DEPARTMENT OF

RETIREMENT SYSTEMS

(1) Will I get service credit for the time I was on an unpaid authorized leave of absence? You will receive service credit for the period of time you are on an unpaid authorized leave of absence, up to a maximum of twenty-four service credit months during your entire working career, provided all of the following apply:

(a) You are a member of LEOFF Plan 2, PERS Plan 2 or 3, PSERS, SERS Plan 2 or 3, or TRS Plan 2 or 3;

(b) Your leave of absence was authorized by your employer;

(c) You resumed employment according to the requirements in subsection (3) of this section; and

(d) You establish the service credit for the period of leave according to the provisions in this section.

(2) How does an unpaid authorized leave of absence affect my retirement? If you establish service credit for the period of time you were on an unpaid authorized leave of absence:

(a) It will be used as part of your total service credit to determine retirement eligibility and pension; but

(b)(i) Except as noted in (b)(ii) of this subsection, the period of time you were on leave will not be included in your average final compensation period.

Example:

Joseph has the following earnable compensation prior to retirement:

Joseph's AFC period will be YR 2, YR 3, YR 4, YR 5, and YR 7.

(ii) This provision does not apply to interruptive military service. If you establish service credit for a period of interruptive military service and that period falls in your AFC period, you are entitled to have the salary you would have earned during that time period used in the calculation of your AFC.

(3) Do I qualify to establish this service credit? As a requirement for establishing this service credit, you must resume employment within the same retirement system you left.

(a) After resuming employment, you may request, and pay for, service credit whether you are a contributing member or whether you become inactive.

(b) If you are a law enforcement officer in LEOFF Plan 2 and took a part-time unpaid leave of absence while you worked part-time, you may request service credit only after returning to full-time employment with the employer that authorized your leave of absence. In this case, you may only request part-time service credit for the portion of time you were on unpaid leave of absence.

(4) How do I request this service credit? If you wish to establish this service credit, you must contact the department. The department will obtain written verification from your employer confirming the months of your authorized leave of absence and your salary for the months preceding and following the leave.

(5) How does the department determine the cost of establishing this service credit?

(a) In order to establish service credit for the period of time you were on leave of absence, you must pay the employee and employer retirement contributions, plus applicable interest. LEOFF Plan 2 members must also pay the contributions normally paid by the state.

(b) The amount of the employee and employer contributions is calculated as follows:

(i) For TRS members, the salary upon which contributions are calculated is determined by averaging the salary earned for the school year, as defined in RCW 28A.150.040, prior to your unpaid leave of absence and the salary earned in the school year after you returned to work. If you were on leave of absence for less than the entire school year, that year's salary will be prorated according to the number of months you were on leave of absence.

(ii) For law enforcement officers in LEOFF Plan 2 who took a part-time unpaid leave of absence while working part-time, the salary upon which contributions are calculated is determined by:

(A) Averaging your basic salary during the last full month of employment before your part-time leave of absence, and your basic salary during the first full month after you return to full-time employment; and

(B) Multiplying the monthly salary determined according to (b)(ii)(A) of this subsection by the number of months you were on leave.

(iii) For members of other systems, the salary upon which contributions are calculated is determined by:

(A) Averaging the compensation earned during the last full month of employment before your leave of absence, and the compensation you earned during the first full month after you returned to work; and

(B) Multiplying the monthly salary determined according to (b)(iii)(A) of this subsection by the number of months you were on leave.

If you worked part-time prior to the leave of absence, partial month wages will be used to estimate your average salary. In this case, you may only establish part-time service credit for the period of time you were on leave of absence.

(6) What is the payment process for establishing this service credit?

(a) You may purchase this service credit in one payment, or make payments at any time until the deadline expires.

(b) Interest will accrue on the unpaid balance until payment is made in full.

(c) The department will accept funds that have been rolled over from a tax deferred retirement account for the purchase of the service credit. However, the amount you may roll over is limited to the purchase price of the service credit. If the rollover amount does not cover the entire purchase price, you must pay the additional amount within thirty days of the rollover. If the balance is not paid within thirty days, the rollover funds will be returned to the original financial institution.

(d) If you took more than one authorized leave of absence, the department will bill you separately for each occurrence. Service credit will be granted for each occurrence only after the bill for that period is paid in full.

(7) What is the deadline for establishing this service credit? Except as provided in subsection (9) of this section:

(a) If you are a member of LEOFF Plan 2, PERS Plan 2, PSERS, or SERS Plan 2, payment in full must be received within five years from the initial date of your return to an eligible position, or prior to your retirement, whichever occurs first.

(b) If you are a member of PERS Plan 3 or SERS Plan 3, payment in full must be received prior to your retirement.

(c) If you are a member of TRS Plan 2 or 3, payment in full must be received by August 31st of the fifth school year, as defined in RCW 28A.150.040, after you return to employment or prior to your retirement, whichever comes first. The school year during which you return to work will be counted as year one.

(8) What if I do not make payment in full by the deadline?

(a) If you are a Plan 2 member or a PSERS member and do not make payment in full by the deadline, the amount you paid will be refunded to you.

(b) If you are a Plan 3 member and do not make payment by the deadline, the portion of your payments that were:

(i) Employer contributions will be refunded to you; and

(ii) Employee contributions will be deposited into your defined contribution account and available to you only upon separation from service.

(c) If you are a Plan 2 member or a PSERS member, the department will refund partial payments prior to the deadline upon your request.

(d) If you are a PERS Plan 2, SERS Plan 2, or TRS Plan 2 member and transfer to Plan 3 prior to making payment in full:

(i) The department will refund any partial payments; and

(ii) You must reapply under Plan 3 if you still wish to establish this service credit.

(9) What is the exception to the deadline? After your initial deadline has passed, you retain the right to establish this service credit until the date of your retirement. However, the purchase price will be equal to the full actuarial value of the increase in benefit that results from the purchased service credit. ((You may)) The department will use the two-part formula in WAC ((415-10-040)) 415-10-030 to determine actuarial value.

(10) What state law applies to establishing service credit for an unpaid authorized leave of absence?

(a) PERS Plan 2: RCW 41.40.710;

(b) PERS Plan 3: RCW 41.40.805;

(c) TRS Plan 2: RCW 41.32.810;

(d) TRS Plan 3: RCW 41.32.865;

(e) SERS Plan 2: RCW 41.35.470;

(f) SERS Plan 3: RCW 41.35.650;

(g) LEOFF Plan 2: RCW 41.26.520;

(h) PSERS: RCW 41.37.260;

(i) Deadline extension: RCW 41.50.165.

RCW 41.50.165(2) and chapter 415-10 WAC allow you to establish or restore service credit by paying the actuarial value of the resulting increase in your monthly retirement allowance. This section describes ((how)) what the factors take into consideration when the department uses actuarial factors to calculate the lump sum costs. See also chapter 415-10 WAC.

RCW 41.50.165 generally allows you to purchase service credit that you failed to establish or reestablish within the statutory deadline.

(1) You must pay the actuarial value of the increase to your retirement benefit. The actuarial value of the increase to your benefit means the cost to the retirement system trust fund of:

(a) Including the additional service credit in your retirement benefit calculation; and

(b) Beginning your retirement benefit at an earlier age, if applicable. ((This second factor applies only to PERS Plan 1, TRS Plan 1, and WSPRS Plans 1 and 2.))

(2) The valuation is based upon economic assumptions. The cost to the retirement system trust fund for the increased value to your benefit is calculated based upon interest rate assumptions adopted by the pension funding council and actuarial factors calculated by the state actuary and adopted ((or approved)) by the ((state actuary)) department.

((If you are a member of LEOFF Plan 1 or 2, PERS Plan 2 or 3, PSERS, TRS Plan 2 or 3, or SERS Plan 2 or 3,)) The department will calculate the actuarial value of the service credit you purchase under RCW 41.50.165(2) using the following formula:

Ron is an active PERS Plan 2 member who currently has ((18)) 5 years of service. Ron turned age ((61)) 45 last month. His annual average ((earnings are $50,000)) salary is $40,000. Ron would like to purchase ((3)) 15 years of service that he previously withdrew but did not restore before the deadline.

The department will ((then)) calculate the cost of purchasing the service credit using the Service Credit Purchase Cost formula:

The cost of Ron's purchase would be calculated as follows:

Ron's total cost to purchase ((3)) 15 years of service credit is (($30,240)) $110,240 (Part 1 + Part 2).

(1) The department will provide you a service credit purchase estimate upon request. If, after receiving the estimate, you wish to purchase some or all of the available credit you must request a bill ((in writing)). Your request must identify the amount of service credit you wish to purchase.

(2) Your bill will be based on a specific date of payment. The cost to purchase the service credit could change if you attempt to pay after the specific payment date listed on the bill. If you do not make payment by the bill's due date but still wish to purchase service credit, you must request a new bill from the department.

(1) Transferring purchased Plan 2 credit under RCW 41.50.165(2) into Plan 3. If you purchase Plan 2 service credit under this chapter and later enter Plan 3, that credit will also transfer to Plan 3.

(a) Fifty percent of the money you paid to purchase the service credit will be credited to the Plan 3 defined contribution account.

(b) The other fifty percent will be credited to the Plan 3 defined benefit plan established under RCW 41.32.831 for TRS Plan 3, RCW 41.35.600 for SERS Plan 3, and RCW 41.40.780 for PERS Plan 3.

(2) Purchasing Plan 2 service credit after transferring to Plan 3. You may purchase service credit initially available under Plan 2 after you transfer to Plan 3. The service will be credited in Plan 3. If you purchase Plan 2 service credit under this chapter, fifty percent of the money you pay to purchase the service credit will be credited to your Plan 3 defined contribution account. The other fifty percent will be credited to the Plan 3 defined benefit portion established under RCW 41.32.831 for TRS Plan 3, RCW 42.35.600 for SERS Plan 3 and RCW 41.40.780 for PERS Plan 3.

(3) Not applicable for service earned after transferring to Plan 3. ((Service you earn as a Plan 3 member is automatically recredited if you reenter membership and earn at least twelve service credit months.)) Plan 3 does not have any deadlines on establishing optional service. ((Because there are no deadlines for establishing or reestablishing service credit there is no provision for purchasing service credit earned in Plan 3 under RCW 41.50.165.))

As used in this chapter:

(1) Annual average ((earnings)) salary means:

(a) In PERS Plan 1, TRS Plan 1 or WSPRS Plan 1: The average of your two highest consecutive years of compensation as of the date of your service credit purchase.

(b) In Plan 2 or Plan 3: The average of your five highest consecutive years of compensation as of the date of your service credit purchase.

(c) In PSERS: The average of your five highest consecutive years of compensation as of the date of your service credit purchase.

(d) In LEOFF Plan 1: The basic salary attached to your position at the date of your service credit purchase.

(2) Factors means the actuarial cost factors calculated by the state actuary and, except as noted below, adopted by the department that are used in the formulas for calculating the cost of a service credit purchase. ((See WAC 415-02-370 for additional information about the service credit purchase)) The law enforcement officers' and firefighters' (LEOFF) retirement board adopts the LEOFF Plan 2 factors.

(3) LEOFF means the law enforcement officers' and firefighters' retirement system established under chapter 41.26 RCW.

(4) PERS means the public employees' retirement system established under chapter 41.40 RCW.

(5) PSERS means the public safety employees' retirement system established under chapter 41.37 RCW.

(6) SERS means the school employees' retirement system established under chapter 41.35 RCW.

(7) Service credit being purchased means the number of service credit months or service credit years you are purchasing.

(8) TRS means the teachers' retirement system established under chapter 41.32 RCW.

(9) WSPRS means the Washington state patrol retirement system established under chapter 43.43 RCW.

(1) You may not purchase service credit under RCW 41.50.165(2) if your deadline to establish or reestablish the service credit has not expired.

(2) If you are reestablishing credit you must purchase at least the service credit you earned in any one calendar month of employment.

(3) If you are establishing optional service credit ((for the first time)), you must purchase the entire period of service. ((If you are not reestablishing credit canceled by a withdrawal of contributions, you must purchase the entire period of service.))

(4) Your ability to purchase service credit may be limited by Internal Revenue Code restrictions. The department may limit the amount of service credit you may purchase in any calendar year in order to stay within the maximum employee contribution limits established by the Internal Revenue Code for 401(a) tax qualified plans.

(5) You may not make installment payments. If you purchase service credit under this section, you must make payment in a single lump-sum as determined by the department for each unit of service credit purchased.

(6) Purchasing service credit will not move you from one plan to another. Plan membership is based upon the date your retirement system membership was established. Purchasing prior service credit does not change the date you first established membership and therefore does not change your plan membership.

If you earned service credit for teaching out-of-state or for the federal government, you may be eligible to purchase that public education experience as TRS service credit. The public education claimed must have been covered by a retirement or pension plan and must have been as a teacher, as defined by that retirement or pension plan.

(1) Do I qualify to purchase TRS service credit for public education experience outside of the state of Washington? You are eligible to purchase service credit under this section if you meet all the following requirements at the time of purchase:

(a) You are employed in a TRS Plan 2 or Plan 3 eligible position;

(b) You have at least two years of TRS service credit;

(c) You earned the education experience service credit by teaching in a public school in another state within the United States or with the United States federal government;

(d) The service was covered by a state, political subdivision of a state, or federal retirement plan;

(e) You are not receiving a benefit from the other system; and

(f) You are not eligible for an unreduced benefit from the other system.

(2) Do I qualify to purchase public education experience service credit if I am a substitute teacher? You may purchase service credit under this section if your employer is currently reporting you as an active substitute teacher and you meet the requirements in subsection (1)(b) through (f) of this section.

(3) If I purchase TRS service credit for public education experience, how may it be used? The service credit you purchase under this section will be treated the same as service credit you earn in TRS. It will be used in the calculation of your retirement allowance, to qualify for retirement or early retirement, and to meet the Plan 3 ten-year vesting requirement.

(4) What is the cost of the service credit? You must pay the actuarial value of the resulting increase in your retirement allowance. The following formula is used to calculate the cost:

(5) How much TRS service credit may I purchase for out-of-state or federal public education experience? If you meet the requirements in this section, you may purchase up to seven years (eighty-four months) of TRS service credit. You may purchase service credit in one-month increments but may not purchase a partial month of service credit.

(6) May I purchase some service credit now and some at a later date? No, you may not purchase some service credit now and some at a later date. You have one opportunity to purchase service credit under this section. You may purchase service credit from more than one retirement system provided you purchase it at the same time.

(7) How do I purchase the service credit? To purchase TRS Plan 2 or Plan 3 service credit for out-of-state or federal public education experience, you must do the following:

(a) You must complete an application provided by the department.

(i) You must complete, sign, and forward the application to your former retirement system(s).

(ii) Your former retirement system(s) must verify your service credit according to the instructions on the application.

(iii) If you are purchasing service credit from more than one retirement system, each retirement system must verify your service on a separate application.

(iv) Upon receipt of your properly completed application, the department will bill you for the service credit using the formula in subsection (4) of this section; the department will set a due date for the payment.

(b) You must make payment in full by the due date. If your payment is not received by the due date, your bill will become null and void. You may request a new bill from the department at a later date and it will reflect factors in effect at that time.

(i) You may make direct payment with either a personal or cashier's check. It may be possible to transfer funds from another eligible retirement account to pay your bill. However, DRS cannot accept funds in excess of the cost to make your purchase. You are advised to check with the administrator of your account to see if you can transfer those dollars.

(ii) Your employer may, at its option, pay some or all of the cost of the service credit.

(iii) If you are a Plan 2 member, your payment will be placed in your member account.

(iv) If you are a Plan 3 member, fifty percent of your payment will be placed in your defined contribution account and fifty percent will be placed in the trust fund from which your retirement allowance will be paid.

(8) Do I need to give up my right to a benefit from my previous retirement system for the service credit I purchase in TRS? No, you do not need to give up your right to a benefit from your previous retirement system for the service credit you purchase in TRS. At the time you purchase TRS service credit, you only need to prove that you are not currently receiving a benefit from your previous system and that you are not currently eligible for an unreduced benefit. Your previous retirement system will be required to verify this information on your application.

(9) May I purchase public education experience service credit to add to my TRS service credit and also use out-of-state teaching service credit to qualify for early retirement? Yes, you may purchase public education experience to add to your TRS service credit and/or use out-of-state teaching to qualify for early retirement. However, you may not use the same out-of-state service for both programs. Please see WAC 415-112-295. For example, if you have seven years of eligible out-of-state service credit, you may purchase five years to increase your TRS service credit and use the remaining two years to qualify for early retirement.