If you work for a school, when’s the best time to retire?

School employees (teachers, paraprofessionals and support staff) often ask us whether it’s better to retire in July (when they stop working) or in September (when their contract ends).

The simple answer is: It’s all about the timing. Choosing July or September will affect two factors:
1) When you receive your Cost-of-Living Adjustment (COLA)
2) Your Public Employees Benefits Board (PEBB) retiree health insurance

About COLA

After your first full year of retirement, your monthly benefit will be adjusted on July 1 every year. This change happens because of the Seattle Consumer Price Index percentage change — a maximum of 3% per year.

About the PEBB Program

While you are working, the School Employees Benefits Board (SEBB) Program offers employer-paid health insurance options for teachers and school employees. When you retire, this employer-supported insurance ends.

After retirement, The PEBB Program can provide you with insurance coverage. However, you must qualify and enroll no later than 60 days after your employer-paid COBRA or continuation coverage ends. Under PEBB, you will still be responsible to pay the Health Care Authority (HCA) for your health insurance costs.

The two examples below show how a June 30 versus an Aug. 31 resignation date can affect your retirement and health insurance coverage. You must tell your employer which date you want.

July retirement example:
You resign from your position on June 30 so you can retire starting in July 2022.
September retirement example:
You resign from your position on Aug. 31 so you can retire starting in September 2022.
You’ll receive your pension benefit plus your salary for July and August.Your pension benefit will start in September.
The COLA will start in July of the following year (July 1, 2023).The COLA won’t go into effect until July 2024, but the one you missed will be banked, or set aside. This means your COLA in 2024 could be bigger than it would have been if you had chosen to retire in July 2022.
Health insurance coverage through SEBB Program will end after June 30, 2022.You’ll earn service credit for July and August (*this doesn’t apply if you’re in TRS Plan 1).
You are responsible for your health insurance costs for July and August.You’ll continue receiving SEBB Program insurance coverage in July and August.
If you’re eligible and meet PEBB’s procedural requirements, your retiree insurance coverage will start July 1.
How to decide

So which one should you choose? Here are two factors to consider:

  • Costs – the cost of your current employer-paid benefits versus the cost of retiree health insurance coverage during the last two months of your contract
  • Timing – when you want your COLA to start

Determine what works for you, and remember to tell your employer, DRS and HCA whether you are resigning effective June 30 or Aug. 31.

If you have any questions about PEBB retiree insurance coverage, please call HCA at 800-200-1004, Monday through Friday, 8 am to 4:30 pm.

You can visit HCA for forms, publications and more information or send a secure online message. You must set up a secure login to use this feature. This helps protect your privacy and sensitive health information.

If you have any questions about your retirement date or COLAs, please contact DRS.

*TRS Plan 1 only: Since you won’t earn additional service credit for July and August, and you likely have a pension based on many years of service, your pension payments for July and August could have a greater value than the difference in cost between the SEBB Program and PEBB insurance coverage for those two months. This could mean it makes more financial sense to resign your position at the end of June, retire, and begin PEBB retiree insurance coverage effective July 1.

In all the examples, eligible retirees can choose to purchase retiree health insurance through PEBB once their SEBB Program insurance coverage ends. Both programs are administered by HCA, which provides online information on SEBB Program employee plan costs and PEBB retiree plan costs.

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