Federal Way’s most recent 2016 audit by the Washington State Department of Retirement Services has revealed a problem with the city’s retirement plan for full-time and part-time employees.
The city’s negligence could affect retirement benefits for several city employees.
According to the audit, 11 employees worked for the city in eligible positions before the city started reporting them for retirement service credits, and one employee was never reported at all.
Also, three employees were apparently reported for service credits for several years despite not meeting eligibility standards.
Because of this, employees who were eligible for Public Employees’ Retirement System (PERS) did not receive their service credits. This could potentially have a serious effect on these employees’ retirement plans.
The city also delayed reporting certain eligible employees for these benefits.
One part of the report reads: “The City also did not evaluate when positions were no longer eligible for membership, or had never met eligibility.”
A cause of this condition, as the report referred to it, was a lack of evaluation for the number of positions that were required from year to year based on departmental needs.
The Department of Retirement Services has recommended that the city assess positions on a year-to-year basis to determine retirement credit eligibility.
The audit report also stated the city failed to keep records of actual hours worked for elected officials and only reported a set 90 hours per month.
Essentially, there was no way to determine the true hours worked by elected officials or determine what service credit amount they were eligible for.
Because retirement service credit is based on reported hours, “reporting hours and compensation differently than earned has the potential to overstate or understate both a member’s service credit and average final compensation,” according to the report.
A recommendation on the report suggests the city should take timesheets or signed statements from its elected officials to report the actual hours worked.
Retirement service credits are similar to a 401K plan, wherein employees earn one month of service credits, or retirement benefits, per month where they worked at least 70 hours with basic salary pay. Employees can also choose to purchase additional retirement credits as well, according to the Department of Retirement Services.
Tyler Hemstreet, communication coordinator for the city, released the following statement regarding the audit.
“The rules and laws with reporting with the Department of Retirement Systems are complex and complicated. One person in the City’s finance department — with occasional help from Human Resources — handles all of the reporting statuses of about 200 temporary and seasonal employees, in addition to her normal payroll duties,” Hemstreet said. “While the state’s interpretation of some of the retirement reporting rules are vague in some areas, we are working to correct the issues addressed in the audit’s findings.”
Hemstreet said the human resources manager is planning to meet with departments to change how seasonal and temporary positions are accessed based on the department’s needs.
“We are… in the midst of taking steps to correct how council members log their hours,” he said.
See the report
Note: The markings in the documents below were made by the Mirror