PROPOSED RULES
RETIREMENT SYSTEMS
Original Notice.
Preproposal statement of inquiry was filed as WSR 03-06-099.
Title of Rule: WAC 415-111-310 Defined contribution account distribution (withdrawal).
Purpose: RCW 41.34.070(3) allows a member with a terminal illness who terminates from employment to withdraw his or her account balance as a lump sum payment based on the most recent valuation in order to expedite the distribution. The Department of Retirement Systems (DRS) is proposing to amend WAC 415-111-310 to set forth its interpretation and practice regarding this statute. In addition, DRS is updating the WAC to cover annuity purchases.
Statutory Authority for Adoption: RCW 41.50.050(5).
Statute Being Implemented: RCW 41.34.070(3).
Summary: See Purpose above.
Reasons Supporting Proposal: See Purpose above. In addition, DRS seeks to provide more flexibility for its customers in their time of need.
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 Changes the Following Existing Rules: See Purpose above.
No small business economic impact statement has been prepared under chapter 19.85 RCW. These amendments have no affect 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 Capitol Boulevard, Conference Room 115, Tumwater, WA, on September 9, 2003, at 3:30 p.m.
Assistance for Persons with Disabilities: Contact the rules coordinator by 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 September 9, 2003.
Date of Intended Adoption: No sooner than September 10, 2003.
August 5, 2003
Merry A. Kogut
Rules Coordinator
OTS-6268.3
AMENDATORY SECTION(Amending WSR 02-03-120, filed 1/23/02,
effective 3/1/02)
WAC 415-111-310
Defined contribution account
distribution (withdrawal).
(1) How do I ((receive)) request a
distribution (withdrawal) of funds from my defined
contribution account? Except as otherwise allowed by RCW 41.34.070, before you can receive a distribution of funds from
your defined contribution account:
(a) You must separate from all eligible employment;
(b) The department must receive the notice of separation from your employer(s) through the retirement transmittal system; and
(c) You must submit the appropriate, completed form requesting a defined contribution distribution to the department's designated recordkeeper as directed on the form. See WAC 415-111-110.
(2) Can I receive an expedited distribution?
(a) If you are terminally ill and eligible, the department will arrange for payment to you within ten work days. To be eligible for an expedited payment:
(i) You must separate from all eligible employment;
(ii) The department must receive the notice of separation from your employer(s);
(iii) You must submit documentation to the department verifying your terminal illness; and
(iv) You must submit the appropriate, completed form requesting a defined contribution distribution to the department's designated recordkeeper as directed on the form (see WAC 415-111-110).
(b) If you have an emergency, the department will consider your request for expedited payment and arrange for expedited payment to you whenever possible. To be eligible for consideration:
(i) You must separate from all eligible employment;
(ii) The department must receive the notice of separation from your employer(s);
(iii) You must submit the appropriate, completed form requesting a defined contribution distribution to the department's designated recordkeeper as directed on the form (see WAC 415-111-110); and
(iv) You must submit documentation to the department verifying and explaining your emergency. The department will consider only unforeseeable emergencies or serious illnesses or death of you or a close family or household member.
(c) If you are invested in a self-directed option, the Plan 3 recordkeeper will distribute your entire self-directed account balance, less any applicable tax withholding.
(d) If you are invested in the Total Asset Portfolio (TAP), the Plan 3 recordkeeper will distribute 80% of your estimated TAP account balance, less any applicable tax withholding. You will be paid the balance of your account after the final valuation has been made.
(3) Can I still receive my defined contribution distribution if I have returned to work before receiving my funds? If you return to work in an eligible position after all the criteria in subsection (1) of this section are met, you may receive distribution from your defined contribution account.
(((3))) (4) What are my options for distributing my
defined contribution funds? You have the following options
for distributions from your Plan 3 defined contribution
account. Options for both the WSIB and the SELF-directed
investment programs are combined where applicable.
(a) Lump sum cash distribution. In either program, you may request the entire amount of your funds in a single lump-sum payment.
(b) Direct rollover. In either program, you may have some or all of your funds rolled over to an eligible retirement plan or individual retirement account (IRA). If you choose a partial rollover, the remaining funds that were not rolled over will be distributed to you as a lump sum, unless you create a personal payment schedule under (d) of this subsection.
(c) Scheduled payments. In either program, subject to the distribution requirements of IRC section 401 (a)(9), you may request that your funds be distributed in equal payments over a specified period of time, or that a specific dollar amount be paid on a monthly basis until the account is exhausted. You may also request equal payments over your lifetime or the lifetimes of you and your beneficiary. Scheduled payments for the WSIB program are made monthly only. Scheduled payments for the SELF-directed program are made monthly, quarterly, semi-annually and annually. Both programs have a minimum payment requirement of one hundred dollars per month.
(d) Personalized payment plan. In either program, you may create a personalized payment plan using any part of one or more of the distribution options provided in (a), (b), and (c) of this subsection (see examples below).
(e) Annuity purchase. ((For the SELF-directed program
only)) In either program, you may request to have your funds
used to purchase an annuity ((from an insurance company))
which pays a benefit for your lifetime or the lifetimes of you
and your beneficiary.
(((4))) (5) Market fluctuations. Your defined
contribution account is subject to actual investment earnings
(both gains and losses). These gains or losses will be used
to adjust the value of your account. The defined contribution
payment plans are subject to the same market fluctuations. As
a result, the funding of your selected payment plan may last
longer than anticipated due to market gains, or end earlier
than anticipated due to market losses.
EXAMPLE (WSIB - Partial rollover with payments until account exhausted):
Pat has $10,000 in the WSIB investment program. Pat wants to rollover $2,000 of the total to an IRA, but does not want to receive the remainder of the account in a lump sum payment as provided by the partial direct rollover option. Pat selects the personalized payment schedule option and requests to do a partial rollover of $2,000 and receive the remaining $8,000 in equal monthly payments of $125 until the account is exhausted (approximately 64 months).
EXAMPLE (Self - Partial rollover with payments for fixed period):
Chris has $10,000 in the self-directed investment program. Chris wants to rollover $3,000 of the total to an IRA, but does not want to receive the remainder of the account in a lump sum payment as provided by the partial direct rollover option. Chris selects the personalized payment schedule option and requests to do a partial rollover of $3,000 and receive the remaining $7,000 in quarterly payments of $250 over the next 7 years (28 quarters).
| Summary of Distribution Options | |
| SELF | WSIB |
| Lump Sum Cash Distribution Direct Rollover | Lump Sum Cash Distribution Direct Rollover |
| -entire account | -entire account |
| -partial amount | -partial amount |
| -remaining funds can be distributed in a lump-sum payment or by a personalized payment schedule (see below). | -remaining funds can be distributed in a lump-sum payment or by a personalized payment schedule (see below). |
| Scheduled Payments | Scheduled Payments |
| -equal payments | -equal payments |
| -monthly, quarterly, semi-annual or annual | -monthly payments only |
| -specified period of time, or | -specified period of time, or |
| -until the account is exhausted | -until the account is exhausted |
| -payments can be combined life expectancy of you and a beneficiary. | -payments can be combined life expectancy of you and a beneficiary. |
| Annuity Purchase | (( |
| -purchase an annuity from an insurance company | -purchase an annuity out of the Total Allocation Portfolio (TAP) |
| -set up to pay benefits for | -set up to pay benefits for |
| -your lifetime, or | -your lifetime, or |
| -lifetimes of you and your beneficiary. | -lifetimes of you and your beneficiary. |
| In addition to the above, you may set up: | In addition to the above, you may set up: |
| Personalized Payment Plan | Personalized Payment Plan |
| -customized for your needs | -customized for your needs |
| -available for options above. | -available for options above. |
[Statutory Authority: RCW 41.50.050(5) and 41.34.070. 02-03-120, § 415-111-310, filed 1/23/02, effective 3/1/02. Statutory Authority: Chapters 41.32, 41.34, 41.35, 41.50 RCW. 01-01-059, § 415-111-310, filed 12/12/00, effective 1/12/01.]