pers plan 2 member handbook 2 plan summary pers plan 2 is a defined benefit plan. when you meet plan...
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W A S H I N G T O N S TAT EDepartment of Retirement Systems
making it easy to see your future
PERS Plan 2 HandbookP u b l i c E m p l o y e e s ’ R e t i r e m e n t S y s t e m
January 2018
Public Employees’ Retirement System (PERS) — Plan 2
Welcome to PERS 2 Plan summary 3 How to contact the Department of Retirement Systems 3 Privacy of your information 4 How your plan works 6 Planning for retirement
Milestones/ life changes
7 Becoming vested 7 Option to transfer to PERS Plan 3 7 Leaving public service 8 Returning to public service 8 Marriage or divorce 8 If the unexpected happens
Approaching retirement
10 Retirement planning checkup10 Service retirement 11 Early retirement 11 Retiring as a dual member 12 Estimatingyourbenefit 12 Purchasing additional service credit 12 Updating your plan for retirement
Ready to retire 13 Applying for retirement online 13 Applying for retirement on paper 13 Yourbenefitoptions 13 Health insurance coverage 14 Federalbenefitlimit 14 Federaltaxonyourmonthlybenefit 14 Legal actions 14 Whenandhowyourbenefitwillbepaid
Once you retire 15 Cost-of-Living Adjustment (COLA) 15 Working after retirement 15 Benefitoverpaymentsandunderpayments 15 Changingabenefitoptionorsurvivorafteryouretire
16 Glossary of terms17 Index
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Plan summary
PERS Plan 2 is a defined benefit plan.When you meet plan requirements and retire, you are guaranteed a monthly benefitfortherestofyourlife.
Your monthly benefit will be based on your earned service credit and compensation while a member of PERS Plan 2. This formula will be used to calculate your monthlybenefit:
2% x service credit years x Average Final Compensation = monthly benefit
You and your employer each contribute a percentage of your salary or wages to help fund the plan. The Pension Funding Council adopts contribution rates and periodically adjusts themtoreflecttheoverallcostoftheplan.TheLegislaturehasthefinaldecisiononcontributionrates.
You are vested in the plan when you have five years of service credit. Once you are vested, you have earned therighttoafuturemonthlybenefit.Ifyou leave your job and withdraw your contributions, however, you give up your righttoabenefit.
You are eligible to retire with a full benefit at age 65 if you have at least five years of service credit. Retirement before 65 is considered an early retirement.Ifyouhaveatleast20 years of service credit and are 55 or older, you can choose to retire early, but yourbenefitmightbereduced.Thereisless of a reduction if you have 30 or more yearsofservicecredit.
If the unexpected happens — disability or death before retirement — a benefit might be available. If you become totally incapacitated and leave your job as a result, you might be eligibleforadisabilityretirementbenefit.
If you die before you retire, your spouse, registered domestic partner or minor child, if applicable, could be eligible to receiveabenefitbasedonyouryearsofservicecredit.
Log in to or sign up for online access to your retirement account. Track your contributions and service credit.Readthelatestnewsletter.Updateyour beneficiary information or email address.Useyourindividualdatatoestimateyourmonthlybenefit.Andwhenyou’reready,applyforretirement.Youcan get started at www.drs.wa.gov/oaa.
Welcome to the Public Employees’ Retirement System
DRS web tools
These tools can help you become retirement ready during your workingyears:
• Live webinars • Retirement Seminars • Benefitestimatorwithinonline
account access • Deferred Compensation
Program (DCP)
Tolearnmore,turntopage6.
How to contact the Department of Retirement Systems
The Washington State Department of Retirement Systems (DRS) administers the Public Employees’ RetirementSystemandtheDeferredCompensationProgram(DCP).
Privacy of your informationWe are committed to protecting the privacy of your personal account information, including your Social Security number, which we use to track your account and submit requiredreportstotheIRS.Wewillnotdiscloseyourinformationtoanyoneunlesswearerequiredtodosobylaw.
If you have insurance coverage through the Washington State Public Employees BenefitsBoard(PEBB),wecouldshareyourinformationwithPEBBtobetterserveyou.
Handbook summaryThishandbookisnotacompletedescriptionofyourretirementbenefit.Stateretirementlawsgovernyourbenefit.Ifanyconflictsexistbetweentheinformationshowninthishandbookandwhatiscontainedincurrentlaw,thelawgoverns.
GlossaryTerms highlighted in bold print appear in the glossary of terms on page16.
To contact DCP
To contact DRS
PERSWebsiteEmailCall
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]
http://www.drs.wa.gov/savewithwahttp://www.drs.wa.gov/savewithwa http://www.drs.wa.gov/savewithwa http://www.drs.wa.gov/savewithwa
888.327.5596TTY 711Fax 866.745.5766
drs.wa.gov/savewithwa
Write Email
Website
Call
HoursVisithttp://www.drs.wa.gov/administration/map.htmhttp://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm
mailto:[email protected] mailto:[email protected]:[email protected] mailto:[email protected]:[email protected] mailto:[email protected]:[email protected] mailto:[email protected]
http://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaahttp://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaa http://www.drs.wa.gov/oaa
http://www.drs.wa.gov http://www.drs.wa.gov http://www.drs.wa.gov http://www.drs.wa.gov http://www.drs.wa.gov http://www.drs.wa.gov
http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm
360.664.7000800.547.6657TTY 711
Department of Retirement SystemsPO Box 48380Olympia, WA 98504
General inquiries:[email protected]
Send a secure message through your online account: drs.wa.gov/oaa
drs.wa.gov
You can also send email through the Contact Us page on the DRS website.
Monday - Friday8 am to 5 pmPacific Time
6835 Capitol Blvd.Tumwater, WA 98501
See the DRS website for directions.
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How your plan works
OverviewPERS Plan 2 is a 401(a) defined benefitplan.When you retire, you will receive a monthly benefitfortherestofyourlifethatisbasedonyour earned service credit and your Average Final Compensation(AFC).Eventhoughthecontributions you make help to fund the plan overall, they do not factor into the monthly benefityoureceive.
Eligibility for PERS Plan 2You are eligible for PERS Plan 2 membership if the position you were hired into (on or after Oct.1,1977)iseligible.Aneligiblepositionisone that is normally compensated for at least 70hoursofworkpermonthforatleastfivemonths of each year and the employer is one ofthefollowing:
• State government (for example, agency, department, board or commission)
• Local government, including a city, town or county
• Public utility district • Public institution of higher learning • Housing authority • Diking,fire,health,irrigation,park,library,
port, reclamation, sewer or water district • Airport
Some employees might satisfy the basic membership criteria but be ineligible for other reasons.Ifoneofthefollowingappliestoyou,please contact us to determine whether you’re eligibleforPERS:
• You are a member of, or have retired from, another public retirement system in Washingtonstate.
• You work for a college or university and belongtothatentity’sretirementplan.
• You signed a student waiver while employedbyacollegeoruniversity.
• You work for the city of Seattle, Spokane or Tacoma, or you are an elected or appointedofficialofoneofthesecities.
• You provide professional services on a fee, retainer or contract basis and the income you receive from those services is less than 50% of your gross income for workperformedinthatprofession.
• You are enrolled in a state-approved apprenticeship program, employed to earn hours for completing the program, and making contributions to a union-sponsored or Taft-Hartley retirement plan.
Membership in PERS might be optional for someelectedorappointedofficials;employeesoftheLegislature;citymanagers;andchiefadministrativeofficersofcity,county,portandpublicutilitydistricts.Ifyouthinkyoumightfall into this category, consider visiting the DRS ElectedorGovernor-AppointedOfficial webpage.
Previous membership in another Washington state public service retirement systemMembership in another of Washington’s public service retirement systems (including the city retirement systems of Seattle, Tacoma or Spokane)canaffectyour:
• Eligibility for PERS Plan 2 membership • Eligibility to retire • Benefitcalculation
If you have ever been a member in another of Washington’s public service plans, it is importantthatyoucontactustoconfirm your eligibility and discuss your retirement options.
Contributing to the planYou are required to contribute a percentage of yoursalaryorwagestoyourretirementplan.This includes overtime and tax-deferred wages, but it doesn’t include severance pay or cash paymentsforunusedsickorvacationleave.Ifyou have questions about the compensation your employer reports for you, please contact youremployer.
Your employer’s contributions are also based onapercentageofyoursalaryorwages.They are not matching funds, and you cannot withdrawthemifyouleavepublicservice.
Whenyouretire,themonthlybenefityoureceive will have been funded over time by your contributions, your employer’s contributionsandinvestmentearnings.The
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Pension Funding Council adopts contribution ratesandperiodicallyadjuststhemtoreflecttheoverallcostoftheplan.TheLegislaturehasthefinaldecisiononcontributionrates.
Federal law limits the amount of compensation you can pay retirement system contributions onandthatcanbeusedinyourbenefitcalculation.In2018,thatlimitis$275,000;theamountcanbeadjustedeachyear.Ifyoureachthe limit in any calendar year, you don’t pay contributions for the remainder of the year and any salary earned over that amount isn’t used inyourpensioncalculation.
Earning service creditService credit is based on the number of hours you work, which your employer reports toDRS.Whenyouretire,yourservicecreditisapartofyourmonthlybenefitcalculation.
You receive one service credit month for each calendar month in which you are compensated for90ormorehoursofwork.Nomorethanone month of service credit can be earned each calendar month, even if more than one employerisreportinghoursyouwork.
You receive one-half of a service credit if you workfewerthan90hoursbutatleast70hoursinacalendarmonth.Youreceiveone-quarterof a service credit if you are compensated for fewerthan70hoursinacalendarmonth.
If one or both of the following apply to you, you need to know additional service credit information:
• You’re an employee who has previous membership in another Washington state public retirement system:
» If you have earned service credit in another of the state’s public retirement systems, you might be able to combine your PERS service credit with credit you earned in theothersystem(s).Formoreinformation, read the What Is Dual Membership and How Does It Affect Me?publication.
• You’re an employee of the Washington State School for the Blind, the Center for
Childhood Deafness and Hearing Loss, or aninstitutionofhigherlearning:
» If you begin working in September in an eligible position and earn compensation during at least nine months of the school year, you can receive 12 service credit months for the school year if you are compensated for at least 810 hours ofemployment.Sixservicecreditmonths can be awarded if you start in September and are compensated for at least 630 hours but fewer than 810 hours during the school year.
» If you earn compensation in fewer than nine months of the school year, you will receive service credit based on the number of hours you arecompensatedforeachmonth.
Designating your beneficiaryThe beneficiary information you give DRS tells us the person(s) you want to receive your remainingbenefit,ifany,afteryourdeath.Youcansubmitorupdateyourbeneficiaryinformation at any time before retirement in your online retirement account.Signupfororlogintoyouraccount.ThenselectMy Account > View/Edit (beside Beneficiary).Youhavethe option of submitting a paper BeneficiaryDesignation forminstead,ifyouprefer.
If you don’t submit this information, any benefitsduewillbepaidtoyoursurvivingspouseorminorchild.Ifyoudon’thaveasurviving spouse or minor child, we will pay yourestate.
Besuretoreviewyourbeneficiarydesignationperiodically and update it in your online retirement account if you need to make a change.Ifyoumarry,divorceorhaveanothersignificantchangeinyourlife,besuretoupdateyourbeneficiarydesignationbecausethese life events might invalidate your previous choices.
State-registered domestic partners, according toRCW26.60.010,havethesamesurvivor and deathbenefitsasmarriedspouses.Contactthe
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SecretaryofState’sOffice if you have questions aboutdomesticpartnerships.
When you will be vestedOnceyouhaveatleastfiveyearsofservice credit in PERS, you have a vested right to a retirementbenefit.
If you leave PERS employment before you’re eligible to retire, you can choose to either leave your contributions in the plan, where they will continue to earn interest, or you can withdraw yourcontributions.
If you decide to withdraw your contributions, you give up your right to a future PERS retirementbenefit.See“Returningtopublicservice” on page 8 to learn more about re-establishingyourbenefitrightsincertaincircumstances.
When you will be eligible to retireYou are eligible to retire at age 65 if you have atleastfiveyearsofservicecredit.
Options to retire earlier are available (see “Earlyretirement”onpage11),butyourbenefitwillbereducedtoreflectthatyou will be receiving it over a longer period of time.
• HiredonorbeforeApril30,2013:Toretire early, you must be at least 55 and have 20 or more years of service credit.Thereislessofabenefitreductionforearly retirement if you have 30 or more yearsofservicecredit.
• HiredonorafterMay1,2013:Toretireearly, you must be at least 55 and have 20 ormoreyearsofservicecredit.Ifyouareat least age 55 with 30 or more years of servicecredit,yourbenefitreductionwillbe 5% for each year (prorated monthly) beforeyouturnage65.
How your monthly benefit will be calculatedYourbenefitisdeterminedbyyourservicecredityearsandcompensation.Whenyouretire, this formula will be used to calculate yourbenefit:
2% x service credit years x AFC = monthlybenefit
Average Final Compensation (AFC) is the average of your 60 consecutive highest paid servicecreditmonths.Anyseverancepayorlump sum payment for unused sick leave or vacation/annualleaveisnotincluded.
Example Using the formula
If you retire at age 65 with 32 years of service credit and a monthly Average Final Compensationof$5,000,yourmonthlybenefitis$3,200,calculatedasfollows:
2%x32x$5,000=$3,200
Planning for retirementEven though retirement might seem far away, planning for it now is one of the best things youcandoforyourselfandyourfamily.Yourmonthlybenefitwillbeanimportantpartof your income in retirement, but it is just a portionofwhatyouwillneed.
How do you begin developing your personal plan for retirement? First, estimate how much moneyyouwillneed.Thatcanvarybasedonfactorsthatinclude:
• The lifestyle you’ll want to lead when you retire
• Your health • Whether you’ll carry any debt into
retirement • Your life expectancy
Next,estimatehowmuchmoneyyouwillreceive from all sources, such as Social Security, personal savings and other employer pension plans.Whenyoucomparethisnumberwithwhat you think you will need, you can adjust yoursavingsplanaccordingly.
Manytoolscanhelpyouwithyourplanning.Here are some on the DRS website:
• Live webinars are available to attend online.TopicsincludePlan2,Plan3,plan choice, the Deferred Compensation Program (DCP), distributions from Plan
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3, investment basics and Social Security basics.
• Retirement seminars are available to attendinperson.Youcanalsowatchseminars when it’s convenient for you on the DRS Retirement Seminarswebpage.Topics include Plan 1, Plan 2, Plan 3, DCP, Social Security and health care options, andtheVoluntaryEmployees’BeneficiaryAssociation(VEBA).
• Thebenefitestimatorwithinonline account access can calculate your monthlybenefitbasedonavarietyof scenarios (for example, different retirement dates) using your actual accountdata.Ifyouhaven’talreadyregistered for this service, it takes just a fewminutestodoso.
• The Deferred Compensation Program (DCP) is a special type of savings program that helps you invest for the retirement lifestyleyouwanttoachieve.Unliketraditional savings accounts, DCP is tax-deferred.Thatmeansitlowersyourtaxable income while you are working and it delays payments of income on your investments until you withdraw your funds.Contributionsareautomaticallydeducted from your paycheck, so saving iseasy.Youcanstartwithaslittleas$30permonth.Youcanalsoletyourcontributions grow with percentage deductions.
Be sure to revisit your plan periodically and adjust for any changes in your professional and personallife.
Milestones/life changes
Becoming vestedWhenyouhaveatleastfiveyearsofservice credit in PERS Plan 2, you have a vested right toaretirementbenefit.Thisisasignificantmilestoneinyourpublicservicecareer.
Option to transfer to PERS Plan 3
If you became a member of PERS Plan 2 before Plan 3 began (that is, March 1, 2002, for state andhighereducationemployeesandSept.1,2002, for local government employees), you have an opportunity each January, while you areemployed,totransfertoPlan3.Plan3hastwo parts — a defined benefit and a defined contribution—andisreferredtoasa“hybridplan.”
If you decide to transfer, your Plan 2 contributions plus any interest they have earnedwillbemovedtoaPlan3definedcontributionaccount.IfyoutransfertoPlan3,youcannotreturntoPlan2.
Making a retirement plan choice is an individualdecision.Yourdecisionshouldbebasedonyourpersonalsituation.Formoreinformation, visit the Plan Choice section of the Plan 3 website.
Leaving public service
If you leave PERS employment, you can choose to either leave your contributions in the plan until you’re eligible to retire or withdraw them.TheIRSrequiresthatyoubegintakingpaymentofyourmonthlybenefitnolaterthanage70½,unlessyouarestillemployed.
Leaving PERS-covered employment is the only circumstance in which you can withdraw your contributions.DoingsocancelsanyrightsandbenefityouhaveaccruedinPERS.Youcan
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restore your contributions and re-establish yourbenefitonlyincertaincircumstances(seethenextsection).
There are tax implications to withdrawing your contributions, so you might want to contact the IRS or a tax advisor before making adecision.TheWithdrawal of Retirement Contributions publication offers more detailed information.
Be sure to keep us up to date on any changes to your name, address or beneficiary.It’simportant that you keep your beneficiarydesignation current, because a divorce, marriage orothercircumstancemightinvalidateit.
Returning to public service
If you leave your position, withdraw your contributions and later return to PERS work, you might be able to restore your previous service credit.Todoso,youmustrepaythetotal amount of the contributions you withdrew plusinterestwithinfiveyearsofreturningtowork or before you retire, whichever comes first.Contactustofindoutthatamount.
A dual member, or someone who belongs to more than one retirement system, might be able to restore service credit earned in a retirementsystemotherthanPERS.Eachtimeyou become a dual member, you’ll have 24 months to restore service credit earned in a previousretirementsystem.
It might still be possible to purchase service creditafterthedeadlinehaspassed.However,thecostinthatcaseisconsiderablyhigher.Toexplorefinancialprojectionsandcomparisonsofyourestimatedretirementbenefits,tryusingour Plan Choice Calculator.
You can learn more by reading Plan 2 Recovery of Withdrawn or Optional Service Credit for PERS, SERS, TRS, PSERS and LEOFF.YoumightfindhelpfulinformationinWhat Is Dual Membership and How Does It Affect Me? as well.
Marriage or divorce
Marrying, divorcing or separating can affect yourmonthlybenefit.
Court-ordered property divisionA court-ordered property division could affect yourbenefit.Aslongastheordercomplieswith applicable laws, we will pay a monthly benefittoyourex-spouseaccordingtothedivision.TheDRSpublicationHow Can a Property Division Affect My Retirement Account?containsdetailedinformation.
Updating your beneficiaryThe beneficiary information you give DRS tells us the person(s) you want to receive your remainingbenefit,ifany,afteryourdeath.Youcansubmitorupdateyourbeneficiaryinformation at any time before retirement in your online retirement account.Signupfororlogintoyouraccount.ThenselectMy Account > View/Edit (beside Beneficiary).You have the option of submitting a paper BeneficiaryDesignation form instead, if you prefer.
If you marry or divorce before you retire, you needtoupdateyourbeneficiaryinformation,evenifyourbeneficiaryremainsthesame.It’sveryimportantthatyoukeepyourbeneficiarydesignationuptodate.
If the unexpected happens
Temporary leave from your jobYou might need to take a temporary leave fromyourjobbecauseof:
• Military service • An authorized leave of absence • A temporary disability
If so, you might be able to obtain service credit for work time missed while you were on leave.
Service credit for military serviceIf you left your position for uniformed military service, you might be eligible to receive service
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creditforthatperiodofmilitaryservice.
Toqualify,youmust: • Apply for a position with the same PERS employerwithin90daysofreceivinganhonorable discharge
• Paythecontributionswithinfiveyearsof returning to employment or before youretire,whichevercomesfirst;contributions might not be required if your military service occurred during certain periods of war
If you become totally incapacitated as a result of serving in the United States military, you (or your surviving spouse or children, in the case of your death) can apply for military service credit without your return to employment.
Read our Military Service Credit publication for moreinformation.
Service credit for an unpaid, authorized leave of absenceYou could be able to earn up to two years of service credit for an unpaid leave of absence thatyouremployerauthorized.Todoso,youmust:
• Return to work in a PERS-covered position • Pay your contributions with interest as
well as your employer’s contributions with interest for the period of time you were on leave
Youmustcompletepaymentwithinfiveyearsof returning to employment or before you retire,whichevercomesfirst.Youcanlearnmore by reading Recovery of Withdrawn or Optional Service Credit for PERS, SERS, TRS, PSERS and LEOFF.
Disability before retirementIn some cases, you can obtain service credit for work time missed while you were on leave foratemporarydisability.
If you become totally incapacitated and leave your job as a result, you might be eligible for a disabilityretirementbenefit.
To learn more, read PERS/SERS/TRSPlans2and3DisabilityBenefits or call us for information.
Death before retirementIf you have fewer than 10 years of service credit at the time of your death, your accumulated contributions plus interest will be paid to your beneficiary.
If you have 10 or more years of service credit at the time of your death, your spouse (or the guardian of your minor children, if you aren’t married) can choose to receive either a lump sum payment of your contributions plus interestoramonthlybenefit.Ifyoudonothave a surviving spouse or minor children, your contributions plus interest will be paid to your beneficiaryorestate.
Themonthlybenefitwillbecalculatedasifyou had retired and chosen a 100% survivor benefit(seeOption2onpage13inthe“Readytoretire”sectionofthishandbook).
If your surviving spouse dies while receiving thebenefit,yourminorchildrenwillreceivethebenefitthatwasbeingpaidtoyoursurvivingspouse.Thebenefitwillbedividedequallyamong the children, and each will receive his orherportionuntilheorsheturns18.
Death as a result of an injury or occupational disease sustained during employmentIf the Department of Labor & Industries determines that your death was the result of injuries sustained during the course of employment or an occupational disease or infection that arose from your employment, your beneficiarywillbeentitledtoaone-time,duty-relateddeathbenefit.
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Approaching retirement
Retirement planning checkupConsider taking time to check in on your retirementplanning.Haveyouanalyzedhowmuch you will need and how much you will have in retirement? Has anything in your plan changed? Have you joined the state’s Deferred Compensation Program (DCP) or another supplemental savings program?
Thingstoconsider: • Identifyyourretirementlifestylegoals.
Will you want to travel the world or stay close to home? Different lifestyle choicescanmeandifferentfinancialgoals.
• Takecareofyourhealth.Thecostofmedical care can be one of the largest expensesyouincurinretirement. Getting regular checkups now and maintaining a healthy lifestyle can have an impact on what those costs will be whenyouretire.
• Paydowndebt.Debtlessensthemoneyyouhaveavailabletosave.Payingoffdebt while you’re still generating a paycheck will affect how much you have tosaveandgiveyougreaterflexibilityinretirement.
• Sign up for DCP or another similar savingsvehicle.(It’snevertoolateto getstarted.)Ifyou’realreadysavingwithDCP or another plan, consider increasing yourcontributionamount.Makingevenasmall increase can make a big difference overthelongrun.Usethecalculator on the DCP website to see the impact different contribution amounts could have.Here’sanimportanttip:Ifyou’reage 50 or older, the IRS allows a higher contribution limit, which enables you to save even more in your DCP account if youchoose.
These questions are key as you approach retirement.
• How much income will you need in retirement?
• Whatwillyourmonthlybenefitbe? • Howwillyourbenefitchangeifyouwork
past age 65 or you decide to retire early?
• Willyouwanttoincreaseyourbenefitbypurchasing additional service credit?
• What other income will you have available to you in retirement?
Thissectioncanhelpyoufindtheanswers.If you haven’t already signed up for online account access,considerdoingso.Withthisaccess,youcancalculateyourbenefitusingdifferent scenarios and your individual account information.
Service retirement
You are eligible to retire when you are 65 and haveatleastfiveservice credityears.Thisformula will be used to calculate your monthly benefit:
2% x service credit years x AFC = monthlybenefit
AFC is the average of your 60 consecutive highestpaidservicecreditmonths.Anyseverance pay or lump sum payment for unusedsickleaveorvacation/annualleaveisnotincluded.
Example Service retirement
If you retire at age 65 with 20 years of service credit and a monthly Average Final Compensationof$3,700,yourmonthlybenefitis$1,480eachmonth,calculatedas:
2%x20x$3,700=$1,480
Ifyourmonthlybenefitislessthan$50,youcan choose to take a lump sum retirement benefit.(It’slikelythatonlyamemberwhoretires early on disability or as a dual member wouldreceivethistypeofpayment.)Ifyou receive a lump sum payment, you are consideredretiredfromPERS.
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Early retirementAny retirement before age 65 is an early retirement.Ifyouretireearly,yourbenefitwillbereducedtoreflectthatyouwillbereceivingitoveralongerperiodoftime.Yourbenefitdepends on how much service credit you have earned, your age and the Early Retirement Factors(ERFs)applied.
Early Retirement Factors
Retirement age
At least 20 years
of service credit*
30 years or more of service credit
(prorated monthly)3%
ERFs2008 ERFs
5% ERFs
55 0.386 0.70 0.80 0.5056 0.423 0.73 0.83 0.5557 0.463 0.76 0.86 0.6058 0.507 0.79 0.89 0.6559 0.556 0.82 0.92 0.7060 0.611 0.85 0.95 0.7561 0.672 0.88 0.98 0.8062 0.741 0.91 1.00 0.8563 0.817 0.94 1.00 0.9064 0.903 0.97 1.00 0.95
* The 20-year ERFs are subject to change based on State Actuaryfigures.Toreviewthefactorsindetail,visitthecomplete tableonline.
Herearetheearly-retirementoptions: • HiredonorbeforeApril30,2013:To
retire early, you must be at least 55 and have 20 or more years of service credit.If you have 30 or more years of service credit,yourbenefitreductionwillbesmaller.With30ormoreyearsofservicecredit, you can retire at or after age 55 underoneoftwoprovisions:1. Yourbenefitisreducedby3%for
eachyearbeforeyouturn65.2. A smaller (or no) reduction is made
toyourbenefit,butyouagreetostricter rules about returning to public service employment (that is, your pension payments stop if you return to public service and don’t start again until you leave employmentorreachage65).This
second provision is referred to as the2008ERFs.
• HiredonorafterMay1,2013:Toretireearly, you must be at least 55 and have 20 ormoreyearsofservicecredit.Ifyouareage 55 with 30 or more years of service credit,yourbenefitreductionwillbe5%for each year (prorated monthly) before youturnage65.
The Thinking About Retiring Early? publication offers in-depth information on what you’ll need to know if you are thinking about retiring early.
Retiring as a dual member
If you are a member of more than one Washington state retirement system, you are a dual member.Youcancombineservice credit earned in all dual member systems to become eligibleforretirement.
Inmostcases,yourmonthlybenefitwillbebased on the highest base salary you earned, regardlessofwhichsystemyouearneditin.
Base salary includes your wages and overtime and can include other cash payments if those payments are included as base salary in all the retirementsystemsyouareretiringfrom.
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Example Dual member
If you retire at age 65 with three years of service credit from PERS Plan 2 and four from the Teachers’ Retirement System (TRS) Plan 2, you are a dual member.Withoutdualmembership,your service would not be eligible for amonthlybenefitfromeithersystem.With dual membership, your service credit is combined, giving you enough toretire.Yourbenefitfromeachsystemis calculated with service from that systemalone.Thisishowyourbenefitiscalculated:
2% x 3 (PERS service credit years) x Average Final Compensation (AFC) = PERSbenefit
2% x 4 (TRS service credit years) xAFC=TRSbenefit
PERSbenefit+TRSbenefit=total monthlybenefit
For more information, read the publication What Is Dual Membership and How Does It Affect Me?
Estimatingyourbenefit
If you expect to retire within the next year, we encourage you to contact us to request a writtenestimateofyourbenefit.Remember,you can also use online account access to estimateyourbenefitatdifferentretirementdates.
Purchasing additional service credit
At the time you retire, you may purchase additional service credit to increase your monthlybenefit.Youcannotusetheadditional
servicecredittoqualifyforretirement.Thisalsoappliestothe3%and2008ERFs.
We can provide you with estimates for the cost of purchasing the service credit and the increasetoyourbenefit.Ifyouchoosetopurchase, a Request to Purchase Additional Retirement Service Credit form must be submitted to us at the same time you submit yourretirementapplication.
For more information, read the Purchasing Additional Service Creditpublication.
Updating your plan for retirement
Has anything changed with your retirement planning? Perhaps you want to work longer orretireearlierthanyoupreviouslythought.Be sure to adjust your planning to meet your needs.
Ifyouarewithinfiveyearsofretirement,weencourage you to attend a DRS retirement planningseminar.Seminarsoffervaluabletipsonpreparingforretirement.Checktheschedule,andsignuponline.Youalsohavethe option of watching a retirement planning seminaronline.
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Ready to retireApplying for retirement online
To apply online, go to online account access andeithersignupfororlogintoyouraccount.
The online retirement application will display only what you need based on your retirement system, planandretirementeligibilityrules.Follow the step-by-step instructions and electronically submit the application to us whenyou’reready.
Applying for retirement on paper
Requestaretirementapplicationfromus.Submit the completed application with all required signatures and documentation, including proof of age for your survivor if you choose a Survivor Option (see Options 2, 3 and 4below).
If you’re purchasing service credit, complete and turn in your Request to Purchase Retirement Service Credit form with your application.
Yourbenefitoptions
When you apply for retirement, you will choose oneofthefourbenefitoptionsshownbelow.Once you retire, you can change your option in onlylimited,specificcircumstances,soselectcarefully.
Option 1Single LifeThis option pays the highest monthly amount of the four choices, but it is for your lifetime only.Noonewillreceiveanongoingbenefitafteryoudie.Ifyoudiebeforethebenefityouhave received equals your contributions plus interest (as of the date of your retirement), the difference will be paid in a lump sum to your designated beneficiary.
Option 2Joint and 100% survivorYourmonthlybenefitunderthisoptionislessthantheSingleLifeOption.Butafteryourdeath, your survivor will receive the same benefityouwerereceivingforhisorherlifetime.
Option 3Joint and 50% survivorThis option applies a smaller reduction to your monthlybenefitthanOption2.Afteryourdeath,yoursurvivorwillreceivehalfthebenefityouwerereceivingforhisorherlifetime.
Option 4Joint and 66.67% survivorThis option applies a smaller reduction to your benefitthanOption2andalargerreductionthanOption3.Afteryourdeath,yoursurvivorwillreceive66.67%(orroughlytwo-thirds)ofthebenefityouwerereceivingforhisorherlifetime.
Your spouse must agree to the option you pickIf you are married and choose a Survivor Option other than Option 3, the law requires that your spouse consent to your choice by cosigningyourretirementapplication.Ifyourspouse’s consent is not provided, an Option 3 benefitwillbepaidtoyouandyourspousewillbe designated to receive the survivorbenefit.
Health insurance coverage
Ask your employer if you will be eligible for health insurance coverage through the PublicEmployeesBenefitsBoard(PEBB) once youretire.YoucanalsocalltheHealthCareAuthority at 800-200-1004 or visit www.hca.wa.gov.
If you qualify for continuing coverage, you must meet strict timelines to apply or request adeferral.IfyouarenotentitledtoPEBBcoverage, you might be eligible for health insuranceyouremployerprovides.Formoreinformation,consultyouremployer.
14www.drs.wa.gov
Federalbenefitlimit
Whenyouretire,yourbenefitcouldbelimitedifitexceedsthefederallyallowedamount.For2018,thelimitis$220,000,butitcanbeadjustedannuallyforinflation.MembershiredbeforeJan.1,1990,havedifferentlimits.Whenweprocessyourbenefitestimate,wewillnotifyyouifyourbenefitexceedsthelimit.
Few retirement system members should be impactedbythislimit.Ifyouthinkitcouldimpact you, please call us for additional information.
Federal tax on your monthlybenefit
Most,ifnotall,ofyourbenefitwillbesubjecttofederalincometax.Theonlyexceptionwillbe any portion that was taxed before it was contributed.Whenyouretire,wewillletyouknow if any portion of your contributions has alreadybeentaxed.
Since most public employers deduct contributions before taxes, it’s likely your entire retirementbenefitwillbetaxable.
At retirement, you must complete and submit a federal W-4P form to let us know how much ofyourbenefitshouldbewithheldfortaxes.If you don’t, IRS rules require withholding as if you are married and claiming three exemptions.Youcanadjustyourwithholdingamount at any time during retirement by completing a new W-4P form.
For each tax year you receive a retirement benefit,wewillprovideyouwitha1099-Rform to use in preparing your tax return (see the 1099-Rsample).Theseformsareusuallymailed at the end of January for the previous year.Theinformationisalsoavailablethroughonline account access.
It is your responsibility to declare the proper amount of taxable income on your income tax return.
Legal actions
Ingeneral,yourmonthlybenefitisnotsubjecttoassignmentorattachment.However,itcould be subject to court and administrative orders issued under federal law or for spousal maintenanceandchildsupport.
Youcanfindmoreinformationinthepublication Can Legal Action Affect My Retirement Account?
Whenandhowyourbenefit will be paid
Afteryouretire,yourretirementbenefitwillbe paid at the end of each month and directly depositedinyourfinancialinstitutionaccount.You must enter your banking information in your online retirement account or complete the Direct Deposit Authorization form as part ofyourretirementapplication.
Ifyouneedtochangeyourfinancialinstitutiononce you’ve started your retirement, just update your information in your online account orsendusanewauthorizationform.Inrarecases, if you are unable to receive payment by direct deposit, payment will be mailed at the endofeachmonth.
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Once you retireCost-of-Living Adjustment (COLA)
OnJuly1ofeveryyearfollowingyourfirst fullyearofretirement,yourmonthlybenefitwill be adjusted to a maximum of 3% per year, as determined by the Consumer Price Index.
Working after retirement
If you return to public service in Washington stateafteryouretire,yourbenefitcouldbeaffected, depending on the position and numberofhoursyouwork.
In certain circumstances, you might be required to become a member of, and pay contributions to, another retirement system.
You might be able to work limited hours with noimpacttoyourbenefit.Ifyouretireearlyunder provisions put in place in 2008 (see “Earlyretirement”onpage11),yourbenefitcould be stopped if you return to public service.
If you think you might be returning to work afterretirement,callustoseeifyourbenefitwillbeaffected.ConsiderreviewingtheThinking About Working After Retirement? publication.
Benefitoverpayments or underpayments
If you ever receive an overpayment of your monthlybenefit,youarerequiredtorepayit.
Ifwediscoveryourbenefithasbeenunderpaid,we will correct the error and award you a retroactivepayment,ifapplicable.
Changingabenefitoption or survivor after you retire
Once you retire, you may change your benefitoptionorsurvivor in the following circumstancesonly:
• If you designate someone other than your spouse to receive your survivor benefit,youcanchangetoanOption1(nosurvivor)benefitatanytimeafterretirement.
• If you choose a Survivor Option (Option 2, 3 or 4) and your designated survivor diesbeforeyoudo,yourmonthlybenefitcan be adjusted to the higher Option 1 paymentlevel.Besuretonotifyustobeginthischange.
• If you marry or remarry after retirement and remain married for at least one year, you might be able to change your benefitoptionandprovideasurvivorbenefitforyournewspouse.Toqualifyfor this opportunity, you must request the change during your second year of marriage.Contactusforestimatesonhowthiswillaffectyourmonthlybenefit.Also, be aware that this opportunity might not be available if a court-ordered property division has impacted your benefit.
• If you re-enter PERS membership and earn 24 months of uninterrupted service credit, you can select a different Survivor Optionwhenyouretireagain.
16www.drs.wa.gov
Glossary of termsAverage Final Compensation (AFC): The monthly average of your 60 consecutive highestpaidservicecreditmonths.YourAverage Final Compensation is used in determiningyourmonthlybenefit.
Beneficiary: The person(s), estate, organization or trust you have designated to receive anybenefitpayableuponyourdeath.YourbeneficiarymusthaveafederaltaxidentificationnumberoraSocialSecuritynumber.
Cost-of-Living Adjustment (COLA): On July 1ofeveryyearfollowingyourfirstfullyearofretirement,yourmonthlybenefitwillbeadjustedtoreflectthepercentagechangeinthe Consumer Price Index — to a maximum of 3%peryear.
Defined benefit: A retirement plan in which yourbenefitisbasedonaformula rather than anaccountbalance.Theformulaprovidesamonthlybenefit based on your years of service andyourAverageFinalCompensation.
Defined contribution (a component of Plan 3 only;somemembersofPlan2havetheoptiontotransfertoPlan3):Abenefitthatconsistssolely of the money you contribute and any investment gains, losses or expenses applied to youraccount.
Domestic partner: In a registered domestic partnership, both individuals have met the state’s legal requirements and registered their partnershipwiththeSecretaryofState’sOfficeoranotherjurisdiction.ContacttheSecretaryofState’sOfficeifyouhavequestionsabouttherequirements. Registered domestic partners havethesamesurvivoranddeathbenefitsasmarriedspouses.However,differencescouldoccur in how taxes are handled at the federal level.
Dual member: You are a dual member if you have established membership in more than one Washington state retirement system, including First Class City retirement systems for
Seattle, Spokane and Tacoma, but excluding Plan1oftheLawEnforcementOfficers’andFire Fighters’ Retirement System.
Early retirement: Retiringbeforeage65.
Membership status: The status of your retirementmembership.Thiscanbe:
• Active, which means you are currently employed in a position covered by one of the state retirement systems
• Inactive, which means you no longer are actively contributing to the state retirement system and have not withdrawn your contributions after leaving employment (which might leave youeligibletoreceiveabenefitonceyoureach retirement age)
• Withdrawn, which means you were employed in a position covered by one of the state retirement systems and you withdrew your contributions after leaving employment
Reduced benefit: AbenefitthathasbeendecreasedbyafactorprovidedbytheOfficeoftheStateActuary.A benefit is reduced in two situations: when you retire early or you retire and select a Survivor Option (which pays a benefittoyour survivor after your death).
Service credit: The credit you receive each month for working in a position covered by oneofthestateretirementsystems.Servicecredit is used to determine your eligibility for retirementandyourbenefitamount.
Survivor: The individual you choose — when picking Option 2, 3 or 4 at retirement — to receivebenefitpaymentsafteryourdeath.
System/plan: The retirement system and plan inwhichyouareamember.
Vested: You have earned the right to receive a retirementbenefitonceyoureachaneligibleage.
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AApplying for retirement, 13Approachingretirement,9Authorized leave of absence, 8Average Final
Compensation, 2, 4, 6, 10, 12
BBecoming vested, 7Beneficiary,5,8,9,13Benefitcalculation,4,5Benefitoptions,13,15
CChangingabenefitoptionor
survivor after you retire, 15Compensation, 4, 5, 6Contribution rate, 2, 5Contributions, 2, 4, 6, 7, 9,13,15
Cost-of-Living Adjustment (COLA), 15, 16
DDeath,2,9,13,16Deferred Compensation
Program (DCP), 3, 7, 10Definedbenefit,4,7,16Definedcontribution,7,16Designating your beneficiary,5Disability, 2, 8, 10Divorce, 8Domestic partner, 5, 16Dual member, 8, 10, 11, 16
EEarly retirement, 2, 6, 11, 12, 16Earning service credit, 5Eligible to retire, 2, 6, 7, 10Estimatingyourbenefit,12
FFederalbenefitlimit,14Federal tax, 14Formula, 2, 6, 10, 16
GGlossary of terms, 16
HHealth insurance coverage, 13How to contact DRS, 3How your plan works, 4
IIf the unexpected happens, 8
LLeaving public service, 7Legal actions, 14Life changes, 7
MMarriage, 8, 15Milestones, 7Military service, 8
OOnce you retire, 13, 14Online account access, 7, 10Option to transfer to PERS
Plan 3, 7Overpayments, 15
PPlan summary, 2Planning for retirement, 6, 12Privacy of your
information, 3Property division, 8, 15PublicEmployeesBenefitsBoard
(PEBB), 3, 13Purchasing additional service
credit, 12
RReady to retire, 12Reducedbenefit,16Retirement planning checkup,9
Retiring as a dual member,”Retiring as a dual member” on page 11
Returning to public service, 8
SSeminar, 12Service credit, 2, 5, 7, 8, 10,
11, 16Service retirement, 10Survivor,5,9,13,15,16
TTemporary disability, 8
UUnderpayments, 15Updating your plan for
retirement, 12
VVested, 2, 6, 7, 16
WWhenandhowyourbenefitwill
be paid, 14Withdraw, 2, 4, 6, 7Working after retirement, 15
Index
PERS2HB 1/18