PROPOSED RULES
RETIREMENT SYSTEMS
Original Notice.
Preproposal statement of inquiry was filed as WSR 01-04-027.
Title of Rule: WAC 415-108-425 Plan choice and transfer rights, 415-108-980 Transfer payment, 415-111-310 Defined contribution account distribution, 415-111-410 Submitting a beneficiary designation for Plan 3 members, 415-111-440 Gainsharing, and 415-111-450 How does a court-ordered division of property affect my Plan 3 account?
Purpose: These new rules are necessary to implement the public employees' retirement system Plan 3. The WACs being added to chapter 415-111 WAC also affect other "Plans 3."
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 were proposed in separate filings.
Statutory Authority for Adoption: RCW 41.50.050(5).
Statute Being Implemented: WAC 415-108-425 is RCW 41.40.785; WAC 415-108-980 is RCW 41.32.8401, 41.35.630, 41.40.795; WAC 415-111-310 is RCW 41.34.070; WAC 415-111-410 is RCW 41.40.835, 41.40.845; WAC 415-111-440 is chapter 41.31A RCW and WAC 415-111-450 is RCW 41.50.670 through 41.50.720.
Reasons Supporting Proposal: These rules are necessary to implement the public employees' retirement system Plan 3 and to address remaining issues from implementing previous Plans 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: Lucille Christenson, 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: 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: See Title of Rule and Statute Being Implemented above.
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, 3rd Floor, Tumwater, WA, on December 27, 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 27, 2001.
Date of Intended Adoption: No sooner than December 28, 2001.
November 20, 2001
Merry A. Kogut
Rules Coordinator
OTS-5337.1
NEW SECTION
WAC 415-108-425
How do I determine if I have choice rights
or transfer rights to PERS Plan 3?
(1) Definitions:
(a) "Concurrently employed" means you are employed at the same time, in eligible positions, by a Phase 1 employer and by a Phase 2 employer.
(b) "Exercising choice rights" means choosing Plan 2 or Plan 3 or defaulting into Plan 3.
(c) "Phase 1 employer" means state agencies and institutes of higher education.
(d) "Phase 2 employer" means all other employers.
(e) "Phase 1 transfer period" is the period from March 1, 2002, through and including August 31, 2002.
(f) "Phase 2 transfer period" is the period from September 1, 2002, through and including May 31, 2003.
(2) What determines if I have "choice rights" or "transfer rights"? Your current employment status and your employment history will be used to determine if you have choice rights or transfer rights. If your employment status changes, your rights must be reevaluated. A change in your employment status, such as separating from employment or becoming reemployed, may change your rights.
(3) What are "choice rights" and how are they applied? "Choice rights" refers to your right, within a ninety-day period, to make an irrevocable choice to become a member of Plan 2 or Plan 3.
(a) You will be reported in Plan 2 until you exercise choice rights.
(b) You must make a choice within ninety days of your first day of employment in an eligible position.
(c) You will be defaulted into Plan 3 if you continue employment past the ninety-day choice period without making a choice.
(d) You may exercise choice rights only once.
(4) Do I have "choice rights"?
(a) You have choice rights if your initial PERS membership began on or after March 1, 2002, with a Phase 1 employer in an eligible position.
(i) If you separate from employment and did not exercise your choice rights, you retain choice rights if you are reemployed in an eligible position with a Phase 1 employer.
(ii) If you separate from employment and did not exercise your plan choice rights, and you are not employed by a Phase 2 employer during Phase 2, you retain choice rights if you begin another period of employment in an eligible position with a Phase 2 employer after May 31, 2003.
(b) You have choice rights if your initial PERS membership began on or after September 1, 2002, with a Phase 2 employer in an eligible position. If you separate from employment and did not exercise your plan choice rights, you retain choice rights if you begin another period of employment in an eligible position with a Phase 1 or Phase 2 employer.
(5) What are "transfer rights" and how are they applied? "Transfer rights" refers to your right as a Plan 2 member to transfer into Plan 3 during an applicable transfer period to your employment type.
(a) You are not required to exercise transfer rights. If you have transfer rights, you will remain in Plan 2 unless you decide to transfer to Plan 3.
(b) If you do not transfer to Plan 3 during the Phase 1 or the Phase 2 transfer periods, you will not qualify to receive the additional transfer payment under RCW 41.40.795 or retroactive gainsharing payment under RCW 41.31A.040.
(6) Do I have transfer rights?
(a) You have transfer rights if you:
(i) Are a Plan 2 member;
(ii) Are employed in an eligible position by a Phase 1 employer during the Phase 1 transfer period; and
(iii) Were not eligible for choice rights under subsection (4)(a) of this section.
(b) You have transfer rights if you:
(i) Are a Plan 2 member;
(ii) Are employed in an eligible position by a Phase 2 employer during the Phase 2 transfer period; and
(iii) Were not eligible for choice rights under subsection (4)(b) of this section.
(7) What are "January transfer rights" and how are they applied? "January transfer rights" refers to a Plan 2 member's right to transfer to Plan 3 during any January after the close of a transfer period.
(a) If you are employed by a Phase 1 employer, in an eligible position, the first January you can transfer is January 2003.
(b) If you are employed by a Phase 2 employer, in an eligible position, the first January you can transfer is January 2004.
(c) You must earn service credit in the January in which you transfer.
(8) Do I have January transfer rights?
(a) You have January transfer rights if you were eligible for transfer rights and did not transfer to PERS Plan 3 during the transfer period that applied to you.
(b) You have January transfer rights if you:
(i) Were employed in an eligible position with a Phase 1 employer before the Phase 1 transfer period, or were employed in an eligible position by a Phase 2 employer before the Phase 2 transfer period;
(ii) Were not employed by a Phase 1 employer during the Phase 1 transfer period;
(iii) Were not employed by a Phase 2 employer during the Phase 2 transfer period; and
(iv) Are employed by a Phase 1 employer in an eligible position that you began after the Phase 1 transfer period ended, or are employed by a Phase 2 employer in an eligible position that you began after the Phase 2 transfer period ended.
(9) What happens after I become a Plan 3 member? Once you choose Plan 3 or default to Plan 3 or transfer to Plan 3, you will remain a Plan 3 member. You will not have any additional transfer rights or choice rights to exercise.
(10) What rules apply to me if I am concurrently employed?If you are, or become concurrently employed during the Phase 1 transfer period in an eligible position, you will have transfer rights but must wait until the Phase 2 transfer period to transfer. If you separate from one of the employers, your membership rights must be reevaluated.
| Examples: | The examples are written, for the most part, for a Phase 1 employer. Use the Phase 2 transfer period (September 1, 2002, through and including May 31, 2003) to apply the rules to a Phase 2 employer. |
Example 1: Pat starts working for a state agency in an eligible position (Phase 1 employer) as of:
A. April 1, 2002. Since Pat has not previously been a member of PERS, Pat has ninety days to make a plan choice for Plan 2 or Plan 3. See subsection (3)(b) of this section.
B. After forty-five days, Pat leaves service without making a choice, and then returns in an eligible position one year later. Pat has a new ninety day period in which to make his plan choice. See subsection (4)(a)(i) of this section.
C. Pat chooses Plan 3 within his ninety days. Pat is now a Plan 3 member regardless of future employment. See subsection (9) of this section.
D. Instead of choosing Plan 3, Pat lets his ninety day plan choice period go by with out choosing Plan 2 or Plan 3. Pat is defaulted into Plan 3 and is now a Plan 3 member regardless of future employment. See subsections (3)(c) and (9) of this section.
Transfer Rights:
Example 2:
A. Chris has been a Plan 2 member since 1977. Chris is working at a state agency (Phase 1 employer) as of March 1, 2002. Since Chris was a member prior to the start of Plan 3, Chris has the right to transfer to Plan 3 in the transfer period (March 1, 2002, through August 31, 2002). See subsection (6)(a) of this section.
B. However, Chris did not make a decision to transfer prior to the close of the Phase 1 transfer period. If Chris remains employed for a Phase 1 employer, her right to transfer to Plan 3 is limited to January of each year. See subsection (8)(a) of this section.
C. In this variation, Chris was a Plan 2 member from March 1, 1987, through February 1, 2002. Chris returns on October 15, 2002, for a state agency (Phase 1 employer). Since Chris returned to service after the transfer period (March 1, 2002, through August 31, 2002), Chris only has the right to transfer to Plan 3 in January of each year. See subsection (8)(b) of this section.
Irrevocable Choice Rule:
Example 3: Mike starts working for a state agency (Phase 1 employer) as of April 1, 2002. Since Mike has not previously been a member of PERS, he has ninety days to make a plan choice for Plan 2 or Plan 3. Mike chooses Plan 3 within his ninety days. Mike is now a Plan 3 member regardless of future employment. See subsection (9) of this section.
Example 4: Pat starts working for a state agency (Phase 1 employer) as of April 1, 2002. Since Pat has not previously been a member of PERS, he has ninety days to make a plan choice for Plan 2 or Plan 3. Pat chooses Plan 2 within his ninety days. Pat is now a Plan 2 member who can no longer have a plan choice regardless of future employment. See subsection (3)(d) of this section.
Concurrent Employment in Phase 1 and 2:
Example 5: Using example 2A, Chris also accepts employment for a county (Phase 2 employer) on April 1, 2002, prior to transferring to Plan 3. Since Chris is concurrently employed at a Phase 1 and a Phase 2 employer, Chris must wait for the Phase 2 window before he can transfer to Plan 3. See subsection (10) of this section.
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(a) You will receive a payment of one hundred and ten percent of your transfer basis if you are employed in an eligible position by a Phase 1 employer and you transfer to Plan 3 during the Phase 1 transfer period. State agencies and institutes of higher education are Phase 1 employers.
(b) You will receive a payment of one hundred and eleven percent of your transfer basis if you are employed in an eligible position by a Phase 2 employer and you transfer to Plan 3 during the Phase 2 transfer period. All other employers are Phase 2 employers.
(2) Your transfer basis is your total accumulated contributions (and interest) on March 1, 2002, less fifty percent of any contributions you made under RCW 41.50.165(2).
(3) If you request to transfer but die before payment is made, the transfer payment will be paid immediately to your defined contribution account. These moneys will be distributed when payment is made from your account to your estate, or the person or persons, trust or organization you nominated by the most recent written beneficiary designation filed with the department.
| Examples: | If your account balance as of March 1, 2002, was
$10,000, and you work for a Phase 1 employer, your
transfer payment would be 110 percent of your
account balance, or $11,000. When you transfer to
Plan 3, your original $10,000 will be deposited in
your Plan 3 account. Your account balance after
the transfer would be $21,000 plus the additional
contributions and earnings that have accumulated
since March 2002, adjusted by any earnings or
losses. |
| If your account balance as of March 1, 2002, was $10,000, and you work for a Phase 2 employer, your transfer payment would be 111 percent of your account balance, or $11,100. When you transfer to Plan 3, your original $10,000 will be deposited in your Plan 3 account. Your account balance after the transfer would be $21,100 plus the additional contributions and earnings that have accumulated since March 2002, adjusted by any earnings or losses. |
(4) Terms defined:
Phase 1 transfer period: WAC 415-108-420.
Phase 2 transfer period: WAC 415-108-420.
Service: RCW 41.40.010 (9)(b).
Transfer basis: RCW 41.40.795 (1)(b).
Transfer period: RCW 41.40.795 (1)(a).
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OTS-5338.1
AMENDATORY SECTION(Amending WSR 01-01-059, filed 12/12/00,
effective 1/12/01)
WAC 415-111-310
Defined contribution ((withdrawal)) account
distribution.
(1) How do I ((withdraw)) receive a distribution
of funds from my defined contribution account? Except as
otherwise allowed by RCW 41.34.070, ((you must meet the following
criteria to withdraw)) before you can receive a distribution of
funds from your defined contribution account:
(a) You must separate from all eligible employment;
(b) The department must receive the notice of separation
((must be received by the department)) from your employer(s)
through the retirement transmittal system; and
(c) You must submit the appropriate, completed form ((for))
requesting a defined contribution ((withdrawal. Pursuant to WAC 415-111-110, you bear the responsibility for completing and
submitting the form)) distribution to the department's designated
recordkeeper as directed on the form. See WAC 415-111-110.
(2) Can I still receive my defined contribution
((withdrawal)) distribution if I ((return)) have returned to work
before receiving my ((withdrawal)) funds? If you have ((made a
request for payment and meet all of the)) requested a
distribution of funds and all criteria in subsection (1) of this
section are met, you may return to work in an eligible position
and still ((take)) receive payment of the requested defined
contribution ((withdrawal)) distribution.
(3) What are my options for distributing my defined contribution funds? You have the following options for distributions from your Plan 3 defined contribution account. Options for both the WSIB and the SELF-directed investment programs are combined where applicable.
(a) Lump sum cash distribution. In either program, you may request the entire amount of your funds in a single lump-sum payment.
(b) Direct rollover. In either program, you may have some or all of your funds rolled over to an eligible retirement plan or individual retirement account (IRA). If you choose a partial rollover, the remaining funds that were not rolled over will be distributed to you as a lump sum, unless you create a personal payment schedule under (d) of this subsection.
(c) Scheduled payments. In either program, subject to the distribution requirements of IRC section 401 (a)(9), you may request that your funds be distributed in equal payments over a specified period of time, or that a specific dollar amount be paid on a monthly basis until the account is exhausted. You may also request equal payments over your lifetime or the lifetimes of you and your beneficiary. Scheduled payments for the WSIB program are made monthly only. Scheduled payments for the SELF-directed program are made monthly, quarterly, semi-annually and annually. Both programs have a minimum payment requirement of one hundred dollars per month.
(d) Personalized payment schedule. In either program, you may create a personalized payment plan using any part of one or more of the distribution options provided in (a), (b), and (c) of this subsection (see examples below).
(e) Annuity purchase. For the SELF-directed program only, you may request to have your funds used to purchase an annuity from an insurance company which pays a benefit for your lifetime or the lifetimes of you and your beneficiary.
(4) Market fluctuations. Your defined contribution account is subject to actual investment earnings (both gains and losses). These gains or losses will be used to adjust the value of your account. The defined contribution payment plans are subject to the same market fluctuations. As a result, the funding of your selected payment plan may last longer than anticipated due to market gains, or end earlier than anticipated due to market losses.
EXAMPLE (WSIB - Partial rollover with payments until account exhausted):
Pat has $10,000 in the WSIB investment program. Pat wants to rollover $2,000 of the total to an IRA, but does not want to receive the remainder of the account in a lump sum payment as provided by the partial direct rollover option. Pat selects the personalized payment schedule option and requests to do a partial rollover of $2,000 and receive the remaining $8,000 in equal monthly payments until the account is exhausted.
EXAMPLE (Self - Partial rollover with payments for fixed period):
Chris has $10,000 in the self-directed investment program. Chris wants to rollover $3,000 of the total to an IRA, but does not want to receive the remainder of the account in a lump sum payment as provided by the partial direct rollover option. Chris selects the personalized payment schedule option and requests to do a partial rollover of $3,000 and receive the remaining $7,000 in quarterly payments of $250 over the next 7 years (28 quarters).
| SELF | WSIB |
| Lump Sum Cash Distribution Direct Rollover | Lump Sum Cash Distribution Direct Rollover |
| -entire account | -entire account |
| -partial amount | -partial amount |
| -remaining funds can be distributed in a lump-sum payment or by a personalized payment schedule (see below). | -remaining funds can be distributed in a lump-sum payment or by a personalized payment schedule (see below). |
| Scheduled Payments | Scheduled Payments |
| -equal payments | -equal payments |
| -monthly, quarterly, semi-annual or annual | -monthly payments only |
| -specified period of time, or | -specified period of time, or |
| -until the account is exhausted | -until the account is exhausted |
| -payments can be combined life expectancy of you and a beneficiary. | -payments can be combined life expectancy of you and a beneficiary. |
| Annuity Purchase | Not available for WSIB program |
| -purchase an annuity from an insurance company | |
| -set up to pay benefits for | |
| -your lifetime, or | |
| -lifetimes of you and your beneficiary | |
| In addition to the above, you may set up: | Not available for WSIB program |
| Personalized Payment Schedule | Personalized Payment Schedule |
| -customized for your needs | -customized for your needs |
| -available for options above. | -available for options above. |
[Statutory Authority: Chapters 41.32, 41.34, 41.35, 41.50 RCW. 01-01-059, 415-111-310, filed 12/12/00, effective 1/12/01.]
(a) When the average of investment returns on the net assets held in the Plan 2 and 3 pension funds exceeds ten percent over a four-year period, the amount in excess of ten percent is called extraordinary gains.
(b) A portion of the extraordinary gains is paid to qualified Plan 3 members, retirees and designated survivors and is called gainsharing. The amount a person receives is calculated based on total service credit.
(c) Gainsharing payments are made in January of even-numbered years.
(d) Gainsharing is based on fiscal years (July 1 - June 30). If the retirement fund does not earn in excess of ten percent over the four-year period, there is no gainsharing payment.
(e) A gainsharing payment is credited to an investment program according to the investment allocations that you have on file. Gainsharing payments appear on your first quarter statement in even-numbered years.
(2) Are my survivors eligible for my gainshare payments if I die?
(a) If you die in-service and your surviving spouse or eligible child or children choose to receive a monthly retirement allowance, they will be eligible to receive gainsharing payments. If you do not have a surviving spouse or minor child or children, your account will no longer receive gainsharing payments.
(b) If you die as the beneficiary receiving a survivorship benefit from a death-in-service member with gainsharing payments, your gainsharing payments will continue to your minor child or children until they reach the age of majority or die. If you do not have any minor children, your account will no longer receive gainsharing payments.
(c) If you die after retirement and you chose a survivorship benefit, the gainsharing payment will continue to your survivor. If you did not choose a survivorship benefit, your account will no longer receive gainsharing payments.
(3) What happens if I die before the first payment is made? If you have qualified for a gainsharing payment, but die prior to the payment being made, the payment will be paid to your estate, or the person or persons, trust, or organization you nominated by the most recent written designation filed with the department.
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(a) Is entered by a court of competent jurisdiction;
(b) Is filed with the department within ninety days of the order's entry by the court;
(c) Establishes the right of a separated or former spouse to a portion of your retirement benefit;
(d) Provides the name, address, date of birth, and Social Security number of the separated or former spouse; and
(e) Incorporates the following statutory language in RCW 41.50.670(2) in which the first paragraph pertains to your defined benefit account and the second paragraph pertains to your defined contribution account (emphasis added):
If . . . . . . (the obligor) receives periodic retirement payments as defined in RCW 41.50.500, the department of retirement systems shall pay to . . . . . . (the obligee) . . . . . . dollars from such payments or . . . . . . percent of such payments. If the obligor's debt is expressed as a percentage of his or her periodic retirement payment and the obligee does not have a survivorship interest in the obligor's benefit, the amount received by the obligee shall be the percentage of the periodic retirement payment that the obligor would have received had he or she selected a standard allowance.
If . . . . . . . . (the obligor) requests or has requested a withdrawal of accumulated contributions as defined in RCW 41.50.500, or becomes eligible for a lump sum death benefit, the department of retirement systems shall pay to . . . . . . . . (the obligee) . . . . . . . . dollars plus interest at the rate paid by the department of retirement systems on member contributions. Such interest to accrue from the date of this order's entry with the court of record.
(2) Periodic retirement payments under RCW 41.50.670(2) (paragraph 1). If the property division order requires the department to pay a portion of your "periodic retirement payments" to your separated or former spouse, the department will pay the required portion (if any) out of your periodic defined benefit payments.
(a) If you die before periodic retirement payments begin, the department's obligation to pay a portion of your periodic payments to your separated or former spouse ceases.
(b) If your separated or former spouse dies before your periodic retirement payments begin, the department will pay you the full amount of your periodic retirement allowance.
(3) Distribution (withdrawal) of accumulated contributions or lump sum death benefit under RCW 41.50.670(2) (paragraph 2). If the property division order requires the department to pay a portion of a distribution of "accumulated contributions" or a portion of a "lump sum death benefit" to your spouse or former spouse, the department will pay the required portion (if any) out of your defined contribution member account, subject to the provisions in this rule.
(4) Provisions for management of accounts:
(a) When the property division order is filed with the department, the department will create a separate account and transfer the amount specified in the order from your defined contribution member account into the new account.
(b) Your separated or former spouse assumes the responsibility to manage the separate account, consistent with the requirements in subsection (6) of this section, but may not contribute to the account.
(c) You retain the responsibility to manage the funds remaining in your defined contribution account, and may continue to contribute to the account.
(d) If your separated or former spouse dies before you request a distribution, the money in the separate account will be transferred back into your defined contribution account.
(5) Distribution provisions.
(a) When you request a distribution from your defined contribution account:
(i) The money in your defined contribution account will be disbursed to you pursuant to your distribution choice.
(ii) Your separated or former spouse (if living) must begin distribution(s) from the separate account pursuant to the distribution options in WAC 415-111-310. (However, if your separated or former spouse has died prior to your request for distribution, the money in the separate account will have been transferred back into your defined contribution account under subsection (4)(d).)
(iii) If you die before the money in your defined contribution account is fully disbursed, the balance of the account will be paid to your designated beneficiary(ies).
(iv) If your separated or former spouse dies before the money in the separate account is fully disbursed, the balance of the separate account will be paid to the beneficiary(ies) designated by your separated or former spouse for the separate account.
(b) If you die before receiving a distribution from your defined contribution account:
(i) Your beneficiary(ies) must apply for the lump sum death benefit from your defined contribution account; and
(ii) The money in your defined contribution account must be paid to at least one of your designated beneficiary(ies); then
(iii) Your separated or former spouse (if living) must begin distribution(s) from the separate account pursuant to the distribution options in WAC 415-111-310. (However, if your separated or former spouse has predeceased you, the money in the separate account will have been transferred back into your defined contribution account under subsection (4)(d).)
(6) In managing the separate account pursuant to subsection (4)(b) of this section, your separated or former spouse may:
(a) Transfer money between investment programs (state-managed or self-directed); and
(b) Transfer money among the investment options in the self-directed program (SELF).
(7) If you and your former spouse filed a property division order with the department while you were a member of Plan 2 and you later transfer to Plan 3, at the time of your transfer, the department will create a separate account. The department will comply with the property division order as provided in this rule.
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OTS-5246.1
NEW SECTION
WAC 415-111-410
Submitting a beneficiary designation for
Plan 3 members.
(1) You may designate or change a beneficiary
for your defined contribution account at any time. When received
by the department, the most recent beneficiary designation
supercedes all prior beneficiaries and will be used for your Plan
3 defined contribution account.
(2) If you designate a beneficiary as a Plan 2 member and move to Plan 3, the Plan 2 beneficiary designation will be used as your Plan 3 defined contribution account beneficiary.
(3) The beneficiary you designate for your defined contribution account can be different from the beneficiary you designate when you apply for your defined benefit retirement.
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