Updated August 2007
Public Employees’ Retirement System (PERS) Plan 1 members who earn 30 years of service credit may choose to have their post 30-year retirement contributions placed in a separate, refundable account that earns 7.5 percent interest annually (compounded quarterly on the previous quarter’s balance). If you elect to participate in this “Post 30-year Program”, your contributions will be refunded when you retire, and will not reduce your retirement benefit.
However, you should keep in mind that your Average Final Compensation (AFC) at retirement will be based on the highest 24 consecutive months (two years) of compensation earned before you made the decision to participate in the Post 30-Year Program. Also, your service credit must have been earned in PERS Plan 1. Any service credit you may have earned in another Department of Retirement Systems (DRS)-covered plan may not be used to meet the 30-year service credit requirement.
DRS will send you a notification letter a few months before you reach 30 years of service credit. You will have six months from the time you reach 30 service credit years to choose to participate in the program. If you elect to participate, beginning the month after DRS receives your election form, your future retirement contributions will be posted to a refundable account.
The decision whether or not you should have your post 30-year contributions refunded will depend on your individual circumstances. This brochure is designed to help you understand how participation in the program works. Finally, your decision to have your post 30-year contributions refunded is irrevocable once DRS receives your election form.
If you work more than 30 years, your monthly retirement benefit calculation is influenced by two factors:
1. your salary; and
2. whether or not you choose to participate in the Post 30-Year Program.
If you do not elect to participate in the program within six months after you reach 30 service credit years, you no longer have the option to participate. If you do not participate in the program, your AFC will be based on your salary for the highest-paid 24 consecutive months of your career and all contributions will remain in your original retirement account.
If you elect to participate in the program, the effective date of election is the first of the month after DRS receives your election form. If you have not reached 30 years when the election form is received, the effective date is the first of the month after you reach 30 years.
The effective date of election is a very important consideration because your AFC will be based on earnings prior to the effective date of election. For example, if your election date is June 1, your salary for June and thereafter will not be used to determine your AFC. If your salary will not increase after 30 years, it may be to your advantage to participate in the program. If you are not sure what your future earnings will be, you may want to discuss the program with your financial advisor.
If you would like an estimate of benefits based on your current account information, complete and return the attached Request for Post 30-Year Program Benefit Estimate form. Estimates based on different election dates can be requested for comparison.
If you do not withdraw any of your accumulated contributions, your maximum monthly retirement benefit is calculated as follows:
Maximum Monthly Benefit = 2% x service credit years (up to 30) x AFC
AFC is the monthly average of your highest-paid 24 consecutive months (two years) of service. A higher AFC provides a higher benefit.
If you elect to participate in the program, only salary earned prior to your election date will be used to determine your AFC. Thus, your projected salary beyond 30 years of service is an important consideration.
Leave cashed out at retirement may be included in your AFC period even if you elect to participate in the program.
If you choose to participate in the program, you will receive your post 30-year contributions and interest when you retire from PERS Plan 1. You cannot defer receiving your post 30-year funds. However, you can roll the funds over to an Individual Retirement Account (IRA) or qualified retirement plan that accepts 401(a) plan rollovers.
If you are younger than 59 1/2 when you retire from PERS Plan 1, and you do not roll over your post 30-year funds, there may be an additional 10% Internal Revenue Service (IRS) tax on your refund.
For more information on the tax treatment of payments from eligible retirement plans, review IRS publication 575, Pension and Annuity Income, available from your local IRS office, (800) TAX-FORMS, or on the IRS Web site.
Please note that DRS staff are not authorized to give tax advice.
The following examples show the influence of salary and participation in the program. Shannon reaches 30 years of service credit in June 2007, at the age of 54. She decides to retire in June 2009 with 32 years of service credit. Shannon’s salary is:
| Does NOT elect Post 30-Year Program | DOES elect Post 30-Year Program |
|---|---|
|
Years of service credit: 32 |
Shannon elects the program as soon as she is eligible (July 1, 2007). She retires in June 2009. |
* Under the 2 percent formula, the maximum benefit amount of 60 percent of AFC is reached at 30 years.
Fore more information about the Post 30-Year Program, contact DRS.
Note: The actual provisions governing the Post 30-Year Program are contained in the Revised Code of Washington (RCW) Chapter 41.40 RCW. This publication is a summary of those provisions, not a complete description of the law, and describes provisions currently in effect. If there are any conflicts between what is written in this publication and what is contained in the law, the applicable law will govern.