ESHB 1981 C HANGES FOR DRS R ETIREES AND H IGHER E DUCATION E MPLOYERS P RESENTATION FOR PPMS U SER G ROUP O CTOBER 21, 2011 Melanie L. Piccin Employer Support Services Department of Retirement Systems 1

S OME OF THE A CRONYMS U SED I N T HIS P RESENTATION 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 2

ESHB 1981 – B ILL D IGEST P ARTS OF THE B ILL C OVERED T ODAY Gives certain newly hired employees more options for retirement 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 that existed for annuity or retirement income plan-covered positions... DRS retiree cannot join SBRP. 3

ESHB T OPICS 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 Employers 4

P ERSON WITH NO DRS H ISTORY H IRED INTO SBRP- ELIGIBLE P OSITION 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 position or PERS Plan 3, if non-faculty position Provide to employee: Plan 3 Facts at a Glance, sent to employers in DRS Notice Plan 3 Member Handbook 5

P ERSON WITH NO DRS H ISTORY H IRED INTO SBRP- ELIGIBLE P OSITION 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 6

P ERSON WITH NO DRS H ISTORY H IRED INTO SBRP- ELIGIBLE P OSITION 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

P ERSON WITH DRS H ISTORY H IRED INTO SRBP- ELIGIBLE P OSITION 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 8

P ERSON WITH DRS H ISTORY H IRED INTO SRBP- ELIGIBLE P OSITION 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”. 9

P ERSON WITH DRS H ISTORY H IRED INTO SRBP- ELIGIBLE P OSITION 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 10

P ERSON WITH DRS H ISTORY H IRED INTO SRBP- ELIGIBLE P OSITION Do employers have to inquire about every DRS member’s retirement eligibility? No. We are providing a guideline based on age and membership history. 11

G UIDELINE – W HEN TO V ERIFY IF AN E MPLOYEE IS E LIGIBLE TO R ETIRE FROM A DRS P LAN 12 Prior Membership in DRS PlanEmployee Age TRS Plan 145 TRS Plan 255 TRS Plan 355 PERS Plan 145 PERS Plan 255 PERS Plan 355 SERS Plan 255 SERS Plan 355 PSERS Plan 253 LEOFF Plan 150 LEOFF Plan 250

P ERSON WITH DRS H ISTORY H IRED INTO SBRP- ELIGIBLE P OSITION What if an employee is “eligible to retire” from a DRS plan? Effective July 1, 2011, the employee is prohibited from participating in the SBRP 13

P ERSON WITH DRS H ISTORY H IRED INTO SBRP- ELIGIBLE P OSITION After you verify that an employee is neither retired nor eligible to retire from a DRS plan: Follow instructions in SBRP Handbook Chart ed to Higher Education employers on August 4,

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON R ETIREE 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. 15

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON R ETIREE 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. 16

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON R ETIREE 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. 17

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON R ETIREE Example – TRS Plan 1 retiree starts work on July 1, 2011 at 8 hours per day. You report the data to DRS and we track the hours. Jul160 Aug184 Sep176 Oct168 Nov176 Dec Retiree has not exceeded 1500 hours and is eligible to receive a DRS pension through December

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON R ETIREE But what happens on January 1, 2012? The retiree has worked over 867 hours in the current fiscal year and the pension benefit will be suspended. Jul160 Aug184 Sep176 Oct168 Nov176 Dec The 1500 hour limit that the retiree had before is gone as of January 1,

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON R ETIREE 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) 20

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER 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” 21

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER 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” 22

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER 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) 23

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER Employer no longer invoiced for ER contributions for T1 retiree that works over 867 hours RCW (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. 24

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER Employer no longer invoiced for ER contributions for P1 retiree that works over 867 hours RCW (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. 25

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER 26 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

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER Example – PERS or TRS Plan 1 retiree starts work on July 1, 2011 at 8 hours per day, and does not participate in SBRP J UL 160 A UG 184 S EP 176 O CT 168 N OV

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER J UL 160 A UG 184 S EP 176 O CT 168 N OV D EC December work would result in an invoice for ER contributions because the Plan 1 retiree exceeded 867 work hours between months of Jul 2011 – Dec

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER 29 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.

L EGISLATIVE U PDATE – ESHB 1981 RRTW C HANGES, I MPACT ON E MPLOYER 30 A Plan 1 retiree was allowed to work in excess of 867 hours without suspension of benefit if the person… RCW (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 (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;

L EGISLATIVE U PDATE – ESHB 1981 C OMMUNICATION TO R ETIREES 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

L EGISLATIVE U PDATE – ESHB 1981 C OMMUNICATION TO R ETIREES 32 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, 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 or document to them (provided by DRS).

L EGISLATIVE U PDATE – ESHB 1981 C OMMUNICATION TO E MPLOYERS 33 Notice will be ed 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 when a retiree is approaching their 867 hour limit Retirees will continue to be notified by letter

Q UESTIONS ? DRS Employer Support Services Phone: (800) , option '6', then '2' (360) , option '2' 34