LEOFF Benefit Enhancements
May 11, 2022
Two laws enacted during the 2022 legislative session will change the way pension benefits are calculated for Law Enforcement Officers’ and Fire Fighters’ (LEOFF) Plan 1 and Plan 2 members. The differences between the benefit enhancements for each plan are shared below, followed by a list of frequently asked questions.
LEOFF Plan 2: tiered multiplier retirement allowance or lump-sum benefit
Additional pension benefits will apply to LEOFF Plan 2 members, retirees or beneficiaries. Members who retired on or before Feb. 1, 2021, will be given a one-time lump-sum benefit equal to $100 per service credit month earned payable by Jan. 31, 2023.
Effective Jan. 16, 2023, members new to the system after Feb. 1, 2021, will receive a tiered benefit multiplier at retirement of 2.5% for service credit earned years 16 through 25. Qualified members who joined the plan on or before Feb. 1, 2021, will be provided an irrevocable choice at retirement between the tiered multiplier retirement allowance or the lump-sum benefit. They can choose a lump-sum option, or they can apply a 2.5% benefit multiplier to a specific portion of their calculation for their service credit earned from years 16 through 25 of their service.
Members who retire with a line-of-duty disability on or before Feb. 1, 2021, will receive a one-time lump-sum benefit equal to $100 per service credit month or $20,000, whichever is greater. If a LEOFF Plan 2 member dies after this law is effective but before the distribution of the lump-sum benefit takes place, the distribution will be made to their designated beneficiaries. Beneficiaries can use the one-time lump-sum funds to purchase an optional actuarially equivalent life annuity benefit through DRS. The percentage of the payout will be the same as the member designated on their account.
If the member dies before retirement, these pension benefits will also apply to the member’s designated beneficiaries.
DRS will contact affected members, retirees or beneficiaries this summer about their payment options and will update benefit estimate tools and retirement applications to reflect these changes.
Plan 1: Lump-sum benefit
LEOFF Plan 1 members will be eligible for a one-time lump-sum benefit equal to $100 per service credit month earned by the member. The benefit will be payable by Jan. 31, 2023. Those members who retire with a line-of-duty disability will receive a one-time lump-sum benefit equal to $100 per service credit month or $20,000, whichever is greater.
If a LEOFF Plan 1 member dies after this law is effective but before the distribution of the lump-sum benefit takes place, the distribution will be made to their designated beneficiaries.
DRS will contact affected members, retirees or beneficiaries later this summer regarding distribution options.
Frequently Asked Questions
Effective January 2023
1 – How is the tiered benefit multiplier different from multipliers used to calculate LEOFF Plan 2 benefits today?
The current formula is 2% x service credit years x Final Average Salary (FAS) = monthly benefit
In the future, the formula will be as follows for qualifying members:
2% x service credit years 1-15, 2.5% x years of service for years 16-25, 2% x 26 and beyond service credit years x FAS.
Formula comparison example:
Let’s say you work 23 years and the average of your highest months of income (FAS) is $5,400 per month.
2% x 23 years x $5400 = $2,484
Future formula with the benefit multiplier applied: 2% x 15 years x $5400 + 2.5% x 8 years x $5400 = $2700
2 – I was active in LEOFF Plan 2 before the bill passed and before Feb. 1, 2021. What additional pension benefits are available to me?
If you earned over 15 years of service credit, you will be eligible to make an irrevocable choice between the $100 per service credit lump-sum benefit or the tiered multiplier at the time you retire.
3 – I joined LEOFF Plan 2 after Feb. 1, 2021. What additional pension benefits will I be eligible for at retirement?
If you earn more than 15 years of service credit before you retire, you will receive a tiered multiplier retirement allowance.
4 – I retired before Feb. 1, 2021. What additional pension benefits are available to me?
You will receive the lump-sum benefit of $100 per service credit month that you have earned. The example below shows a lump-sum benefit calculation as if you had 240 service credit months at the time you retired.
Example: 240 x $100 = $24,000
5 – I retired with a line-of-duty disability with 180 service credit months before this legislation passed. What additional pension benefits are available to me?
In your case, the 180 service credit months you earned equals $18,000. Since the new law allows you to receive the greater of a one-time lump sum benefit equal to $100 per service credit or $20,000, you will earn $20,000.
6 – How are the lump-sum benefits taxed?
The tax status of the lump-sum payments will be the same as the retiree pension payment. For example, the lump-sum benefit of a retiree with a catastrophic disability retirement will have the same tax requirements as their monthly benefit payment. We will provide an IRS form W-4R for non-periodic payments if you wish to change your withholding for this lump-sum benefit.
7 – If a retiree receives a lump-sum benefit, will their beneficiaries also receive one upon their death?
No. This is a one-time benefit payable only once to the retiree. Beneficiaries will only receive this benefit if a member dies before retirement.
8 – I am a LEOFF Plan 2 retiree who retired on or before Feb. 1, 2021. What new benefits am I eligible for?
You will be eligible for a lump-sum benefit. We will provide you with an estimate and a lump-sum benefit distribution form.
9 – I am a LEOFF Plan 2 retiree who retired after Feb. 1, 2021. Will you need to recalculate my benefits to determine which option is best for me?
You will have a choice between a tiered benefit multiplier and a lump-sum benefit. We will provide a benefit estimate showing your new benefit if you choose the tiered multiplier and the amount you would be entitled to if you choose the lump sum. Once the new enhancements are available and you have made your irrevocable choice, we will recalculate your benefits.
10 – Can a LEOFF Plan 1 retiree or beneficiary purchase an annuity with the lump-sum benefit?
No. The funds provided through these enhancements do not qualify for a DRS annuity purchase.