WASA/AWSP FAQ QUESTIONS AND ANSWERS
What’s the status of the Supreme Court case dealing with gain sharing and early retirement?
The Washington Supreme Court (9-0) issued its decision on August 14, 2014. They upheld the state’s right to discontinue the uniform cost of living adjustments (UCOLA) for members of Plans 1 and they upheld the state’s right to repeal gainsharing (GS).
The decision on the GS case centered on a law affecting members in Plans 2 and 3. It provided early retirement and other benefits as a replacement for gain sharing benefits, which were repealed. Since the court upheld the right of the state to reserve, and then implement the option to repeal GS, the early retirement option remains in place, pending the outcome of any appeal.
Members of Plan 1 lost any opportunity to receive future cost of living adjustments.
The plaintiffs in the case have 20 days in which to appeal the court’s decision.
What does this mean if I want to retire before the age of 65?
Pending an appeal of the court’s decision seeking a reconsideration of their decision, this is of particular interest to pension system members who may be considering early retirement. The law, if the decision if upheld will continue to allow members of PERS, TRS and SERS Plan 2 and Plan 3 with at least 30 years of service to retire at age 62 (instead of 65) with no actuarial reduction in their benefit. It also allows those members to retire before age 62 with less of a benefit reduction than had previously been provided.
When I began as an administrator, I lost two months of service credit. What’s that about?
If you are a teacher, service credit (years of experience) is calculated from a year that runs from September 1 through September 1. If you are an administrator, service credit runs from July 1 through July 1. So, if you were a teacher and moved into school administration, you ‘lose’ two months of service credit. For example, if you retired from being an administrator after 30 years of service, the Department of Retirement Systems (DRS) would show that you had 29 years, 10 months of service credit. In effect, you have ‘lost’ the two months credit for teaching.
How can I make up those lost two months?
There is little likelihood of a legislative fix, but there are some options. One of the first steps in planning for retirement is to estimate your benefit. This link takes you to that page: http://www.drs.wa.gov/benefit-estimators/html/
You can input your estimated date of retirement. You should input both July 1 of the year you expect to retire and have the estimator calculate your benefit, and you should input September 1 of the year you expect to retire and see the result. Technically, you have never ‘lost’ the two months as a teacher. They have just become phantoms in the system due to the calendar years for the different positions. You are still entitled to that credit.
So you have a decision to make. If y ou forgo collecting your first retirement check until September 1, you will have full service credit. If you choose July 1 as your retirement date, you will lose two months of pension checks. If the difference in the benefit is enough to justify the wait, then you may decide to do so. If not, then choose July 1.
What are the chances of changing the pension system to the rule of 85?
The “Rule of 85” is a suggested change in the pension system. As proposed, it would allow an individual to retire with full benefits if he/she had a combination of years of experience and age that totaled 85.
Given the present make-up of the Legislature, there is little, if any, chance of getting this change. In fact, the Republican led Senate has and will continue to move state and school employees to an entirely different pension plan modeled after the defined contribution 401(k) style plans prevalent in private industry, most notably Boeing.
I’m a Plan 3 member. Are there any changes that affect me?
TRS Plan 3 Contribution Rate Change Window
The Legislature passed and the Governor signed legislation that will eliminate the annual option a member of Plan 3 has had to change his/her contribution rate. If you’re a TRS Plan 3 member, you will have one last opportunity in January 2015 to change your contribution rate. If you decide to do so, please complete the TRS Plan 3 Contribution Rate Change. Once you have filled out the form, submit it to your employer between January 1 and January 31. After that, TRS Plan 3 members would only be able to change their rate when they change employers, as is the case currently with PERS and SERS Plan 3 members.
This change was made because the Internal Revenue Service has provisionally qualified the state of Washington’s TRS Plan 3 with an important condition – that the annual rate change option be removed.
What about retirement health benefits?
The Washington State Public Employees Benefits Board (PEEB) offers insurance plans for retirees. Their website has information. Upon retirement, an individual has many choices. For example, he/she could choose under COBRA to continue with the school district’s insurance carriers, move into one of the PEBB plans, or choose a plan from the Health Benefit Exchange available under the Affordable Care Act. The important and critical piece is that a potential retiree must fill in a form upon retirement or separation to either enroll in PEBB or defer enrollment because he/she chooses another option. If an employee does not fill this out, then he/she loses any future eligibility for PEBB plans. Benefit specialists are available to assist with explanations and outlining options.
I’m still confused. Where can I get more information?
The best source for definitive answers on retirement is through DRS. They offer many options for helping you regarding retirement. Their website, http://www.drs.wa.gov/, is extremely useful. It contains phone numbers for live people to contact with questions about your retirement plan. DRS also offers pre-retirement workshops that are extremely worthwhile to attend. Information on these is on their website.
The PEBB website outlining plans and costs is given above.
The Nexus Group
Nothing in this document should be considered definitive legal, tax or investment advice. All information is provided for the convenience and personal reference of members to assist them in discussing their individual situations with legal and financial advisors. Retirement benefits and the applicable rules are highly complex and can vary dramatically from individual to individual. Readers are strongly encouraged to seek professional advice before making retirement benefit decisions.