PROPOSED RULES
RETIREMENT SYSTEMS
Original Notice.
Preproposal statement of inquiry was filed as WSR 12-22-063.
Title of Rule and Other Identifying Information: WAC 415-02-177 May I purchase additional service credit?
Hearing Location(s): Department of Retirement Systems, 6835 Capitol Boulevard, Conference Room 115, Tumwater, WA, on February 26, 2013, at 1:30 p.m.
Date of Intended Adoption: February 26, 2013.
Submit Written Comments to: Jilene Siegel, Department of Retirement Systems, P.O. Box 48380, Olympia, WA 98504-8380, e-mail jilenes@drs.wa.gov, fax (360) 753-5397, by February 26, 2013, 1:30 p.m.
Assistance for Persons with Disabilities: Contact Jilene Siegel by February 22, 2013, TTY (866) 377-8895 or (360) 586-5450.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: Corrects the administration of retirement benefits when a retiree who has purchased additional service credits returns to work and exceeds the hours limit for continuing pension payments. Retirees who exceed the return-to-work limits will have their retirement benefit suspended, including any portion that is attributable to purchased service credit.
Reasons Supporting Proposal: A retirement benefit calculation includes three factors: Service credits, average compensation and a multiplier. Purchasing service credits increases that factor in the calculation, but there is no independent monetary value to the service credits that are purchased. Therefore, if the benefit is stopped, the portion attributable to the purchased service credit is also stopped.
Statutory Authority for Adoption: RCW 41.50.050(5).
Statute Being Implemented: RCW 41.26.199, 41.26.432, 41.40.034, 41.37.265, 41.35.183, 41.32.066, 43.43.233.
Rule is not necessitated by federal law, federal or state court decision.
Agency Comments or Recommendations, if any, as to Statutory Language, Implementation, Enforcement, and Fiscal Matters: Retirees who applied for or purchased service credit between September 1, 2010, and March 31, 2013, will continue to receive payment for that portion of the retirement benefit that is attributable to the purchased service credit, when the rest of the benefit is suspended upon exceeding the return-to-work hours limit, in accordance with the rule that was in effect at the time of the purchase. (WAC 415-02-177 (11)(a)(ii)).
Name of Proponent: Department of retirement systems, governmental.
Name of Agency Personnel Responsible for Drafting: Jilene Siegel, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7291; Implementation: Shawn Merchant, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7303; and Enforcement: Jennifer Dahl, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7219.
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 one of the departments named in the section requiring a cost benefit analysis (RCW 34.05.328).
January 23, 2013
Jilene Siegel
Rules and Contracts Manager
OTS-5277.1
AMENDATORY SECTION(Amending WSR 10-16-086, filed 7/30/10,
effective 9/1/10)
WAC 415-02-177
May I purchase additional service
credit?
(1) What is the option for purchasing additional
service credit? The following statutes provide an option for
eligible members to purchase additional service credit that
provides a guaranteed, lifetime increase to their monthly
retirement benefit:
(a) RCW 41.26.199 for LEOFF Plan 1 members;
(b) RCW 41.26.432 for LEOFF Plan 2 members;
(c) RCW 41.40.034 for PERS Plan 1, 2, and 3 members;
(d) RCW 41.37.265 for PSERS Plan 2 members;
(e) RCW 41.35.183 for SERS Plan 2 and 3 members;
(f) RCW 41.32.066 for TRS Plan 1, 2, and 3 members; and
(g) RCW 43.43.233 for WSPRS Plan 1 and 2 members.
(2) Am I eligible to purchase additional service credit?
(a) You may purchase additional service credit if you are eligible to retire from one or more of the following plans and you elect a monthly benefit rather than a lump sum payment:
(i) LEOFF Plan 1 or 2 under RCW 41.26.090 or 41.26.430;
(ii) PERS Plan 1, 2 or 3 under RCW 41.40.180, 41.40.630, or 41.40.820;
(iii) PSERS Plan 2 under RCW 41.37.210;
(iv) SERS Plan 2 or 3 under RCW 41.35.420 or 41.35.680;
(v) TRS Plan 1, 2, or 3 under RCW 41.32.480, 41.32.765, or 41.32.875; or
(vi) WSPRS Plan 1 or 2 under RCW 43.43.250.
(b) If you retire as a result of a disability, you may purchase additional service credit if you meet the requirements in (a) of this section.
(3) How much additional service credit may I purchase? If you are eligible, you may purchase from one to sixty months of additional service credit in whole month increments.
(4) May I use the additional purchased service credit to qualify for normal retirement or an early retirement? No. You may not use the purchased service credit to qualify for normal retirement or to qualify for an early retirement.
(5) When must I apply to purchase additional service credit? You must submit your request to purchase additional service credit to the department at the same time you submit your application for retirement.
(6) How much will my monthly retirement benefit increase if I purchase additional service credit? The increase in your monthly retirement benefit will be calculated using the benefit formula for your system and plan, with a reduction for early retirement, if applicable.
Example 1 (PERS Plan 2): John is a member of PERS Plan 2. He applies for retirement, effective the first month after his 62nd birthday. His AFC is $4000 per month. If he purchases sixty months of additional service credit, his monthly retirement benefit will increase by $289.60 per month, calculated as follows:
Additional service credit: 60 months ÷ 12 = 5 yearsEarly retirement factor (WAC 415-02-320(5)): .7240000
| Amount of increase | = | 2% x additional service credit years x AFC x early retirement factor |
| = | 2% x 5 years x $4000 x .7240000 | |
| = | $289.60 |
Additional service credit: 60 months ÷ 12 = 5 yearsEarly retirement factor (WAC 415-02-320(5)): .7240000
| Amount of increase | = | 1% x additional service credit years x AFC x early retirement factor |
| = | 1% x 5 years x $4000 x .7240000 | |
| = | $144.80 |
Additional service credit: 60 months ÷ 12 = 5 years
| Amount of increase | = | 2% x additional service credit years x FAS |
| = | 2% x 5 years x $4000 | |
| = | $400 |
Example. In subsection (6) of this section, Example 1, it was determined that John's retirement benefit would increase by $289.60 per month. The cost to purchase the five years of additional service credit would be $44,542.88, calculated as follows:
| Age-based annuity factor | (WAC 415-02-340): .0065016 | |
| Cost | = | Amount of increase ÷ age-based annuity factor |
| = | $289.60 ÷ .0065016 | |
| = | $44,542.88 | |
(a) Payment may be made with an eligible rollover, a direct rollover or a trustee-to-trustee transfer, if allowed by the transferring plan. Payment may also be made with after-tax dollars, such as money from a personal savings account. However, IRS regulations limit the amount of after-tax dollars you may use to purchase additional service credit.
(b) Payment must be made in full within ninety days after the bill issue date.
(9) If I choose a benefit option with a survivor feature, will my survivor beneficiary's monthly benefit reflect the additional purchased service credit? Yes. Depending upon the rules for your retirement system and plan and the benefit option you choose at retirement, your survivor beneficiary's monthly benefit will be a percentage of the gross monthly retirement benefit you were receiving at the time of your death. If you choose a benefit option with a survivor feature and your survivor beneficiary dies before you, your monthly retirement benefit will increase to the amount it would have been had you not selected a survivor option.
(10) Will I receive a cost of living adjustment (COLA) on the portion of my benefit that is based on the additional purchased service credit?
(a) For all systems and plans, except as noted in (b) of this subsection, your COLA will be based on your gross monthly retirement benefit, including the increase due to the purchased service credit.
(b) If you retire from PERS Plan 1 or TRS Plan 1 and you do not elect the optional auto COLA, you will not receive a COLA on the additional purchased service credit amount.
(11) If I purchase additional service credit and then return to work, how will my retirement benefit be affected?
(a) If you return to work with an employer that participates with the department:
(i) Elect to return to membership - Your entire retirement benefit is suspended, including the portion of your retirement benefit attributable to service credit purchased under this section.
(ii) Do not elect to return to membership - If your
retirement benefit is suspended due to working over the hours
allowed annually, the portion of your retirement benefit
attributable to service credit purchased under this section
will ((not)) be suspended.
(b) If you return to work with an employer that does not participate with the department, your retirement benefit and the portion of your retirement benefit attributable to service credit purchased under this section will not be suspended.
(12) If I retire and purchase less than sixty months of additional service credit, may I purchase more at a later time? If you retire and purchase less than sixty months of additional service credit, you may not purchase additional months of service credit from the same plan unless you return to membership and reretire from the same system and plan. You must meet the eligibility requirements provided in subsection (2) of this section at the time you reretire. You may not purchase more than a total of sixty months of service credit regardless of how many times you reretire from the same system and plan.
(13) May I purchase service credit 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 up to sixty months of additional service credit from each of your dual member plans.
(b) If you retire from more than one plan, but are not a dual member under chapter 415-113 WAC, you may purchase up to sixty months of additional service credit from each plan in which you meet the eligibility requirements in subsection (2) of this section.
(14) How are the funds I paid to purchase the additional service credit treated upon my death (and the death of my survivor beneficiary, if applicable)?
(a) Plans 1 and 2. The amount paid to purchase the additional service credit 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 415-108-326 for PERS Plan 1 and 2;
(ii) WAC 415-112-504(((8))) (9) for TRS Plan 1;
(iii) WAC 415-112-505(7) for TRS Plan 2;
(iv) WAC 415-110-610(7) for SERS Plan 2;
(v) WAC 415-106-600(7) for PSERS Plan 2;
(vi) WAC 415-103-215 for WSPRS Plan 1;
(vii) WAC 415-103-225(7) for WSPRS Plan 2;
(viii) WAC 415-104-202 for LEOFF Plan 1; or
(ix) WAC 415-104-215(7) for LEOFF Plan 2.
(b) Plan 3. The amount paid to purchase the additional service credit is credited to the Plan 3 trust fund and not to your member account. There are no circumstances under which the amount will be distributed upon your death.
[Statutory Authority: RCW 41.50.050(5). 10-16-086, § 415-02-177, filed 7/30/10, effective 9/1/10. Statutory Authority: RCW 41.50.050(5), 2006 c 214, and RCW 41.26.432. 06-16-043, § 415-02-177, filed 7/26/06, effective 8/26/06.]