PROPOSED RULES
RETIREMENT SYSTEMS
Original Notice.
Preproposal statement of inquiry was filed as WSR 03-13-026.
Title of Rule: WAC 415-02-520 How can my Plan 1 or Plan 2 retirement account be split by a property division dissolution order? and 415-02-540 How can my Plan 3 retirement account be split by a property division dissolution order?
Purpose: The Department of Retirement Systems (DRS) adopted these rules to implement ESB 6380 (chapter 158, Laws of 2002) effective July 1, 2003. DRS is amending these rules to add an omitted paragraph, fix a minor error, and provide some clarification about an ex-spouse's age at which he or she can receive retirement benefits.
Statutory Authority for Adoption: RCW 41.50.050(5).
Statute Being Implemented: RCW 41.50.500, [41.50.]670 et seq., [41.50.]790.
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: Dave Nelsen, 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: WAC 415-02-520, adds a new explanatory statement. Deletes a undefined term from the list of terms in the last subsection. Adds clarification about age.
WAC 415-02-540, adds clarification about age.
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 November 25, 2003, at 9:00 a.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 November 25, 2003.
Date of Intended Adoption: No sooner than November 26, 2003.
October 14, 2003
Merry A. Kogut
Rules Coordinator
OTS-6671.3
AMENDATORY SECTION(Amending WSR 03-12-014, filed 5/27/03,
effective 7/1/03)
WAC 415-02-520
How can my Plan 1 or Plan 2 retirement
account be split1 by a property division dissolution order?
(1) Who may use this section? Vested members of LEOFF Plan 2,
PERS Plans 1 or 2, TRS Plans 1 or 2, SERS Plan 2, or WSPRS
Plan 2 who have or will have a property division dissolution
order or amendment dated on or after July 1, 20032. If your
ex-spouse will be receiving an interest in your account, use
WAC 415-02-510.
(2) What are the rules for splitting my account? If you and your ex-spouse are eligible, the department will split your retirement account into two separate accounts -- one for you, and one for your ex-spouse. The rules for splitting your account are different depending on whether your dissolution order or most recent amendment is dated BEFORE or AFTER retirement.
(3) How will my account be affected if the department accepts the property division dissolution order BEFORE my retirement?
(a) The department will split your retirement account into two completely separate accounts and create an account for your ex-spouse under his or her Social Security number for the amount awarded in the dissolution order.
(b) The department will pay each of you out of your separate accounts either a monthly retirement benefit payment or a withdrawal of contributions.
(c) If you retire and receive a monthly retirement benefit payment, your monthly payment will have a permanent reduction to account for the amount awarded as a monthly payment to your ex-spouse.
(d) Your monthly benefit payment will be payable over your lifetime, and your ex-spouse's monthly payment will be payable over his or her lifetime.
(e) You will have the right to pick a survivor option for your monthly benefit payment.
(f) Your ex-spouse will not have the right to pick a survivor option for his or her monthly payment but may name a beneficiary to receive any final death payment that may be due.
(g) If you terminate employment, whatever decision you make about your accumulated contributions will have no effect upon your ex-spouse's separate account.
(h) When you or your ex-spouse dies, there will be no impact to the other person's retirement account because the accounts are independent from one another.
(i) Your ex-spouse may begin receiving monthly payments when he or she reaches retirement age for your retirement plan, or the first day of the month following the department's acceptance of the order, whichever is later. The retirement age for an ex-spouse receiving a benefit from TRS Plan 1 and PERS Plan 1 is age sixty; from PERS Plan 2, SERS Plan 2, and TRS Plan 2 it is age sixty-five; from LEOFF Plan 2 it is age fifty-three; and from WSPRS Plan 2 it is age fifty-five. Your age or retirement eligibility has no effect on when your ex-spouse is eligible to begin receiving his or her monthly benefit. Your ex-spouse must apply for his or her monthly payment according to the rules for your system and plan.
(j) Your ex-spouse may withdraw his or her share of the accumulated contributions at any time before receiving a monthly retirement benefit. Regardless of whether your ex-spouse withdraws or receives a monthly payment, your monthly benefit payment will be permanently reduced to account for your ex-spouse's share of your retirement account.
(4) Is there a limit to the amount of contributions I can award to my ex-spouse? Yes. The amount of contributions awarded to an ex-spouse, cannot be greater than the percentage of the member's monthly benefit used to determine the amount of the monthly benefit awarded to the ex-spouse.
| Example: | ||
| Accumulated contributions earned during the marriage period: | $50,000 | |
| Member's monthly benefit: | $1,000 | |
| Percentage of member's monthly benefit awarded to ex-spouse: | 50% | |
| Monthly benefit awarded to ex-spouse: | $500 (50% of $1,000) |
|
| Contributions awarded to ex-spouse: | $25,000 (50% of 50,000) | |
(a) If you are eligible and decide to retire early, or must retire early because of a disability, your monthly retirement benefit payment will be reduced by an early retirement factor (ERF). See WAC 415-02-320.
(b) To determine the reduction to your benefit because of your preretirement split (see subsection (3)(c) of this section), the adjustment to the amount awarded to your ex-spouse in the dissolution order will be reduced by the ERF used to reduce your benefit.
Example: You are a member of PERS Plan 2 and retire for
disability two years before you are eligible for a service
retirement. The dissolution order awarded your ex-spouse a
monthly benefit of five hundred dollars.
| Your defined benefit before ERF is applied: | $2,500 | |
| ERF (factor for retiring two years early) | 0.82 | |
| Your base benefit: | $2,050 | ($2500 x 0.82 ERF) |
| Adjustment for divorce split: | - $410 | (ex-spouse's $500 x 0.82 (ERF)) |
| The defined benefit you will receive: | $1640 | ($2050 - $410) |
| Your ex-spouse will receive the full monthly amount ($500) that was awarded to him or her in the dissolution order, regardless of your benefit amount. | ||
(a) The order must include the language provided below.
Do not use the language in RCW 41.50.670(2). The exact dollar
amount of your ex-spouse's monthly benefit must be specified.
Do not use formulas or percentages.
(a) The department will split your retirement account only if you selected your ex-spouse to receive survivor benefits at the time you retired. If you did not select your ex-spouse to receive survivor benefits at the time you retired, you cannot use this section. You must use WAC 415-02-510.
(b) If you selected your ex-spouse to receive survivor benefits at the time you retired, the rules in subsection (3)(a) through (f) of this section will apply.
(c) At the time the department splits your account, your ex-spouse will be removed as the survivor beneficiary on your account.
(d) Regardless of his or her age, your ex-spouse will begin receiving a monthly benefit the first month after the department has accepted the dissolution order.
(((7))) (8) If the property division dissolution order is
dated AFTER my retirement, how will my monthly retirement
benefit payment be calculated after the split?
(a) The dissolution order must state the exact dollar amount your ex-spouse is to receive as his or her separate monthly benefit. The following describes how the new amount of your benefit will be calculated, assuming your ex-spouse was awarded a monthly benefit of one thousand dollars in the dissolution order.
| Step 1 | The department will determine the single life benefit of your current monthly benefit payment by dividing your current monthly benefit payment by the survivor option factor (see WAC 415-02-380) in effect at the time of the split. |
Current monthly benefit = $1679.38
Option factor = 0.9400000
Single life benefit amount = $1679.38/0.9400000 = $1786.57
| Step 2 | The single life benefit ($1786.57) is divided by your annuity factor (see WAC 415-02-360) to determine the current present value of the single life benefit amount. The annuity factor the department uses is the factor for your age as of the date of the split. |
Your age at time of the split = 61 years old
Annuity factor for age 61 = 0.0084149
Present value of single life benefit = $1786.57/0.0084149 = $212,310.31
| Step 3 | The department then determines the present value of your ex-spouse's share by dividing your ex-spouse's monthly benefit amount (as awarded in the dissolution order) by your ex-spouse's annuity factor. The annuity factor is the factor for your ex-spouse's age as of date of the split. |
Ex-spouse's monthly benefit amount = $1000
Ex-spouse's age at time of the split = 67
Annuity factor for age 67 = 0.0095028
Present value of your ex-spouse's monthly benefit = $1000/0.0095028 = $105,232.14
| Step 4 | Next, the department subtracts your ex-spouse's present value from the single life benefit present value. The result is the present value of the benefit you will receive. |
Present value of single life benefit = $212,310.31
Less present value of ex-spouse's benefit = -105,232.14
Your present value = $107,078.17
| Step 5 | The department determines your new monthly benefit amount by multiplying your present value by your annuity factor. |
Your present value = $107,078.17
Annuity factor = 0.0084149
Your new monthly benefit amount = $107,078.17 x 0.0084149 = $901.05
(b) The department determines the percentage of the total
present value each of you will receive by dividing each of
your present value amounts by the single life benefit present
value amount.
Example:
Your percentage of the single life benefit present value: $107,078.17/$212,310.31 = .5043
Your ex-spouse's percentage of the single life benefit present value: $105,232.14/$212,310.31 = .4957
(((8))) (9) What language must be used in a property
division dissolution order or amendment that is accepted by
the department AFTER my retirement?
(a) The order must include the language provided below.
Do not use the language in RCW 41.50.670(2). The exact dollar
amount of your ex-spouse's monthly benefit must be specified.
Do not use formulas or percentages.
(((10))) (11) Can I amend an existing order that has
awarded an interest in my account to my ex-spouse under WAC 415-02-520 and remove my ex-spouse as my survivor beneficiary?
Yes. To remove your ex-spouse as your survivor beneficiary,
you must submit a "conformed copy" of the court order
splitting your account. A conformed copy is a copy of the
order that has been signed by the judge or commissioner on or
after July 1, 2003, and filed with the court. Removing your
ex-spouse as survivor beneficiary will change your retirement
benefit. See WAC 415-02-520(8) for the language that must be
used.
Example:
Julio and May were married when Julio retired. Julio chose survivor Option 2 (joint and one hundred percent survivorship) when he retired. This meant that if Julio died, May would receive monthly survivor benefits. Two years after Julio's retirement, the couple divorced. The court awarded "one hundred percent of retirement benefits" to Julio. Julio later learned that this award did not change the survivor option. Julio can return to court and obtain an order stating that May is to receive "$0" as the dollar amount for her separate monthly benefit. The order must use the language in WAC 415-02-520(8) and be signed by the court no sooner than July 1, 2003.
(((11))) (12) How much is the fee the department charges
for making payments directly to my ex-spouse? See RCW 41.50.680 and WAC 415-02-500(11) for information.
(((12))) (13) What happens if I transfer to Plan 3 after
the property division dissolution order has been filed with
the department? See WAC 415-02-550 for information.
(((13))) (14) Terms used:
(a) Department's acceptance - Order that fully complies with the department of retirement systems requirements and RCW 41.50.500.
(b) Dissolution order - RCW 41.50.500.
(c) Ex-spouse - WAC 415-02-030.
(d) LEOFF - Law enforcement officers' and fire fighters' system.
(e) PERS - Public employees' retirement system.
(f) Plan 3 retirement systems - WAC 415-111-100.
(g) ((Present value -
(h))) SERS - School employees' retirement system.
(((i))) (h) Split account - WAC 415-02-030.
(((j))) (i) Survivor benefits - WAC 415-02-030.
(((k))) (j) TRS - Teachers' retirement system.
(((l))) (k) Vested - The length of service, by system and
plan, required to receive a service retirement when age
requirements are met.
(((m))) (l) WSPRS - Washington state patrol retirement
system.
Footnotes to section:
| 1 | When a court splits your retirement account, the department will establish a separate account for your ex-spouse. Once the account is established, your account and your ex-spouse's account are not tied in any way. |
| 2 | If an ex-spouse was not listed as the member's survivor beneficiary at retirement, then no postretirement property division dissolution order (or postretirement amendment) may split the member's retirement account using WAC 415-02-520. |
[Statutory Authority: RCW 41.50.050(5), 41.50.500, [41.50.]670-[41.50.]710, [41.50.]790 and 2002 c 158. 03-12-014, § 415-02-520, filed 5/27/03, effective 7/1/03.]
(a) You are a member of TRS Plan 3, SERS Plan 3 or PERS Plan 3;
(b) You have enough service credit to receive a defined benefit payment when you meet the age requirement for your system; and
(c) You have or will have a property division dissolution order or amendment dated on or after July 1, 20032. If your ex-spouse will be receiving an interest in your account, use WAC 415-02-530.
(2) What are the rules for splitting my account? If you and your ex-spouse are eligible, the department will split both portions of your retirement account (defined benefit and defined contributions) into two separate accounts - one for you, and one for your ex-spouse. The rules for splitting your account are different depending on whether your dissolution order or most recent amendment is dated before or after retirement.
(3) How will the defined benefit portion of my retirement account be affected if the department accepts the property division dissolution order BEFORE I retire?
(a) The department will split your defined benefit account into two completely separate accounts and create an account for your ex-spouse for the amount awarded in the defined benefit portion of the dissolution order under your ex-spouse's Social Security number.
(b) The department will pay each of you a defined benefit, when eligible, out of your separate accounts.
(c) The amount awarded to your ex-spouse as his or her defined benefit payment will be a permanent reduction to your defined benefit payment amount.
(d) Your defined benefit payment will be payable over your lifetime, and your ex-spouse's defined benefit payment will be payable over his or her lifetime.
(e) You will have the right to pick a survivor option for your defined benefit payment for your own account.
(f) Your ex-spouse will not have the right to pick a survivor option for his or her defined benefit payment but may name a beneficiary to receive any final death payment that may be due.
(g) You may begin receiving your defined benefit payment when eligible according to the rules for your system.
(h) Your ex-spouse may begin receiving ((benefits the
first day of the month following the month in which he or she
reaches retirement age for your retirement system, or the
first day of the month following the dissolution date))
monthly payments when he or she reaches age sixty-five, or the
first day of the month following the department's acceptance
of the order, whichever is later. Your ex-spouse must apply
for retirement according to the rules for your system and
plan. Your age or retirement eligibility has no effect on
when your ex-spouse is eligible to begin receiving his or her
monthly benefit.
(i) When you or your ex-spouse dies, there will be no impact to the other person's retirement account, because the accounts are independent from one another.
(4) What happens to my defined benefit if my account was split and then I retire early?
(a) If you are eligible and decide to retire early, or must retire early because of a disability, your monthly retirement benefit payment will be reduced by an early retirement factor (ERF). See WAC 415-02-320.
(b) To determine the reduction to your benefit because of your preretirement split (see subsection (3)(c) of this section), the adjustment to the amount awarded to your ex-spouse in the dissolution order will be reduced by the ERF used to reduce your benefit.
Example: You are a member of TRS Plan 3 and retire for
disability five years before you are eligible for a service
retirement. The dissolution order awarded your ex-spouse a
monthly benefit of two hundred fifty dollars.
| Your defined benefit before ERF is applied: | $1,000 | |
| ERF (factor for retiring two years early) | 0.61 | |
| Your base benefit: | $610 | ($1,000 x 0.61 ERF) |
| Adjustment for divorce split: | -$152.50 | (ex-spouse's $250 x 0.61 (ERF)) |
| The defined benefit you will receive: | $457.50 | ($610 - $152.50) |
| Your ex-spouse will receive the full monthly amount ($250) that was awarded to him or her in the dissolution order, regardless of your benefit amount. | ||
(a) The amount the dissolution order awards to your ex-spouse will be deducted from your defined contribution account and set up in a separate account for your ex-spouse under his or her Social Security number.
(b) You and your ex-spouse will manage your separate accounts independently from one another.
(c) You must continue to contribute to your account during your employment.
(d) Your ex-spouse may not contribute to his or her account.
(7) What options does my ex-spouse have in managing his or her separate defined contribution account? Your ex-spouse may:
(a) Transfer money between investment programs (state-managed (WSIB) or self-directed (SELF)); and
(b) Transfer money among the investment options in the SELF-directed program.
(8) How will the department make distributions to my ex-spouse and me out of our defined contribution accounts?
(a) You must be separated from employment before funds in your account can be distributed according to your distribution choice.
(b) Your ex-spouse may begin receiving distribution of the funds in his or her account at any time according to his or her distribution choice.
(c) Both you and your ex-spouse will have the same distribution options as outlined in WAC 415-111-310.
(d) If you die before a distribution has been made from your defined contribution account, your beneficiary(ies) must apply for a lump sum death benefit from your account.
(e) If your ex-spouse dies before a distribution has been made from his or her account, your ex-spouse's beneficiary(ies) must apply for a lump sum death payment from his or her account.
(f) If you die after you begin receiving funds but before the funds in your account have been exhausted, the balance will be paid to your designated beneficiary(ies).
(g) If your ex-spouse dies after receiving funds but before the funds in his or her account have been exhausted, the balance will be paid to your ex-spouse's designated beneficiary(ies).
(9) What language must be used in a property division
dissolution order to award a portion of my defined
contribution account to my ex-spouse? The order must include
the language provided in the following paragraph. The exact
dollar amount to transfer to your ex-spouse's defined
contribution account must be specified. Do not use formulas
or percentages. (See example in WAC 415-02-500 (15)(b)).
Example:
Julio and May were married when Julio retired. Julio chose survivor Option 2 (joint and one hundred percent survivorship) when he retired. This meant that if Julio died, May would receive monthly survivor benefits. Two years after Julio's retirement, the couple divorced. The court awarded "one hundred percent of retirement benefits" to Julio. Julio later learned that this award did not change the survivor option. Julio can return to court and obtain an order stating that May is to receive "$0" as the dollar amount for her separate monthly benefit. The order must use the language in WAC 415-02-540 and be signed by the court no sooner than July 1, 2003.
(11) If the dissolution order or amendment is dated AFTER
my retirement, how will my defined monthly retirement benefit
payment be split?
(a) The department will split your defined monthly retirement benefit payment only if you selected your ex-spouse to receive a survivor benefit at the time you retired. If you did not select your ex-spouse to receive a survivor benefit at the time you retired, you cannot use this section. You must use WAC 415-02-530.
(b) If you selected your ex-spouse to receive survivor benefits at the time you retired, the rules in subsection (3)(a) through (f) of this section will apply.
(c) At the time the department splits your account, your ex-spouse will be removed as the survivor beneficiary on your account.
(d) Regardless of his or her age, your ex-spouse will begin receiving a monthly benefit payment the first month after the department accepts the property division dissolution order.
(12) If the dissolution order or amendment is dated AFTER my retirement, how will my monthly retirement benefit be calculated after the split?
(a) The dissolution order must state the exact dollar amount your ex-spouse is to receive as his or her separate monthly benefit. The following describes how the new amount of your benefit will be calculated assuming your ex-spouse was awarded a monthly benefit of six hundred dollars in the dissolution order.
| Step 1 | The department will determine the single life benefit of your current monthly benefit payment by dividing your currently monthly benefit payment by the survivor option factor (see WAC 415-02-380) in effect at the time of the split. |
Currently monthly benefit = $1200
Option factor = 0.865
Single life benefit amount = $1200/0.865 = $1387.28
| Step 2 | The single life benefit ($1387.28) is divided by your annuity factor (see WAC 415-02-340) to determine the current present value of the single life benefit amount. The annuity factor the department uses is the factor for your age as of the date of the split. |
Your age at time of the split = 61 years old
Annuity factor for age 61 = 0.0065448
Present value of single life benefit = $1387.28/0.0065448 = $211,966.75
| Step 3 | The department then determines the present value of your ex-spouse's share by dividing your ex-spouse's monthly benefit amount (as awarded in the dissolution order) by your ex-spouse's annuity factor. The annuity factor is the factor for your ex-spouse's age as of date of the split. |
Ex-spouse's monthly benefit amount = $600
Ex-spouse's age at time of the split = 67
Annuity factor for age 67 = 0.0076715
Present value of your ex-spouse's monthly benefit = $600/0.0076715 = $78,211.56
| Step 4 | Next, the department subtracts your ex-spouse's present value from the single life benefit present value. The result is the present value of the benefit you will receive. |
Present value of single life benefit = $211,966.75
Less present value of ex-spouse's benefit = -78,211.56
Your present value = $133,755.19
| Step 5 | The department determines your new monthly benefit amount by multiplying your present value by your annuity factor. |
Your present value = $133,755.19
Annuity factor = 0.0065448
Your new monthly benefit amount = $133,755.19 x 0.0065448 = $875.40
(b) The department determines the percentage of the total
present value each of you will receive by dividing each of
your present value amounts by the single life benefit present
value amount.
Example:
Your percentage of the single life benefit present value:
$133,755.19/$211,966.75 = .6310
Your ex-spouse's percentage of the single life benefit present value:
$78,211.56/$211,966.75 = .3690
(13) What language must the postretirement property
division dissolution order or most recent amendment include to
split my monthly defined benefit payment with my ex-spouse?
Do not use the language in RCW 41.50.670(2). The order must
include the language provided in the following paragraph. The
exact dollar amount of your ex-spouse's monthly benefit
payment must be specified. Do not use formulas or
percentages. (See example in WAC 415-02-500 (15)(b).)
(15) Is there a maximum payment that a property division dissolution order can award to my ex-spouse? Yes. See RCW 41.50.670(4) and WAC 415-02-500(10) for information.
(16) How much is the fee the department charges for making payments directly to my ex-spouse? See RCW 41.50.680 and WAC 415-02-500(11) for information.
(17) Terms used:
(a) Department's acceptance - A dissolution order that fully complies with the department of retirement systems' requirements and chapter 41.50 RCW.
(b) Dissolution order - RCW 41.50.500.
(c) Ex-spouse - WAC 415-02-030.
(d) Split accounts - WAC 415-02-030.
(e) Survivor benefits - WAC 415-02-030.
(f) Plan 3 retirement systems - WAC 415-111-100.
(g) TRS - Teachers' retirement system.
Footnotes to section:
| 1 | When a court splits your retirement account, the department will establish a separate account for your ex-spouse. Once the account is established, your account and your ex-spouse's account are not tied in any way. |
| 2 | If an ex-spouse was not listed as the member's survivor beneficiary at retirement, then no postretirement property division order (or postretirement amendment) may split the member's retirement account using WAC 415-02-540. |
[Statutory Authority: RCW 41.50.050(5), 41.50.500, [41.50.]670-[41.50.]710, [41.50.]790 and 2002 c 158. 03-12-014, § 415-02-540, filed 5/27/03, effective 7/1/03.]
Reviser's note: The brackets and enclosed material in the text of the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.