WSR 17-04-044
[Filed January 25, 2017, 4:21 p.m.]
Original Notice.
Preproposal statement of inquiry was filed as WSR 16-20-042.
Title of Rule and Other Identifying Information: WAC 415-02-178 May I purchase an annuity?
Hearing Location(s): Department of Retirement Systems, Conference Room 115, 6835 Capitol Boulevard S.E., Tumwater, WA 98502, on Tuesday, March 7, 2017, at 10:00 a.m.
Date of Intended Adoption: March 7, 2017.
Submit Written Comments to: Jilene Siegel, Department of Retirement Systems, P.O. Box 48380, Olympia, WA 98504-8380, email, fax (360) 753-3166, by March 6, 2017, 5:00 p.m.
Assistance for Persons with Disabilities: Contact Jilene Siegel by March 2, 2017, TTY (866) 377-8895 or (360) 586-5450.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: Chapter 222, Laws of 2016 (SB 6264) provides the opportunity for members of the law enforcement officers' and firefighters' (LEOFF) Plan 1 retirement system to purchase an annuity. This amendment incorporates the new provisions into the existing rule concerning annuity purchases.
Statutory Authority for Adoption: RCW 41.50.050(5).
Rule is not necessitated by federal law, federal or state court decision.
Name of Agency Personnel Responsible for Implementation: Seth Miller, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7304.
No small business economic impact statement has been prepared under chapter 19.85 RCW. Not applicable. These rules do not impact small businesses and are not being submitted by the state board of education.
A cost-benefit analysis is not required under RCW 34.05.328. The department of retirement systems is not listed in RCW 34.05.328 as required to prepare a cost-benefit analysis.
January 25, 2017
Jilene Siegel
Rules Coordinator
AMENDATORY SECTION (Amending WSR 16-04-048, filed 1/27/16, effective 2/27/16)
WAC 415-02-178 May I purchase an annuity?
(1) Am I eligible to purchase an annuity? You are eligible to purchase an annuity at the time of retirement from your defined benefit ((for either service or disability)) plan if you are a member of TRS (RCW 41.32.067), WSPRS (RCW 43.43.315), LEOFF Plan 1 (RCW 41.26.105), or LEOFF Plan 2 (RCW 41.26.463). This annuity provides a lifetime increase to your monthly benefit. (For purchasing an annuity from your Plan 3 defined contribution account, refer to WAC 415-111-320.)
(2) Can I purchase an annuity if I take a lump sum payment? ((No,)) You may not purchase an annuity if you elect a lump sum payment instead of a monthly benefit.
(3) Are there limits to the annuity amount I may purchase? There is no maximum limit on the purchase amount. If you are a LEOFF ((Plan 2 member)) or WSPRS member the minimum purchase amount ((you may purchase)) is $25,000. There is no minimum required for TRS members.
(4) When can I apply to purchase an annuity? You must submit your request to purchase an annuity to the department at the time you apply for retirement.
(5) How much will my monthly benefit increase if I purchase an annuity? The increase in your monthly benefit will be calculated using the following formula:
Purchase Annuity Amount x Annuity Factor = Increase to Monthly Benefit
The annuity factor is determined by your age on the later of your retirement date or the date your retirement application is submitted to the department.
Example: John is a member of LEOFF Plan 2. He applies for retirement and requests to purchase an annuity for $45,000. For illustration purposes in this example only, we will use .0051025 as the corresponding annuity factor (factors change periodically). John's monthly benefit will increase by $229.61 per month, calculated as follows:
Purchase Annuity Amount x Annuity Factor = Increase to Monthly Benefit
$45,000 x .0051025 = $229.61
(6) How and when do I pay for the annuity? The department will generate a bill to you for the cost of the annuity after we receive your request to purchase.
(a) For all TRS members, payment may be made by making a one-time ((cash, check, or electronic fund transfer)) personal payment; or you may roll over funds from another tax-deferred retirement account.
(b) For LEOFF ((Plan 2)) and WSPRS members, the annuity must be purchased by rolling over funds from an "eligible retirement plan" which is a tax qualified plan offered by a governmental employer (like the state of Washington's deferred compensation program).
(c) Payment must be made in full by ninety days after the later of your retirement date or bill issue date. Your annuity will begin once your payment is received and your retirement is processed. The effective date for the start of this benefit is the later of your retirement date or the payment in full date plus one day.
(7) ((Are there benefit options that allow me to choose a survivor to receive a continuing payment after my death? Yes.)) What are the survivor options for my annuity? The survivor option you designate for your ((monthly benefit must)) retirement benefit will also be used for your ((purchase of)) annuity purchase, with the exception of WSPRS Plan 1 Option A and LEOFF Plan 1.
((Depending upon the rules for your retirement system and plan and the benefit option you choose at retirement, your survivor's monthly benefit will be a percentage of the gross monthly benefit you were receiving.)) If you are a WSPRS Plan 1 member who chose Option A or you are a LEOFF Plan 1 member, your annuity will be paid for your lifetime only. Under these two survivor options, even though the retirement benefit may be paid over two lifetimes, there is no actuarial reduction. No actuarial reduction can be applied to the annuity, therefore the annuity can only be treated as if a single life option was chosen.
If you choose a benefit option with a survivor feature and your survivor dies before you, your monthly ((benefit)) annuity payment will increase to the amount it would have been had you not selected a survivor option.
(8) Will I receive a cost of living adjustment (COLA) on the portion of my benefit that is based on the purchased annuity?
(a) If you are eligible for an annual COLA adjustment on your monthly benefit, you will receive the same COLA percentage on this annuity.
(b) If you retire from TRS Plan 1 you must elect the optional auto COLA in order to receive a COLA on the annuity amount.
(9) If I purchase an annuity and then return to work, how will the annuity portion of my benefit be affected? You will continue to receive the annuity portion of your monthly benefit payment even if you return to work, or return to membership.
(10) If I retire then return to membership and reretire, may I purchase another annuity? Yes. You may purchase another annuity when you reretire provided you are reretiring from an eligible plan that allows an annuity purchase.
(11) May I purchase an annuity from more than one retirement plan?
(a) If you are a dual member under chapter 415-113 WAC, Portability of public employment benefits, and you combine service credit to retire as a dual member, you may purchase an annuity from each dual member plan that allows an annuity purchase.
(b) If you are not a dual member and retire separately from more than one plan you may purchase an annuity from each eligible plan that allows an annuity purchase.
(12) ((How are the funds I paid to purchase the annuity treated upon my death (and the death of my survivor beneficiary, if applicable)?
(a) Plans 1 and 2. The amount paid to purchase the annuity is credited to your individual account as part of your accumulated contributions. Distribution of accumulated contributions after your death (and the death of your survivor beneficiary, if any) is governed by the statutes and rules applicable to your plan. See:
(i) WAC 415-112-504(9) for TRS Plan 1;
(ii) WAC 415-112-505(7) for TRS Plan 2;
(iii) WAC 415-104-215(7) for LEOFF Plan 2;
(iv) WAC 415-103-215 for WSPRS Plan 1;
(v) WAC 415-103-225(7) for WSPRS Plan 2.
(b) TRS Plan 3. If you and your survivor (if you selected a survivor option) die before the amount of your purchased annuity has been paid back to you in your monthly benefit, the difference will be refunded to your designated beneficiary.)) What happens to my annuity upon my death (and the death of my survivor, if applicable)?
System Plan
Benefit Option
Annuity Payment upon Death
Maximum Option
At the time of your death the annuity payment stops.
Option 1 (single life)
At the time of your death the annuity payments stop. The original amount you paid for your annuity, less any payments you have received, will be paid to your designated beneficiary.
Option A
Automatic Survivor
Option 2, 3, 4 (joint life)
At the time of your death, payments will continue to your survivor. At the time of your survivor's death, the original amount you paid for your annuity, less any payments you and your survivor have received, will be paid to your designated beneficiary.
Option B (joint life)