Leaving employment before vesting – rollover or withdraw?

Posted on June 30, 2026

If you’re a Plan 1 or 2 member of a DRS-covered public retirement system and you leave employment before becoming vested, or eligible to receive a pension, you generally have four choices:

Option 1: Leave your contributions

If your account balance is more than $1,000, you can leave your contributions with DRS after separating from employment, even if you’re not vested. If you return to eligible public employment, your service credit continues to accumulate toward vesting.

This option often makes sense if you might return to Washington public employment, you’re relatively close to vesting, or you want to preserve service credit for potential retirement benefits.

Option 2: Withdraw your contributions

After separating from service, you can request a refund of your employee contributions, including their accumulated interest. Employer contributions remain in the pension trust fund.

If you do this, you forfeit any future pension rights, and you no longer have any service credit for vesting purposes.

Option 3: Roll the funds to another retirement account

Instead of taking a taxable cash payment, you can generally roll your refunded contributions and interest directly into an IRA or qualified employer retirement plan.

This approach provides some tax benefits, including: no immediate federal income tax withholding, no early withdrawal penalty, and your retirement savings remain tax-deferred.

If you take the money directly rather than rolling it over, we will withhold 20% federal income tax from tax-deferred contributions and interest. If you’re under age 59½, you may also owe an additional 10% IRS early withdrawal penalty when filing taxes.

Option 4: Partial rollover and partial cash withdrawal

You don’t have to choose one or the other. Members can rollover part of their balance and receive the remainder as a direct payment. The cash portion will be subject to the standard tax withholding, but the rolled-over portion will not.

Special note for Plan 3 members

If you’re a Plan 3 member, the situation is different because your investment account is separate from your pension benefit. You may be able to withdraw or rollover the investment account funds while still preserving future pension rights if you eventually become vested.