Plan 3 Withdrawals

Plan 3 Withdrawals

Plan 3 has two parts – a defined benefit part and a defined contribution part. Your employer contributes to your defined benefit part. You contribute to the defined contribution part. One plan; two separate payouts in retirement. For this reason, you will withdraw funds from each part of your account separately.

How do I start the process of getting my money in Plan 3 when I leave service? Notify your employer of your separation date. They will upload your separation date through their automatic payroll system. The timing is different for every employer; check with your payroll department on when your separation date will be sent to DRS.


How do I withdraw money from my Plan 3 defined contribution account? When you leave Plan 3 employment, you are entitled to withdraw or roll over the money in your defined contribution account. You can also leave your money invested in your account even after you've left service. Your account balance would be subject to market fluctuations.

To initiate a withdrawal or rollover see the Forms section.

Withdrawal eligibility

When can you withdraw money from Plan 3? What special circumstances apply to withdrawals?

Service credit years (SCY) – The number of months of compensated time reported by an employer used for calculating a member's retirement eligibility and benefit amount.

Average Final Compensation (AFC) – The monthly average of a member's 60 consecutive highest paid service credit months.

When can I start withdrawing from my Plan 3 defined contribution account?
To be eligible for a withdrawal, you must separate from Plan 3 service. Under current law, if you receive payments before age 59½, you could be required to pay a 10% tax in addition to your ordinary income taxes on the distribution. There are exceptions to this rule. Consult the IRS or a tax advisor to learn more about the tax consequences of withdrawing.
Can I withdraw money from Plan 3 while I'm still working?
No, Plan 3 does not allow in-service withdrawals, even for emergencies.
Can I get a loan from Plan 3?
No, Plan 3 does not allow in-service withdrawals, including loans.
Can I take a hardship or emergency withdrawal from Plan 3?
No, Plan 3 does not allow for in-service withdrawals, including hardship withdrawals.
Can I take money out of my defined contribution account without starting my defined benefit payments?
Yes, this flexibility is a benefit of a hybrid retirement plan. You can begin withdrawals from one side without touching the other side of the plan. Many people choose to withdraw only from their defined contribution account and leave the defined benefit payments until they reach full retirement age of 65.
I've quit, what do I do next?

You can leave your money in the plan until you're ready to begin taking payments, or you can begin taking payments from one or both sides of the plan (provided you are age 55 or older and have at least 10 years of service credit). Your defined benefit is reduced if you retire before age 65.

If you elect to leave both sides of the plan alone, you don't have to do anything until you're ready to begin receiving payments.

If you elect to begin payments, log on to the DRS website to apply for your defined benefit retirement and/or download the Member Withdrawal form to apply for your defined contribution funds. Withdrawals could be subject to ordinary income tax.

Withdrawal options

Payment options, rollovers, etc.

Your Plan 3 defined contributions do not affect the calculation of your defined benefit. Therefore, you have several options available to you, once you separate from service, for accessing your account balance from your defined contribution part. These options include:

  • Lump-sum or partial cash distribution
  • Roll over into an eligible employer plan, such as a qualified plan or an IRA
  • Scheduled installment payments
  • Annuities
  • Any combination of the above

Lump-sum or partial cash distribution

This option lets you take all or part of your account balance at once.

Roll over into an eligible employer plan

This option is a Direct Rollover into an eligible employer plan, such as a qualified plan or an Individual Retirement Account (IRA). It is a nontaxable event. You can choose to have part or all of an eligible rollover distribution paid from Plan 3 directly to another qualified retirement plan that accepts rollover distributions or to an IRA.

One important consideration to keep in mind though is that – few programs can match the low fund management fees you're able to take advantage of in Plan 3. Be sure to compare wisely before moving your money.

You are encouraged to discuss rolling money from one account to another with your financial advisor/planner, considering any potential fees and limitation of investment options.










Scheduled installment payments

With this option, you can choose to have the money sent to you monthly, quarterly, semiannually or annually. If your money is in the WSIB Investment program, installment payments can only be made on a monthly basis. You can state a specific amount and have it last for a certain timeframe or over an estimated life expectancy (payments might not last for an entire lifetime). With this option, you can change your amount or frequency by resubmitting a withdrawal application.

Keep in mind a higher or lower payment amount will affect the duration of the payments you will receive. If you want the money to last longer, you might want to consider a lower or less frequent payment amount. Also, since your funds will continue to be invested, market returns can impact the length of time your payments will last. Regardless of your installment arrangements, your payments will stop once your account balance exhausts.

Annuities

You can use your funds to purchase an annuity with all or part of your balance. Annuities can guarantee a lifetime benefit from your account throughout a chosen specific time frame:

  • Your life
  • Your life and a beneficiary’s life
  • Certain number of years

See “Plan 3 annuities” for more information.

Do I have to withdraw or roll over my account when I leave Plan 3 service?
No, Plan 3 does not require you to withdraw or roll your money out of the plan when you leave service.
If I need an extra lump-sum payment this month, what do I do?
If you're currently receiving scheduled payments or have purchased an annuity but still have funds in your Plan 3 account, you can add a lump-sum payment at any time by filling out the paperwork to indicate you'd like a lump-sum payment.
Why would someone leave money in Plan 3 after leaving service?
With a diversified selection of investments and easy-to-use account access features, Plan 3 offers many advantages. The most compelling advantage is the low fees associated with the investments in the plan. By rolling your money out of the plan, you might be subjected to administrative fees, redemption fees, 12(b)-1 fees, account maintenance fees, investment management fees and withdrawal fees. Plan 3 might have a lower fee structure than other investments available.
After I select a scheduled payment, can I change it or is it locked in?
You are never locked into your scheduled payment plan. The scheduled payments can be changed any time by submitting the Member Withdrawal form.

Retiring from Plan 3

Ready to retire? What choices do you need to make?

When am I considered retired? – You're considered retired once you begin receiving a defined benefit. Usually the first of the month after the month you've separated from employment. If you separate from employment, but wait to start drawing a benefit, you'll be considered retired once you do begin receiving it. If you wait to start drawing your benefit, you will be required to start taking it once you reach age 65.


How much will I receive in retirement?

Defined benefit

Your payment is based on a formula:

1% x service credit years (SCY) x Average Final Compensation (AFC)

Your payment might be reduced if you draw your defined benefit early.

Defined contribution

Your payment is based on your account balance and the payment option that you select: lump-sum, rollover, installments, and/or annuity.






What are my choices when I leave service or retire?

Defined benefit Defined contribution

Mary separates (leaves employment) at age 61.

She retires at age 65.

Mary's Plan 3 account balance at separation = $197,687*

She delays payments until age 65.

Mary's Average Final Compensation = $4,600/mo. Average annual return before withdrawal = 7%
Mary has 22 service credit years Annual COLA on TAP Annuity = 3% (on each anniversary)
She selects benefit option #1 (Single Life)

She selects payment option #4

(Annuity Purchase with the TAP Annuity**)

Because Mary delayed receiving her defined benefit (DB) until age 65, she receives 100% of her benefit. Plus, with at least 20 SCY, her DB qualifies for inflation protection. Her benefit will increase approximately 3% per year from her date of separation to age 65. Because Mary delayed receiving her defined contribution, her account balance earns pre-withdrawal returns until age 65. A $197,687 account balance averaging 7% annually to age 65 = $259,127. She purchases a TAP Annuity for her full account balance at age 65.
0.01 x 22 x $4,600 = $1,012 x 1.1273 (delay factor) = $1,141 per month for life TAP Annuity payments start at age 65 = $1,662 per month for life
Defined benefit Defined contribution

Mary retires at age 61.

(Full retirement age = 65)

Mary's Plan 3 account balance at separation = $197,687*

She begins payments at age 61.

Mary's Average Final Compensation = $4,600/mo. Average annual return before withdrawal = 7%
Mary has 22 service credit years (SCY) Annual COLA on TAP Annuity = 3% (on each anniversary)
She selects benefit option #1 (Single Life)

She selects payment option #4

(Annuity Purchase with the TAP Annuity**)

Mary begins receiving her defined benefit at age 61 (before her full retirement age) and receives a reduced benefit amount based on Early Retirement Factors (ERF) for life. Mary purchases a TAP Annuity for her full account balance of $197,687. She begins receiving her annuity payments at age 61 for life.
0.01 x 22 x $4,600 = $1,012 x 0.657 (ERF factor) = $665 per month for life TAP Annuity payments start at age 61 = $1,173 per month for life
Defined benefit Defined contribution

Mary separates (leaves employment) at age 61.

She retires at age 65.

Mary's Plan 3 account balance at separation = $197,687*

She begins payments at age 61.

Mary's Average Final Compensation = $4,600/mo. Average annual return before withdrawal = 7%
Mary has 22 service credit years (SCY) Annual COLA on TAP Annuity = 3% (on each anniversary)
She selects benefit option #1 (Single Life)

She selects payment option #4

(Annuity Purchase with the TAP Annuity**)

Because Mary delayed receiving her defined benefit until age 65, she receives 100% of her benefit. Plus, with at least 20 SCY, her benefit qualifies for inflation protection and will increase approximately 3% per year from her date of separation to age 65. She purchases a TAP Annuity for her full account balance of $197,687. She begins receiving her annuity payments at age 61 for life.
0.01 x 22 x $4,600 = $1,012 x 1.1273 (delay factor) = $1,141 per month for life TAP Annuity payments start at age 61 = $1,173 per month for life

* Defined contribution example assumptions:

  • Starting salary = $31,450, Ending salary = $58,500, Salary growth rate = 3%, Contribution rate = 10%
  • Average investment return pre-withdrawal = 7%,

    Average investment return during withdrawal =5%

  • Beginning balance = $0, Ending Balance at 61 = $197,687,

    Ending Balance at 65 = $259,127

    Numbers are rounded to the nearest dollar.

** TAP Annuity – Provides a guaranteed payment for life with an annual 3% cost of living increase; however, it does not allow a member to change payment options or payment amounts once purchased.

Forms

Plan 3 withdrawal and related forms.

Plan 3 withdrawal forms

Plan 3 Member Withdrawal: Use this form to request distribution after separation/retirement, change current distribution option.

Plan 3 Automated Minimum Distribution: Request ongoing minimum distributions from your account to meet your required minimum distribution after age 70½.

Plan 3 Beneficiary, Estate and Successor Withdrawal: Request distribution from your awarded beneficiary account.

Plan 3 Annuity Payment Form: Initiate a TAP Annuity payment.

Plan 3 Legal Order Payee Withdrawal: Alternate payee distribution per Qualified Domestic Relations Order.

Related forms

Plan 3 Direct Deposit (ACH): Request direct deposit of your retirement benefit.

IRS Form W-4P: Request to have federal income tax withheld from each withdrawal or annuity payment you receive.

Withdrawal timeline

How long will it take to get my first withdrawal payments? The timing is dependent on a few things. Because Plan 3 has a defined benefit and a defined contribution, withdrawals from your accounts are separate and have unique timeline factors.

Defined benefit pension (employer contributions)

Before you can receive your defined benefit pension, you must first request an official benefit estimate from DRS 3 to 12 months prior to your retirement date. When you’re ready, apply for retirement online. All defined benefit members retire on the first of the month and all pension payments are distributed on the last business day of every month.








Defined contribution payments (your investments)

The defined contribution, or investment portion you pay into has investment shares with valuation time periods that vary by the investment program you selected. If you've already left service and your employer has electronically uploaded your separation date, the following timelines will apply. It could take an additional 30 days beyond the timeframes given below if your employer hasn’t uploaded your termination date.

Self-Directed Investment Program (1 to 31 days): For lump-sum payments, investment shares are redeemed daily. If your documents are accepted by 1 pm Pacific Time and the 30-day waiver is checked, the checks or direct deposits are issued the next business day. One caution: if you have after-tax money in your account, allow an additional one to two business days. For scheduled payments, investment shares are redeemed between the first and 27th of every month, and payments are issued on the next business day.

WSIB Investment Program TAP Fund (34 to 70 days): For payments from WSIB, investment shares are valued monthly. Payments from the WSIB Investment Program are issued on the fourth business day of the month following valuation. You might be able to avoid a withdrawal delay by transferring the money you'll need from the TAP Fund into a Self-Directed Fund 34 to 70 days before you separate from service.

Leaving employment before eligible to retire

One important reason to delay withdrawing your defined benefit until age 65: Inflation protection. If you have at least 20 service credit years when you separate from employment, your benefit increases approximately 3% for every year that you delay receiving benefits (until age 65). This is called indexing or inflation protection.

The defined benefit part of your plan is designed to provide you with a source of income throughout your retirement. For this reason, you can’t withdraw the contributions your employer makes to this part of your plan.

  • If you have at least 20 years of service credit when you leave employment and do not start to receive your defined benefit, your defined benefit will increase by approximately 3% for each year you delay receiving it up to age 65 (this is called indexing).
  • If you have at least 10 years of service credit and you're age 65, you can retire with a full benefit.
  • If you have at least five years of service credit, you can retire at age 65 with a full benefit if you earned at least one of your five years of service credit after age 44.

As a Plan 3 member, it is possible to withdraw your contributions and investment earnings from your defined contribution part any time after leaving Plan 3-covered employment. However, if you do withdraw early, you reduce an important source of your retirement income.

Beneficiaries

In the event of your death, your beneficiaries will receive payment from your Plan 3 account. Keeping your beneficiaries updated is important. This section also includes information for beneficiaries.

About beneficiaries

The beneficiary you designate for your defined contribution account can be different from the beneficiary you designate when you apply for your defined benefit retirement. You can name anyone as your beneficiary: spouse, child, domestic partner, friend, neighbor, etc. You can also designate a charity or trust. If you die without a current beneficiary designation on file, a distribution will be made to your estate.

Update your beneficiaries instantly online or complete the paper form and mail it to DRS.

Resources

Beneficiary information for the employer-funded Plan 3 defined benefit (pension) account:

What to do when a death occurs

Beneficiary information for the employee-funded Plan 3 defined contribution (investment) account:

Plan 3 Beneficiary, Estate and Successor Withdrawal booklet and form

Returning to work after retirement

Retiring from Plan 3? Thinking about returning to work after you retire? Here’s what you need to know. go there

Plan 3 annuities

An annuity provides a guaranteed payment for the rest of your life, regardless of stock market performance. Plan 3 has unique annuity opportunities with a range of options for you to choose from.

What is an annuity?

A product offered by an insurance company or an employer to which one makes contribution(s) and immediately or later begins receiving payments, which usually last the remainder of the annuitant’s life. An annuity usually refers to a retirement account into which the annuitant makes payments over his/ her working life. The payments are then invested and the annuitant begins to receive the principal plus earnings after retirement. There are three different types of annuities: Single Life, Joint Life and Term Certain

What kinds of annuities are offered through Plan 3?

With Plan 3, you have the choice between two types of annuities based on the two different investment programs available to you—WSIB and Self-Directed. Each annuity type has distinctly different features and options. Here is a quick comparison:

TAP annuity (WSIB Investment Program) Self-Directed Investment Program
Contract provider Washington State MetLife
Minimum purchase price $25,000 $5,000
Payment frequency Monthly Monthly, Quarterly, Semi-Annually or Annually
Length of contract Provides regular payments for your lifetime (Single Life Annuity) and, if selected, a beneficiary’s lifetime (Joint Life Annuity) Provides regular payments for your lifetime (Single Life Annuity) and, if selected, a beneficiary’s lifetime (Joint Life Annuity)
Cost-of-Living Adjustment (COLA) Automatic annual 3% COLA (beginning on your first anniversary) Optional COLA
Conversion option Could be converted to a Joint Life Annuity No conversion option
Joint annuitant option Yes Yes
Joint annuitant survivorship payment options 100%, 66.66% or 50% 100%, 75%, 66.66% or 50%
Multiple purchase option No. Only one TAP Annuity can be purchased per Plan 3 member account. Yes. Multiple Self-Directed annuities can be purchased per Plan 3 member account over member’s lifetime.
Balance refund Yes Optional balance refund
Term Certain option No Yes. Provides regular payments for as long as you live. If you should die before the specified period of time (Term Certain), payments will continue to your beneficiary for the balance of the period. Term Certain period options: 5, 10, 15 or 20 years.
Rescission period (length of time you can alter or cancel the contract) 15 days from the rescission start date sent to you in writing Varies. Typically 7-15 days from date of purchase. Contact the record keeper for more details.
Is an annuity right for you?
Retirees often choose annuities because they provide guaranteed income for life. Retirees like the security of a set monthly payment that covers part or all of their fixed expenses. However, flexibility is not a feature of annuities. If fixed expenses increase, annuities do not allow retirees to adjust their payment amounts to meet those changing needs. With annuities, you are trading market risk and account growth for the guarantee of a steady, fixed lifetime income stream. Annuities are the only withdrawal option that guarantees you will not outlive your account balance.
When can you purchase an annuity?
Purchase an annuity with all or part of your Plan 3 investment account when you separate from service or any time after.
How do your purchase an annuity?
  1. Make sure there is enough money in the appropriate investment account (WSIB or Self-Directed Investment Program) to cover the purchase price The minimum purchase price for each investment program is $25,000 for a WSIB annuity and $5,000 for the Self-Directed program annuity. You can move funds from one investment program to the other if necessary. It might take up to 70 days to complete the transfer, but you can do this at any time before purchasing your annuity. You do not need to wait until your employment has ended before you transfer funds between investment programs.
  2. Submit the following

    • Plan 3 Annuity Payment Request Form
    • Form W-4P (if applicable)
    • Proof of age required for your joint annuitant (Acceptable documents include: birth certificate, government-issued identification card, NEXUS card, naturalization certificate, passport, driver license, and Certificate of Armed Services Record — US DD-214)
  3. Send completed forms and proof of age to the record keeper:

    Include this name for all communications:

    Empower Retirement Washington State Plan 3

    Fax: 866-745-5766

    Regular mail: PO Box 173764 Denver, CO 80217-3764

    Express mail: 8515 E. Orchard Road Greenwood Village, CO 80111

  4. Your official annuity certificate will be mailed to you.

    If you do not receive your annuity certificate within 10 days or if you discover a discrepancy or wish to alter the contract, notify the record keeper immediately. Your payments will begin according to the terms of the contract if you do not notify the record keeper before the end of the rescission period. A rescission period is the length of time you can alter or cancel the contract. For the TAP annuity (WSIB Investment Program), this period is 15 days from the rescission start date sent to you in writing. For the Self-Directed Investment Program, the date varies. It is typically 7-15 days from date of purchase. Contact the record keeper for more details.

Who provides the annuities for Plan 3?
If you use funds from the Washington State Investment Board (WSIB) Investment Program, you will purchase a Total Allocation Portfolio (TAP) Annuity, which is administered by the state of Washington. If you use funds from the Self-Directed Investment Program account, the record keeper will arrange the annuity purchase through an insurance company on your behalf.
What is the difference between an annuity and purchasing additional service credit?
Purchasing additional service credit:
How much would you receive each month?
The amount of your annuity payment is calculated using factors such as purchase price, your age, your joint annuitant’s age, survivorship percentage, Cost-of-Living Adjustments (COLAs) and the refund component. For example, a Single Life Annuity without a COLA or refund component would bring in more each month for you, but it wouldn’t include an annual payment increase, refund of the remaining balance after you die, or a lifetime payment to a survivor. A Joint Life Annuity with a COLA and refund component would include those benefits.
When can you expect your first annuity payment?
Your first payment might take up to 70 days depending on which investment program you use to purchase your annuity. Checks or direct deposits for the TAP Annuity are issued on the second business day of the month. Payment dates for the Self-Directed Annuity will be indicated in the contract.
How does an annuity affect my taxes?

You will receive a tax information statement indicating the taxable portion of your annuity payments each year. Complete a Form W-4P, to choose the amount you’d like withheld from your payments for federal and/ or state taxes. Without a Form W-4P, withholding amounts will follow the IRS guidelines using a filing status of married with three exemptions.

For more information about tax consequences:

  • Review IRS Publication 575, Pension and Annuity Income.
  • Consult a professional tax advisor. DRS and the record keeper representatives are not authorized to give tax advice.
If I choose to purchase a TAP Annuity, can I decide later to cash it in?
No, once you purchase a TAP Annuity, you are locked into the annuity's monthly payment plan.
Does the TAP Annuity include an annual Cost-of-Living Adjustment?
Yes, the TAP Annuity pays an annual Cost-of-Living Adjustment (COLA) of 3% on your anniversary. It is a flat 3% increase each year that is not tied to inflation.
Can I buy more than one TAP Annuity?
No, Plan 3 members can buy only one TAP Annuity.
If I'm invested in the Self-Directed Investment Program, can I buy a TAP Annuity?
Yes, but you'll have to move funds from the Self-Directed to the WSIB Investment Program in order to complete your TAP Annuity purchase. You can do a whole or partial transfer to accomplish this purchase.

Annuity tools and resources

Use these tools to help you estimate what your TAP annuity payment could be:

TAP Annuity Estimator: Calculate your payments.

Call the Plan 3 record keeper to estimate the amount of your annuity payments or discuss purchasing an annuity from the Self-Directed Investment Program at 888-327-5596.

Rollovers

How do I start a rollover of my contributions? What kinds of rollovers can I do?

How do I start a rollover of my contributions?
When you separate, DRS receives notice from your employer that you are no longer employed. Or, in the case of a beneficiary request, receives a certified death certificate. To initiate a rollover, submit a withdrawal form. The forms vary by who is requesting the withdrawal. A member completes the Member Withdrawal Form, a beneficiary completes the Beneficiary Withdrawal Form and a Legal Order Payee completes the Legal Order Payee Withdrawal Form. To ensure that the most current information is submitted, do not send forms earlier than 60 days before your separation from service.
What should I do prior to a rollover?
Talk with your financial planner or advisor about rolling money from one account to another; consider any potential fees or limitations of investment options. If you roll over any governmental 457 dollars to another type of plan or account, the withdrawals made prior to age 59½ could be subject to a 10% federal early withdrawal penalty upon distribution from the non-457 account. Money from other types of plans or accounts that are rolled over into a governmental 457 plan might still be subject to the 10% federal early withdrawal penalty prior to age 59½ upon distribution from the 457 account.
Can I roll my Plan 3 defined contribution account into my IRA while I'm still working?
No. Plan 3 does not allow for in-service withdrawals, including rollovers.
Can I roll over my employer's contributions?
No. Your employer's contributions pay for your defined benefit (pension) and cannot be withdrawn or rolled over.
Can I roll money from my former employer's retirement plan into Plan 3?
No. You are not able to roll over additional contributions or consolidate a prior retirement plan account into Plan 3. However, if eligible, you might be able to use the money in your former employer's retirement account (or another qualified retirement plan) to purchase out-of-state service credit or additional service credit. Another potential option is to roll your money into an employer-sponsored Deferred Compensation Program (DCP) account. If you don't have an existing DCP account, talk with your employer to explore your enrollment options. To learn more about your rollover options, call a Retirement Specialist at 800-547-6657 for assistance.

Taxes

There are some tax implications to keep in mind as you decide what withdrawal option is best for you.

If you choose a direct rollover, except for a Roth IRA, you are not taxed until you later take payment out of the traditional IRA or the eligible employer plan. Taxes will continue to be deferred.

The IRS requires a 20% tax withholding on any lump-sum withdrawal or if your installment payment plan is expected to last less than 10 years. This means that if you decide to withdraw $10,000 all at once, you will be sent a check for $8,000. The remaining $2,000 will be sent to the IRS. If your installment payments will last longer, you might decide what you would like withheld by completing a form IRS W-4P.

If you receive a payment before you reach age 59½, and you do not roll over your defined contribution funds, you might have to pay an additional tax equal to 10% of the taxable portion of the payment when you file your taxes. Visit the www.irs.gov for more information.

For tax advice, you should consult an accountant, qualified financial advisor, or the Internal Revenue Service.

Do I pay taxes on the money I receive from Plan 3 in retirement?
Yes, you will pay taxes on your payments from both sides of Plan 3. The payments are taxed as ordinary income, not capital gains.
Will I be taxed on my after-tax contributions in Plan 3?
No, after-tax and pre-tax contributions are reported separately. Once you start receiving payments, your annual 1099 will indicate the taxable portion of your distribution each year.

Cancelling a withdrawal

To cancel payments from your defined contribution funds, contact the record keeper in writing. Provide the notification at least 30 days prior to the payment date.

Send a written request with the date and your signature to:

Empower Retirement
State of Washington Plan 3
PO Box 173764
Denver, CO 80217-3764

Fax your request to 866-745-5766

Contact

For more information about Plan 3, or assistance with your account, contact us:

Plan 3 defined contribution (the account you contribute to)

   888-327-5596

   Email savewithwa@empower-retirement.com


Plan 3 defined benefit (the account your employer contributes to)

Contact DRS