Chapter 3: Overview

Summary

This chapter provides information about service credit in the Washington State retirement systems. Refer to this chapter for:

  1. General information about service credit and its importance to members
  2. Service credit rules for the retirement systems you report. Your handbook may include information for:
    • Public Employees' Retirement System (PERS)
    • Public Safety Employees' Retirement System (PSERS)
    • School Employees' Retirement System (SERS)
    • Teachers' Retirement System (TRS)
    • Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF)
    • Washington State Patrol Retirement System  (WSPRS)
    • Judicial Retirement System (JRS)
    • Judges' Retirement Fund (JRF)
  3. Summaries of service credit rules for prior periods for PERS, SERS, TRS and LEOFF members

What is Service Credit?

An employee working for you in a position covered by a retirement system earns service credit toward his or her retirement. The amount of service credit an employee earns is based on the time he or she works. For all plans except TRS Plan 1, no more than one month of service may be granted for any calendar month. For TRS Plan 1, no more than one year of service may be granted for any fiscal year.

The Importance of Service Credit

A member must earn service credit in order to qualify for a service retirement benefit. Service credit is used to calculate the amount of a member's monthly retirement benefit. In order to ensure service credit is recorded correctly, employers must report hours or days of service to DRS each month.

A member's monthly retirement benefit is based on both accumulated service credit and average final compensation (AFC) or salary. To determine accumulated service credit, all the years and months of service credit the member earned while working in a given system are added together. To determine the AFC or salary, DRS averages the member's highest-paid consecutive months or years of earnings. (The period used for calculating the AFC or salary varies between systems and plans.)

Example:

In PERS Plan 2, PSERS Plan 2, SERS Plan 2, TRS Plan 2 and LEOFF Plan 2, the monthly retirement benefit is calculated using the following formula:

2 percent x service credit years x average final compensation equals monthly benefit

Note: The AFC for PERS Plan 2, PSERS Plan 2, SERS Plan 2, TRS Plan 2 and LEOFF Plan 2 is the monthly average of the 60 consecutive highest paid service credit months.

The following examples show the importance of service credit in calculating retirement benefits. Qualifications for retirement and the percentages used in benefit calculations vary between systems and plans. For more information, members should refer to the member handbooks.

Examples of Retirement Benefit Calculations

A PERS Plan 2 member retires at age 65 with 25 years service credit and a monthly AFC of $2500. The member's monthly retirement benefit will be $1250.

2% x 25 years = 50%

50% x $2500 = $1250

A second PERS Plan 2 member retires at age 65 with 20 years service credit and the same AFC. The member's monthly retirement benefit will be $1000.

2% x 20 years = 40%

40% x $2500 = $1000

The Importance of Service Credit in Prior Periods

From January 1987 through August 1991, service credit carried additional importance for employers. During that period, for members of PERS Plan 1 and Plan 2, TRS Plan 2 and LEOFF Plan 2, contributions were not due unless service credit was earned. An employer determined whether an employee had earned service credit each month before deciding to pay employer and employee contributions. For details about service credit rules for prior periods, refer to the information on Service Credit and Contributions for each system later in this chapter.

How is Service Credit Earned?

How Service Credit is Earned

Each retirement system and plan has rules on how service credit is earned. For members of PERS, PSERS, SERS, TRS Plan 2 and Plan 3, LEOFF, JRS and WSPRS, service credit is measured in months. Service credit for members of TRS Plan 1 is measured in years. It is important to report the service hours (or days for TRS Plan 1) correctly because partial service credit may be granted for less than full-time service.

To view service credit details for current and prior reporting periods for a system select the system in the "Chapter 3 Categories" above and then go to "Table of Service Credit Rules" on that page.

Service Credit for Certain Types of Leaves

In some circumstances, members may also earn or purchase service credit for military leave, disability leave or unpaid leave of absence authorized by an employer. Rules vary between systems and plans. The member initiates the process of purchasing the optional service credit. Refer members to their Member Handbook.

Service Credit Reported on Member's Annual Statement

Each year, DRS provides you with an annual statement for each employee who is a member of a retirement system. The statement incorporates the member's individual account information with details about the system and plan and how a benefit is calculated at retirement. The annual statements are sent to you for distribution. Statements are sent to education employers each November and non-educational employers receive statements in March.

Information on the annual statements include service credit earned by the member for the prior year (calendar or school year, depending on the type of employer), the member's total service credit, contributions (except Plan 3 who receive contribution statements from the third party record keeper) and interest account information. If the member suspects an error on the annual statement, the member should contact DRS Membership.

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