Washington State Retirement Plan 2 Vs Plan 3

Date:

Will I Owe Interest On My Bill

WA DRS – Plan 2 Vs Plan 3 (TRS, SERS, PERS)

The interest-free period lasts from September through February of the school year after the one for which youre seeking service credit.

If your payment is received after the last day of February, you will be charged interest on employer contributions. Plan 2 members will also be charged interest on the member contributions.

Trs Sers And Pers Plan 2 And 3

What should I do if I return to work for a DRS-covered employer?

If you return to work for a DRS-covered employer, it is important to let your employer know you are a retiree. Your employer is required to report your employment to DRS. If your employer does not know you are retired, you may be reported as an active member-which may stop your benefit.

What happens if I return to work more than 30 days after I retire?

The rules that determine the number of hours you can work and continue receiving your benefits at the same time depend on how you choose to retire.

If you choose a normal retirement or early retirement using factors other than the 2008 Early Retirement Factors

You will continue to receive retirement benefits if you wait at least 30 consecutive days after you retire and you work:

  • For a DRS-covered employer, but your position is ineligible for a membership in a DRS or higher education retirement plan , or
  • As a contractor with a Washington state educational institution , or
  • 867 hours or less in a calendar year in one or more eligible DRS-or HERP-covered positions. Your retirement benefits stop once you work more than 867 hours in a calendar year. Your benefits will resume following your last day of employment, or at the beginning of the next calendar year, whichever comes first.

If you choose to retire early using the 2008 ERF

If you are a TRS member who retired using the 2008 ERF and have not reached 65:

Can I work over the annual limit?

Related

How Do The Requirements Apply To A Surviving Spouse Or Beneficiary

If the original account holder dies, the required minimum distribution is still required for beneficiaries of the account. Heres how these requirements work:

A spousal beneficiary will be required to continue receiving RMD payments if the account owner had already met the required age. If the account owner had not reached the required age prior to death, the spousal beneficiary will be required to start their RMD payments in the year in which the account owner would have turned age 72.

For non-spousal beneficiaries, the RMD is calculated based on the beneficiarys life expectancy in the calendar year immediately following the account owners date of death. DRS will process an RMD payment if the account owner had turned age 72 or older. If the account also has rollover requests, the RMD will be processed before these.

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Plan 3 Tap Total Allocation Portfolio

Plan 3 members can use their plan contributions to purchase the Total Allocation Portfolio Annuity. With the TAP Annuity, you are not limited to the survivor options you chose for your pension retirement. You can choose another survivor. You can also purchase the TAP Annuity any time after you separate from DRS-covered employment. View TAP Annuity video.

It can take 45 to 90 days to receive your first TAP Annuity payment. See the payment section below for a timeline of the purchase process.

More about the Plan 3 TAP Annuity

When can I purchase? When DRS receives your separation date, or any time after.

Are there limits to the annuity amount I can purchase? Minimum: $25,000 Maximum: Your total Plan 3 investment account balance.

How much does it cost? Use the TAP Annuity Estimator calculator or contact the Plan 3 record keeper.

What funds can I use to purchase the annuity? Contributions from your Plan 3 investment account. To purchase the annuity using funds from both your WSIB and Self-Directed investment programs, youll need to transfer the funds to the WSIB program first.

How often do I receive my annuity benefit? Monthly.

Can I designate a survivor? Yes.

Can I cancel the annuity if I change my mind? In most cases, no. Annuities are fixed income sources. Once you purchase the annuity, you will not have access to the funds you used to make the purchase.

There are two exceptions:

What if I return to work? Your annuity continues.

What else should I know?

Elected Or Appointed Official

How Much You Should Have Saved in Your Retirement Account, by Age

As an elected or governor-appointed official, you are eligible to join a state retirement plan. To earn service credit, most elected positions need to earn at least 90 times the state minimum wage each month. Or you can participate if you are already working in another position with a DRS retirement plan.

To enroll or opt out, complete this membership form. You can enroll at any time during your elected or appointed service. Your contributions will continue until you separate from employment.

Your contributions and retirement benefit

  • See contribution amounts.

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Death Of A Retired Member

Please contact DRS as soon as possible. If the retiree chose a survivor benefit, we must update the account for payments to continue. If the retiree did not select a survivor option, we need to stop monthly benefits to avoid an overpayment. When you contact us, please be ready to provide the deceased retirees full name, Social Security number and date of death.

Defined Benefit Portion Of Plan:

You do not have the option to withdraw the contributions that WSU has made on your behalf into this plan.  If you are vested in the plan at the time of the end of your employment, but are not yet eligible to retire, you would be able to draw a retirement benefit at a future date.
If you have at least 20 years of service at the end of your employment, the Defined Benefit will continue to increase by approximately 3 percent for each year you delay receiving the benefit, up until age 65.
What you do with the Defined Contribution portion of your account upon end of employment will not have an impact of a possible future Defined Benefit payment.
Additional valuable benefit separation information can be found under .

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Types Of Retirement Systems In Washington

The state of Washington has a fairly complicated set of retirement systems. There are seven broad categories for employees and several subcategories within those seven. For most systems, your monthly benefit in retirement will be a function of your years of service and your average final compensation . Your AFC will likely be the average of your 24 consecutive highest paid months on the job.

When Can I Apply For Service Credit

Washington DRS Plan 3 – How it works TRS / PERS /SERS

Once the school year is over, you can apply for service credit and request a bill beginning in September of the next school year. To avoid paying interest on the contributions, submit your application between September and February of the school year following the one in which you worked.

For example, if you worked during the 2016-17 school year, submit your application between September and February of the 2017-18 school year. If your payment is received after the last day of February, you will be charged interest on the employer contributions.

Your SERS membership officially will begin on the date your substitute bill is paid in full. For existing members, your membership began on either the date your first substitute bill was paid in full or when you were first hired into a SERS-eligible position.

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How Service Is Calculated

  • State elected officials earn one full credit for each month worked, regardless of hours worked.
  • Governor-appointed and local elected officials need to earn 90 times the state minimum wage and then service credit will be based on the standard rules of the planfull credit is applied when you work at least 90 hours in a month, with partial credit for fewer hours.

How Do Survivors Or Beneficiaries Impact The Limit

Does my benefit amount change for my survivor beneficiary after I die?

No. If you chose to provide for a survivor beneficiary, and you die before your survivor does, your benefit transitions to your survivor at the rate you chose . After the transition, your survivors benefit will also be tested.

What happens if my survivor beneficiary dies before I do?

If your survivor beneficiary dies before you do, your benefit increases as if you hadnt chosen a survivor option. If your survivor beneficiary was your spouse or domestic partner, we will continue to use your original benefit amount in your annual testing. If your survivor beneficiary was not your spouse or domestic partner, we will use your new, higher limit amount in your annual testing.

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If I Retire Early What Reductions Will Apply

The amount of the reduction to your monthly benefit depends on how much younger than age 65 you are when you retire and the amount of service credit you have. This reduction reflects that you will be receiving your defined benefit for a longer period of time than if you had retired at age 65. Consider how the ERFs are applied in the examples shown below.

For more information on early retirement, read Washington Administrative Code 415-02-320.

Plan 3 early-retirement formula

1% x service credit years x Average Final Compensation x ERF = monthly benefit

Returning to work could affect your retirement income. See working after retirement.

Example Of Fees Applied To A $10000 Balance

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This example is simplified because normally your investments would vary each quarter depending on your contributions and the performance of the market. Plan 3 fees are calculated based on your exact account balance and performance at the time.

The fee total varies by fund. For this example, lets use the 2035 Retirement Strategy Fund for Plan 3. The total cost for this fund is included in the last column of the fee tables above. This fund has a total fee of 0.3258% per year.

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Irs Distribution Period For Your Age

Age
1.9

Example of an RMD calculation:

Alex is age 75 with a Plan 3 account balance of $150,000 as of December 31, 2018. To find the required minimum distribution amount, Alex takes the account balance and divides it by the distribution period based on age 75, which is 22.9 years.

$150,000 / 22.9 years = an RMD of $6,550.00 for 2019.

If Alex is also a member of DCP, the same calculation will need to be performed on the DCP investment account balance.

Plan 3 Has Pension And Investment Withdrawals

Plan 3 has two parts a pension funded by your employer and an investment account funded by you. These account balances are kept separate and you withdraw them separately in retirement. This separation allows you an important opportunity for flexibility. You can withdraw from both fund sources at the same time in retirement, or you can choose to withdraw from one or the other at different times. Many people choose to withdraw only from their investment contributions and leave the employer-funded pension payments until they reach the full retirement age of 65. You withdraw your pension account funds through DRS and your investment account funds through the DRS record keeper.

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Public Employees Retirement System

Members of the Public Employees Retirement System are typically employed by the state or by a county, city, town, public utility district or local government entity.

A pension plan for public employees who established membership as:

State employees:

  • on or after October 1, 1977 and before March 1, 2002, unless transferred to Plan 3 or
  • on or after March 1, 2002 and chose Plan 2.

Local government employees:

  • on or after October 1, 1977 and before September 1, 2002, and have not transferred to Plan 3 or
  • on or after September 1, 2002 and chose Plan 2.

As of June 30, 2020, Plan 2 is the default plan for PERS members who do not select a plan in their first 90 days of employment.

A pension and investment plan for public employees who established membership as:

State employees:

  • in Plan 2 on or after October 1, 1977 and before March 1, 2002 and transferred to Plan 3 or
  • on or after March 1, 2002 and chose Plan 3.

Local government employees:

  • on or after October 1, 1977 and before September 1, 2002 and transferred to Plan 3 or
  • on or after September 1, 2002 and chose Plan 3.

On and before June 29, 2020, Plan 3 was the default plan for PERS members who did not select a plan in their first 90 days of employment.

How Much Will Your Investment Retirement Be

Plan 3 Drawbacks – WA DRS – TRS 3, PERS 3, SERS 3

The total amount available from your investment account in retirement will depend on a few things.

  • The income percentage you chose when you selected the plan
  • Your income and years of contributions
  • Investment selection and performance

Get a complete picture of your projected retirement income through your investment account. Here you can add your Plan 3 pension and investment income, social security, and any additional retirement savings such as DCP.

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How Do Annuities Affect My Taxes

Each year youll receive a statement that shows the taxable amount of your annuity. Complete a Form W-4P to choose the amount youd like withheld from your payments for taxes. Without a Form W-4P, the tax withholding will follow IRS guidelines using a status of married with three allowances.For more information about taxes, review IRS Publication 575. You might want to consult a tax advisor. DRS and the record keeper are not authorized to give tax advice.

Retirement Plan Options For Classified Staff

Below is a table summary of the retirement plans offered to classified staff, plans are administered by the Department of Retirement Systems. Participation in a retirement plan is mandatory. You will participate in Plan 2, or Plan 3 based on your initial eligible employment with any state agency, as indicated below, even if you withdrew prior contributions.

Service credit canceled by previous withdrawals may be restored by repayment of withdrawn contributions, plus interest within 5 calendar years of returning to a PERS eligible position or before retirement, whichever is first.

* Eligible employees will initially be enrolled in PERS Plan 2 if you fail to choose a plan within the 90-day enrollment period you will default to PERS Plan 2 permanently.

Plan
Employer: 10.25% After 5 years of service. At age 65 with 5 years of service, age 55 with 20 years of service with reduced benefit, or age 62 with 30 years of service with full benefit. 2% of AFC per year of service
401 Defined Benefit Plan with Defined Contribution Employee: Six options availableEmployer: 10.25% After 10 years of service. At age 65 with 10 years of service, or a reduced benefit at age 55 with 10 years of service . 1% of AFC per year of service , plus Defined Contribution portion. *see handbook for details
Employer: 8.71% After 5 years of service. At age 53 with 5 years of service, or a reduced benefit at age 50 with 20 years of service. 2% of AFC per year of service

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Your Spouse Must Agree To The Option You Pick

If you are married and choose a Survivor Option other than Option 3, the law requires that your spouse consent to your choice by cosigning your retirement application. If your spouses consent is not provided, an Option 3 benefit will be paid to you and your spouse will be designated to receive the survivor benefit.

Members Of More Than One Retirement Plan

MRSC

If you are a member of more than one Washington state retirement system, you are a dual member. You can combine service credit earned in all dual member systems to become eligible for retirement. However, your retirement benefit will be calculated using only the service credit earned in each system.

In most cases, your monthly benefit will be based on the highest base salary you earned, regardless of which system you earned it in. Base salary includes your wages and overtime and can include other cash payments if those payments are included as base salary in all the retirement systems you are retiring from.

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How Is The Minimum Payment Calculated

You can calculate your required minimum distribution by taking the previous years Dec. 31 investment account balance and dividing it by the IRS distribution period based on your age. If you are a member of Plan 3 and DCP, you have two investment accounts that are subject to minimum distribution requirements and you calculate these separately.

To calculate your own RMD withdrawal, you can use the tables below. Find your age in the table. The distribution period is the number you divide your total investment account balance by to get the required minimum amount. See the following table for an example.

IRS distribution period for your age

This table applies to you if your status is:

  • Unmarried

Teachers Retirement System Plan 3

Employees who have established eligibility to participate in the State Board Retirement Plan and have not previously participated in a Washington state retirement plan have the option to participate in either the SBRP or Plan 3 of the Teachers Retirement System or the Public Employee Retirement System .

This page outlines the choices faculty must make to decide whether to participate in the SBRP or Teachers Retirement System Plan 3 .

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When Will I Receive A Bill

Once DRS receives your application materials, we will look up the amount of service credit you are eligible to buy. Then we will send you a bill for the amount due.

Once you pay your bill in full, we will apply the service credit to your account. View your service credit balance in your online account.

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