Subject: DRS Email 11-034, ESHB 1981 Update for Higher Education...

  • Notice No.: 11-034
  • Date: November 02, 2011
  • Applies to: Higher Education Employers
  • Subject: DRS Email 11-034, ESHB 1981 Update for Higher Education Employers – Retirees who Return to Work and System Choice

The passage of ESHB 1981 in the 2011 Legislature impacts three areas of retirement law. To keep you informed as we make progress while implementing the bill, we’ve updated the areas that affect Higher Education Employers:

  • System Choice for new higher education employees;
  • Changes for retirees who return to work (RRTW); and
  • The Higher Education Retirement Plan (HERP) Supplemental Benefit fund (please see DRS Email 11-029, ESHB 1981 for details).

System Choice for new higher education employees

Brief background: Effective July 1, 2011, new employees (with no past HERP history) who are hired into a HERP-eligible position have a choice between retirement systems. They have 30 days to choose either the HERP or Plan 3 (PERS is non-faculty; TRS is faculty). If a choice isn’t made within 30 days, the employer will default the employee to the HERP. New employees with prior DRS membership may also be eligible for the HERP/Plan 3 choice, depending on their past membership scenario.

Higher education employers cannot offer HERP to new employees who have retired or are eligible to retire from any retirement plan administered by DRS and listed in RCW 41.50.030. Employers can contact DRS to verify the employee’s retirement status.

Rehired retirees who were participating in a HERP before July 1, 2011, may continue to do so, but are subject to the return to work rules described in this notice.

Update: At the end of June we sent you a Higher Education Employees Plan 3 Investment Program Form that we designed for your internal use. We originally asked you to keep the form. However, to track employees for our processes, we’re now requesting that you begin using the updated form linked above and send copies to us. Please also send us copies of all the forms that you’ve been gathering since July 1.

Reporting

Reporting your employees remains the same. If an employee (who hasn’t previously participated in Plan 3) chooses Plan 3 instead of HERP, report the following information on your DRS transmittal:

  • 3C and date TRS or PERS was chosen
  • Employment begin date
  • Member contributions, investment program, rate option
  • Compensation, hours, employer contributions

Communications

DRS will develop additional Plan 3 materials specific for higher education employees. In the meantime, employees considering whether or not to choose Plan 3 should review:

Please do not refer new HERP/Plan 3 eligible employees to the Plan Choice Booklet. The rules affecting HERP-eligible higher education employees are different. If your employees have Plan 3 questions that cannot be answered with the above publications, please ask them to contact DRS.

 

Changes to the rules for retirees who return to work

RRTW rules will change beginning January 2012. Changes to work limits impact primarily Plan 1 members of TRS and PERS who will no longer be able to work in excess of 867 hours. Hours worked by retirees employed in HERP-eligible positions must be reported to DRS. These hours count toward the retiree’s work limits. We’re developing a handout to notify retirees employed in HERP-eligible positions of the 867 hour limit. We will ask for your assistance to distribute this handout later in November.

Limit Reductions

The current law, which is in effect until December 31, 2011, allows some Plan 1 retirees to return to work for up to 1500 hours without stopping their benefit. Beginning January 1, the new law limits all PERS Plan 1 retirees to 867 hours in a calendar year and TRS Plan 1 retirees to 867 hours in a fiscal year (July – June).

  • Work Limit Hours for PERS Plan 1
    Through December 31, 2011, we will continue to monitor PERS Plan 1 retirees employed in a DRS eligible position and stop the retirement benefit of any who exceed their limit in the 2011 calendar year. Beginning in January 1, 2012, we will stop the retirement benefit of any PERS Plan 1 retiree employed in either a DRS eligible or a HERP eligible position who returns to work and exceeds 867 in the 2012 calendar year and future calendar years.
  • Work Limit Hours for TRS Plan 1
    The effective date falls in the middle of the fiscal year. Through December 31, 2011, we will continue to stop the retirement benefit of any TRS Plan 1 retiree who returns to work and exceeds their limit. Beginning January 1, 2012, we will stop the retirement benefit of any TRS Plan 1 retiree who returns to work and exceeds 867 hours for the entire 2011/2012 fiscal year (June 2011 – June 2012) and future fiscal years.

DRS will send letters in November to affected retirees regarding the change in limits. Employers will continue to receive emails and retirees will continue to receive letters as the limits are approached.

Employer Invoicing and Justifiable Need Documentation

Because the retirement benefit will be stopped at 867 hours, effective January 1, 2012, you:

  • Will no longer be invoiced for employer contributions when Plan 1 retirees from TRS or PERS work more than 867 hours annually. But you could still receive an Employer Billing Invoice if the retiree exceeds 867 hours in 2011. You will not receive any new invoicing for work performed in 2012.
  • Will not be required to complete justifiable need paperwork.

HERP-Eligible Positions Impact DRS Retirees

Beginning January 1, 2012, hours worked by a DRS retiree in a position eligible for HERP must be reported to us and the hours will be counted toward the retiree’s work limits.

Reporting Changes for Employers

Beginning January 1, 2012, you must report DRS retirees working in HERP-eligible positions as working in retirement-eligible positions. In the past these individuals were reported to DRS as working in retirement-ineligible positions. Please see the attached DRS Retiree Returning to Work at Institution of Higher Education Reporting Chart for a list of reporting codes for retirees working in HERP-eligible positions.

Questions

If you have any questions regarding this DRS Notice, please contact Employer Support Services at 360-664-7200, option 2, or 800-547-6657, option 6, option 2 or email us.

Communications