Gain sharing is the distribution made to Plan 1 retirees and Plan 3 members if the Washington State Investment Board’s (WSIB) earnings average more than 10 percent annually over a four-year period. Gain sharing distributions are made in January of even-numbered years, if the criteria are met. Plan 1 retirees receive their gain sharing portion as a permanent increase in their monthly retirement benefit. Distributions to eligible Plan 3 members are deposited in their defined contribution accounts.
In the statute that created gain sharing, the Legislature reserved the right to modify or eliminate the program.
Engrossed House Bill (EHB) 2391 ends gain sharing after the January 1, 2008 distribution to Plan 1 retirees and Plan 3 members and provides the following new benefits:
The law ending gain sharing contains directions on what will happen if a court of law decides the repeal of gain sharing is invalid:
Yes. There was a gain sharing distribution in January 1, 2008 because the compounded average earnings of investment returns on pension fund assets exceeded 10 percent annually over the past four years ending June 30, 2007.
If you are a PERS Plan 1 or TRS Plan 1 retiree (or a surviving beneficiary), to qualify for gain sharing you must have received a Uniform COLA in July 2007.
If you are a PERS Plan 3, SERS Plan 3 or TRS Plan 3 member, to qualify for a 2008 gain sharing payment, you must have been hired before July 1, 2007 and meet one of the following criteria:
If you are a PERS Plan 1 or TRS Plan 1 retiree, you are eligible for the Uniform COLA if:
PERS Plan 1 and TRS Plan 1 retirees receive gain sharing as an additional increase to the Uniform COLA. The gain sharing increase is added to the Uniform COLA base and increases subsequent COLAs.
| Effective Date | Uniform COLA Increase | Gain Sharing Increase | Total distribution per service credit year* |
|---|---|---|---|
| 07/01/2007 | .04 | 1.33 | |
| 07/01/2006 | .04 | 1.29 | |
| 01/01/2006 | .00 | 1.25 | |
| 07/01/2005 | .04 | 1.25 | |
| 07/01/2004 | .03 | 1.21 | |
| 01/01/2004 | .00 | 1.18 | |
| 07/01/2003 | .04 | 1.18 | |
| 07/01/2002 | .03 | 1.14 | |
| 01/01/2002 | .00 | 1.11 | |
| 07/01/2001 | .03 | 1.11 | |
| 07/01/2000 | .03 | 1.08 | |
| 01/01/2000 | .28 | 1.05 | |
| 07/01/1999 | .03 | .77 | |
| 07/01/1998 | .01 | .10 | .74 |
| 07/01/1997 | .02 | .63 | |
| 07/01/1996 | .02 | .61 | |
| 07/01/1995 | .59 | .59 |
* The year’s total distribution is calculated by adding the Uniform COLA increase and any gain sharing increase to the previous year’s increase.
The amount for the gain sharing increase is calculated by the Office of the State Actuary. DRS determines if you are eligible and how many years of earned service credit you have. Your payment is based on a flat dollar amount multiplied by your years of service credit.
There were gain sharing events in 1998 and 2000. In 1998, the amount for Plan 1 was 10 cents per year of service, and for Plan 3 it was $134.43 per year of service. In 2000, the amount for Plan 1 was 28 cents per year of service, and for Plan 3 it was $254.23 per year of service.
The 2008 gain sharing amounts were:
No. It doesn’t matter whether you are contributing to the Washington State Investment Board's (WSIB) Total Allocation Portfolio (TAP) or a Self-Directed investment option.
Your gain sharing payment was posted to your account based on the current asset allocation that you have on file.
If you were eligible for payment, it was posted to your Plan 3 account on January 2, 2008. The amount also appeared on your first quarterly statement in 2008 (for the quarter ending March 31, 2008).
The payment you receive from gain sharing comes from the investment returns on the pension trust funds that exceed 10 percent over the past four years, ending on June 30, 2007. Half of these earnings are distributed to Plan 1 and Plan 3 members in the form of a gain sharing payment.
TRS members first hired on or after July 1, 2007 will have 90 days to choose between Plan 2 and Plan 3.
SERS members, with no past PERS Plan 2 service*, first hired on or after July 1, 2007 will have 90 days to choose between Plan 2 and Plan 3.
*SERS members, with past PERS Plan 2 service, first hired on or after July 1, 2007 will be reported in Plan 2 and will have the opportunity to transfer to Plan 3 in January of each year.
New PERS members will continue to have 90 days to choose between Plan 2 and Plan 3 according to the rules already in place before the new 2007 legislation.
Yes. Eligible new SERS and TRS members have 90 days to choose between Plan 2 and Plan 3. If you don’t make a choice you will default to Plan 3. Once you have made a choice, or defaulted, you cannot change plans again.
Yes. Substitutes who request their first substitute bill on or after July 1, 2007, will make their plan choice at the time of that request. Their bill will reflect that plan choice, and once paid, the choice is irrevocable.
If a court of law determines that the repeal of gain sharing is invalid and you entered SERS or TRS membership before the court decision you will remain in the plan you chose.
If you are first hired into a SERS or TRS position after a court of law decides the repeal of gain sharing is invalid, you will be mandated into Plan 3.
If you retire before the normal retirement age of 65, an early reduction factor is applied to your benefit. The ERF reduces your benefit to reflect the fact that you are likely to be receiving your benefit for a longer period of time. Reductions are prorated based on the length of time between your age at retirement and age 65.
Members of Plans 2 and 3 of TRS, SERS, and PERS who are at least age 55 and have at least 30 years of service credit, may choose between the new ERF and the existing ERF of three percent per year.
The new 2008 ERFs are effective on:
Yes. You can choose either one when you retire early with 30 years of service credit, after age 55 and after the effective dates of the new 2008 ERF.
| Existing ERF | Retirement Age | New 2008 ERF | ||
|---|---|---|---|---|
| Reduction Factor | Portion of a Normal Benefit You Receive | Reduction Factor | Percent of a Normal Benefit You Receive | |
| 30% | 70% | 55 | 20% | 80% |
| 27% | 73% | 56 | 17% | 83% |
| 24% | 76% | 57 | 14% | 86% |
| 21% | 79% | 58 | 11% | 89% |
| 18% | 82% | 59 | 8% | 92% |
| 15% | 85% | 60 | 5% | 95% |
| 12% | 88% | 61 | 2% | 98% |
| 9% | 91% | 62 | 0% | 100% |
| 6% | 94% | 63 | 0% | 100% |
| 3% | 97% | 64 | 0% | 100% |
No. If you retire using the new 2008 ERF, and then return to work in any capacity for a DRS-covered employer, your benefit payments will be stopped until you stop working or until you reach age 65.
But once you reach age 65, you can return to work for 867 hours per calendar year for a DRS-covered employer before having your benefit payments stopped. Please see the DRS brochure, Thinking About Working After Retirement? for your Plan and System.
Yes. If you retire using the existing ERF and wait 30 days before returning to work for a DRS-covered employer, you can return to work for 867 hours before having your benefit payments stopped. Please see the DRS brochure, Thinking About Working After Retirement? for your Plan and System.
When you re-retire you are not obligated by the ERF choice you made for your original retirement. If you still qualify for early retirement when you re-retire, you will have your choice between the existing ERF and the 2008 ERF.
To calculate your benefit for early retirement with 30 years of service, multiply your full benefit by the factor in the Benefit You Receive column shown under "Do I have a choice between the existing ERF and the new 2008 ERF?"
Suppose you retire from Plan 2 at age 55 with 30 years of service credit and an average final compensation of $3,500. Because you are retiring early, your benefit will be reduced. With the new early reduction factors, your benefit will be reduced 20%. In other words, you will receive 80% of what your benefit would be if you were 65 when you retired, with the same service credit and average final compensation. Your monthly benefit of $1,680 is calculated as follows:
2% x 30 years x $3,500 x 80% = monthly benefit
2% x 30 years = .60
.60 x $3,500 = $2,100.00
$2,100 x 80% = $1,680.00
Suppose you work another seven years rather than retiring at age 55. At age 62, you will have 37 service credit years and no reduction. Assuming you have the same average final compensation, your benefit would be calculated as follows:
2% x 37 years x $3,500 x 100% = monthly benefit
2% x 37 years = .74
.74 x $3,500 = $2,590.00
$2,590 x 100% = $2,590.00
Yes. You can get your benefit estimate by using the self-service benefit estimator, available online through our DB Access application. You can also get a written estimate from DRS.
Yes. Members of Plans 2 and 3 of TRS, SERS and PERS with at least 30 service credit years (in one DRS Plan or combination of DRS Plans*) can use the new 2008 ERF.
*DRS Plans eligible for combining service credit are:
Plan 3 indexing rules do not change. As long as you have 20 years when you separate from service, your benefit will be indexed from your date of separation until you retire. For more information about indexing see your Plan 3 member handbook.
Out-of-state service may be used to meet the years of service requirement. However, if you use out-of-state service credit, it's important to remember that only your Washington state service credit will be used to calculate your retirement benefit, and that your benefit will be actuarially reduced for each year of out-of-state service credit used to meet early retirement eligibility.
The answers in this FAQ summarize the legislation that repealed gain sharing and enacted new benefits (EHB 2391). This FAQ is a summary, written in less legalistic terms. It is not a complete description of the law. If there are any conflicts between what is written in this FAQ and what is contained in the law, the current law will govern.
