A cost-of-living adjustment (COLA) is an annual adjustment applied to your retirement income to reflect changes in the economy (inflation). Most DRS retirement plans offer a COLA, but Plan 1 members in PERS and TRS only have a COLA if they selected it during retirement. View the 2025 COLA percentages by retirement date and plan. When will I receive the 2025 COLA? LEOFF Plan 1 COLAs take effect April 1 and start with April 30 benefit payments. All other DRS Plan COLAs take effect July 1 and start with July 31 benefit payments. You need to be retired by July 1 for at least one year to be eligible for a COLA. Once you’re eligible, you’ll receive any COLA starting with the pension payment issued at the end of July, and every year after. You don’t need to apply to receive the COLA – it’s automatic. How much will the COLA be? The maximum annual COLA you can receive for most DRS plans is 3%. If inflation that year is above 3%, the additional amount is applied to future adjustments (called COLA banking). Any year inflation is lower than 3%, the COLA can pull from banked amounts in prior years. This happens automatically and the adjustment is made for you. You could receive a different adjustment each year, depending on the amount available in your COLA bank. Will PERS 1 and TRS 1 receive a benefit increase? If the legislature changes the current law, most of these retirees could receive a one-time increase in July. There are several bills that could affect this decision. You can track all bills here.

Taxes are known causes of headache, nausea and anxiety. But when you save with the Deferred Compensation Program (DCP) there are actual tax benefits that can cure your taxation woes. Well, at least a few of them! Here’s how taxes affect your DCP savings: DCP has a Roth and a pretax option. Each option affects when your retirement contributions will be taxed. Use this handy calculator to see which option is best for you.What is Roth? Your contributions are made after your income is taxed. When you take a withdrawal, the earnings associated with your Roth contributions will not be taxed if you meet the minimum qualifications. These qualifications include a five-year holding period from the year of your first contribution, and a minimum age of 59½. If you withdraw before meeting these qualifications, your earnings will be taxed. What is pretax? Your contributions are made before they are taxed. Withdrawals, including investment earnings, are taxed in the year you withdraw them. Every pretax dollar you contribute reduces your taxable income by a dollar. As a result, you’ll pay less in your current income taxes for the year because, in the eyes of the IRS, you’ve been paid less money. This can help reduce the impact on your overall take-home pay. You’ll pay taxes on the contributions and earnings in the year the money is distributed, which could mean a lower tax bracket during your working years. Contributions to DCP will not impact your pension or Social Security benefits. That’s because only federal income tax is deferred, not pension contributions or Social Security tax. The DCP – Deferred Compensation Program webpage has more tips and information about how saving with DCP has many advantages in addition to tax savings. If your employer doesn't offer DCP, find out what retirement savings options you do have. Or think about opening a traditional pretax or Roth IRA through a financial institution. Overall tax considerations DRS and the investment record keeper Voya are not able to offer tax advice. Please work with a tax adviser if you have questions beyond the general information we can provide. Okay, disclaimer aside, here’s what we can tell you about your pension plan: For most people, whether you are in Plan 1, 2 or 3, your retirement contributions are deducted from your salary before taxes. This means these amounts have not been taxed (same as the pretax option available for DCP). Plan 3 doesn’t have a Roth option because current IRS laws don’t allow it. When you withdraw these funds, either as a withdrawal or in retirement, you will pay federal income tax on the money you receive. When we issue payment, DRS withholds IRS federal income tax for your distribution type. No matter what state you live in, we do not withhold state income tax. Good news is Washington is one of nine states that do not have a state income tax. As of 2025, these are the states without an income tax: Washington, Texas, Florida, New Hampshire, Tennessee, Wyoming, Alaska, South Dakota and Nevada. If you aren't sure where you will live when you retire, add this information to your retirement planning. If you live in one of the other 41 states, you will be responsible for determining any additional taxes owed when you receive a withdrawal or monthly pension payment. Tax tips The biggest tool you have is planning. Make sure your withholding information is accurate. Even if you don't file your taxes until April each year, calculate them in January or February every year so you’ll know in advance whether you'll owe. Did you get a refund this year? If you did, you overpaid your taxes and gave the government an interest-free loan. Think about the best way to use this year’s tax refund before you spend it on something you may want but don’t need. Use the refund to help build up your emergency savings, pay down debt, or get closer to achieving a personal savings goal. To help keep more of your money working for you throughout 2025 and beyond, consider increasing your contributions to DCP. Did you owe money this year? You can help change that next year by reducing your taxable income. Saving to DCP on a pretax basis can help you do that as well. With pretax saving, you’ll reduce your current taxable income and may also save money on the taxes you will eventually pay. It’s never too late to save for retirement or update your tax situation. Make this the year you take what you’ve learned to help improve your financial situation now and in the future.

Most of us don’t know exactly what we’ll be doing 30, 20 or even 10 years from now. And yet, when you chose a retirement plan, you were faced with deciding just that. Which plan will serve me better for my lifetime? It’s a big decision. And in the case of your DRS retirement plan, a permanent one. Occasionally, DRS hears from customers who question if the retirement plan they chose is the right one for them. This buyer’s remorse is a natural human reaction to many financial related situations. As you learn more, or life circumstances change, you may prioritize different features in a retirement plan. But here’s some good news. Both Plan 2 and Plan 3 are strong, solid retirement plans designed to benefit you. Each plan includes different features that may be appealing depending on your life circumstances and preferences. Both plans include a pension - a monthly retirement benefit you receive for life. For more, visit  Plan 2 and Plan 3 comparison. What if you still have buyer’s remorse? Both plans have a lot to offer. But what if you still aren’t happy with your plan? Well, fortunately there are some ways to adapt your plan to better fit your needs. How to make Plan 2 behave more like Plan 3 Common issue: When it comes to account balance and flexibility, you might have seen how Plan 3 can really escalate a member’s retirement savings. DRS calculates your retirement pension based solely on your years of service, income, and a factor of 2%. This lack of control and flexibility over retirement income can lead some Plan 2 members to regret choosing their plan. Potential solution: Consider additional savings through Washington’s Deferred Compensation Program (DCP) or similar voluntary retirement savings plan like 457, 403b or IRAs. The Plan 3 members who are contributing 10 or 15% of their income into their investment account may have more flexibility for options like early retirement. For similar flexibility, some Plan 2 members may set their DCP contribution rate to be the difference between 15% and the current Plan 2 rate to treat Plan 2 more like Plan 3. Similar to the Plan 3 investment component, you can withdraw your DCP savings any time after you separate, making options like early retirement more available to you. How to make Plan 3 behave more like Plan 2 Common issue: With a 2% defined benefit calculation, the Plan 2 pension benefit is twice as large as Plan 3, which uses a 1% calculation. Why? Because both the employer and the employee fund the Plan 2 pension. In contrast, your employer funds your Plan 3 pension benefit. Your Plan 3 contributions go into your separate investment account. This difference in pension payouts often leads some Plan 3 members to regret choosing their plan, because of the smaller, guaranteed benefit. Potential solution: Consider annuity options offered by DRS—these provide a lifetime monthly benefit similar to your pension. TAP annuity, purchased with your Plan 3 investments Plan annuity, purchased using DCP or other similar savings Annuities can often be misunderstood, and many people don’t want to give up the flexibility that an investment account with a large balance can provide. However, if you are looking for more stability in your monthly income, an annuity may be right for you. Without a built-in profit margin, Washington’s annuities provide the maximum benefit to you.   You can purchase a plan annuity using your DCP savings or other approved funding sources. The plan annuities increase your monthly pension and therefore offer the same survivor option and COLAs, as well as a balance refund. If you or your survivor pass before the original purchase amount is fully paid out, your beneficiaries will receive the remaining balance. You must purchase Plan annuities at the time of retirement. Plan 3 members can also purchase the TAP annuity. You can buy a TAP annuity at any time after you separate from employment. The TAP annuity requires a minimum purchase amount of $25,000 but has no maximum limit. It can only be purchased using your Plan 3 investments and is a payment separate from your pension. This annuity was designed to act like a monthly pension. It guarantees an annual 3% COLA increase, a survivor continued payment option, and a balance refund if you or your survivor pass away before the annuity amount is fully paid out. You can purchase a TAP annuity at any age, but you can only purchase one per plan. In addition to an annuity, DCP is a great way to help supplement those additional savings especially if wish you had selected a bigger contribution rate in Plan 3. DCP allows for a minimum monthly contribution of 1% and depending on your age, a yearly maximum of $23,500 or $31,000. You can learn more about limits by visiting the DCP section of our website. Summary With multiple options, it’s important to identify the unique strengths and advantages that will benefit you most. Take the time to learn the features your plan offers. This will help you maximize your benefits in the long run. Both plans offer powerful, flexible tools to save for retirement. If you have questions about your plan’s features, visit your plan page or contact us securely through your online account.   More resources: Episode 21 – DCP earnings and annuitiesEpisode 44 – All about the Plan 3 TAP Annuity

One of the biggest challenges of prepping for retirement is understanding all the different pieces — like choosing the right health care, understanding the jargon and getting a clear picture of your finances. Since retirement looks different for everyone, it’s important to take the time to figure out what’ll work best for you. Luckily, our podcast Fund Your Future with DRS can be a great resource. These short episodes are good introduction to what you’ll need to know before you retire. Even if you’re in the middle of your career, this is a great way to “dip your toe in” and start exploring these topics. Listen on your favorite podcast platform, or, by following the links below and reading the transcript. 1. First month of retirement; what to avoid DRS team member John, shares insights about handling the transition period and how to avoid pitfalls. Whether you're planning to buy a house, plan to travel, or trying to navigate insurance coverage, this episode provides valuable tips to help ensure a smooth transition. Listen now. 2. Understanding separation vs. retirement dates There’s a big difference between separation date and retirement date, specifically for those retiring with DRS. Understanding these dates will help you determine when you can start collecting your pension benefits. Find out why timing matters, especially if you're planning around health insurance coverage or have accumulated leave. Listen now.   3. Beneficiary vs. survivor These two terms are commonly used for retirement plans, but what's the difference? If you haven’t retired from your plan, you only have beneficiaries. If you are retired, you could have both. In this episode, we look at the difference between these two terms and what they can provide for your loved ones. Listen now. 4. How fewer deductions in retirement can help Is your pension benefit taxed? The short answer is: yes. However, there are a lot fewer deductions taken out once you retire. In retirement, you're no longer paying into programs like Medicare and FICA which could result in you seeing more money than you might think. Listen now. 5. How SHIBA helps with Medicare questions Some of the biggest decisions you'll make in retirement are around your health care. Luckily, the Statewide Health Insurance Benefits Advisors (SHIBA) offer a free, unbiased service. Our guest Tim explains how SHIBA volunteers help people of all ages and backgrounds with their Medicare questions. Listen now. 6. A PEBB and Medicare overview As a retired public employee, you’ll have access to insurance options through the Public Employees Benefits Board (PEBB). And when you retire at age 65 or more, you're required to enroll in Medicare. Find out about Medicare and what options you have for a PEBB retiree health plan. Listen now. 7. Social Security basics Our special guest Kirk, from the Social Security Administration answers common questions about creating a My Social Security account, its benefits, and how to use online resources for your retirement planning. Find out how to qualify for Social Security retirement benefits and the best age to start receiving benefits. Listen now. Bonus episode: for Plan 3 members All about the Plan 3 TAP Annuity Do you know how much you can spend from your investment account once you retire? Some people choose to purchase an annuity for peace of mind. Plan 3 members have access to a TAP Annuity with a lifetime cost of living adjustment (COLA). Find out more about this and other unique advantages of the TAP Annuity. Listen now.