefits board. No expense charge which has been approved may be changed unless such change has been approved by the board.