What do ports need to know about emergency rule changes to PERS retirement and furloughs?

The Department of Retirement Systems, the state agency responsible for the administration of public employees’ retirement system (PERS), adopted an emergency rule on June 23rd that changes the way furloughs effect public employees’ retirement benefits. But what does this mean specifically for port employees, who are not necessarily affected by the state government-level furloughs mandated by Gov. Inslee, but may still face furloughs for other reasons?

We asked WPPA Counsel Les Reardanz of Chmelik Sitkin and Davis to weigh in on the emergency rule changes.

The short answer is yes, the emergency rule (revised DRS WAC 415-20-170) allows furloughed employees to receive their same retirement benefits as if their hours weren’t reduced; however, this only applies to port districts participating in the Department of Employment Security’s (ESD) SharedWork program.

The new WAC clarification ensures that the average final compensation (i.e. the highest 60 months of consecutive earnings) for the calculation of DRS retirement benefits will not be adversely affected by a COVID-19 furlough’s reduction in hours.

ESD’s SharedWork program allows an ESD-approved employer to avoid layoffs by reducing employee hours by up to 50 percent while the employee gets unemployment benefits to help replace a portion of the lost wages. Additionally, employees are not required to look for other work to receive unemployment benefits and continue to receive their employer-provided insurance. In turn, the employee must remain available to work for the employer. A port could apply to participate in the SharedWork program, and then reduce their employees’ hours by up to 50 percent through furloughs.

SharedWork’s main intent is to help employers avoid layoffs and losing productivity and protect against the costs and issues of rehiring laid-off employees later. The program provides an alternative where the employment relationship is maintained, employees retain health care, and can use unemployment income to supplement that income lost to furlough hours. DRS’ rule change adds a further benefit to the program by figuring furloughed employees’ PERS retirements without the lost hours.

Ports must apply to this program to participate—ports are not automatically enrolled. Visit their website for more information about the program, including how to enroll your port.

More broadly, when considering whether furloughs are a sound decision for your port during the pandemic, furloughs are mainly used when you may need to reduce hours for financial reasons but don’t want to terminate the employment relationship.  Furloughed employees retain reemployment rights and typically retain benefits.

Furloughs can come in different forms; for example, an employer may require a certain number of furlough days per year and it’s up to the employee when to schedule them; or, they may mandate certain furlough days of office closure (e.g. We are closing the office on certain days); or, they may furlough employees for a designated period of time (e.g. the employee is on furlough for a month). Furloughs that apply to union employees need to be discussed through the union; we encourage you to talk with your Port Counsel before taking action.

We hope this gives you an idea of how this new rule change applies to your port and helps you as you navigate through the challenges and difficult decisions presented by the pandemic and associated economic downturn.

If you need further assistance, don’t hesitate to contact WPPA at Washington.ports@washingtonports.org.