Choose your retirement plan: Plan 2 or Plan 3

• Plan 2 is simple. No investments or contributions to select. Your retirement benefit is not dependent on stock market performance.
• Five years is the total number of years you need to work while contributing to Plan 2. After five years, you are guaranteed a pension in retirement as long as you don’t withdraw your contributions before you retire.
• The majority of public service employees in Washington are enrolled in Plan 2. The main reasons they cite for choosing the plan are simplicity and low-risk.

Plan 2 is a 2% pension plan that provides a guaranteed monthly benefit for life once you meet retirement eligibility. Your benefit is based on your years of service credit and your average pay during your highest-paid 60 consecutive months. The formula is:

2% × Service Credit Years × Average Final Compensation = Monthly Benefit.

For example, 15 years of service with $4,000 average pay would give a $1,200 monthly benefit. Contributions are made by both you and your employer, but the benefit isn’t based on how much you contribute.

Visit the Plan 2 pages to view the current rates: Public employees, School employees, Teachers.  Your contributions are deducted from your pay and you can view the dollar amounts on your pay statements. Contribution rates can change every two years, based on funding needs of the plan. The Washington State Investment Board (WSIB) invests your contributions.

You’re guaranteed a full pension at age 65 with at least five years of service credit. You can retire as early as age 55 with 20 or more years, but your benefit will be reduced. If you have 30 or more years of service, the early retirement reduction is smaller—5% for each year before age 65.

If you leave Plan 2 before retirement, you can withdraw your contributions and interest, but you’ll give up your future pension benefit. You can’t withdraw your employer’s contributions. If you leave your money in the plan, it continues to earn interest. With at least five years of service credit, you’re vested and eligible for a pension once you meet retirement age. If you withdraw and later return to public service, you may be able to restore your service credit with a one-time payment.

Plan 2 doesn’t offer individual investment choices. It’s a pension plan that provides a guaranteed monthly benefit based on your service and salary, not investment performance. Contributions are professionally managed by the Washington State Investment Board (WSIB).

• Plan 3 is two separate accounts: An employer-funded pension, and an investment account you fund with your contributions. Having two separate accounts means you can start collecting income from your pension or investment account without affecting the other account.
• You choose your Plan 3 contribution rate and the rate is fixed- an amount between 5 and 15 percent. Plan 3 offers a few options for graduated rates that can increase your retirement savings as you age.
• The investment part of Plan 3 gives you the opportunity to grow your retirement funds beyond what you can earn from Plan 2.

Plan 3 includes two parts: a 1% pension funded by your employer and a separate investment account funded by you. The pension provides a guaranteed monthly benefit for life based on your service credit and average final compensation, using the formula:
1% × Service Credit Years × Average Final Compensation = Monthly Benefit.

Your investment account is yours to manage and grows based on market performance. The pension is not affected by investments and is managed by the Washington State Investment Board (WSIB).

In Plan 3, you choose how much to contribute to your investment account from six rate options ranging from 5% to 15% of your pay. If you don’t choose, you’ll default to 5%. Your contributions are invested in options you select, managed by the Washington State Investment Board. You can only change your rate if you change employers. Choose a rate that fits your budget, retirement timeline, and income goals.

You can retire from Plan 3 with a full pension at age 65 if you have at least 10 years of service credit—or just 5 years if at least one year was earned after age 44. Early retirement is available from ages 55 to 64 with at least 10 years of service, but your pension will be reduced. With 30 or more years of service, the early reduction is smaller—5% per year before age 65. You can also access your investment account separately, even if you delay your pension.

If you leave Plan 3 before retirement, you can withdraw your investment contributions and earnings, but doing so may reduce your future retirement income. You cannot withdraw the employer-funded pension portion. If you have at least 20 years of service and delay your pension, it will increase about 3% per year until age 65. You may also choose to buy an annuity with your investment funds to receive guaranteed monthly income for life, though annuities offer less flexibility for changing financial needs.

Plan 3 offers three types of investment options for your account: a professionally managed Retirement Strategy Fund (target date fund), self-directed investment options, and the WSIB TAP fund. If you don’t choose an option, your contributions will go into a Retirement Strategy Fund based on a retirement age of 65. You can change your investments at any time.

More about DRS investments:

Public employees PERS 3
Teachers TRS 3
School employees SERS 3
Investment Basics Webinar

After 90 days, you’ll automatically be placed in Plan 2. (If you were hired on or before June 29, 2020, and did not choose a plan, you would have been placed in Plan 3.) This placement is permanent, even if you leave employment and later come back.

Yes. If you are a public employee, teacher or school employee in Washington State, a retirement plan is a required part of the benefits package for your public service. Both Plan 2 and Plan 3 offer a lifetime pension benefit. The pension amount depends on how long you work in public service and your salary. Pensions can be a powerful source of lifetime retirement income.

Plan 3 contributions can be as low as a fixed rate of 5% of your pretax salary. Most Plan 2 rates fall between 6 and 9% of your pretax salary and are subject to change every two years.

Plan 2. It’s a one-part pension plan. There are no decisions to make within the plan. Our Retirement Specialists like to call Plan 2 the “plug and play” plan. Plan 3 definitely requires more decisions from you, but it does offer more control. There are also options for simplification within Plan 3, such as the use of target date funds, which are invested for you based on your age.

It depends. Plan 3 offers choices that could result in a higher or lower retirement income than Plan 2. For example, a person in Plan 3 who chooses a 15% contribution rate will have much more in their retirement account than a person who chooses 5%. And those contributions will grow differently depending on the investments selected and how the market performs during the employee’s working years. Plan 3 “could” give you more in retirement, but there is also more uncertainty because of the investment choices. Additionally, you may have contributed more into the plan to have that higher amount. Check out this Plan Choice calculator to compare some numbers of your own.

With both plans, the money you contribute is yours. You can withdraw or roll over your contributions and the interest they’ve earned at any time after you leave public service. However, if you do, you give up your right to a future retirement benefit. The money you contribute to each plan is a percentage of your income, calculated pretax. This means you will need to pay tax for withdrawals from either plan.

Yes. Both plans include contributions from your employer. For both plans, the only way you receive your employer’s contributions is by receiving a monthly retirement pension from DRS. More about employer contributions.

No. Your membership in either Plan 2 or Plan 3 is permanent. Even if you leave public service and later return, you will still be a member of the same plan.

After receiving your first paycheck from your employer, you can activate your DRS retirement account and view your account information online. For the first 90 days of your employment, your employer will start your retirement contributions as though you are in Plan 2. If you become a Plan 3 member, your online account will change to a Plan 3 account.