WSR 01-18-072

PROPOSED RULES

DEPARTMENT OF

RETIREMENT SYSTEMS

[ Filed September 4, 2001, 1:37 p.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 01-04-027.

Title of Rule: WAC 415-10-020 Definitions, 415-108-445 What compensation can be reported?, 415-108-466 Do I receive reportable compensation for union leave?, 415-108-480 Vehicles -- Does the value of my use of an employer vehicle qualify as compensation earnable?, 415-108-679 Purpose and scope of eligibility rules, and 415-111-100 To whom does this chapter apply?

Purpose: These rules are necessary to implement the public employees' retirement system plan 3. DRS is also converting as much language as possible to "plain English."

Other Identifying Information: Unless specifically noted, substantive changes are required by ESSB 6530 (chapter 247, Laws of 2000). Sections of the Internal Revenue Code, 26 U.S.C., may also apply. Note: Additional PERS Plan 3 changes will be made in separate filings.

Statutory Authority for Adoption: RCW 41.50.050(5).

Statute Being Implemented: RCW 41.26.030, 41.32.010, 41.35.010, 41.40.010, 41.40.175, 41.40.710, 41.40.805, 43.43.120, and chapter 41.45 RCW.

Reasons Supporting Proposal: These rules are necessary to implement the public employees' retirement system plan 3.

Name of Agency Personnel Responsible for Drafting: Merry A. Kogut, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7291; Implementation and Enforcement: Jack Bryant, P.O. Box 48380, Olympia, WA 98504-8380, (360) 664-7193.

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: Each rule is being amended to implement ESSB 6530 (2000). At the same time, the department is attempting to improve the clarity of each rule.

Proposal Changes the Following Existing Rules: WAC 415-10-020, adds PERS Plan 3 (and SERS); revises language to make more clear.

WAC 415-108-445, adds PERS Plan 3 and completely revises language to make more clear.

WAC 415-108-466, adds PERS Plan 3; revises language to make more clear.

WAC 415-108-480, adds PERS Plan 3 and completely revises language to make more clear.

WAC 415-108-679, adds PERS Plan 3; revises language to make more clear.

WAC 415-111-100, adds PERS Plan 3; revises language to make more clear.

No small business economic impact statement has been prepared under chapter 19.85 RCW. These amendments have no effect 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, Boardroom, Tumwater, WA, on December 4, 2001, at 10:00 a.m.; and at the Department of Social and Health Services, Spokane Valley CSO, Lunchroom, 8517 East Trent, Spokane, WA, on December 6, 2001, at 10:00 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 December 6, 2001.

Date of Intended Adoption: No sooner than December 7, 2001.

August 31, 2001

Merry A. Kogut

Rules Coordinator

OTS-4925.2


AMENDATORY SECTION(Amending WSR 00-22-049, filed 10/27/00, effective 11/27/00)

WAC 415-10-020   Definitions.   As used in this chapter:

(1) (("))Average earnings((")) 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 ((if you are purchasing service credit in PERS Plan 1, TRS Plan 1 or WSPRS;)).

(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 ((if you are purchasing service credit in Plan 2 or Plan 3)).

(c) In LEOFF Plan 1: The basic salary attached to your position at the date of your service credit purchase ((if you are purchasing service credit in LEOFF Plan 1)).

(2) Factors:

(a) "Factor 1" means the actuarial cost factor calculated by the state actuary and adopted by the department. The actual factor used varies depending upon the time between the date of payment and the projected date of retirement. Generally, the longer the gap between date of payment and date of retirement the lower the factor.

(((3))) (b) "Factor 2" is the actuarial factor calculated by the state actuary based upon demographic differences between the membership of the different retirement systems. Those factors are: .00788 (PERS Plan 1); .00698 (TRS Plan 1); and .00908 (WSPRS Plan 1).

(((4))) (c) "Factor 3" means the interest factor calculated by the state actuary and adopted by the department. This factor is used only when the service credit purchase lowers the projected retirement age and is based upon the higher cost to the system of the earlier retirement.

(((5) ")) (3) LEOFF((")) means the law enforcement officers' and fire fighters' retirement system established under chapter 41.26 RCW.

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

(((7) "Plan 1" means the retirement system plan that includes persons who established membership before October 1, 1977. PERS and LEOFF are divided into Plan 1 and Plan 2. TRS is divided into Plan 1, Plan 2 and Plan 3. WSPRS has only one plan.

(8) "Plan 2" means the retirement system plan that includes persons who established membership on or after October 1, 1977. PERS and LEOFF are divided into Plan 1 and Plan 2. TRS is divided into Plan 1, Plan 2 and Plan 3. SERS is divided into Plan 2 and Plan 3. WSPRS has only one plan.

(9) "Plan 3" means the teachers' retirement system Plan 3 established by RCW 41.32.831 and the school employees' retirement system Plan 3 established by RCW 41.35.600.

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

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

(((11) ")) (7) TRS((")) means the teachers' retirement system established under chapter((s)) 41.32 ((and 41.34)) RCW.

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

(((13) ")) (9) Years of earlier retirement((")) equals the number of years or fractions of years you will be able to retire earlier as a result of your purchase of service credit.

(((14) ")) (10) Years of service((")) equals the total anticipated years of service you will have accrued at retirement, including the additional service credit you purchase under this section.

(((15) "SERS" means the school employees' retirement system established under chapters 41.34 and 41.35 RCW.))

[Statutory Authority: Chapter 41.50 RCW. 00-22-049, 415-10-020, filed 10/27/00, effective 11/27/00. Statutory Authority: RCW 41.50.050 and 41.50.165. 97-01-014, 415-10-020, filed 12/6/96, effective 1/6/97.]

OTS-4924.3


AMENDATORY SECTION(Amending WSR 98-09-059, filed 4/17/98, effective 5/18/98)

WAC 415-108-445   What compensation can be reported?   ((In order for payments to be subject to retirement system contributions and included in the calculation of a member's retirement benefit, those payments must meet the definition of compensation earnable in RCW 41.40.010(8).

(1) Payments for personal services rendered. To determine whether a payment meets this definition and can be reported, ask the following questions:

(a) Was the payment earned as a salary or wage for personal services rendered during a fiscal year? If the answer is no, the payment is not reportable. If the answer is yes, ask question (b).

(b) Was the payment paid by an employer to an employee? If the answer is no, the payment is not reportable. If the answer is yes, report the payment.

(2) Payments included that are not for personal services rendered. The legislature has included certain specific payments within the definition of compensation earnable even though those payments are not for personal services rendered by the employee to the employer. (See WAC 415-108-464 through 415-108-469.)

(3) Reportable compensation is earned when the service is rendered, rather than when payment is made.


Example: If a member works during June but does not receive payment for the work until July, the reportable compensation was earned during June and must be reported to the department as June earnings.

(4) Salary characterizations are based upon the nature of the payment. A payment is reportable compensation if it meets the criteria of subsection (1) or (2) of this section. The name given to the payment or the document authorizing it is not controlling in determining whether the payment is reportable compensation. The department determines whether a payment is reportable compensation by considering:

(a) What the payment is for; and

(b) Whether the reason for the payment brings it within the statutory definition of compensation earnable.


Example: A payment conditioned upon retirement is not reportable compensation. Attaching the label "longevity" to the payment does not change the fact that the payment is conditioned on retirement. Such a payment is not for services rendered and will not be counted as reportable compensation despite being identified by the employer as a longevity payment.

(5) Differences in reportable compensation between plans. WAC 415-108-445 through 415-108-488 define reportable compensation for each of the two PERS plans. "Compensation earnable" is defined in very similar terms for both PERS Plan I and PERS Plan II. The characterization of payments as reportable compensation or not reportable compensation in WAC 415-108-455 through 415-108-488 is the same for both PERS Plan I and PERS Plan II except as specifically noted.)) (1) Compensation earnable:

(a) Compensation earnable must meet the definition in RCW 41.40.010(8) and:

(i) Be earned as a salary or wage for personal services provided during a fiscal year and paid by an employer to an employee; or

(ii) Qualify as compensation earnable under WAC 415-108-464 through 415-108-470.

(b) The department determines whether payments to an employee are compensation earnable based on the nature, not the name, of the payment. The department considers the reason for the payment and whether the reason brings the payment within the statutory definition of compensation earnable.

Example: "Longevity pay" conditioned on retirement is not for services provided and is therefore not reportable compensation.
(c) "Compensation earnable" is defined in very similar terms for all three PERS plans. Any differences among plans are specifically noted in WAC 415-108-443 through 415-108-488.

(2) Reportable compensation:

(a) Reportable compensation is the compensation paid by an employer to an employee that the employer must report to the department.

(b) An employer must report all compensation earnable of an employee, as defined by RCW 41.40.010(8) and WAC 415-108-445(1) to the department.

(c) An employer must report compensation for the month in which it was earned. Compensation is earned when the service is provided, rather than when payment is made.

Example: A member is paid in July for work performed during June. The employer must report the compensation to the department as "June earnings."

[Statutory Authority: RCW 41.50.050. 98-09-059, 415-108-445, filed 4/17/98, effective 5/18/98.]


AMENDATORY SECTION(Amending WSR 98-09-059, filed 4/17/98, effective 5/18/98)

WAC 415-108-466   Do I receive reportable compensation for union leave((.))?   If ((a member)) you take((s)) an authorized leave of absence to serve as an elected official of a labor organization and ((the)) your employer pays ((the member)) you while you are on leave subject to reimbursement from the union, ((the person's)) your pay qualifies as reportable compensation provided that all the conditions of RCW 41.40.175 (Plan ((I)) 1) ((or)), RCW 41.40.710 (Plan ((II)) 2), or RCW 41.40.805 (Plan 3) as appropriate, are met.

[Statutory Authority: RCW 41.50.050. 98-09-059, 415-108-466, filed 4/17/98, effective 5/18/98.]


AMENDATORY SECTION(Amending WSR 95-22-006, filed 10/18/95, effective 11/18/95)

WAC 415-108-480   Vehicles--Does the value of my use of an employer vehicle qualify as compensation earnable?   (((1) PERS Plan I members:

(a) If you use an employer vehicle solely in connection with your employer's business, your use of the vehicle does not qualify as compensation earnable. Use of an employer-provided vehicle only qualifies as compensation earnable to the extent that you use it for personal, rather than business, purposes. Your use of an employer vehicle does not qualify as compensation earnable if:

(i) You use the vehicle solely in connection with your employer's business; or

(ii) Your employer has an established policy prohibiting you from using the vehicle for any purpose other than in connection with your employer's business.

(b) The department presumes that any employer-provided vehicle is used solely in connection with your employer's business and does not qualify as compensation earnable.

(c) A portion of your use of an employer-provided vehicle may qualify as compensation earnable. In order for any portion of your use of an employer vehicle to qualify as compensation earnable, your employer must either:

(i) Report your personal use of the vehicle to the Internal Revenue Service (IRS) as income; or

(ii) Maintain monthly records reflecting your personal use of the vehicle.

(d) Your personal use of an employer vehicle qualifies as compensation earnable if your employer reports your use to the IRS as taxable income. Your employer may report your personal use of an employer vehicle to the Internal Revenue Service (IRS) as taxable income as provided under the Internal Revenue Code (I.R.C.). See I.R.C. Section 61 and Treas. Reg. Section 1.61-21. If so, the department will consider the amount reported to the IRS as compensation earnable.

(e) Your personal use of an employer vehicle qualifies as compensation earnable to the extent your employer documents your personal use of the vehicle. If your employer does not report your use of an employer vehicle to the IRS as income, your use of the vehicle may qualify as compensation earnable if your employer maintains monthly contemporaneous records detailing your personal use of the vehicle. Your employer records must reflect all of the following:

(i) Whether your employer authorized you to have the vehicle for personal use, including commuting;

(ii) Whether you used the vehicle for commuting and, if so, the distance you normally commuted on a daily basis during the month;

(iii) The dates, if any, on which you used the vehicle for other personal purposes, including the miles you drove the vehicle on each personal trip and your itinerary for each trip;

(iv) The total number of miles you drove the vehicle during the month; and

(v) The percentage of the total miles you drove the car during the month for personal use, including commuting.

(f) Your employer must report as compensation earnable an amount based on your personal use of the vehicle. If your employer maintains records documenting your personal use of the vehicle as provided in (e) of this subsection, your employer must report to the department as monthly compensation earnable the lesser of the following amounts:
(i) Monthly Fair Market Lease Value of the Vehicle
x
Percentage of Personal Use of the Vehicle During the Month;
or
(ii) Miles of Personal Use
x
IRS Mileage Rate

"IRS mileage rate" means the mileage rate adopted by the Internal Revenue Service for use by taxpayers in computing the value of the use of a vehicle.)) (1) PERS Plan 1 members:

(a) Use of an employer vehicle for business purposes does not qualify as compensation earnable. If your employer's established policy prohibits the use of an employer vehicle for nonbusiness uses, all use of the vehicle will be deemed business use.

(b) Use of an employer vehicle for nonbusiness purposes qualifies as compensation earnable if:

(i) Your employer reports your personal use of the vehicle to the IRS as taxable income under IRC Section 61 and Treas. Reg. Section 1.61-21; or

(ii) Your employer maintains monthly records of your personal use. These records must contain:

(A) Your employer's authorization of your personal use;

(B) The distance normally commuted each day during the month, if you use the vehicle to commute;

(C) The dates, mileage, and itinerary of each personal trip other than a commute trip;

(D) Your total mileage for the month; and

(E) The ratio of personal mileage to total mileage, expressed as a percent.

(c) The department presumes that your use of an employer vehicle is solely for business purposes. If you used an employer vehicle for personal use, your employer must report the value of this use as compensation earnable on a monthly basis. Monthly compensation earnable is the lesser of the following:

(i) Fair Market Lease Value x Percentage of Personal Use

(ii) Miles of Personal Use x IRS Mileage Rate.

The IRS Mileage Rate is the mileage rate adopted by the Internal Revenue Service for use by taxpayers in computing the value of the use of a vehicle.

(2) PERS Plan ((II)) 2 and 3 members. If you are a ((PERS Plan II)) member of PERS Plan 2 or 3, you are not entitled to count any of the value of an employer-provided vehicle as compensation earnable.

[Statutory Authority: RCW 41.50.050. 95-22-006, 415-108-480, filed 10/18/95, effective 11/18/95. Statutory Authority: RCW 41.40.010(8) and 41.40.020. 87-17-061 (Order DRS 87-08), 415-108-480, filed 8/19/87.]


AMENDATORY SECTION(Amending WSR 95-16-053, filed 7/25/95, effective 8/25/95)

WAC 415-108-679   Purpose and scope of eligibility rules.   WAC 415-108-680 through 415-108-728 codify the department's existing interpretation of statutes ((and existing administrative practice)) regarding eligibility for membership in ((PERS Plan I and Plan II. The department has applied and will apply these rules to determine eligibility for service occurring prior to effective dates of these sections)) all three PERS plans.

[Statutory Authority: RCW 41.50.050. 95-16-053, 415-108-679, filed 7/25/95, effective 8/25/95.]

OTS-4926.1


AMENDATORY SECTION(Amending WSR 01-01-059, filed 12/12/00, effective 1/12/01)

WAC 415-111-100   ((Application of chapter.)) To whom does this chapter apply?   This chapter applies only to members of Plan 3 retirement systems created under chapters 41.32 (TRS) ((and)), 41.35 (SERS) and 41.40 (PERS) RCW.

[Statutory Authority: Chapters 41.32, 41.34, 41.35, 41.50 RCW. 01-01-059, 415-111-100, filed 12/12/00, effective 1/12/01.]

Washington State Code Reviser's Office