Chapter 5: Special Conditions

In this section

You might encounter special situations that will affect your reporting to DRS. For example, if you hire a retiree, different rules might apply to their eligibility for membership. If you have an employee who works for nine months but is paid over 12 months, you might need to take special steps to report their compensation. If you hire a substitute teacher or classified employee, you must use the substitute Type Codes. This chapter provides information about some of the special conditions you might encounter when reporting to DRS.

Employer responsibilities

Employers are responsible for understanding the steps required to report special situations accurately.

Employing retirees

This section provides information about the special rules that apply to retirees of a Washington state retirement system who return to work for a DRS employer, except at an institution of higher education. The rules for employing a retiree at an institution of higher education are addressed in this chart.

Reporting retirees returning to work

If you hire a DRS retiree as an employee, you must report their employment on the retirement transmittal report. Include DRS retirees on the transmittal report for the system applicable to the position in which they are working; do not report them for the system from which they are retired. You must indicate their employment begin date and type code for the position status as defined in each Washington state retirement system. When the position status changes for a retiree (ineligible to eligible or vice-versa), you must submit an end date for the previous position, along with a begin date and position type code for the new position. When they end employment, you must report the end date along with the appropriate type code.

If you fail to report the retiree’s employment, you will be liable for any pension overpayments made to them. In addition, if you report incorrect information that results in a retiree receiving a pension benefit in violation of the retirement rules, you are liable for any overpayment.

RCW 41.50.139 requires employers to obtain a form from all new employees indicating whether they have ever been retired from a Washington state retirement system. The information should be obtained each time an employee begins working for you. The Retirement Status Verification form can be used to document this information.

Retiree return-to-work rules contain many exceptions. Please use ERA Member Management or the reporting charts below to determine how to report retirees.

Retiree return-to-work reporting charts

Use the ERA Member Management process to determine if your new employee is a retiree of a DRS-administered plan. You can also use ERA Member Management to determine how to report the retiree, or you can use these quick reference charts.

Retired from:

LEOFF Plan 1

LEOFF Plan 2

PERS Plan 1

PERS Plan 2 or 3

PSERS Plan 2

SERS Plan 2 or 3

TRS Plan 1

TRS Plan 2 or 3

WSPRS Plan 1

WSPRS Plan 2

Is the retiree returning to work at an institution of higher education? See this reporting chart.

Reporting deferred payments

Some employees earn compensation in one month but are paid compensation in a later month. If you defer payment of your employees’ compensation, you need to make sure compensation is identified properly on the transmittal report by the earning period that is the month and year the compensation was earned. This rule also applies to members’ contributions (except for Plan 3) and hours for the associated compensation.

Some of the employers who report deferred payments of employee compensation include school districts, community and technical colleges, educational service districts, the School for the Deaf, the School for the Blind and four-year colleges and universities.

Procedure for reporting deferred payments

Which employees must be considered

Special reporting on the monthly transmittal is required any time an employee has earnings deferred for payment in a later month. For example, an employee can:

• Work for nine or 10 months but be paid over 12 months
• Be paid on a month lag
• Receive supplemental earnings during the year (such as coaching)

Special reporting is not required if an employee is paid all their salary in the month in which it is earned.

How to determine the deferred amounts

When you defer payment of an employee’s compensation, you must determine the amount of compensation (and the corresponding contributions) you have deferred each month. The following example shows how this can be reported for an employee who works for 10 months (from September – June) but is paid over 12 months.

If an employee is paid additional compensation for other duties, does not complete a contract, is given additional contracts or makes other changes during the school year, you will need to make the necessary adjustments in your reporting to account for those changes. You will also need to figure the amount of contributions due on this deferred amount and report these deferred contributions when you report the deferred compensation.

Step one

Determine the amount of compensation you will pay the employee each month. In this example, the employee is paid over 12 months. Divide the employee’s total annual contract amount by 12.

Step two

Determine the employee’s daily or hourly rate of pay by dividing the employee’s total annual contract amount by the number of days or hours the employee has been contracted to work.

or

Step three

Determine the amount of compensation the employee earned in a given month by multiplying the daily or hourly salary times the number of days or hours the employee worked that month. (Include days or hours the employee was in paid status such as paid holidays, vacation time or sick leave.)

Or

Step four

Compare the monthly amount the employee was paid and the amount the employee earned. The difference is the amount of compensation that will be deferred.

Compensation earned	$5,040.00
Minus compensation paid	-3,600.00
= Deferred amount	$1,440.00

How to report the deferred amounts

How you report the deferred amounts of compensation and contributions will depend on the reporting method you choose. You can select either of two methods. With either method, you must always report the total compensation paid and identify the compensation by when it was earned.

Method #1: next month correction

With this method, you will add lines to your transmittal report each month to account for the deferred amounts of compensation and contributions from the preceding month. Method #1 Chart shows how to report a PERS Plan 1 member with a 12-month contract of $43,200. Notice that:

• Service is reported in hours because the employee is a PERS Plan 1 member
• Multiple lines are used for reporting after the employee’s first month
• The deferred compensation and contributions are identified with the proper earning period
• For July and August reporting, Status Code B is used to report zero compensation, contributions and service for these months when the employee did not work

Method #2: end-of-year correction

With this method, you will wait until the last few months of the employee’s contract year to account for the deferred payments from the preceding months. The Method # 2 Chart shows how to use this method to report a TRS Plan 1 member with a 12-month contract of $43,200. Notice that:

• A single line is used for reporting the first nine months of the 12-month contract
• Multiple lines are needed for reporting during the final three months of the contract
• For June, July and August reporting, Status Code A is used to report the deferred compensation and contributions from prior months
• Compensation is identified by the proper earning period
• Status Code B is used to report zero compensation, contributions and service for July and August when the employee did not work

Points to remember when reporting deferred compensation and contributions

• Make sure the total compensation you report for each reporting period matches the total compensation the employee was paid for that period. Some, or all, of this compensation may need to be identified as earned in a prior period.
• Use additional lines in your reporting when you need to report more than one earning period. Use the line with the current earning period to report the actual number of hours or days the employee works in a month.
• Use Status Code B and report zero compensation, contributions and service in any months when the employee does not work.
• Be sure to adjust your reporting if the employee has multiple contracts, does not complete a 12-month contract, earns other compensation or makes other changes during the school year.

School district and educational service district pay adjustments

This section applies to school district and Educational Service District employees in the Public Employees’ Retirement System (PERS) Plan 1, the School Employees’ Retirement System (SERS) or the Teachers’ Retirement System (TRS).

You must continue to set up regular contracts to be reported as earned; however, DRS provides alternatives to reporting as earned for pay adjustments. You do not need to change how you report to DRS and in some cases, your current business policies might not allow you to change.

The pay adjustments were developed keeping in mind the time impact on daily work and the impact to benefit calculation (service versus compensation).

Reporting options

For pay adjustments only, you may report payments as evenly distributed over the months of the school year associated with the pay, or as a lump-sum payment.

Payment types that qualify

The following payment types qualify for the reporting options if there are no additions or adjustments to previously reported hours/days, and only pay is being adjusted, or hours/days are not an issue because the employee will earn a full year’s service credit based on regular compensation. These pay adjustments can only be made to the current school year.

This chapter includes pay adjustments for:

• Calendar issues
• Overpayments
• Pay in lieu of vacation
• Retroactive pay
• Time sheet cycles
• Time vs. responsibility
• Time, Responsibility or Incentives (TRI) contracts

Employer responsibilities

As the employer, you are responsible for accurately reporting retirement data. While regular school district contracts must be created and reported as earned, special reporting is allowed for pay adjustments. Keep the following in mind when using special pay adjustments:

• Pay adjustments can’t result in a negative impact to a member’s service credit.
• You must determine if the employee is part-time or full-time; you have less flexibility when reporting part-time employees because additional hours may increase service credit.
• Pay adjustments are allowed only within one school year.
• You are responsible for documenting the earning periods associated with the payments and hours if DRS needs the information.
• If the employee terminates before the end of the school year, you must adjust the reporting if service credit is impacted.
• You must adjust reporting for contribution rate changes.
• The fiscal year ends June 30 for TRS Plan 1; adjust special reporting for this.
• Time sheets aren’t required for supplemental contracts for DRS purposes. The district-assigned hours used to determine pay will meet DRS requirements; however, districts might need to use time sheets to determine if the employee worked overtime.

Adjustments for:

Overpayments

Salary overpayments for full- and part-time employees that don’t involve adjustments to service credit can be recovered during the school year over a period of time or as a lump sum.

• Over a period of time – you can back out the overpayment equally over the remaining working months of the school year using Status Code A
• As a lump sum – the lump-sum negative adjustment can be backed out with Status Code M in the month the adjustment is recovered from the employee, provided the amount doesn’t exceed the dollars available

If the lump-sum back out creates a large discrepancy between hours reported and compensation for the earning period, you might receive a request to verify earnings when the member retires or withdraws contributions.

Refer to Contribution rate changes and Using Status Code A or M for additional restrictions that might apply.

Pay in lieu of the ability to take a vacation

Some school districts negotiate additional compensation for staff who can’t accumulate and use vacation leave. Sometimes it is labeled “vacation payout,” but it isn’t a payment for unused accumulated vacation leave; it is a term used in place of “bonus pay.” This payment has no additional service associated with it.

The payment is reportable for all systems and plans and the coding of the payment will depend on the following:

• If paid out equally:
  • Full-time and part-time –report evenly over the working months of the school year associated with the pay, using Status Code A
• If paid in a lump sum at the end of the school year:
  • Full-time and part-time – report with Status Code M in the month it was paid
  • If paid in July or August– report a lump-sum payment in the last month the employee worked – usually June
    Refer to Contribution rate changes and Using Status Code A or M for additional restrictions that might apply.

Retroactive payments

A retroactive payment is additional salary paid to a full- or part-time employee for services already rendered. No additional hours or days are reported. An employer reporting retroactive pay can choose from the following options:

• Break the payment into the specific earning periods and report to DRS with a Status Code A as earned.
• If the retroactive pay adjustment is paid equally over the remaining months of the school year, report the additional compensation as paid with a Status Code A. The pay cannot be reported in the months the employee did not work – usually July or August.
• If the adjustment is paid as a lump sum, it can be reported with Status Code M in the month in which it is paid. If paid in July or August, report the lump sum in the last month the employee worked –usually June.

Refer to Contribution rate changes and Using Status Code A or M for additional restrictions that might apply.

Snow days

School calendar adjustments might not be necessary if the employees are full-time.

• Full-time – Many school districts will not have snow day pay adjustments for contracted employees. If employees meet the “compensated criteria for full service credit” and service credit is not impacted, you don’t need to adjust the compensation and service.
• Part-time – For part-time employees who earn less than a full year of service credit, the impact of the snow day must be analyzed to determine if it affects service credit accumulation. If service credit is impacted, you must report retirement data as earned and might need to adjust the calendar.

Refer to Contribution rate changes and Using Status Code A or M for additional restrictions that might apply.

Time sheet cycles

Typically, time sheet pay is turned into the payroll office by a designated cutoff date each month. Most school districts designate specific cut off dates or create a payroll calendar. These dates direct employees and administrators when to turn in time sheets to payroll.

While you may continue to break the payment into the specific earning periods and report with a Status Code A as earned, if additional time is submitted past the expected time sheet cycle, you may follow these guidelines:

• Full-time – If you receive a time sheet for several earning periods for a full-time employee, this can be reported in the current working month with Status Code M. Status Code M won’t allow you to submit hours, so the member must have full service credit for the months when the compensation was earned. If they don’t, use Status Code A and report as earned.
• Part-time – Because compensation and service credit are affected, the wages and service must be reported by the specific earning period using Status Code A.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that might apply.

Time vs. responsibility

Additional time

Staff may receive additional compensation for additional work that occurs beyond the normal work hours, such as providing after school tutoring services or coaching a sport.

If paid out equally:

• Full-time – the payment and hours can be evenly distributed over the working months of the school year associated with the pay and reported with Status Code A.
• Part-time – report additional service and compensation as earned with Status Code A. The additional hours might increase the employee’s service credit.

If paid in a lump sum at the end of the school year:

• Full-time – report with Status Code M in the month it was paid. If paid in July or August, report a lump-sum payment in the last month of work for the employee – usually June.
• Part-time – report additional service and compensation as earned with Status Code A. The additional hours might increase the employee’s service credit.

Time sheets aren’t required for supplemental contracts for DRS’ purposes. Districts might need to use time sheets to determine if the employee worked overtime. If your district only uses time sheets, then report this service to DRS; however, if you use both time sheets and assigned hours, the latter can be reported as service.

Additional responsibility

Staff may receive additional compensation for added responsibilities occurring during their regular scheduled workday, such as being available in the lunchroom while they are at work. No additional hours or days are reported.

If paid out equally, and there is no corresponding service associated with the payment, it can be evenly distributed over the working months of the school year associated with the pay and reported with Status Code A.

If paid in a lump sum at the end of the school year, report with Status Code M in the month it was paid. If paid in July or August, report a lump-sum payment in the last month of work for the employee – usually June.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that might apply.

Time, Responsibility or Incentives (TRI) contracts

An employee has three mandatory days connected with a TRI contract. The work for these days is assumed to occur during the school year in addition to the normal number of work days. The method for reporting TRI pay is dependent on employer business practices, contractual agreements, whether the employer tracks time with the TRI responsibility and whether the employee is full- or part-time.

 Payments for responsibility only

The employer pays the TRI contract over the school year with no additional hours and the employee receives additional compensation as a portion of pay for each day of the school year.

If paid out equally, and there is no corresponding service associated with the payment, it can be evenly distributed over the working months of the school year associated with the pay and reported with Status Code A.

If paid in a lump sum, and if there is no corresponding service associated with the lump-sum payment, report with Status Code M in the month it was paid.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that might apply.

Payments for time plus responsibility

The employer designates a set number of hours and responsibility associated with the TRI contract.

If paid out equally:

• Full-time – The payment and hours can be evenly distributed over the working months of the school year associated with the pay and reported with Status Code A
• Part-time – Report additional service and compensation evenly over the period they were earned based on the designated hours using Status Code A

If paid in a lump sum:

• Full-time – Report with Status Code M in the month it was paid or the employee’s last working month. The associated hours are not required
• Part-time – Report additional service and compensation evenly over the period they were earned based on the designated hours using Status Code A

If the designated hours don’t exist, you must track hours and report as earned.

Refer to Contribution Rate Changes and Using Status Code A or M for additional restrictions that might apply.

Using Status Code A or Status Code M

Full-time status impacts the status code

When determining which status code to use, you must evaluate whether the employee’s service credit will be affected. If the employee is full-time and meets the required compensated criteria for full service credit, more flexibility is allowed.

Full-time employees earn a full year of service credit as follows:

System and Plan	Compensated criteria for full service credit:
TRS Plan 1	144 full-time days = 12 months of service credit
TRS Plans 2 and 3	If compensated in 9 months of the school year and for 810 hours or more = 12 months of service credit
SERS Plans 2 and 3	If compensated in 9 months of the school year and for 810 hours or more = 12 months of service credit
PERS Plan 1	If compensated in 9 months of the school year and for 630 hours or more = 12 months of service credit

Refer to Chapter 3: Service Credit Rules, for how service credit is earned for part-time members and to learn about the rules that were in place before Sept. 1, 1991.

Newly hired employees (except TRS Plan 1) must begin in September to earn a full year’s service credit.

Status Code A

• Full-time
  • If additional compensation and service are paid out equally through the school year, report the adjustment evenly over the working months of the school year associated with the pay using Status Code A. Use this method only if there is no negative impact to the member’s service credit.
  • The adjustment can’t be reported in months the employee didn’t work – usually July and August.
  • You have the option to report the adjustment as earned using Status Code A.
  • If the employee terminates before the end of the school year, you must adjust the reporting if service credit is affected.
• Part-time
  • If there is additional compensation but no service attached to the adjustment, and it is paid out equally through the school year, the adjustment can be evenly distributed over the working months of the school year associated with the pay using Status Code A
  • An adjustment with additional service must be reported as earned because the additional hours or days can potentially increase the employee’s service credit.
    • Part-time includes substitutes and anyone who doesn’t meet the full-time definition.

For more information about reporting as earned using Status Code A, review Chapter 7: List of Status Codes for Current Reporting – Status Code A.

Status Code M

• Status Code M is optional. You can use Status Code M to report lump-sum payments and back outs, or you can use Status Code A and break the data into earn periods.
• Some examples of lump-sum payments include: settlements resulting from contract agreements, court-ordered back-pay settlements, holiday and longevity pay or supplemental contract payments (such as coaching contracts).
• Service can’t be reported with Status Code M, only compensation can.
• Status Code M can be used for:
  • Full-time – if there is additional service attached to the adjustment, you can report only the compensation because the member already has full service credit.
  • Part-time – if there is additional compensation but no service attached to the adjustment.

• Status code M can’t be used for:
  • Part-time – if there is service attached to the payment because additional service can affect the employee’s service credit. Report the adjustment as earned with Status Code A.
  • Substitutes – a substitute is defined as “a classified or certificated employee who is employed as a substitute for an absent employee or is working in an ineligible position” for a school district or an educational service district.

• National Board for Professional Teaching Standards (NBPTS) certification payments or bonuses are considered reportable compensation. Report the payment as a lump sum using Status Code M in the month in which it is paid.
• If paid in July or August, report a lump-sum payment in the last month of work for the employee – usually June. This status code can’t be reported in months that have no service.
• You must document the earning periods associated with the adjustment in case DRS needs this information.
• If the earning periods for the lump-sum payment fall into more than one contribution rate period, you will need to report the adjustment applicable to each rate period.
• If the earning period for the lump-sum payment falls into the period used to calculate the member’s retirement benefit (the AFC period), a month-by-month breakdown of the lump-sum payment may be required at the time of the member’s retirement.

For more information about reporting retirement data using Status Code M, review Chapter 7: List of Status Codes for Current Reporting – Status Code M.

Contribution rate changes

To correctly report earnings that fall into more than one rate period, you must calculate retirement contributions at the rate in effect when the service was earned. You may need to report compensation using Status Code A, or Status Code M. Refer to Chapter 6: Contributions, for additional information.

Status Code A

It is March and a retroactive pay adjustment is to be paid equally over the remaining months of the school year. There is a contribution rate change April 1. Because September – March, and April – June have different contribution rates, report the payments as earned.

Status Code M

There is a rate change in April but the retroactive pay adjustment is paid as a lump sum in June. Because the earning periods for the lump-sum payment fall into more than one contribution rate period, you will need to report the adjustment applicable to each rate. Report the pay adjustment for August – March in the March earning period. Report the pay adjustment for April – June in the June earning period.

Reporting substitutes

Substitute teachers employed by the School for the Deaf, School for the Blind or any higher education institution must include the quarterly report when they submit their application to purchase service credit.

School district and educational service district-covered employers will be required to report hours and compensation for substitute employees on their monthly transmittal report. Refer to “Reporting substitutes on the transmittal report.”

The quarterly report is only required when the substitute is applying for service credit for a period before the 2004-05 school year. Refer to the “quarterly report” section for additional information.

A substitute employee includes substitute SERS employees working for any school district or educational service district, and a substitute teacher working for any of the following TRS employers: school districts, educational service districts, community or technical colleges, the School for the Deaf or the School for the Blind.

A substitute is defined in WAC 415-110-010 as “any classified employee who is employed as a substitute for an absent employee or working in an ineligible position.”

A substitute is defined in RCW 42.32.010 as follows:

• A teacher who is hired by an employer to work as a temporary teacher, except for teachers who are annual contract employees of an employer and are guaranteed a minimum number of hours, or
• Teachers who either work in ineligible positions for more than one employer or work in an ineligible position or positions together with an eligible position

The term “ineligible position” is used in SERS Plans 2 and 3 and TRS Plans 2 and 3 law but not in TRS Plan 1 law. An ineligible position for Plans 2 and 3 is any position that normally requires fewer than five months of 70 or more hours of compensated employment during the school year (Sept. 1 – Aug. 31).

Reporting substitutes on the transmittal report

What system and plan?

The charts must be used in the order listed. When determining type codes, retirees take precedence over all types of reporting.

• Retiree return-to-work reporting charts: if the individual is a retiree, use these charts.
• Employees working in school districts and educational service districts: Use for reporting eligible, ineligible and educational substitute positions. Do not use for retirees returning to work.
• Substitute teachers working in higher education, the School for the Deaf or the School for the Blind are not reported on the transmittal. The employer should provide the substitute with a quarterly report.

Reporting considerations for substitutes

• Begin and end dates: Report the first day that the substitute works as their begin date. Do not report the first day of the month or the start of the school year unless it is the first day they work for you as a substitute. Report the last day a substitute works as their end date. Do not report the last day of the month or the end of the school year unless that is the last day they work for you as a substitute.
• Status changes: If an employee transitions from substitute status to active/eligible member status, report an end date as indicated above for their substitute service and a new begin date for their active/eligible service; however, report all earnings for the month under the active/eligible type code. Follow these same procedures if the employee transitions from active/eligible member status to substitute status.

The quarterly report

The quarterly report provides a record of the number of hours or days a substitute employee worked and the amount of compensation earned. The substitute can use this information to estimate the cost of purchasing service credit. Substitutes must apply to DRS by submitting the application in the Substitute’s Guide for their plan and system. Substitutes employed by the School for the Deaf, School for the Blind or any higher education institution must include the quarterly report when they submit their application to purchase service credit.

School district and educational service district employers are required to provide SERS classified substitute employees with quarterly reports showing hours worked and compensation earned in each month.

School district and educational service district-covered employers are required to report hours and compensation for substitute employees on the monthly transmittal report. The quarterly report is not required unless the substitute employee is applying for service credit for a period before the 2004-05 school year, or if your organization’s payroll system doesn’t report substitutes to DRS, such as a community college.

What to include

To be accepted as proof of service and compensation, the quarterly report must provide:

• Your organization’s name and TRS or SERS reporting group number. The reporting group number is not required by law on the quarterly report; including it will assist the DRS Retirement Services Division to process the substitute’s application.
• The employee’s name and Social Security number.
• The total number of hours (for Plans 2 or 3) or days (for TRS Plan 1) the employee worked for you each month. (If you are not sure of an employee’s plan, report the employee’s hours or days and give the conversion rate. For example, 7.5 hours = 1 day).
• The total amount of compensation the employee earned with you each month. Be sure to identify compensation by when it was earned, not by when it was paid.
• The signature of the payroll officer or other person authorized to sign Verification of Employment forms.

If your quarterly report does not include this information, you will be required to provide missing details at the time the substitute applies for service credit.

How it should look

Refer to Figure 5-1 for an example of a quarterly report using the recommended format. This sample shows how information should be reported for the first quarter of a school year. The remainder of the report is completed as the employee works the remaining quarters of the year.

How the quarterly report is used

Substitutes must submit their quarterly reports to DRS with their application to purchase service credit for a period of employment before the 2004-05 school year. Substitute teachers employed by the School for the Deaf, School for the Blind or any higher education institution must continue to submit quarterly reports. Substitutes can apply for service credit any time before their retirement. To receive service credit, they must:

• Be an active TRS or SERS member (or be eligible for TRS or SERS membership based on their service as a substitute)
• Submit the quarterly reports after the end of the school year for which application is being made (June 30 for TRS Plan 1 or Aug. 31 for Plans 2 and 3) and before retirement
• Pay all employee contributions due, as well as any interest that might apply

The employee will be billed for the interest on both employee and employer contributions if payment is made more than six months after the end of the school year for which application has been made. The employer will be billed for employer contributions only after the employee’s contributions and any applicable interest have been paid.

Substitute reporting charts

These charts provide information for correctly reporting a substitute working in a school district or educational service district:

• Retiree Return-to-Work Reporting Charts in Chapter 5 – If the substitute is a retiree, use these charts.
• Substitute reporting chart – Use this chart to determine how to report an employee working in an ineligible position or as a substitute (not retirees).
• Refer to School District and ESD Substitutes for more information.
• Substitutes employed by the School for the Deaf, School for the Blind or any higher education institution are not reported on the transmittal, but are provided a quarterly report.
  
  

Reporting in higher education

This section provides information on retirement plan options for non-retired employees working in positions eligible for participation in a Higher Education Retirement Plan (HERP) or for a DRS-administered plan through their employment at an institution of higher education. This section also contains information on reporting a retiree from a DRS-administered plan who returns to work for an institution of higher education. The following public higher education institutions have authority to sponsor a HERP:

• University of Washington (UW)
• Washington State University (WSU)
• Western Washington University (Western)
• Central Washington University (Central)
• Eastern Washington University (Eastern)
• The Evergreen State College (Evergreen)
• The State Board for Community and Technical Colleges

Each of the four-year institutions listed above has developed rules for participation and each administers the plan for its employees. The State Board for Community and Technical Colleges sponsors the HERP applicable to employees of the community and technical colleges and adopts rules governing participation; however, each community or technical college administers the plan. Please check with the appropriate individual at your institution for details about the requirements for HERP participation.

An employee who is eligible for HERP participation and is a current PERS or TRS member may be given certain options for retirement coverage. This section provides general information about these options for PERS or TRS members working in higher education. Please check with the appropriate individual at your institution for information specific to a person or situation.

New hires

New employees with no past Higher Education Retirement Plan (HERP) history who are hired into a HERP-eligible position have a choice between retirement systems. New employees with prior DRS membership may also be eligible for the HERP/Plan 3 choice, depending on their past membership scenario.

There are several steps to consider when evaluating an employee’s eligibility for membership. You need to know if the employee has retired or is eligible to retire from a DRS-covered retirement system. You will also need to know if the employee has ever been a member of a Washington state retirement system. Then, depending on the position you hire them into, you must evaluate the employee’s eligibility under the rules that apply for the appropriate system and plan.

Higher education employers cannot offer their HERP to new employees who have retired or are eligible for a full, unreduced retirement from any retirement plan administered by DRS and listed in RCW 41.50.030. Employers can use the ERA Member Management process to look up an employee and determine whether the employee is retired. Review their age, DRS history and the rules of their plan to determine if they are eligible for a full, unreduced retirement. Contact Employer Support Services (ESS) to verify.

Use the ERA Member Management process in conjunction with the publications listed below to determine member eligibility.

• Retirement Membership Options – Faculty
• Retirement Membership Options – Non Faculty
• Higher education retirement membership (HERP)
  

Choice between HERP and TRS/PERS Plan 3

New employees who qualify for the choice between the HERP and Plan 3 have 30 days to choose (PERS for non-faculty; TRS for faculty). If a choice isn’t made within 30 days, the employer will default the employee to the HERP. Whether the employee chooses or defaults, the choice is permanent.

Please provide the following information to employees considering whether to choose Plan 3:

• Higher Education Plan 3: 30-Day Retirement System Choice
• Plan 3 Member Handbooks: PERS (non-faculty) or TRS (faculty) on the DRS website

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.

When an employee chooses Plan 3, have them complete the Higher Education Employees Plan 3 Investment Program form and then forward a copy of the form to DRS.

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
  

Reporting retirees who return to work (RRTW)

Hours worked by retirees employed in HERP-eligible positions must be reported to DRS. These hours count toward the retiree’s work limits.

HERP-eligible positions affect DRS retirees

Employers must report DRS retirees working in HERP-eligible positions as working in retirement-eligible positions on the retirement transmittal. These hours will be counted toward the retiree’s work limits. In the past, these individuals were reported to DRS as working in retirement-ineligible positions. Please see the Retiree Returning to Work At Institution of Higher Education Chart for a list of reporting codes for retirees working in HERP-eligible positions.

HERP supplemental fund

Higher education employers contribute a percentage of all HERP salaries paid to prefund the unfunded future obligations of the supplemental retirement benefit established in RCW 28B.10.400. The rates are set by the state actuary and adopted by the pension funding council per RCW 28B.10.423. Similar to other retirement reporting, employers will report data and pay the HERP contributions directly to DRS that will be invested by the Washington State Investment Board (WSIB).

Reporting

Higher education employers are required to report the total compensation paid each payroll for all employees who are participating in a HERP, regardless of whether the employees are eligible for the supplemental benefit. The employer will then owe employer contributions based on the contribution rate in effect for that month for their agency.

Employers may choose to report the HERP supplemental fund information in ERA by using the Interactive option; or by uploading a file to ERA through the Manual Upload option; or through Managed File Transfer (MFT).

HERP report group number

Each higher education institution uses a unique HERP report group number to report HERP information via the transmittal.

Payments

A Payment Advice form for paying HERP contributions is available in ERA. System/Plan code (Z1) is used by employers and DRS for tracking contributions made to the HERP fund.

Similar to other retirement reporting, payment of HERP contributions is due by the 15th of the month following the report period. If payments are past due, interest will be assessed. DRS will include HERP payments in the Current Account Activity report in ERA. See Chapter 10 for additional information regarding account activity.

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LEOFF Plan 2 Non-LEOFF Employer Compensation (NLEC) reporting

Summary

If a LEOFF employer charges a fee or recovers costs for services rendered by a LEOFF Plan 2 member to a non-LEOFF employer, the LEOFF employer must cover both the employer and state contributions on the LEOFF Plan 2 basic salary earned for those services. RCW 41.26.450

Use ERA to report NLEC data to DRS.

Determining NLEC eligibility for reporting

Are there general guidelines we can follow to determine if this change applies to any basic salary we report to DRS for our LEOFF Plan 2 employees?

Yes. Basically, if you can answer “yes” to all three of the following questions, you are responsible for funding the state contributions owed on the LEOFF Plan 2 basic salary earned for the associated services rendered:

• Were the services rendered to a non-LEOFF Plan 2 employer?
• Is the salary reportable to DRS as LEOFF Plan 2 basic salary under RCW 41.26.030?
• Is your organization monetarily compensated by the non-LEOFF employer receiving the services?
  

What is a non-LEOFF employer?

A non-LEOFF employer is any employer that is NOT one of the following:

• Washington municipalities (cities and towns)
• Washington counties (county seats)
• Washington port authorities
• Washington universities
• Washington State Patrol
• Washington State Department of Fish and Wildlife
  

When is NLEC reporting required?

Here are some scenarios in which the LEOFF employer would be required to report NLEC to DRS:

Do we use NLEC reporting if we don’t contract out our LEOFF Plan 2 employees for these types of services?

No. NLEC reporting doesn’t currently apply to you; however, we recommend you remain aware of NLEC requirements in case you begin contracting for these types of services in the future.

NLEC reporting

Report type NLEC Non-LEOFF Employer Compensation is used by LEOFF employers to report total compensation for an earning period associated with LEOFF services provided to non-LEOFF employers. NLEC does NOT replace any otherwise required transmittal reporting by the LEOFF employer, but rather it allows the employer to tell DRS the portion of the total reported basic salary for its LEOFF Plan 2 members that was associated with NLEC services.

Is the NLEC I report supposed to be based on the basic salary earned for NLEC services, or should it be equal to the amount of the fee received from the non-LEOFF employer?

The NLEC you are responsible for reporting is the portion of the total LEOFF Plan 2 basic salary associated with NLEC services. The amount of the fee has nothing to do with the amount you report.

The fees we receive from the non-LEOFF employer are not directly allocated to our LEOFF Plan 2 members’ salaries. Do we still have the pay the state rate?

Yes. If you receive a fee for services rendered by your LEOFF Plan 2 member(s) to a non-LEOFF employer, you are responsible for reporting the portion of the total LEOFF Plan 2 basic salary associated with NLEC services, and for paying the state contributions owed on that portion.

For which periods are we required to report NLEC?

You are responsible for reporting NLEC earned from July 1, 2017, forward.

Should the compensation be reported as earned?

Yes. All gross NLEC should be reported as earned by payroll period. If you have payroll periods that span more than one month, and there was NLEC earned in both months, you would create separate earning periods for each month.

How often should I report NLEC?

You should report NLEC after your regular transmittal has processed for the earning period containing NLEC. This timing will ensure the receivables associated with both the transmittal and the NLEC reports will post to the same reporting period for the employer.

What if we don’t have NLEC for a period, or don’t have it at all?

You are not required to submit an NLEC report unless you have NLEC services associated with an earning period.

I submitted an incorrect amount on a previous report. Can I correct it?

Yes. You can adjust any prior earning period by adding a line to your report. You can reverse previously reported NLEC, but only up to the amount you originally reported.

Paying the state contributions owed on NLEC

How will my NLEC receivable be posted?

When your NLEC report is processed, the receivable amount will be posted directly to your receivable account (Current Account Activity) the same way your transmittal amounts are posted. The transaction will be listed on your current account activity in ERA as Non-LEOFF Employer Compensation, and will post to the reporting period listed on your NLEC report. You can review your NLEC report history in ERA.

Can I use ERA to submit a payment?

Yes. Use the Manage Payments process in ERA; you add the payment amount to the LEOFF Plan 2 contribution box.

Can I add the additional LEOFF Plan 2 contribution to my existing payment advice for my regular transmittal?

Yes. You can add the amount to the LEOFF Plan 2 contribution amount from the regular report. Make sure the reporting periods match. You can view the processed NLEC report to ensure you’re paying the dollars into the correct reporting period. 

NLEC state and member contributions

What happens if I report NLEC?

The state contributions you pay on the NLEC will be included in the GASB 68 reconciliation and must be taken into consideration when you’re reporting for this purpose.

Will it affect my LEOFF Plan 2 employees’ contributions or accounts in any way?

No. The LEOFF Plan 2 members’ accounts will not be affected.

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