ESHB 1981

CHANGES FOR DRS RETIREES

AND HIGHER EDUCATION EMPLOYERS

PRESENTATION FOR PPMS USER GROUPOCTOBER 21, 2011

Melanie L. Piccin

Employer Support Services

Department of Retirement Systems

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SOME OF THE ACRONYMS USED IN THIS PRESENTATION

DRS – Department of Retirement Systems

ER – Employer

PERS – Public Employees’ Retirement System

RRTW – Retiree Return to Work

SBRP – State Board Retirement Plan

TRS – Teachers’ Retirement System

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ESHB 1981 – BILL DIGESTPARTS OF THE BILL COVERED TODAYGives certain newly hired employees more options forretirement plans.

Choice between the SBRP and a DRS Plan.

Reduces the expanded postretirement employment provisions for members of certain retirement systems.

Eliminates the provisions that allow some Plan 1 retirees to work over 867 hours before their pension is suspended.

Eliminates postretirement employment exceptions thatexisted for annuity or retirement income plan-covered positions...

DRS retiree cannot join SBRP.3

ESHB 1981 - TOPICS

Retirement System Options for SBRP-eligible Positions

Employee with no DRS History

Employee with DRS History

Rules for DRS Retirees Returning to Work (RRTW)

Changes for Retiree

Changes for Employer

DRS Communication to Retirees

DRS Communication to Employers4

PERSON WITH NO DRS HISTORY HIRED INTO SBRP-ELIGIBLE POSITION

Prior to July 1, 2011, employee was required to participate in the SBRP

Effective July 1, 2011, an employee has 30 days to choose between the SBRP and:

TRS Plan 3, if faculty positionor

PERS Plan 3, if non-faculty position

Provide to employee:

Plan 3 Facts at a Glance, sent to employers in DRS Notice 11-019 Plan 3 Member Handbook 5

PERSON WITH NO DRS HISTORY HIRED INTO SBRP-ELIGIBLE POSITION

How is the employer supposed to document the employee’s retirement system choice?

Each institution will determine their procedure

What if the employee fails to make a choice within 30 days?

Employee is defaulted into the SBRP

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PERSON WITH NO DRS HISTORY HIRED INTO SBRP-ELIGIBLE POSITION

What if employee chooses the DRS plan?

Have employee complete the Higher Education Employee Plan Investment Program form

From used to gather DRS reporting information Originally advised employer not to send form to DRS Notice will be sent asking employers to submit copies of form to DRS

Report employee on the DRS retirement transmittal

Plan Choice Code = 3C Choice Date = date employee made choice Investment program (SELF or WSIB) Rate Option (A, B, C, etc.) 7

PERSON WITH DRS HISTORY HIRED INTO SRBP-ELIGIBLE POSITION

Prior to July 1, 2011, employers were required to verify whether an employee was retired from a DRS plan

Effective July 1, 2011, employers are also required to verify whether an employee is eligible to retire from a DRS plan

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PERSON WITH DRS HISTORY HIRED INTO SRBP-ELIGIBLE POSITION

What does “eligible to retire” mean?

The statute as written does not use verbiage such as “eligible to retire with full pension benefit”.

Therefore, if a DRS member could apply for and receive a reduced pension benefit, they are considered “eligible to retire”.

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PERSON WITH DRS HISTORY HIRED INTO SRBP-ELIGIBLE POSITION

How will the employer find out if a DRS member is “eligible to retire”?

Contact DRS Employer Support Services

Advise that you have hired person into an SBRP-eligible position

Indicate type of position (faculty or non-faculty)

Provide employee name and last four digits of SSN

We should be able to respond promptly unless the member has a complicated account

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PERSON WITH DRS HISTORY HIRED INTO SRBP-ELIGIBLE POSITION

Do employers have to inquire about every DRS member’s retirement eligibility?

No. We are providing a guideline based on age and membership history.

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GUIDELINE – WHEN TO VERIFY IF AN EMPLOYEE IS ELIGIBLE TO RETIRE FROM A DRS PLAN

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Prior Membership in DRS Plan Employee Age

TRS Plan 1 45

TRS Plan 2 55

TRS Plan 3 55

PERS Plan 1 45

PERS Plan 2 55

PERS Plan 3 55

SERS Plan 2 55

SERS Plan 3 55

PSERS Plan 2 53

LEOFF Plan 1 50

LEOFF Plan 2 50

PERSON WITH DRS HISTORY HIRED INTO SBRP-ELIGIBLE POSITION

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PERSON WITH DRS HISTORY HIRED INTO SBRP-ELIGIBLE POSITION

After you verify that an employee is neither retired nor eligible to retire from a DRS plan:

Follow instructions in

SBRP Handbook

Chart emailed to Higher Education employers on August 4, 2011

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON RETIREE

Currently, there are provisions that allow some plan 1 retirees to work more than 867 hours (up to 1500) in a year before their pension benefit is suspended.

ESHB 1981 will eliminate these provisions.

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON RETIREE

Effective January 1, 2012:

TRS Plan 1 retiree - pension benefit will be suspended after 867 hours worked in any position in the fiscal year (July – June)

PERS Plan 1 retiree - pension benefit will be suspended after 867 hours worked in a retirement-eligible position in a calendar year.

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON RETIREE

Q: How does the January 1, 2012 effective date for the 867 hour limit impact a TRS Plan 1 retiree who started working for in July 2011?

A: Let’s look at an example using a TRS Plan 1 retiree who has up to 1500 hours to work in the current fiscal year before their pension is suspended.

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON RETIREE

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON RETIREE

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON RETIREE

SBRP-eligible Positions and Retirees

Effective January 1, 2012, the hours worked in a SBRP- eligible position will count against a retiree’s annual hourly work limit

Currently, there is no negative impact for most retirees as a result of working in an SBRP-eligible position

Exception: TRS Plan 1 retirees (hours worked in any position count)

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

Same subject – how does it impact the employer?

Prior to July 1, 2011, a retiree working in an SBRP-eligible position was reported to DRS as working in a “retirement-ineligible” position

Retirees were reported to DRS in Plan 0 with Type Code “99”

Except TRS Plan 1 retirees – reported with Type Code “97”

Effective January 1, 2012, a retiree working in an SBRP-eligible position must be reported to DRS as working in a “retirement-eligible” position

Start reporting retirees to DRS with Type Code “98”

Continue to report TRS Plan 1 retirees to DRS with Type Code “97”

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

Is this reporting change for retirees working in SBRP-eligible positions going to create additional work for you?

Yes. For retirees (other than TRS Plan 1 retirees) working in an SBRP-eligible position, you will need to:

1. Report an ‘end date’ of 12/31/2011 to DRS for Type Code “99”

2. Report a ‘begin date’ of 01/01/2012 to DRS with Type Code “98”

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

Effective January 1, 2012; Higher Education employers will no longer be invoiced for ER contributions when:

TRS Plan 1 retiree works over 867 hours in the fiscal year

PERS Plan 1 retiree works over 867 hours in the calendar year

(Employers were invoiced if retirees did not participate in the SBRP)

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

Employer no longer invoiced for ER contributions for T1 retiree that works over 867 hours

RCW 41.32.570(4) used to read:

When a retired teacher or administrator renders service beyond eight hundred sixty seven hours, the department shall collect from the employer the applicable employer retirement contributions for the entire duration of the member’s employment during that fiscal year.

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

Employer no longer invoiced for ER contributions for P1 retiree that works over 867 hours

RCW 41.40.037(4)(c) used to read:

When a plan 1 member renders service beyond eight hundred sixty-seven hours, the department shall collect from the employer the applicable employer retirement contributions for the entire duration of the member's employment during that calendar year.

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

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Q: What exactly does it mean for employers since this change is effective January 1, 2012?

A: An employer won’t be invoiced for ER contributions for work performed after January 1, 2012; but could still receive an invoice for work performed in 2011 by a retiree.

Q: What!? Why?

A: See following example using same work hours as in earlier slides

LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

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LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

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Employer no longer has to document a justifiable need to hire a Plan 1 retiree into a position.

The provisions that allowed a TRS Plan 1 or PERS Plan 1 retiree to work in excess of 867 hours in a PERS-eligible or TRS-eligible position before their pension was suspended, has been struck from the RCWs by ESHB 1981.

LEGISLATIVE UPDATE – ESHB 1981RRTW CHANGES, IMPACT ON EMPLOYER

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A Plan 1 retiree was allowed to work in excess of 867 hours without suspension of benefit if the person…

RCW 41.32.570(3)(a) Is hired pursuant to a written policy for which the school board has documented a justifiable need to hire a retiree for the position;

RCW 41.40.037(2)(b)(a)(ii) Is hired pursuant to a written policy for which the school board has documented a justifiable need to hire a retiree for the position;

LEGISLATIVE UPDATE – ESHB 1981COMMUNICATION TO RETIREES

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1. Letter will be mailed to all TRS Plan 1 retirees advising of the changes to hourly limits that could affect them this fiscal year

2. A note regarding the new limits has been posted on the myDRS website that a retiree would see if checking to see how many RRTW hours have been reported for the year

3. The “Thinking about Working after Retirement?” publications are being updated

4. The retiree page on the DRS website is being updated

LEGISLATIVE UPDATE – ESHB 1981COMMUNICATION TO RETIREES

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There is one group of retirees that DRS is unable to identify and isolate – retirees working in positions eligible for the SBRP or other Higher Education Retirement Plan (HERP).

We would like to alert this specific group of retirees that working in a SBRP-eligible or HERP-eligible position will count against their annual work limits effective January 1, 2012.

We are hoping, that because you have to identify these individuals to input the 12/31/2011 end dates and the 01/01/2012 begin dates; that perhaps you could help us communicate to these retirees by forwarding an email or document to them (provided by DRS).

LEGISLATIVE UPDATE – ESHB 1981COMMUNICATION TO EMPLOYERS

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Notice will be emailed in the next two weeks that will recap the information provided today

System choice between DRS Plans and SBRP

Changes to RRTW rules

We are updating Chapter 5 of the DRS Employer Handbook to include the documents, forms, and charts that have been sent (and will be sent in the near future)

We will continue to notify employers via email when a retiree is approaching their 867 hour limit

Retirees will continue to be notified by letter

QUESTIONS?

DRS Employer Support Services

e-mail: drsemployer@drs.wa.gov

Phone: (800) 547-6657, option '6', then '2' (360) 664-7200, option '2'

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