Choose a plan: Plan 3 basics
Plan 3 has two parts: a pension account and an investment account.
Your employer contributes to pension. You contribute to the investment account.
Pension
(funded by your employer)
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Investment
(funded by you)
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Plan 3 retirement
A 1% pension plan
The 1% pension part of Plan 3 is funded by your employer and invested by the Washington State Investment Board (WSIB). The pension is guaranteed and is not dependent on investment performance.
Lifetime benefit
Once you meet age and service requirements and you’ve applied for retirement, you will receive a guaranteed monthly benefit for your lifetime. Your benefit is based on your years of service credit and the pay you’ve earned.
Service credit years (SCY) The number of years you are credited for working.
Average Final Compensation (AFC) The average of your highest consecutive 60 months earnings, wherever they are in your service.
Formula
The formula used to calculate your pension benefit:
1% x SCY x AFC = monthly benefit
Example
If you worked full time every month for 15 years and your average monthly pay for your highest consecutive five years was $4,000, your monthly benefit would be $600.
1% x 15 SCY x $4,000 AFC = $600 monthly benefit
And a contribution you select
Under the investment account part of Plan 3, a portion of your pay is directed to investments that you select from a range of offerings managed by the Washington State Investment Board. These next sections discuss your contribution rate options and the investment programs available to you.
| Choose from six contribution rates | |
|---|---|
| Option A: | 5% all ages |
| Option B: | 5% up to age 35 6% ages 35 through 44 7.5% age 45 and older |
| Option C: | 6% up to age 35 7.5% ages 35 through 44 8.5% age 45 and older |
| Option D: | 7% all ages |
| Option E: | 10% all ages |
| Option F: | 15% all ages |
If you don’t choose a contribution rate, it will default to option A: 5%. Once your rate is set, you can change it only when you change employers. Changing means working for a different employer, not another division or unit at your current workplace.
Ideally, you want to choose your contribution rate based on three considerations: retirement income needs, years until retirement and current budget.
Your investment options
The investment account portion of your Plan 3 retirement income gives you several options to choose from. You can choose a one-step investing plan with a portfolio managed for you by investment professionals. The portfolio changes based on your age and proximity to retirement. This is called a Retirement Strategy Fund (or target date fund). Plan 3 also offers investments you can self-select and manage. A third type of investment program is the Plan 3 WSIB TAP fund. See more about DRS investments:
If you do not select an investment
What happens if I don’t make a selection? Your contributions will be invested in the Retirement Strategy Fund that assumes you’ll retire at age 65. However, you can change your investment selections at any time.
Retirement age and service credit requirements
What age can I retire with a full benefit? What about early retirement?
Retirement with a full benefit: Age 65. If you have at least 10 years of service credit and you’re age 65, you can retire with a full benefit. If you have at least five years of service credit, you can retire at age 65 with a full benefit if you earned at least one of your five years of service credit after age 44.
How it works: You’re age 47 and have five years of service credit. You earned three years of service credit after the age of 44. You choose to leave public service and begin drawing from the investment part of your plan. You plan to delay receiving your pension benefit until age 65. Because you have earned at least one year of service credit after age 44, you can retire with a full benefit at age 65 even though you only have five years of service credit.
Early retirement with a reduced benefit: Ages 55 to 64 with at least 10 years of service credit. If you retire early, your monthly benefit is reduced to reflect that you will receive it for a longer period of time. The earlier you retire, the larger the reduction.
There is less of a benefit reduction for early retirement if you have 30 or more years of service credit. Your benefit will be reduced by 5% for each year (prorated monthly) before you turn age 65. Again, the earlier you retire, the larger the reduction.
Leaving employment before you’re eligible to retire
Can you withdraw your contributions? What happens to employer contributions?
Your employer contributions
The pension benefit part of your plan is designed to provide you with a source of income throughout your retirement. For this reason, you can’t withdraw the contributions your employer makes to this part of your plan. If you have at least 20 years of service credit when you leave employment and do not start receiving your pension benefit, it will increase by about 3% each year you delay receiving it, up to age 65.
Your contributions
In Plan 3, it is possible to withdraw your contributions and investment earnings from your investment account any time after you leave all public service. However, withdrawal could reduce an important source of your retirement income.
Plan 3 annuities
An annuity purchase is a way to convert your investments to a guaranteed lifetime income stream, providing the security of a set monthly payment that can cover part or all of your fixed expenses.
However, flexibility is not a feature of annuities. If your fixed expenses increase, annuities do not allow you to adjust payment amounts to meet changing needs. With annuities, you are trading market risk and account growth for the guarantee that you will not outlive your account balance. For more information about annuities, including the TAP Annuity, visit purchasing an annuity.
