Updated December 2014
If you are a member of TRS Plan 3, you have two options that allow you to use service credit earned as a teacher outside TRS:
|Out-of-State Service Credit Program||Public Education Experience Program|
You may take advantage of one or both of these programs. See example.
This will depend on your personal situation, and the eligibility rules as described in this brochure. The table below shows some of the key differences between the two ways you may use service credit.
|Out-of-State Service Credit Program||Public Education Experience Program|
|No payment required||Payment is required|
|No limit to how much out-of-state service
credit you may use
|You may purchase up to seven years of
|Service credit must be earned in an out-of-state public retirement system that covers teachers||Service credit must be earned as a teacher in a public school in another U.S. state or with the U.S. federal government and covered by a retirement or pension system|
|Allows you to qualify for early retirement||Allows you to qualify for normal or early retirement|
|Retirement benefit is based only on your Washington state service credit; the out-of-state service credit is not used in your benefit calculation||Retirement benefit is based on both your TRS service credit and the service credit you purchase|
|Must be a vested member of TRS||Must be an active member with two years of TRS service credit|
If you are a vested member of TRS Plan 3, you may use service credit earned in an out-of-state public retirement system that covers teachers to qualify for early retirement. However, it's important to remember that only your Washington state service credit will be used to calculate your retirement benefit. Your benefit will be reduced for each year you are under age 65, and for any out-of-state service credit used.
You are eligible for normal retirement at age 65 if you have at least:
Retirement before age 65 is considered an early retirement. You can retire as early as age 55 with a reduced benefit if you have at least 10 service credit years. There is less of a benefit reduction for early retirement if you have 30 or more years of service credit.
In some cases you can retire at age 62 with an unreduced benefit (see the early retirement factors table).
If you have enough Washington state service credit to qualify for a normal retirement at age 65, there is no need to use your out-of-state service credit.
If you do not have enough Washington state service credit to retire early with at least 10 years, and you are at least age 55, you may use your out-of-state service credit to qualify for and begin collecting a benefit. However, your benefit will be reduced for each year you are under age 65.
If you have at least 10 years of Washington state service credit, and you want to reach 30 years, you may qualify for a smaller benefit reduction if you use your out-of-state service credit.
If you use out-of-state service credit to reach 10 years, your benefit will be reduced for each year you are under age 65.
Suppose you are 57 years of age with seven years of Washington state service credit and a monthly Average Final Compensation (AFC) of $5,000. You have three years of out-of-state service credit that you could use to meet the 10-year service requirement for early retirement. Your benefit would be reduced based on the difference between your age (57) and the normal retirement age (65). Your early retirement factor would be .442 in this case, because you are eight years away from 65. While your out-of-state credit helps you qualify for retirement, your benefit is calculated using only the seven years of Washington state service credit.
Here’s how the calculation works:
Service Credit Years x 1% x AFC x Early Retirement Factor = Monthly Benefit
7 x 1% x $5,000 x .442 = $154.70
Your monthly retirement benefit would be $154.70
There are two reduction factors that apply if you use your out-of-state service to retire with 30 service credit years. One reduction factor is based on the amount of out-of-state service credit you are using to reach 30 years. The other reduction factor is determined by subtracting the out-of-state service credit you are using from the total number of years you are retiring early.
Suppose you are age 57 with 25 years of Washington state service credit and a monthly AFC of $5,000. You plan to retire on November 1, 2016. If you retire without using the out-of-state service program, your benefit would be reduced by a factor of 0.442 (you are retiring eight years early with 25 years of service). However, if you have five years of out-of-state service, you qualify for the reduction factors available to those with 30 years of service and your benefit reduction would be smaller. Here are the steps for calculating your benefit:
Step 1 – Determine your base benefit
TRS Service Credit Years x 1% x AFC = Base Benefit 25 x 1% x $5,000 = $1,250
Step 2 – Determine the first benefit reduction
The factor is based on the number of years of out-of-state service you are using. In the following chart, use the column for at least 10 years of service. The factor for five years is .594
Base Benefit x Reduction Factor 1 = Reduced Benefit $1,250 x .594 = $742.50
Step 3 – Determine the final reduced benefit
The final factor is determined by subtracting the years of out-of-state service you are using to reach 30 years from the total number of years you are retiring early (8 - 5 = 3 years). In the Early Retirement Factors table, use the columns for 30 years or more of service.
Because you were hired before May 1, 2013, and will retire after September 1, 2008, you can choose which factor to use – either 1.00 (the 2008 Early Retirement Factor [ERF]) or 0.91 (the 3% ERF).
Reduced Benefit 1 x Reduction Factor 2 = Final Reduced Benefit
Your benefit using the 2008 ERF: $742.50 x 1.00 = $742.50
Your benefit using the three percent ERF: $742.50 x 0.91 = $675.68
The 2008 ERF provides a smaller benefit reduction, but imposes stricter return to work rules. Please see the Thinking About Retiring Early? brochure for more information.
|Early Retirement Factors|
|Years to age 65||At least 10 years service||30 years or more service (prorated monthly)|
|3% ERF||2008 ERF||5% ERF*|
*If you were hired on or after May 1, 2013, have 30 years of service credit and are age 55 or older, your ERF reduces your benefit by 5% for each year (prorated monthly) before age 65.
Eligible members of TRS Plan 3 can purchase service credit for public education experience earned as a teacher outside TRS (as defined by your former retirement system). The service credit purchased is considered membership service, may be used to qualify for normal or early retirement, and will be used in calculating your benefit. To help determine your costs, you may wish to use the Buy Back calculator for Public Education Experience.
To be eligible, you must:
You may purchase up to seven years of service credit in whole month increments. Multiple purchases are not allowed. For example, if you purchased four years of public education experience, you will not be able to make another purchase even though your total is less than seven years.
Qualifying public education experience is that which you have earned as a teacher in a public school in another U.S. state or with the U.S. federal government. While working as a teacher, you must have been granted service credit in a retirement or pension system. Your former retirement system will be required to verify this information on your service credit purchase application.
You must pay the actuarial equivalent value of the resulting increase in your future benefit. The actuarial equivalent value is the amount needed today to pay for the increase in your monthly benefit over your lifetime.
Use this service credit purchase cost formula to calculate your cost:
Part 1: Annual Average Salary x Service Credit Years to Purchase x Factor 1
Part 2: Annual Average Salary x Current Service Credit Years x (Factor 1 – Factor 2)
Total Cost = Part 1 cost + Part 2 cost
The Part 1 cost pays for the additional value of the service credit you plan to purchase.
The Part 2 cost pays for the increased value of your current service credit. The value of your current service credit may increase with this purchase because you may be eligible for earlier retirement, better early retirement factors, or both. For some situations your Part 2 cost will be $0.
The factors used in the example below are for illustrative purposes only. See current factors.
Ron is an active TRS Plan 3 member who currently has 17 years of service and wants to purchase three years of service credit to reach 20 years. Ron is 49. His annual average salary is $49,992. We calculate the cost of Ron’s service credit purchase like this:
Part 1: $49,992 (annual average salary) x 3 (years to purchase) x 0.1824 (factor 1) = $27,356
Part 2: $49,992 (annual average salary) x 17 (current service credit) x (0.1824 - 0.1611) (factor 1 - factor 2) = $18,102
Total Cost: $45,458 = $27,356 + $18,102 (Part 1 + Part 2)
No. At the time you purchase service credit in TRS, you only need to prove that:
Your former retirement system must verify this information on your application.
You must pay your service credit bill in full within 90 days of the bill issue date. You will receive your bill after we receive your application.
You are not allowed to make installment payments.
Payment must be made in full in a lump sum. You may make direct payment with either a personal or cashier's check. In many cases it's also possible to transfer funds from another eligible retirement account to pay your bill. However, DRS cannot accept funds in excess of the cost to make your purchase. You are advised to check with the administrator of your account to see if you can transfer those dollars. DRS is classified by the Internal Revenue Service as a 401(a) account.
No. We must receive your complete payment before you retire.
Your employer may choose to contribute to the cost of your purchase. Payments sent in by employers must reference your bill number on the check.
Yes. If you are a substitute teacher who is currently reported by your employer as an active substitute and you meet the eligibility requirements.
As a Plan 3 member, 50 percent of the amount you pay will go to your defined contribution account and the remainder will go toward funding your defined benefit.
When you separate from employment and request a refund of your contributions, the 50 percent of your payment that went to your defined contribution account will be refunded to you based on the market value of your contributions, including earnings and losses, at the time you withdraw. The 50 percent that went to the defined benefit side is not refundable and will be used to help fund your monthly benefit payments once you become eligible. If you do not become eligible to receive benefits, that portion will remain within the Plan 3 trust fund.
The application must be completed by you and your former retirement system to verify previous service.
Complete Section 1 of the application. Send it to the retirement system where you earned the service credit. They should complete Section 2 and return the application to DRS. Please refer to the instructions on the back of the application.
The following example shows how to take advantage of both programs. The factors used are for illustrative purposes only. See current factors.
Mary is 60 years of age with five years of Washington state service credit and would like to retire. Mary has five years of service credit earned in another state that she can use to meet the 10-year service requirement for early retirement. She decides to purchase three years under the Public Education Experience Program and use two years to qualify under the Out-of-State Service Credit Program. Mary must purchase her Public Education Experience Service Credit while she is an active member. This is an example of Mary’s cost:
Part 1: $32,991 = $51,996 x 3.00 x 0.2115
Part 2: $0 = $51,996 x 5.00 x (0.2115 - 0.2115)
Total Cost: $32,991 = $32,991 + $0
Mary’s total cost to purchase three years of service credit is $32,991
Once Mary purchases the three years of service credit, it is applied to her total membership service. Now she has eight years of service credit. If she uses her other two years to qualify for early retirement, her benefit will be reduced based on her age (60) and the normal retirement age (65). In this case an early retirement factor of .588 would be applied, as Mary would have 10 years of service and be five years away from 65. Mary’s benefit will be calculated using only the eight years of Washington state service credit.
Here’s an example of how the calculation works:
TRS Service Credit Years x 1% x AFC x Early Retirement Factor (see table on page 3) = Monthly Benefit 8 x 1% x $4,333 x .588 = $203.82
Mary’s monthly retirement benefit would be $203.82
If you have questions, or would like more information about using service credit earned as a teacher outside the Washington state retirement system, contact DRS.