Editor’s Note: The Washington State Supreme Court ruled on this litigation on Aug. 14, 2014. For more information, see the article Supreme Court rulings issued in gain sharing, UCOLA lawsuits.
As the Washington Supreme Court deliberates on legal issues related to gain sharing benefits and provisions for early retirement, questions often arise around what is meant by “legal certainty.”
The question is of particular interest to pension system members who may be considering early retirement under the law that is currently before the Court. The law allows 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.
These provisions, known as the 2008 early retirement factors, are tied to a law which repealed gain sharing benefits in 2008. Under the law, the early retirement factors — which were approved as replacement benefits for gain sharing — will terminate if gain sharing or alternate benefits are reinstated by the courts.
The law also says the early retirement factors will continue to be available until there is “legal certainty” in litigation over the gain sharing repeal.
The Department of Retirement Systems believes there will be no legal certainty in the gain sharing litigation at least until the end of the Washington state legal proceedings in the case. While it is not possible to predict when the Supreme Court will issue an opinion in the gain sharing litigation, there is a 20-day period following the issuance of an opinion in which the parties can ask the Court to reconsider its ruling.
If there is no request for reconsideration, or once the Court rules on reconsideration, the Court issues its ‘mandate,’ which makes the decision final. The earliest a mandate can be issued is 20 days after the Court issues its opinion. Therefore, it appears that the earliest there could be legal certainty is 20 days following the issuance of an opinion.
If a member has not received his or her first benefit payment under the 2008 early retirement factors at the time legal certainty is reached, the early retirement factors will not be available to the applicant. This includes those who have applied for retirement and separated from employment, but have not yet received the first installment of their retirement allowance. Those who have retired and received at least one installment prior to legal certainty would not be affected.
Members who plan to retire under the 2008 early retirement factors should be mindful of the processing and payment timeline for retirement applications. Retirements are effective on the first of the month following the month in which the member separated from employment, with the first benefit paid at the end of that month. For example, if a person works any hours in October, the earliest he or she could retire would be Nov. 1, and the first payment would be at the end of November.
Members who have questions about the likely timing of the Supreme Court opinion and how that may affect their individual situation may want to contact a financial advisor or the attorneys representing the plaintiffs in the gain sharing litigation. For questions about the retirement application and benefit payment process, please contact DRS.