All Agency News

FDIC warns of e-mail scam

The Federal Deposit Insurance Corporation (FDIC) has received reports of a fraudulent e-mail that appears to have been sent from the FDIC.

The subject line states: “Check your Bank Deposit Insurance Coverage.” The e-mail tells recipients they have been sent the message because the FDIC has taken control of their bank’s assets. It then directs them to a Web site to open a “personal FDIC Insurance File.”

The FDIC warns that the e-mail and associated Web site are fraudulent. You can find further information at: http://www.fdic.gov/consumers/consumer/alerts/index.html.

State Actuary recommends a study of the pension plans

On September 15, State Actuary Matt Smith presented his economic experience report to the Select Committee on Pension Policy (SCPP). In the report, he recommended a study of the plans that would include developing funding policies for the future.

The Actuary regularly analyzes Washington’s pension plans and recommends adjustments to ensure the continued health of the plans over the long term. The new report acknowledges the current difficult economic climate and the possible long-term impact of lower investment returns and employer contributions. Recommended changes include decreasing the assumed rate of investment return and increasing employer contributions.

The Pension Funding Council and the SCPP will review and consider the Actuary’s recommendations. The Legislature ultimately makes the decision on any adjustments to the plans.

DRS and Health Care Authority continue to identify efficiencies; end merger discussion

When Steve Hill was appointed to head both DRS and HCA, the two agencies began to explore the possibility of merging. Over the past four months, that idea has been carefully considered and evaluated. At the same time, we identified a number of areas where we could better work together to serve common customers and we started implementing efficiencies.

In June, it was concluded that merging the two agencies would neither result in significant costs savings for taxpayers nor make good business sense. It was decided, however, that we will continue to partner in streamlining our operations and increasing customer satisfaction. We will also work together to maximize shared services between the two agencies.

Steve Hill will continue in his dual role of DRS Director and HCA Administrator. In that role, he will continue to serve as chair of the Public Employees Benefit Board and as a member of the Select Committee on Pension Policy, the Washington State Investment Board and the Governor's Health Policy Team.

Lower contribution rates for most members begin July and September

Contribution rates are going down for most members beginning July and September.

If you're a Plan 2 member of PERS, PSERS or WSPRS, you'll see a lower contribution amount deducted from your July paycheck. If you're a member of TRS or SERS, you'll see a lower contribution rate in September. Plan 1 members will not see a change.

You can see your new rate on the Contribution Rates Chart. This chart also shows the rate changes that will go into effect in September for some plans, to reflect the cost of benefit changes put in place during the most recent legislative session.

Contribution rates can fluctuate over time. The state actuary performs a valuation of the retirement plans every year, studying the actual experience of each and analyzing the effects of anticipated economic and demographic changes. He also factors in the cost of any changes the Legislature makes to pensions, determining how much money must be contributed annually to pay for the benefits members are expected to earn during their public service.

The actuary's recommendations go to the Pension Funding Council (PFC), which is responsible for evaluating and recommending any contribution rate changes to the Legislature (except for LEOFF Plan 1). Contribution amounts are then calculated as a percentage of your pay. In a few plans, those percentages are set in statute, but for most, the Legislature can adjust the rates as needed.

For more information on public pension plan funding, visit the state actuary's Web site.

Update on gain sharing

In 2007, the Legislature repealed the statutory gain sharing provisions that had allowed PERS, TRS and SERS Plan 1 and Plan 3 members to share in "extraordinary investments returns" under certain conditions. Language in the repealed statutes had stipulated that gain sharing was not a contractual right and that the Legislature reserved the right to amend or repeal it.

The 2007 Legislature also enacted new provisions for early retirement. These early retirement reduction factors (known as ERFs) allowed members of PERS, TRS and SERS Plan 2 and Plan 3 to retire at age 62 (instead of 65) with no actuarial reduction in their benefit. The factors also allowed these members to retire before age 62 with less of a benefit reduction than had previously been offered.

The repeal of gain sharing was effective January 2, 2008. Members and retirees of Plans 1 and 3 filed four separate lawsuits to challenge the repeal. The four were then consolidated into one. This month, one of the four plaintiffs withdrew from the case and that plaintiff's lawsuit was dismissed from the consolidated action. The new ERFs are contingent on what happens in the lawsuit and will no longer be available if a court of law finds that the repeal of gain sharing was invalid and gain sharing is restored (or an alternate benefit put into place).

To date, the court has heard motions that ask it to join Plan 2 members into the case to protect those members' interest in the new ERFs. Additional motions will also be heard and, while a date has not yet been set, a trial is expected to take place after the first of the year (2010).

Administrative factors will be updated

Administrative factors are the percentages we use to calculate adjustments to your retirement benefit if you choose options such as providing a survivor benefit or taking an early retirement. They are also used to calculate the cost to purchase service credit. If you requested a benefit estimate or costs for purchasing service credit in the past year, you likely received a letter from us notifying you of the update.

To find out how administrative factors might affect you and when they will change, see the FAQs.

Investment market conditions

Following are quick facts relating to the impacts of the financial system turmoil on Washington State retirement plans.

Defined Benefit Plans

Market fluctuations do not affect your defined benefit plan retirement. The benefit you receive from that plan is based on your compensation, plan and years of service. Market fluctuations may affect the defined contribution portion of PERS, SERS, and TRS Plan 3 retirement plans. It may also affect your DCP and JRA plan or other investments you own.

Direct Deposits

Retirement benefit direct deposits will occur as usual on the last business day of each month. (Direct deposits can be changed throughout the year by submitting an Authorization for Direct Deposit form.)

Plan 3 Money Market Funds

WSIB staff have been in close contact with the provider of the Money Market Fund (BGI) and have been reassured that none of the money market funds offered should be in any danger of dropping below $1 in value.

DCP Savings Pool

DCP's Savings Pool is comprised of Guaranteed Investment Contracts (GIC's) which are a fixed rate, fixed maturity contract. They are issued by insurance companies with a financial strength rating of Aa3 or better. The Savings Pool is not insured by the FDIC. However, Washington State regulations require that companies maintain a certain amount of cash reserves based on their liabilities. In the DCP investment lineup, the Savings Pool seeks to preserve principal while earning a rate of return in excess of the current yield of U.S. Treasury securities of similar maturities.

WSIB Investment Losses

The Washington State Investment Board (WSIB) did not invest in sub-prime mortgage products, and was not impacted by the initial losses incurred earlier this year. The WSIB announced an estimated loss of $130 million to its funds from the Lehman Brothers bankruptcy on Monday, September 15th, and a $47 million loss from the acquisition of Washington Mutual on September 26th. These losses represent 0.229% of the total assets under management at the WSIB.

Reviewing your investment portfolio is a good practice on an on-going basis to make sure your investment mix reflects the level of risk with which you are comfortable. It is important to avoid emotional responses any time you review and consider changing your investment strategy, especially during a market fluctuation such as the one we are currently experiencing. Changes should always be made using a thoughtful, deliberate strategy. Trading restrictions in our plans help maintain overall stability of the investments and therefore our members in maintaining thoughtful, deliberate strategies.

Online benefit estimator updated

If you are thinking about retiring early and would like to see if you qualify for the new 2008 Early Retirement Factors, you can now use the DRS Online benefit estimator.

LEOFF Plan 1 medical benefit study

DRS submitted a preliminary study of LEOFF Plan 1 medical benefits to Governor Gregoire in 2007 and is now conducting a more extensive review.