2012 Comprehensive Annual Financial Report - the City of Tukwila

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CITY OF TUKWILA: 2012 CAFRNOTES TO THE FINANCIAL STATEMENTSPERS Plan 2 and Plan 3 members who become totally incapacitated for continued employment whileserving the uniformed services, or a surviving spouse or eligible child(ren), may request interruptivemilitary service credit.PERS Plan 2 and Plan 3 members can also purchase up to 24 months of service credit lost because ofan on-the-job injury.PERS members may also purchase up to five years of additional service credit once eligible forretirement. This credit can only be purchased at the time of retirement and can be used only to providethe member with a monthly annuity that is paid in addition to the member’s retirement benefit.Beneficiaries of a PERS Plan 2 or Plan 3 member with ten years of service who is killed in the course ofemployment receive retirement benefits without actuarial reduction. This provision applies to any memberkilled in the course of employment, on or after June 10, 2004, if found eligible by the Director of theDepartment of Labor and Industries.A one-time duty-related death benefit is provided to the estate (or duly designated nominee) of a PERSmember who dies in the line of service as a result of injuries sustained in the course of employment, or ifthe death resulted from an occupational disease or infection that arose naturally and proximately out ofmember’s covered employment, if found eligible by the Department of Labor and Industries.From January 1, 2007 through December 31, 2007, judicial members of PERS were given the choice toelect participation in the Judicial Benefit Multiplier (JBM) Program enacted in 2006. Justices and judges inPERS Plan 1 and Plan 2 were able to make an irrevocable election to pay increased contributions thatwould fund a retirement benefit with a 3.5 percent multiplier. The benefit would be capped at 75 percentof AFC. Judges in PERS Plan 3 could elect a 1.6 percent of pay per year of service benefit, capped at37.5 percent of AFC.Members who chose to participate would: accrue service credit at the higher multiplier beginning with thedate of their election; be subject to the benefit cap of 75 percent of AFC; stop contributing to the JudicialRetirement Account (JRA); pay higher contributions; and be given the option to increase the multiplier onpast judicial service. Members who did not choose to participate would: continue to accrue service creditat the regular multiplier; not be subject to a benefit cap; continue to participate in JRA, if applicable;continue to pay contributions at the regular PERS rate; and never be a participant in the JBM Program.Newly elected or appointed justices and judges who choose to become PERS members on or afterJanuary 1, 2007, or who had not previously opted into PERS membership, were required to participate inthe JBM Program. Members required into the JBM program would: return to prior PERS Plan ifmembership had previously been established; be mandated into Plan 2 and not have a Plan 3 transferchoice, if a new PERS member; accrue the higher multiplier for all judicial service; not contribute to JRA;and not have the option to increase the multiplier for past judicial service.82
CITY OF TUKWILA: 2012 CAFRNOTES TO THE FINANCIAL STATEMENTSThere are 1,184 participating employers in PERS. Membership in PERS consisted of the following as ofthe latest actuarial valuation date for the plans of June 30, 2011:Type of MembershipMembershipRetirees and Beneficiaries Receiving Benefits 79,363Terminated Plan Members Entitled to but not yet Receiving Benefits 29,925Active Plan Members Vested 105,578Active Plan Members Non-vested 46,839Total 261,705Funding PolicyEach biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2employer and employee contribution rates, and Plan 3 employer contribution rates. Employeecontribution rates for Plan 1 are established by statute at six percent for state agencies and localgovernment unit employees, and at 7.5 percent for state government elected officials. The employer andemployee contribution rates for Plan 2 and the employer contribution rate for Plan 3 are developed by theOffice of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers arerequired to contribute at the level established by the Legislature. Under PERS Plan 3, employercontributions finance the defined benefit portion of the plan, and member contributions finance thedefined contribution portion. The Director of the Department of Retirement Systems sets Plan 3 employeecontribution rates. Six rate options are available ranging from 5 to 15 percent; two of the options aregraduated rates dependent on the employee’s age. As a result of the implementation of the JudicialBenefit Multiplier Program in January 2007, a second tier of employer and employee rates wasdeveloped to fund, along with investment earnings, the increased retirement benefits of those justicesand judges that participate in the program. The methods used to determine the contribution requirementsare established under state statute in accordance with RCW 41.40 and RCW 41.45.The required contribution rates expressed as a percentage of covered payroll as of December 31, 2011,are as follows:Members Not Participating in JBM:PERS Plan I PERS Plan II PERS Plan IIIEmployer* 7.21% 7.21% 7.21% **Minimum 5% toEmployee 6.00% 4.64% maximum 15%* The employer rates include the employer administrative expense fee currently set at 0.16%.** Plan 3 defined benefit portion only.83
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2012 Comprehensive Annual Financial Report - the City of Tukwila

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