PERMANENT RULES
RETIREMENT SYSTEMS
Date of Adoption: September 15, 2003.
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. Department of Retirement Systems (DRS) is amending this WAC to set forth its interpretation and practice regarding this statute.
Citation of Existing Rules Affected by this Order: Amending WAC 415-111-310.
Statutory Authority for Adoption: RCW 41.50.050(5), 41.34.070(3).
Adopted under notice filed as WSR 03-16-095 on August 6, 2003.
Changes Other than Editing from Proposed to Adopted Version: Second sentence, deleted ("Except as otherwise...account") because it was meaningless; (2)(a)(iii) and (b)(iv) were changed from "you must submit" to "you or your beneficiaries must submit" to clarify who submits the documents in case the member is unable to do so because of the member's death; all amendments related to the annuity plan were deleted, so that the WAC was left as it was originally, because DRS is not ready to implement the changes; and a new subsection (7) was added, stating "See RCW 41.34.070 for additional information" was added to direct the public to more information.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 1, Repealed 0.
Number of Sections Adopted Using Negotiated Rule Making:
New 0,
Amended 0,
Repealed 0;
Pilot Rule Making:
New 0,
Amended 0,
Repealed 0;
or Other Alternative Rule Making:
New 0,
Amended 0,
Repealed 0.
Effective Date of Rule:
November 1, 2003.
September 15, 2003
Maureen Westgard
for John Charles
Director
OTS-6268.4
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 or your beneficiaries 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 or your beneficiaries 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, 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 | Not available for WSIB program |
| -purchase an annuity from an insurance company | |
| -set up to pay benefits for | |
| -your lifetime, or | |
| -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. |
(7) See RCW 41.34.070 for additional information.
[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.]