Career transitions and your retirement
If you leave your public service employment, you’ll have choices to make about your DRS retirement accounts. Here are the three big ones:
- Leaving your money in the account
- Withdrawing or rolling over the account funds
Here is helpful information to have about each of these options. First a question for you.
Are you vested?
Vesting means you’ve earned the minimum amount of service credit you need to be eligible to retire with a lifetime monthly pension from your plan. For Plan 2, this is 5 years. For Plan 3, you need 10 years or 5 years if at least one year is earned over age 44. The service credit you earn toward vesting is cumulative. This means if you separate but later return to public service, you can continue to earn service credit toward your vested status even if you didn’t yet qualify when you separated.
If you are in Plan 2, and you withdraw your contributions when you separate, your service credit balance goes to zero. If you are in Plan 3 and you separate, you might not yet qualify for the pension part of Plan 3, but if you were to return to service at a later date, you would keep earning credit toward that vested pension amount.
Leaving your money in the account
Let’s look at what happens if you leave your money in your account after you leave public service.
How much is in your account? You can look at your account balance through your online account. Select your plan summary to see the pension balance. You can also review the investment balances if you have DCP or Plan 3.
Is your account balance at least $1,000? If yes, you are eligible to leave your money in the account when you separate. If you are inactive and non-vested with a balance of less than $1,000, DRS is required to close your account and return the funds to you.
Plans 1 and 2 members: After you meet age and service requirements, you will be entitled to a monthly benefit for the rest of your life as long as you remain a member of your retirement plan. The money in your account will continue to earn interest until you retire or withdraw it.
Plan 3 members: Because you have both a pension and investment part of your plan, you have more options when you separate.
- Your investment contributions (funded by you): If you leave money in your investment account, it will stay invested while you maintain control of your investment choices.
- Your pension account (funded by your employer): Once you meet age and service requirements, you qualify for a lifetime monthly pension. See the vesting section above for what it means to meet service requirements. If you have at least 20 years of service credit when you leave employment and do not start to receive your pension, it will increase by approximately 3% for each year you delay receiving it up to age 65 (this is called indexing and is exclusively available to Plan 3 and LEOFF 2).
Withdrawing or rolling over retirement account funds
Plans 1 and 2 members: Withdrawing your money means you are no longer a member of your retirement plan and, therefore, ineligible to receive a retirement benefit. There is no partial withdrawal option.
Plan 3 members: You can withdraw your investment contributions and investment earnings without affecting your pension income eligibility. If you meet the vesting requirements when you separate, you will still receive a monthly pension benefit when you are eligible to retire.
Taxes: If I withdraw my retirement or DCP funds, will they be taxed? Yes. Payments you receive are subject to income tax. Rollovers are not subject to income tax. To find out more about how taxes could affect you, contact a tax advisor.
If you are 55 or older, you might be eligible to retire. Review the requirements for your retirement system on your plan page. DRS has several resources for retiring members including a retirement planning checklist and available seminars.
DCP account options
If you retire or leave your public service job, you can leave your money in your DCP account or choose to receive or roll over some or all of your account balance.
If you continue public employment, you can continue, increase, reduce or stop your DCP contributions. In limited circumstances, the Internal Revenue Service allows for hardship withdrawals while you are still employed. Contact the DCP record keeper Voya at 800-547-6657 to find out more about this option.
More career change information
What happens if I change to another public employer?
If you go directly to another DRS-covered eligible position with the state or a participating public employer, you will continue to contribute to your retirement account.
What happens to my account if I return to public service?
If a DRS-covered retirement system is offered for your position, the choice you made when you left employment will determine the answer:
- You retired: You might be able work limited hours without affecting your benefit. Contact us to hear your options.
- You’re a Plan 3 member and you left your money in your account or withdrew it: You will begin contributing to your retirement account again. Plan 3 members can withdraw their investment funds but not the pension funds their employers contribute.
- You withdrew from Plan 1 or 2: You will begin contributing to your account again. For a limited time, you will have the option to repay the money you withdrew plus interest to restore your service credit. This retirement benefit is a monthly pension based on your service credit years as well as your earnings.
Rumors. They sure can be wild at times. At DRS, it’s not unusual for us to speak with customers who have heard a rumor that, as it so often turns out, is not exactly accurate.
The 2023 Annual Comprehensive Financial Report (ACFR) reflects our on-going commitment to accurate and transparent financial reporting of the retirement systems.
Department of Retirement Systems recently learned of several email and phone schemes targeting public employees.