Purchasing an Annuity


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What's an annuity?

When it's time to retire, you have some additional options—options that can change your finite savings into a monthly, lifetime income called an annuity.

An annuity is a guaranteed income plan you purchase. You choose the amount and immediately or later begin receiving money, which usually lasts your lifetime depending on the annuity you select.



Is an annuity right for me?

Annuities can provide guaranteed income for your life. And they offer security through a set monthly income. However, flexibility is not a feature of annuities. Once you set it up, an annuity doesn't allow you to change the income amount.

With annuities, you take money out of market risk and use it to give yourself a monthly lifetime income. Annuities are the only withdrawal option that guarantee you will not outlive your account balance.

How do annuities affect my taxes?

Each year you'll receive a statement that shows the taxable amount of your annuity. Complete a Form W-4P to choose the amount you'd like withheld from your payments for taxes. Without a Form W-4P, the tax withholding will follow IRS guidelines using a status of married with three allowances.

For more information about taxes, review IRS Publication 575. You might want to consult a tax advisor. DRS and the record keeper are not authorized to give tax advice.

Available annuities

Whether you qualify for these annuities depends on your retirement system and plan.

  • Purchase Service Credit (for all members)
  • Deferred Compensation Program (DCP)
  • Plan 3: TAP – Total Allocation Portfolio (Plan 3: PERS, SERS or TRS)
  • Plan 3: Self-Directed Investment Program (Plan 3: PERS, SERS or TRS)
  • Teachers' Retirement Systems (TRS Plans 1, 2 and 3)
  • Law Enforcement Officers' and Fire Fighters' Plan 2 and Washington State Patrol (LEOFF Plan 2 or WSPRS)

Annuity comparison

Annuity type Minimum purchase Who provides it How to purchase
Purchase Service Credit for all members 1 month of service WSIB Contact DRS
Deferred Compensation Program for all DCP participants Min: $2,000 MetLife Contact DCP record keeper
Plan 3: TAP for PERS, SERS, TRS Min: $25,000 WSIB Complete Plan 3 TAP annuity form
Plan 3: Self-Directed for PERS, SERS, TRS Min: $5,000 MetLife Contact Plan 3 record keeper
Teachers' Retirement System for TRS Plans 1, 2 and 3 No minimum WSIB Contact DRS
LEOFF and WSPRS Plans 1 and 2 Min: $25,000 WSIB Contact DRS

Dollar for dollar, Purchase Service Credit, Teachers' and LEOFF/WSPRS annuities offer you the same monthly amounts—in fact the calculator you use to estimate your monthly benefit is the same for these three annuities. What's the difference? Each annuity type has different allowances like funding sources, limits and more. For example, the service credit annuity might pause payments if you return to work for a DRS-covered employer. The LEOFF and Teachers' annuities will continue. Read on for more comparisons.

With Plan 3, you have the choice between two types of annuities based on the two investment programs available to you, WSIB and Self-Directed. Each annuity type has different features.

Plan 3 annuity comparison

  TAP annuity (WSIB Investment Program) Self-Directed Investment Program
Annuity provider WSIB MetLife
Minimum purchase price $25,000 $5,000
Payment frequency Monthly Monthly, Quarterly, Semi-Annually or Annually
Length of annuity Payments for your lifetime (Single Life Annuity). You also have the option to cover a survivor's lifetime (Joint Life Annuity) Payments for your lifetime (Single Life Annuity). You also have the option to cover 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 a 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 die before the specified period of time, 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 change or cancel the annuity) 15 days from the rescission start date sent to you in writing Varies. Usually 7-15 days from date of purchase. Contact the record keeper for more details (888-327-5596).

Purchasing additional service credit increases your monthly retirement benefit for the rest of your life. And if you choose a survivor option, we’ll continue paying the increase to your survivor after your death.

What's different about this annuity?

The service credit annuity is available to all members with DRS pension plans. The increments for this annuity are not dollars, but months. You can purchase between one and 60 months of service credit in whole months. The cost is based on your age and plan. The monthly increase to your benefit is based on the same formula used to calculate your retirement benefit.

This additional service credit is available at the time of your retirement only. Also, you cannot use the additional credit to qualify for retirement (it won’t increase your years of service).

Who can purchase?
All members.
When can I purchase?
When you are retiring.
How much does it cost?
Log in to your account and choose "Purchasing Service." Here you can find the estimated cost and income increase per month you purchase.
Are there limits to the amount of service credit I can purchase?

Minimum: One month
Maximum: 60 months

What funds can I use to purchase service credit?
You can use any funds except for your Plan 3 contributions.
When does my annuity benefit begin?
After you have made payment in full.
How often do I receive the benefit?
Monthly.
Can I designate a survivor?
Yes. Your survivor will be the same option you chose for your retirement benefit.
Will I receive a Cost-of-Living Adjustment (COLA)?
Yes. You will receive a COLA up to 3% annually. If you're a TRS Plan 1 or PERS Plan 1 member, a COLA is an optional choice at retirement.
Can I cancel the annuity if I change my mind?
No. Annuities are fixed income sources. Once you purchase the annuity, you will not have access to the funds you used to make the purchase. If you have not completed the annuity purchase, you can still change or cancel the annuity.

How do I purchase service credit?

Complete the Request for Purchasing Service Credit form included with your packet when you apply for retirement. DRS will issue a bill during the month of your retirement, and then you'll have 90 days to pay. You can cancel or change the bill before payment.

Will my annuity purchase be refunded when I die?
Yes. If you (and your survivor if you selected a survivor option) die before the amount of your purchase has been paid back to you, the difference will be refunded to your beneficiary. For TRS Plan 1, this refund does not apply if you selected the Maximum Option.
What if I return to work?
The return to work rules for service credit are the same as your retirement benefit. If you return to work for a DRS-covered employer, your annuity will stop if you return to retirement system membership or if you exceed allowable hours as a retiree (867 per year). If you do not return to a DRS-covered employer, your annuity will continue.
Who provides the purchase service credit benefit?
The Washington State Investment Board.
How can I find out more?
Call DRS at 800-547-6657.
When will my benefit increase be effective?
The increase in your benefit will be effective the day after the department receives your full payment.
  • Example 1: If your full payment is received on Aug. 31, your benefit increase will be effective for the entire month of September and every month thereafter.
  • Example 2: If your full payment is received Aug. 13, your August benefit payment will be prorated to provide an increase for the days from Aug. 14 through Aug. 31. Your September benefit and future monthly payments will reflect the entire monthly increase from purchasing the additional service credit.

You can use your DCP savings to purchase any annuity, with the exception of the Plan 3 TAP Annuity. Two options available for all members include: MetLife or Purchase Service Credit. For more about service credit, see the previous section. The section below covers information about purchasing MetLife annuities with your DCP savings.

What’s different about this annuity?

This annuity option is commercially available and is offered through MetLife. This annuity gives you options. Use your DCP savings to purchase as many annuities as you want, for as long as you want. Do you want an annuity for 10 years? A lifetime? $2,000? $200,000? You can choose different terms and amounts for the annuity. (This convenience can sometimes include higher fees.)

Who can purchase?
Washington State DCP participants.
When can I purchase?
When DRS receives your separation date and you are at least 40 years of age.
How much does it cost?
Call the DCP record keeper at 888-327-5596.
Are there limits to the annuity amount I can purchase?
Minimum: $2,000
Maximum: Your DCP account balance
What funds can I use to purchase an annuity?
Your DCP funds.
When does my annuity benefit begin?
After you separate from employment and complete your purchase.
How often do I receive my annuity benefit?
Monthly or quarterly. Purchases under $100,000 are paid quarterly.
Can I designate a survivor?
Yes.
Will I receive a Cost-of-Living Adjustment (COLA)?
Optional.

How do I purchase an annuity?

Call the DCP record keeper at 888-327-5596.

Can I cancel the annuity if I change my mind?
In most cases, no. Annuities are fixed income sources. Once you purchase the annuity, you will not have access to the funds you used to make the purchase.
There are two exceptions:
  • If you have not completed the annuity purchase, you can still change or cancel the annuity.
  • Once you make the purchase, you'll have 7 to 15 days to cancel the transaction. The DCP record keeper will mail you a letter that includes your rescission, or cancel by date.
Will my annuity purchase be refunded when I die?
Optional.
What if I return to work?
Your annuity continues.
Who provides the annuity?
MetLife. This is a commercially available annuity.
How can I find out more?
Call the DCP record keeper at 888-327-5596.

Plan 3 members can use their plan contributions to purchase the Total Allocation Portfolio (TAP) Annuity. This annuity is guaranteed to pay you for your lifetime.

Sometimes when members first hear about the TAP Annuity, they say it sounds too good to be true. After all, it has low fees and it comes with a built in 3% annual Cost-of-Living Adjustment. But here's the deal. This annuity is managed by Washington state, not a for profit company. So the savings are passed to you.

If your contributions are in the Self-Directed Investment Program, you can still get a TAP Annuity. Just transfer the funds to the WSIB program when you apply for the annuity.

What's different about this annuity?

With the TAP Annuity, you are not limited to the survivor options you chose for your pension retirement. You can choose another survivor. You can also purchase the TAP Annuity any time after you separate from DRS-covered employment.

Your guaranteed payment might be more than you think

For example, a 65-year-old member who purchases a single-life annuity for $100,000 would have an initial benefit of over $600 per month, and that benefit would increase by 3% every year.

Who can purchase?
Plan 3 members of PERS, SERS and TRS.
When can I purchase?
When DRS receives your separation date, or any time after.
How much does it cost?
Use the TAP Annuity Estimator calculator or call the Plan 3 record keeper at 888-327-5596.
Are there limits to the annuity amount I can purchase?
Minimum: $25,000
Maximum: Your total Plan 3 investment account balance
What funds can I use to purchase the annuity?
Use contributions from your WSIB investment account. If you have funds in Self-Directed investments, you can transfer them to the WSIB program when making the purchase. The Plan 3 record keeper can help you with this. Call 888-327-5596.
When does my annuity benefit begin?
About 60-90 days after your request to purchase.
How often do I receive my annuity benefit?
Monthly.
Can I designate a survivor?
Yes.
Can I cancel the annuity if I change my mind?
In most cases, no. Annuities are fixed income sources. Once you purchase the annuity, you will not have access to the funds you used to make the purchase.
There are two exceptions:
  • If you have not completed the annuity purchase, you can still change or cancel the annuity.
  • Once you make the purchase, you'll have 15 days to cancel the transaction. You'll receive a mailed letter that includes your rescission, or cancel by date.

How do I purchase an annuity?

Use the Plan 3 Annuity Payment Request form.

Will I receive a Cost-of-Living Adjustment (COLA)?
Yes. Your TAP annuity will receive an automatic COLA of 3% annually. This COLA is applied on the anniversary of the annuity.
Will my annuity purchase be refunded when I die?
If you (and your survivor if you selected a survivor option) die before the amount of your annuity purchase has been paid back to you, the difference will be refunded to your beneficiary.
What if I return to work?
Your annuity continues.
Who provides the annuity?
The Washington State Investment Board.
Can I buy more than one TAP Annuity?
No. You can buy only one TAP Annuity.
If I'm invested in the Self-Directed Investment Program, can I buy a TAP Annuity?
Yes. You'll need to move funds from the Self-Directed to the WSIB Investment Program to complete your purchase. You can do a whole or partial transfer when you apply for the annuity.
How can I find out more?
See the Plan 3 Annuity Payment Request form or call the Plan 3 record keeper at 888-327-5596.

The Plan 3 Self-Directed Investment Program is available to all PERS, SERS and TRS members in Plan 3.

What's different about this annuity?

This annuity option is commercially available and is offered through MetLife. The Self-Directed Program annuity gives you options. Unlike the TAP annuity, which limits you to a single lifetime annuity purchase, you can purchase multiple Self-Directed program annuities. And you can choose the length you want. Do you want an annuity for 10 years? A lifetime? $5,000? $200,000? You can choose different terms and amounts for the annuity. (This convenience can sometimes include higher fees.)

Who can purchase?
Plan 3 members.
When can I purchase?
Anytime after DRS receives your separation date from employment.
How much does it cost?
Call the Plan 3 record keeper at 888-327-5596.
Are there limits to the annuity amount I can purchase?
Minimum: $5,000
Maximum: Your total Plan 3 contributions in the Self-Directed Investment Program account.
What funds can I use to purchase an annuity?
You can only purchase the annuity with funds from your Plan 3 investment account. If you want to use WSIB program funds, you’ll need to transfer them into the Self-Directed Investment Program when you purchase the annuity.
When does my annuity benefit begin?
After you separate from employment and payment for your annuity is received.
How often do I receive my annuity benefit?
Monthly, quarterly, semi-annual, or annually.
Can I designate a survivor?
Yes.
Will I receive a Cost-of-Living Adjustment (COLA)?
Optional.

How do I purchase an annuity?

Call the Plan 3 record keeper at 888-327-5596.

Can I cancel the annuity if I change my mind?
In most cases, no. Annuities are fixed income sources. Once you purchase the annuity, you will not have access to the funds you used to make the purchase.
There are two exceptions:
  • If you have not completed the annuity purchase, you can still change or cancel the annuity.
  • Once you make the purchase, you'll have 7 to 15 days to cancel the transaction. The Plan 3 record keeper will mail you a letter that includes your rescission, or cancel by date.
Will my annuity purchase be refunded when I die?
Optional.
What if I return to work?
Your annuity continues.
Who provides the annuity?
MetLife. This is a commercially available annuity.
How can I find out more?
Call the Plan 3 record keeper at 888-327-5596.

This annuity is available to all Teachers' Retirement System (TRS) members. With this annuity, the retirement benefit increase you receive is based on the dollar amount you choose to purchase.

If you are eligible for an annual Cost-of-Living Adjustment (COLA) on the defined benefit part of your monthly benefit, you will receive the same COLA percentage on your purchased annuity.

What's different about this annuity?

This annuity is available to all Teachers' retirement plan members. Unlike purchasing service credit or the Plan 3 TAP annuity, the Teachers' annuity can be purchased using any funds other than your Plan 3 contributions. With the Teachers' annuity, your survivor will be the same as the one you selected for your pension payment. You'll continue to receive the annuity portion of your monthly benefit even if you return to work or return to membership.

Who can purchase?
TRS Plans 1, 2 and 3 members.
When can I purchase?
When you are retiring.
How much does it cost?
Log in to your account and choose "Purchasing Annuity." Here you can find the monthly increase to your pension for any purchase amount.
Are there limits to the annuity amount I can purchase?
No. There are no minimum or maximum limits.
What funds can I use to purchase an annuity?
You can use any funds except for your Plan 3 contributions.
When does my annuity benefit begin?
Your retirement date or the day after your bill for the annuity is paid in full, whichever comes later.
How often do I receive my annuity benefit?
Monthly.
Can I designate a survivor?
Yes. Your survivor will be the same option you chose for your retirement benefit.
Will I receive a Cost-of-Living Adjustment (COLA)?
Yes. You will receive a COLA up to 3% annually. If you're a TRS Plan 1 or PERS Plan 1 member, a COLA is an optional choice at retirement.

How do I purchase an annuity?

Contact DRS for a bill. You can pay before retirement or up to 90 days after retirement. You have the option to cancel or change the amount of a bill before payment.

Can I cancel the annuity if I change my mind?
In most cases, no. Annuities are fixed income sources. Once you purchase the annuity, you will not have access to the funds you used to make the purchase.
There are two exceptions:
  • If you have not completed the annuity purchase, you can still change or cancel the annuity.
  • Once you make the purchase, you'll have 15 days to cancel the transaction. You'll receive a mailed letter that includes your rescission, or cancel by date.
Will my annuity purchase be refunded when I die?
If you (and your survivor if you selected a survivor option) die before the amount of your annuity purchase has been paid back to you, the difference will be refunded to your beneficiary. This refund option does not apply to the TRS Plan 1 Maximum Option.
What if I return to work?
Your annuity continues.
Who provides the annuity?
The Washington State Investment Board.
How can I find out more?
Call DRS at 800-547-6657.

This annuity is available to:

  • Law Enforcement Officers' and Fire Fighters' (LEOFF) Plans 1 and 2
  • Washington State Patrol (WSPRS) Plans 1 and 2

The retirement benefit increase you receive is based on the dollar amount you choose to purchase. You can purchase an annuity through the state by using your DCP contributions.

What’s different about this annuity?

If you're eligible for an annual Cost-of-Living Adjustment (COLA) on your monthly benefit, you will receive the same COLA percentage on your purchased annuity.

Who can purchase?
LEOFF and WSPRS members.
When can I purchase?
When you are retiring.
Are there limits to the annuity amount I can purchase?
Minimum: $25,000
Maximum: There is no maximum
How much does it cost?
Log in to your account and choose "Purchasing Annuity." Here you can find the monthly increase to your pension for any purchase amount.
What type of funds can I use to purchase an annuity?
Your payment must come from an eligible governmental plan, like your DCP savings. Members cannot use PERS/SERS/TRS Plan 3 contributions to pay for this annuity.
When does my annuity benefit begin?
Your retirement date or the day after your bill for the annuity is paid in full, whichever comes later.
How often do I receive my annuity benefit?
Monthly.
Can I designate a survivor?
Yes. Your survivor must be the same survivor and survivor option you chose for your retirement benefit.
Will I receive a Cost-of-Living Adjustment (COLA)?
Yes. You will receive a COLA up to 3% annually.

How do I purchase an annuity?

Contact DRS for a bill at 800-547-6657. You can pay before retirement or up to 90 days after retirement. You have the option to cancel or change the amount of a bill before payment.

Can I cancel the annuity if I change my mind?
In most cases, no. Annuities are fixed income sources. Once you purchase the annuity, you will not have access to the funds you used to make the purchase.
There are two exceptions:
  • If you have not completed the annuity purchase, you can still change or cancel the annuity.
  • Once you make the purchase, you'll have 15 days to cancel the transaction. You'll receive a mailed letter that includes your rescission, or cancel by date.
Will my annuity purchase be refunded when I die?
If you (and your survivor if you selected a survivor option) die before the amount of your annuity purchase has been paid back to you, the difference will be refunded to your beneficiary.
What if I return to work?
Your annuity continues.
Who provides the annuity?
The Washington State Investment Board.
How can I find out more?
Call DRS at 800-547-6657.

This page is a summary. It is not a complete description for purchasing an annuity. State retirement laws govern your benefit. If a conflict exists between the information shown in this document and what is contained in current law, the law governs.