LEOFF Benefit Enhancements

An error was made in our system that caused LEOFF 1 duty disability members and their survivors to have taxes withheld on lump-sum payments for any amount over $20,000. We are working to quickly resolve this issue and expect all accounts to be corrected and refunded no later than January 31.

New benefit enhancements will increase LEOFF Plans 1 and 2 retirement benefits. Receiving these benefit enhancements will not stop your lifetime monthly pension benefit.

Retiring in 2023?

If you’re applying for retirement in 2023, you’ll need a new benefit estimate. Go to your online account and use the “Request/View Estimate” link to make your request.

LEOFF Benefit Enhancements Election form

This form only applies to LEOFF Plans 1 and 2 customers who received a letter from DRS to contact us about their payment election and their payment option. Don’t use this form if you want to receive your lump sum in the same way you’re currently receiving your monthly benefit, with a minimum 20% withheld for tax purposes.

Retirees: If you need to update your address information, please sign into your account.

DRS has mailed estimate letters to customers eligible for a new benefit enhancement in January 2023. Below is additional information clarifying when a benefit election form is required.

Do I need to complete a LEOFF Benefit Enhancements Election form?

It depends. You do not need to complete the form if you do not need or want to take any of the actions below.

If you were notified that you are eligible for either the tiered multiplier benefit enhancement or the lump-sum benefit enhancement, you are required to complete the LEOFF Benefit Enhancements Election form to make your choice. You must return the completed form, or you will not receive a benefit enhancement.

If you are eligible for ONLY the lump-sum benefit and do not have the tiered multiplier choice, complete the LEOFF Benefit Enhancements Election form for one of the following reasons:

LEOFF Plan 2 ONLY

• Your lump-sum benefit is $20,000 or more and you want to purchase a lump-sum annuity

LEOFF Plan 1 and Plan 2

• You want to roll over your lump-sum benefit
• You want to increase your tax withholding
• You need to change your direct deposit information (any new direct deposit information you provide will also apply to any ongoing pension payments)

If we don’t receive your completed election form by Jan. 5, 2023, you will receive your benefit enhancement funds the same way you are currently receiving your monthly benefit beginning Jan. 13, 2023.

Frequently Asked Questions

Benefit enhancements for LEOFF Plans 1 and 2

FAQ Updated Dec. 6, 2022 – Benefit Enhancements Effective January 2023

1 – If I receive the lump-sum benefit enhancement, will that replace and stop my monthly pension benefit?
No. The lump-sum benefit enhancement is a new benefit that is an addition to your monthly pension. Receiving the lump-sum benefit will have no impact on your monthly pension and you will continue to receive payment as you do today.

2 – I was active but not retired 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. If you retire between Feb. 1, 2021, and Oct. 1, 2022, DRS will mail you a benefit estimate at the end of October 2022, notifying you of your choices and steps required to receive your benefit enhancement.

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 180 service credit months at the time you retire.

Example: 180 x $100 = $18,000

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?
Because your earned service credit results in a lump-sum payment of $18,000, you will be paid the maximum allowable lump-sum benefit of $20,000.

6 – 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 at the end of October 2022.

7 – I am not retiring until after November 2022. When can I expect to receive my benefit enhancement?
Your initial benefit enhancement payment will be delayed until February to allow time for your response and for us to process your choice.

8 – What if I have submitted or plan to submit retirement paperwork for January 2023 or later? Will DRS provide me with an updated estimate that will include my benefit enhancement options?
Yes. Once DRS has completed system updates, we will contact customers who have applied for retirement to inform them of their benefit enhancement options and provide instructions about how to receive payment. Also after system updates, future retirees will be able to use their online accounts to estimate their future benefit enhancements.

9 – If a retiree receives a lump-sum benefit, will their survivor or beneficiaries, upon death, also receive an additional lump-sum benefit?
No. This is a one-time lump-sum benefit.

A beneficiary will only be owed a lump-sum benefit enhancement payment when the benefit has not already been paid to the LEOFF retiree or survivor.

10 – Can legal orders affect my benefit enhancement?
The answer to this question depends on the plan you participate in:

LEOFF Plan 2:

LEOFF Plan 2 rules exempt the lump-sum payment from the judicial processes and taxes under RCW 41.26.053, and your lump-sum benefit will not be affected by legal orders.

The tiered multiplier retirement allowance does not have this exemption and could be affected by a legal order. If DRS has or receives a court order awarding interest to your ex-spouse or domestic partner, they may see an increase in their entitlement after the tiered multiplier is applied to your retirement benefit. For more information, please visit the Life Events – Marriage or Divorce webpage.

LEOFF Plan 1:

LEOFF Plan 1 does not exempt the lump sum from judicial process and taxes under RCW 41.26.053. DRS could be required to award an interest or split this payment with your ex-spouse or domestic partner. For more information about how your lump-sum benefit could be affected by a legal order, please visit the Life Events – Marriage or Divorce webpage.

Legal orders filed with DRS before the enactment of the lump-sum benefit enhancement do not apply to the lump-sum benefit payment. Your benefit will be paid to you unless DRS receives a new court order that awards interest to your ex-spouse or domestic partner.

11 – How are the lump-sum benefits taxed?
The IRS requires a mandatory withholding of 20% for lump-sum payments. If you wish to withhold more than 20% from the lump-sum benefit, you may use the IRS form W-4R for non-periodic payments.

12 – I retired with a line-of duty disability. Will my lump-sum benefit have a mandatory withholding of 20%?
The answer to this question depends on the plan you participate in:

LEOFF Plan 2:

Yes. Although in this situation, only a portion of the lump-sum payment will require a mandatory withholding of 20%.

If you are retired or receiving benefits related to duty disability or death, your lump-sum benefit will be tax free up to the $20,000 minimum payment and any amount above the $20,000 will have taxes withheld.

LEOFF Plan 1:

No. In this situation the tax status for the lump-sum payments will be the same as the retiree’s pension payment. For example, if the monthly pension benefit of a retiree who retired for a catastrophic disability is tax free, the entire lump-sum payment will also be tax free.

13 – Can I roll over the lump-sum benefit?
Yes. In most cases you can roll over the lump-sum benefit. You must ensure the rollover institution you name will accept the funds. If the rollover institution rejects the payment, DRS will make a direct payment to you. Direct payments of rollover eligible funds are subject to a mandatory withholding of 20%.

If you are receiving a lump-sum benefit that is exempt from tax withholding because you are a LEOFF member with a line-of-duty disability or you are a designated beneficiary due to the LEOFF retiree’s death, you should work with a financial planner to ensure future distributions will not become taxable if you roll these funds over to another institution.

14 – Will the Deferred Compensation Program (DCP) accept a rollover of the lump-sum benefit?
In most cases, yes. You must currently participate in DCP and your lump-sum benefit must be taxable. If your lump-sum benefit payment is tax exempt due to line-of-duty disability or death, you cannot roll it over to DCP.

15 – 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.

16 – How is the tiered multiplier retirement allowance 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 after 15-25,
2% x years of service credit for years beyond 25 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.
Current formula:
2% x 23 years x $5,400 = $2,484
Future formula with the benefit multiplier applied:
2% x 15 years x $5,400 + 2.5% x 8 years x $5,400 = $2,700

If you’d like to see a rough estimate of your benefit, use one of the worksheets on this page.

17 – I am a LEOFF Plan 2 member who will have a choice between the lump-sum benefit and tiered multiplier retirement allowance. Which option will be the default if I do not make an election?
There is no default option for this choice. You must make a choice, or we will not be able to adjust your benefit.

Two laws enacted during the 2022 legislative session will change the way pension benefits are calculated for LEOFF Plan 1 and Plan 2 members. The differences between the benefit enhancements for each plan are shared below.

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 have a .5% increase added to their benefit for their service credit earned from 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.

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. 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. Benefit estimates and letters created just for those affected were mailed at the end of October 2022.

LEOFF 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.

Want to estimate your benefit now?

Download the worksheet that applies to your situation and use it to calculate your benefit. You can apply different scenarios based on the information you supply.

Before you select a worksheet: If you plan to retire after January 2023, and you’re eligible for a lump-sum or tiered multiplier benefit, please visit the DRS Administrative Factors webpage and select the most current factors to estimate your benefit.

LEOFF Plan 1 and 2 lump-sum calculation worksheet

Compare your current LEOFF Plan 2 benefit with the lump sum and multiplier options

LEOFF Plan 2 – Tiered multiplier calculation worksheet

LEOFF Plan 2 – Lump-sum annuity calculation worksheet

Important dates and information about your payment options

DRS mailed estimates to affected members, retirees, or beneficiaries at the end of October 2022, to provide benefit enhancements and distribution options. To ensure you receive payment in January 2023, it is important you review this information and respond if needed as soon as possible. We will do our best to ensure payments will be received by those who are entitled by Jan. 31, 2023. However, payment may be delayed for incomplete or incorrect paperwork.

Retiring on or after November 2022? DRS will reach out to you and provide your benefit enhancement options. Your initial benefit enhancement payment will be delayed until February to allow time for your response and for us to process your choices.

DRS anticipates that system updates to accommodate these benefit enhancements will be complete in January 2023. Future retirees will be able to estimate and apply for these retirement benefits in their online accounts beginning in February 2023. DRS forms and publications will also be updated.

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