Melanie L. Piccin Employer Support Services Department of Retirement Systems

1. ESHB 1981Changes for DRS Retirees and Higher Education EmployersPresentation for PPMS User GroupOctober 21, 2011 Melanie L. Piccin Employer Support Services Department of Retirement Systems

2. 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

3. ESHB 1981 – Bill DigestParts of the Bill Covered Today 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.

4. 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 Employers

5. 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

6. 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

7. 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.)

8. 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

9. 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”.

10. 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

11. 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.

12. Guideline – When to Verify if an Employee is Eligible to Retire from a DRS Plan

13. Person with DRS History Hired into SBRP-eligible Position 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

14. 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

15. 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.

16. 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 positionin a calendar year.

17. 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.

18. Legislative Update – ESHB 1981RRTW Changes, Impact on Retiree 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. Jul 160 Aug 184 Sep 176 Oct 168 Nov 176 Dec 176 1040 Retiree has not exceeded 1500 hours and is eligible to receive a DRS pension through December 2011.

19. Legislative Update – ESHB 1981RRTW Changes, Impact on Retiree 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. Jul 160 Aug 184 Sep 176 Oct 168 Nov 176 Dec 176 1040 The 1500 hour limit that the retiree had before is gone as of January 1, 2012.

20. 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)

21. 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”

22. 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: • Report an ‘end date’ of 12/31/2011 to DRS for Type Code “99” • Report a ‘begin date’ of 01/01/2012 to DRS with Type Code “98”

23. 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)

24. 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.

25. 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.

26. Legislative Update – ESHB 1981RRTW Changes, Impact on Employer 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

27. Legislative Update – ESHB 1981RRTW Changes, Impact on Employer Example – PERS or TRS Plan 1 retiree starts work on July 1, 2011 at 8 hours per day, and does not participate in SBRP Jul 160 Aug 184 Sep 176 Oct 168 Nov 176864

28. Legislative Update – ESHB 1981RRTW Changes, Impact on Employer Jul 160 Aug 184 Sep 176 Oct 168 Nov 176864 Dec 176 1040 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 2011.

29. Legislative Update – ESHB 1981RRTW Changes, Impact on Employer 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.

30. Legislative Update – ESHB 1981RRTW Changes, Impact on Employer • 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;

31. Legislative Update – ESHB 1981Communication to Retirees • Letter will be mailed to all TRS Plan 1 retirees advising of the changes to hourly limits that could affect them this fiscal year • 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 • The “Thinking about Working after Retirement?” publications are being updated • The retiree page on the DRS website is being updated

32. Legislative Update – ESHB 1981Communication to Retirees • 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).

33. Legislative Update – ESHB 1981Communication to Employers • 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

34. Questions? DRS Employer Support Services e-mail: drsemployer@drs.wa.gov Phone: (800) 547-6657, option '6', then '2' (360) 664-7200, option '2'