Plan 2 Insights

A 2% defined benefit plan

Plan 2 has a 2% defined benefit. You and your employer contribute to your plan. Your benefit does not depend on the amount of the contributions.

Lifetime benefit

Once you meet age and service requirements and you’ve applied for retirement, you will receive a guaranteed monthly benefit for your lifetime. Your benefit is based on your years of service credit and the pay you’ve earned.

Service credit years (SCY) The number of years you are credited for working. 

Average Final Compensation (AFC) The average of your highest consecutive 60 months earnings, wherever they are in your service. 


Formula

The 2% defined benefit formula used to calculate your retirement is:

2% x SCY x AFC = monthly benefit

Example

If you worked full time every month for 15 years and your average monthly pay for your highest consecutive five years was $4,000, your monthly benefit would be $1,200.

2% x 15 SCY x $4,000 AFC = $1,200 monthly benefit

Your contributions

Plan 2 is funded by mandatory contributions you and your employer make.

The Washington State Investment Board (WSIB) invests those contributions. Your member contributions are deducted from your pay and you can see your contributions on your statement. Contribution rates change over time, based on funding needs of the plan.

Your contribution rates
Public Employees’ Plan 2 7.38%
School Employees’ Plan 2 7.27%
Teachers’ Plan 2 7.06%

What is WSIB? WSIB, or the Washington State Investment Board, is responsible for developing member investment options and managing retirement savings investment programs.


Rates are as of 2017. Contribution rates are adjusted as needed every two years in odd-numbered years.

Retirement age and service credit requirements

At what age can I retire with a full benefit? What about early retirement?

Retirement with a full benefit: Age 65 with at least five years of service credit. If you have at least 5 years of service credit and you’re age 65, you can retire with a full benefit.





Early retirement with a reduced benefit: Age 55 with 20 or more years of service credit. Your monthly benefit will be reduced for each year (prorated monthly) before you turn age 65 to reflect that you will receive a monthly benefit over a longer period of time. The amount of your reduction depends on your age. The earlier you retire, the larger the reduction.

There is less of a benefit reduction for early retirement if you have 30 or more years or service credit. Your benefit will be reduced by 5% for each year (prorated monthly) before you turn age 65. Again, the earlier you retire, the larger the reduction.




Leaving employment before you're eligible to retire

Your plan is designed to provide you with a source of income throughout your retirement. For this reason, you may not borrow from or against your contributions at any time.

Withdrawing when you leave employment

It is possible to withdraw your contributions and the interest they’ve earned at any time after you leave public service. However, if you do, you give up your right to a future retirement benefit. You may not withdraw your employer’s contributions under any circumstances.



Leaving your money in the plan

When you leave employment without starting to receive a retirement benefit, you can leave your money in the plan where it will continue to earn interest. If you have at least five years of service credit, you are vested in the plan. Being vested means you’re eligible for the 2% defined benefit provisions of Plan 2 once you meet the age and service credit requirements.

Recovering service credit

If you withdraw your contributions and later return to public service, there are certain options for recovering your withdrawn service credit by making a one-time purchase. See Plan 2 Recovery of Withdrawn or Optional Service Credit.




Glossary

Here are some helpful retirement terms to know.

Asset mix:
An investment portfolio that is invested in any combination of the three major classes of assets: (1) cash and equivalents, (2) fixed income instruments (bonds), and (3) equity instruments (common stocks or ordinary shares).
Average Final Compensation (AFC):
The monthly average of your 60 highest paid consecutive service credit months.
Cost-of-Living Adjustment (COLA):
In Plan 2 and in the defined benefit part of Plan 3, on July 1 of every year following your first full year of retirement, your monthly benefit is adjusted by the percentage change in the Consumer Price Index, to a maximum of 3% per year. This percentage change can increase or decrease your benefit.
Defined benefit:
A predetermined retirement benefit, also called a pension plan. • Plan 2 defined benefit: 2% x your SCY x your AFC. Both you and your employer make contributions to your defined benefit. • Plan 3 defined benefit: 1% x your SCY x your AFC. Your employer makes contributions to the defined benefit part of your plan.
Defined contribution:
For Plan 3 members, an amount based on your contributions and the performance of the investments you choose. Investment returns (both gains and losses) are applied to your account.
Early retirement:
In most cases, if you retire before you turn age 65, your monthly benefit is reduced to reflect the fact that you will receive it over a longer period of time. The amount of the reduction depends on how much younger than age 65 you are when you retire and the amount of service credit you have.
Full retirement:
For all members, a retirement benefit that is not reduced because you retired from public service at age 65.
Interest or interest rate:
An amount that your contributions earn.
Normal retirement:
The age you’re entitled to receive a full retirement benefit.
Pension:
Your retirement benefit. Portfolio: A collection of investments. Return: A measure of how your investments perform. Returns consist of interest, dividends, and gains or losses in the value of the principal. Your investment returns can be positive or negative.
Risk:
The probability that an investment will lose value or fail to gain in value.
Service credit years (SCY):
We calculate your service credit years by dividing your total service credit months by 12. Twelve months equals one year of service credit. For more information about service credit earned for your system (PERS, SERS or TRS), see your member handbook.
Vested:
The point at which you have earned a defined benefit. • Plan 2 members are vested after earning five years of service credit. • In Plan 3, you are vested after earning 10 years of service credit in most cases or after five years of service credit, depending on your age and when your service credit was earned. However, you have no vesting requirements for the defined contribution part of your benefit and may take distributions at any time after you leave public employment.