PROPOSED RULES
RETIREMENT SYSTEMS
Original Notice.
Preproposal statement of inquiry was filed as WSR 02-16-084.
Title of Rule: WAC 415-02-310 How does the department use my age in calculating benefits? and 415-02-350 What are cost of living adjustments (COLA) and how are they calculated?
Purpose: The Department of Retirement Systems (DRS) adopted a number of changes to its actuarial Washington Administrative Code (WAC), effective September 1, 2002 (WSR 02-18-048) to implement new actuarial projections from the Office of the State Actuary (OSA). DRS is now proposing enhancements to the actuarial WACs. These additions or amendments would further explain how DRS determines age and cost of living adjustments in calculating various benefits for the retirement plans that DRS administers.
Statutory Authority for Adoption: RCW 41.50.050(5), 41.50.175.
Statute Being Implemented: Chapter 41.45 RCW.
Summary: See Purpose above.
Reasons Supporting Proposal: See Purpose above.
Name of Agency Personnel Responsible for Drafting: Merry A. Kogut, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7291; Implementation and Enforcement: Lucille Christenson, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7069.
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: See Purpose above.
Proposal does not change existing rules. See Purpose above.
No small business economic impact statement has been prepared under chapter 19.85 RCW. These amendments have no effect on businesses.
RCW 34.05.328 does not apply to this rule adoption. The Department of Retirement Systems is not one of the named departments in RCW 34.05.328.
Hearing Location: Department of Retirement Systems, 6835 Capital Boulevard, Conference Room 115, Tumwater, WA, on February 26, 2003, at 10:00 a.m.
Assistance for Persons with Disabilities: Contact the rules coordinator seven days before the hearing, if possible, phone (360) 664-7291, TTY (360) 586-5450, e-mail merryk@drs.wa.gov.
Submit Written Comments to: Identify WAC Numbers, Merry A. Kogut, Rules Coordinator, Department of Retirement Systems, P.O. Box 48380, Olympia, WA 98504-8380, e-mail merryk@drs.wa.gov, fax (360) 753-3166, by 5:00 p.m. on February 26, 2003.
Date of Intended Adoption: No sooner than February 27, 2003.
December 23, 2002
Merry A. Kogut
Rules Coordinator
OTS-6107.2
NEW SECTION
WAC 415-02-310
How does the department use my age in
calculating benefits?
This section provides an overview of
the several different ways in which the department uses age in
calculating benefits. The department may use your age to
determine your retirement date, early retirement factors to
apply, survivor factors, or cost of living adjustment factors.
(1) Present value: The department uses a rounding method to determine your age when calculating what your future lifetime monthly benefit is worth in present-day dollars. If the number of months in your age is under six months, the department will round down. If the number is six months or more, the department will round up. See WAC 415-02-340 for more information about the present value calculations.
Example 1:
At the time that the department is calculating Sharon's age in
making a present value calculation, Sharon is 55 years, 5
months and 26 days old. The department will round down and
use 55 as Sharon's age.
Example 2:
At the time that the department is calculating Donna's
age in making a present value calculation, Donna is 54 years
and 7 months old. The department will round up and use 55 as
Donna's age.
(2) Early retirement: The department uses the difference
between your "fully eligible retirement date" and your actual
retirement date in calculating any actuarial reductions to
your benefits. See WAC 415-02-320 for more information about
early retirement.
(a) Step 1: Determine the fully eligible retirement date.
(i) The department first calculates the date on which you would have been fully eligible to retire.
(ii) All plans (except for LEOFF Plan 1, TRS Plan 1, WSPRS Plans 1 and 2, JRF and JRS): You can retire the first day of the month following your meeting the age requirement for retirement if you are otherwise eligible.
| Example: | Jake was born on May 12, 1934. On May 12, 1999, Jake reaches age 65 and has met the age requirement for retirement. Provided that he is otherwise eligible, Jake's retirement date is June 1, 1999. |
| Example: | If Jake is a member of this type of plan, he could retire May 12th or 13th, 1999 (his birthday or the day after his birthday). |
(i) Example:
| Fully eligible date: | 06/01/99 |
| Minus actual retirement date: | 08/01/95 |
| Difference: | 3 years, 10 months |
| Fully eligible date: | 05/25/99 |
| Minus actual retirement date: | 08/01/95 |
| Difference: | 3 years, 9 months |
(3) Optional COLA Factor for PERS Plan 1 and TRS Plan 1. The department uses the rounding method described in the "present value" subsection in this section to calculate your age when determining the optional COLA factor. See WAC 415-02-360 for a description of the optional COLA factor calculation.
(4) Calculating age to use in determining the survivor option factor. At retirement, if you select a survivor option, the department must calculate the difference between your age and your beneficiary's age. See WAC 415-02-380 for more information about survivor options.
(a) Step 1: The department calculates your age and your beneficiary's age at the time of your retirement.
(b) Step 2: The department rounds the ages, using the same method described in the "present value" subsection in this section.
(c) Step 3: The department subtracts your beneficiary's age from your age.
Example:
| Member's age: | 60 |
| Minus beneficiary's age: | 49 |
| 11 |
Example:
| Member's age: | 65 |
| Minus beneficiary's age: | 67 |
| -2 |
(5) Terms used
(a) JRF - Judicial retirement fund.
(b) JRS - Judicial retirement system.
(c) LEOFF - Law enforcement officers' and fire fighters' system.
(d) PERS - Public employees' retirement system.
(e) SERS - School employees' retirement system.
(f) TRS - Teachers' retirement system.
(g) WSPRS - Washington state patrol retirement system.
[]
OTS-6108.1
NEW SECTION
WAC 415-02-350
What are cost of living adjustments
(COLA) and how are they calculated?
(1) What is a cost of
living adjustment (COLA)? A retiree's, beneficiary's, or
ex-spouse's benefit is a fixed amount. The benefit's value
can change in the years after retirement because of inflation
or other factors. A COLA automatically adjusts benefits based
on the cost of living changes.
(2) What retirement plans include COLAs? With one exception, all retirement plans that the department administers provide one or more of the types of COLAs listed in subsection (3) of this section. The judges retirement fund (JRF) (chapter 2.12 RCW) does not provide a COLA.
(3) What are the types of COLAs?
(a) Auto COLA
The auto COLA is an option members can select at retirement. Members who choose this option have their benefits actuarially reduced at retirement to provide for an automatic annual adjustment in the benefit for the members' lives. The auto COLA has no age requirement and is based on the annual Consumer Price Index (CPI)1 change up to a maximum of 3% times the monthly benefit. The annual adjustment for the uniform COLA is independent from the auto COLA or any other COLA.
| 1CPI for the Seattle-Tacoma-Bremerton, Washington area for urban wage earners and clerical workers compiled by the Bureau of Labor Statistics, United States Department of Labor. |
The base COLA is applied in July (April for LEOFF Plan 1) of each year and adjusts the benefit based on the change in the CPI for Seattle.
(c) Uniform COLA
The uniform COLA is an annual adjustment to the benefit, based on years of service, payable to:
(i) Retirees, beneficiaries, or ex-spouses age 66 or older who have been retired for at least one year by July 1st of each year; and
(ii) Retirees, beneficiaries, or ex-spouses of any age whose retirement is calculated under the minimum formula.
(4) How are COLAs calculated? The retirement statutes for all department administered systems explain how the COLAs are calculated. Refer to the following table to find your plan:
| RETIREMENT SYSTEM |
PLAN | COLA TYPE | STATUTE |
| JUDICIAL | Base | RCW 2.10.170 | |
| LEOFF | Plan 1 | Base | RCW 41.26.240 |
| LEOFF | Plan 2 | Base | RCW 41.26.440 |
| PERS | Plan 1 | Uniform | RCW 41.40.197 |
| PERS | Plan 1 | Optional Auto | RCW 41.40.188 (1)(c) |
| PERS | Plan 2 | Base | RCW 41.40.640 |
| PERS | Plan 3 | Base | RCW 41.40.840 |
| SERS | Plans 2 and 3 | Base | RCW 41.35.210 |
| TRS | Plan 1 | Uniform | RCW 41.32.489 |
| TRS | Plan 1 | Optional Auto | RCW 41.32.530 (1)(d) |
| TRS | Plan 2 | Base | RCW 41.32.770 |
| TRS | Plan 3 | Base | RCW 41.32.845 |
| WSPRS | Plans 1 and 2 | Base | RCW 43.43.260 |
(a) The amount of change for each COLA is provided annually by the office of the state actuary (OSA) to the department. Questions concerning how a specific amount is calculated should be directed to OSA.
(b) Based upon the amounts that OSA provides, the department calculates the COLA applied to a benefit.
(c) Questions concerning eligibility and COLA formulas should be directed to the department. Please see WAC 415-06-100 for information on contacting the department.
[]