PERS Plan 3

Public Employees’ Retirement System (PERS) Plan 3 is a 401(a) plan with two parts: pension and investment. Your employer contributes to your pension, and you contribute to the investment account. When you meet plan requirements and retire, you are guaranteed a monthly benefit for the rest of your life from the employer-funded pension. With the investment part, you choose when to begin withdrawing funds, which can be any time after you separate employment.

You contribute between 5% and 15% of your wages to your investment account. You select this percentage when you begin employment.

See a live or recorded Plan 3 webinar.

How much will your pension retirement be?

Estimate your retirement benefit in minutes using the personalized Benefit Estimator in your online account. Your total pension amount is based on your years of service and your income. See more about how we calculate your benefit.

How to estimate your benefit

  1. From the DRS homepage, select the Member Login button in the top right.
  2. Log in to your online account.
  3. In the menu bar, select your plan name – such as PERS 2. This will open a dropdown menu.
  4. Select Benefit Estimator.
  5. Read how to use the estimator and select Accept & Continue.
  6. For first-time users, we recommend using the four-step process. This helps you learn how your benefit is calculated.  

You can use this tool at any point in your career. You can create an estimate using different factors as many times as you like. This calculator will allow you to see a private preview of what your monthly retirement income might look like. 

Years of service

Your service credit is the number of years you work in public service. You receive one service credit each calendar month in which you are compensated for 90 or more hours of work. You can earn no more than one month of service credit each calendar month, even if more than one employer is reporting hours you work. You receive one-half of a service credit if you work fewer than 90 hours but at least 70 hours in a calendar month. You receive one-quarter of a service credit if you are compensated for fewer than 70 hours in a calendar month. Review your service credit detail through your online account.

Your income

The Average Final Compensation, or AFC is the average of your 60 consecutive highest earning months in your career. This could be at the beginning, middle or end of your career. DRS uses your AFC income information to calculate your pension amount. For high income public employees, federal law limits the amount you can contribute toward retirement and limits the benefit calculation. See IRS limits.

PERS Plan 3 pension formula

1% x service credit years x Average Final Compensation = monthly benefit

Example:

Let’s say you work 23 years and the average of your highest 60 months of income (AFC) is $5,400 per month.

1% x 23 years x $5,400 = $1,242

When you retire, you’d receive $1,242 per month in pension income. Remember, your investment income is calculated separately

How much will your investment retirement be?

The total amount available from your investment account in retirement will depend on a few things.

  • The income percentage you chose (or defaulted into) when you selected the plan
  • Your income and years of contributions
  • Investment selection and performance

Get a complete picture of your projected retirement income through your investment account. Here you can add your Plan 3 pension and investment income, social security, and any additional retirement savings such as DCP.

When can you retire?

Now that we’ve discussed how much money you can get in retirement, let’s talk about when you can retire. You are eligible for a pension retirement when you are vested, which happens when you have achieved one of the following:

  • 10 service credit years
  • Five years of service credit with at least 12 months earned after age 44
  • Five service credit years earned in PERS Plan 2 before June 1, 2003

Full retirement

Full retirement is the earliest age you can retire without any reduction to your retirement benefit. PERS Plan 3 members are eligible to retire at age 65 if they are vested.

Early retirement

You can withdraw from your investment account at any time after separating employment. For your employer-funded pension plan, specific rules apply for when you can retire. You can retire as early as age 55 with a reduced benefit if you have at least 10 service credit years.

See a live or recorded early retirement webinar.

Considering delaying your retirement? This short delayed retirement video offers some tips and information.

How do you retire?

Plan 3 member, you have two money sources to use toward retirement – an employer funded pension, and an investment account you fund. You must meet service requirements to be eligible for the employer-funded pension. But once you meet those, you are guaranteed a lifetime pension income.

Pension

Plan 3 investment withdrawals

When do you get paid?

Pension payments

Your pension money will be deposited into your bank account on the last business day of the month, every month, for the rest of your life. The retirement application has a section for your bank information so your funds will be deposited. Once you’ve retired, you can make any updates to your direct deposit through your online account.

Investment withdrawals

The time it takes to begin receiving your investment withdrawals depends on two things:

  1. Do you have contributions in the WSIB TAP fund?
  2. Has your employer reported your separation to DRS?

See live or recorded retirement planning webinars.

How can you increase your pension amount?

You can increase your pension benefit by increasing your years of service or your income. But when it comes to total retirement income, you have more options.

DCP savings program

The Deferred Compensation Program or DCP is a voluntary savings program you can use to increase your retirement savings. DCP uses many of the same investment options available to Plan 3 members, including investments that are managed for you. With DCP, you control your contribution amount so your savings can grow with you. Saving an additional $100 a month now could mean an extra $100,000 in retirement!

(Example based on 6% annual rate of return over 30 years of contributions.) More about DCP.

Plan 3 benefit indexing

Benefit indexing is a form of pension inflation protection you may automatically qualify for when you separate from service. Eligibility for benefit indexing requires you to:

  • Be in Plan 3
  • Have at least 20 service credit years before you stop working
  • Separate before reaching normal retirement and delay receiving your pension benefit

For every month you delay collecting your pension, your benefit amount will be increased by 0.25% (or 3% annually). Benefit indexing stops once you retire or reach your normal retirement age. Once you retire, you’ll instead be eligible to receive an annual maximum 3% COLA.

Annuity options

What is an annuity?

Annuities are lifetime income plans you purchase.

When it’s time to retire, you have some additional options—options that can change your finite savings into a monthly, lifetime income called an annuity. An annuity is a guaranteed income plan you purchase. The monthly payments you receive are based on the dollar amount you choose to purchase. The annuity will provide monthly payments for your lifetime. The annuities DRS offers are administered by Washington state with investments provided by the Washington State Investment Board.

Is an annuity right for me?

Annuities can provide guaranteed income for your life. And they offer security through a set monthly income which can increase annually if you are eligible for a Cost-of-Living Adjustment (COLA). However, flexibility is not a feature of annuities. Once you set it up, an annuity doesn’t allow you to change the income amount. Once you begin receiving monthly payments, you cannot cancel the annuity.

With annuities, you take money out of market risk and use it to give yourself a monthly lifetime income. Annuities are the only investment withdrawal option that guarantee you will not outlive your account balance.

How do annuities affect my taxes?

Each year you’ll receive a statement that shows the taxable amount of your annuity. DRS is required to withhold a certain amount of federal taxes. If you would like more tax withheld, complete a W-4P form. Without a W-4P, the tax withholding will follow IRS guidelines, using a filing status of single with no adjustments.

For more information about taxes, review IRS Publication 575. You might want to consult a tax advisor when considering purchasing an annuity. DRS and the record keeper are not authorized to give tax advice.

Considering an annuity?

If you are considering purchasing an annuity offered through your plan, be sure to let us know when you request your official retirement estimate. This will allow us to include an annuity estimate along with your retirement estimate.

PERS Plan annuity

This annuity is available to all PERS, SERS and PSERS retirement plan members. With this annuity, your survivor will be the same as the one you selected for your pension payment. You can use your DCP savings to purchase this annuity in addition to other approved funding sources. If you return to work, this annuity continues.

Purchase service credit

Purchasing additional service credit increases your monthly retirement benefit for the rest of your life. You can purchase between one and 60 months of service credit in whole months. Purchasing service credit will increase your monthly benefit, but it will not increase the years of service posted on your account. The increase to your benefit is calculated using the same formula as your retirement benefit. This additional service credit is available at the time of your retirement only. Also, you cannot use the additional credit to qualify for retirement (it won’t increase your years of service).

Plan 3 TAP Annuity

Plan 3 members can use their plan contributions to purchase the Total Allocation Portfolio (TAP) Annuity. With the TAP Annuity, you are not limited to the survivor options you chose for your pension retirement. You can choose another survivor. You can also purchase the TAP Annuity any time after you separate from DRS-covered employment.

It can take 45 to 90 days to receive your first TAP Annuity payment. See the payment section below for a timeline of the purchase process. For information about the status of your annuity purchase, contact the DRS record keeper.

See a live or recorded annuity option webinar.

Investments

Plan 3 customers have investment accounts you fund with a percentage of your income. 

We offer two types of funds: One-step or build and monitor. All funds are managed by the Washington State Investment Board.

One-step: These investments are automatically adjusted for you based on your age. The One-Step Investing approach includes Retirement Strategy Funds, also called age-based or target date funds. Because most customers choose one-step investing, this is also the default investment type for customers who do not select investments.  

Plan 3 also includes a fund called the WSIB TAP or Total Allocation Portfolio. This is also a one-step investment program. However, this fund is not adjusted based on your age, but is managed in the same way the state pension fund is invested. If you select this option, all your new contributions will be invested in this fund.

Build and monitor: This is the DIY approach to investing where you choose from a selection of investments and create your own mix from a list of funds.

Life events that can affect your pension

More about PERS Plan 3

PERS 3 resources

Retirement terms glossary

Live webinars

Retirement planning seminars

Contact DRS

New employees

Account access help

Retired members

COLA information

Retirement checklist

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