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School Employees’
W A S H I N G T O N S TAT EDepartment of Retirement Systems
SERS Plan 2 HandbookS c h o o l E m p l o y e e s ’ R e t i r e m e n t S y s t e m
January 2020
School Employees’ Retirement System (SERS) — Plan 2
Welcome to SERS 2 SERS Plan 2 summary 3 How to contact the Department of Retirement Systems 3 Privacy of your information 4 How your plan works 6 Planning for retirement
Milestones/ life changes
7 Becoming vested 7 Option to transfer to SERS Plan 3 8 Leaving public service 8 Returning to public service 8 Marriage or divorce 9 If the unexpected happens
Approaching retirement
10 Retirement planning checkup10 Service retirement 11 Early retirement 11 Retiring as a dual member 12 Estimatingyourbenefit 12 Annuity options
Ready to retire 12 Applying for retirement online 13 Applying for retirement on paper 13 Yourbenefitoptions 13 Health insurance coverage 13 Federalbenefitlimit 14 Federaltaxonyourmonthlybenefit 14 Legal actions 14 Whenandhowyourbenefitwillbepaid
Once you retire 15 Cost-of-Living Adjustment (COLA) 15 Working after retirement 15 Benefitoverpaymentsorunderpayments 15 Changingabenefitoptionorsurvivorafteryouretire
16 Glossary of terms17 Index
School Employees’
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SERS Plan 2 summary
SERS Plan 2 is a defined benefit plan.When you meet plan requirements and retire, you are guaranteed a monthly benefitfortherestofyourlife.
Your monthly benefit will be based on your earned service credit and compensation while a member of SERS Plan 2. This formula will be used to calculate yourmonthlybenefit:
2% x service credit years x Average Final Compensation = monthly benefit
You and your employer each contribute a percentage of your salary or wages to help fund the plan. The Pension Funding Council adopts contribution rates and periodically adjuststhemtoreflecttheoverallcostoftheplan.TheLegislaturehasthefinaldecisiononcontributionrates.
You are vested in the plan when you have five years of service credit. Once you are vested, you have earned therighttoafuturemonthlybenefit.Ifyou leave your job and withdraw your contributions, however, you give up yourrighttoabenefit.
You are eligible to retire with a full benefit at age 65 if you have at least five years of service credit. Retirement before 65 is considered an early retirement.Ifyouhaveatleast20 years of service credit and are 55 or older, you can choose to retire early, butyourbenefitmightbereduced.There is less of a reduction if you have 30ormoreyearsofservicecredit.
If the unexpected happens — disability or death before retirement — a benefit might be available. If you become totally incapacitated and leave your job as a result, you might be eligible for a disability retirement benefit.
If you die before you retire, your spouse, registered domestic partner or minor child, if applicable, could be eligibletoreceiveabenefitbasedonyour years of service credit.
Log in to or sign up for online access to your retirement account. Track your contributions and servicecredit.Readthelatestnewsletter.Updateyourbeneficiary informationoremailaddress.Useyour individual data to estimate your monthlybenefit.Andwhenyou’reready,applyforretirement.Youcangetstarted at drs.wa.gov/oaadrs.wa.gov/oaa.
Welcome to the School Employees’ Retirement System
How to contact the Department of Retirement SystemsThe Washington State Department of Retirement Systems (DRS) administers the SchoolEmployees’RetirementSystemandtheDeferredCompensationProgram(DCP).
Privacy of your informationWe are committed to protecting the privacy of your personal account information, including your Social Security number, which we use to track your account and submitrequiredreportstotheIRS.Wewillnotdiscloseyourinformationtoanyoneunlesswearerequiredtodosobylaw.IfyouhaveinsurancecoveragethroughtheWashington State Health Care AuthorityWashington State Health Care Authority (PEBB or SEBB for example), we could share yourinformationwithHCAtobetterserveyou.
Handbook summaryThishandbookisnotacompletedescriptionofyourretirementbenefitunderPlan2oftheSchoolEmployees’RetirementSystem.Stateretirementlawsgovernyourbenefit.Ifanyconflictsexistbetweentheinformationshowninthishandbookandwhatiscontainedincurrentlaw,thelawgoverns.
GlossaryTerms highlighted in bold print appear in the glossary of terms on page16.
To contact DRS
To contact DCP
Write Email
Website
Call
HoursVisithttp://www.drs.wa.gov/administration/map.htmhttp://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm http://www.drs.wa.gov/administration/map.htm
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http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm http://www.drs.wa.gov/administration/contact.htm
360.664.7000800.547.6657TTY 711
Department of Retirement SystemsPO Box 48380Olympia, WA 98504
General inquiries:[email protected]
Send a secure message through your online account: drs.wa.gov/oaa
drs.wa.gov
You can also send email through the Contact Us page on the DRS website.
Monday - Friday8 am to 5 pmPacific Time
6835 Capitol Blvd. SETumwater, WA 98501
See the DRS website for directions.
WebsiteEmailCall
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]
http://www.drs.wa.gov/savewithwahttp://www.drs.wa.gov/savewithwa http://www.drs.wa.gov/savewithwa http://www.drs.wa.gov/savewithwa
888.327.5596TTY 711Fax 866.745.5766
drs.wa.gov/savewithwa
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How your plan worksOverviewSERS Plan 2 is a 401(a) defined benefitplan.When you retire, you will receive a monthly benefitfortherestofyourlifethatisbasedonyour earned service credit and your Average Final Compensation(AFC).Eventhoughthecontributions you make help to fund the plan overall, they don’t factor into the monthly benefityoureceive.
Membership in SERS Plan 2In general, you are automatically a member of SERS if you are hired into an eligible position.ASERS-eligiblepositionisnormallycompensated for at least 70 hours of work per monthforatleastfivemonthsofeachyearand the employer is a Washington state public schooldistrictoreducationalservicedistrict.
EnrollmentinyourspecificSERSplan(Plan2or Plan 3) depends on additional conditions, including your hire date and the plan you choseatthetimeyoufirstwenttoworkforaDRS-covered employer
Some employees might satisfy the basic membership criteria but be ineligible for other reasons.Ifoneofthefollowingappliestoyou,please contact us to determine whether you areeligibleforSERS:
• You are a member of, or have retired from, another public retirement system in Washingtonstate.
• You work for a college or university and belongtothatentity’sretirementplan.
• You signed a student waiver while employedbyacollegeoruniversity.
• You provide professional services on a fee, retainer or contract basis and the income you receive from those services is less than 50% of gross income for work performedinthatprofession.
• You work for the city of Seattle, Spokane or Tacoma, or you are an elected or appointedofficialofoneofthesecities.
• You are enrolled in a state-approved apprenticeship program, employed to earn hours for completing the program, and are making contributions to a union-sponsored or Taft-Hartley retirement plan.
If you are a classified substitute, your membershipinSERSisoptional.Formoreinformation, read the SERS Plans 2 & 3 SERS Plans 2 & 3 ClassifiedSubstitute’sGuideClassifiedSubstitute’sGuide.
Membership in SERS might be optional for someelectedorappointedofficials;employeesoftheLegislature;citymanagers;andchiefadministrativeofficersofcity,county,portandpublicutilitydistricts.Ifyouthinkyoumightfall into this category, consider visiting the DRS ElectedorGovernor-AppointedOfficialElectedorGovernor-AppointedOfficial webpage.
Previous membership in another Washington state public service retirement systemMembership in another of Washington’s public service retirement systems (including the city retirement systems of Seattle, Tacoma and Spokane)canaffectyour:
• Eligibility for SERS Plan 2 membership • Eligibility to retire • Benefitcalculation
If you have ever been a member in another of Washington’s retirement plans, it is important thatyoucontactustoconfirmyoureligibilityanddiscussyourretirementoptions.
If you have earned service credit in another of the state’s public retirement systems, you may be able to combine your SERS service credit withcredityouearnedintheothersystem(s).For more information, read the What Is Dual What Is Dual Membership and How Does It Affect Me?Membership and How Does It Affect Me? publication.
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Contributing to the planYou are required to contribute a percentage of yoursalaryorwagestoyourretirementplan.This includes overtime and tax-deferred wages, but it doesn’t include severance pay or cash paymentsforunusedsickorvacationleave.
If you have questions about the compensation your employer reports for you, please contact youremployer.
Your employer’s contributions are also based onapercentageofyoursalaryorwages.They aren’t matching funds, and you cannot withdrawthemifyouleavepublicservice.
Whenyouretire,themonthlybenefityoureceive will have been funded over time by your contributions, your employer’s contributionsandinvestmentearnings.ThePension Funding CouncilPension Funding Council adopts contribution ratesandperiodicallyadjuststhemtoreflecttheoverallcostoftheplan.TheLegislaturehasthefinaldecisiononcontributionrates.
Federal law limits the amount of compensation you can pay retirement system contributions onandthatcanbeusedinyourbenefitcalculation.Theamountcanbeadjustedeachyear (see the current IRS limitIRS limit).Ifyoureachthe limit in any calendar year, you don’t pay contributions for the remainder of the year and any salary earned over that amount isn’t used inyourpensioncalculation.
Earning service creditService credit is based on the number of hours you work, which your employer reports toDRS.Whenyouretire,yourservicecreditisapartofyourmonthlybenefitcalculation.
No more than one month of service credit can be earned each calendar month, even if more than one employer is reporting hours you work.
Review the following chart to determine how muchservicecredityouearn:
Earning service creditHours worked Amount of service creditYou work 810 hours or more, beginning work inSeptember and working at least nine months of theschoolyear.
You earn 12 service credit monthsperschoolyear.*
You work 630-809 hours, beginning work inSeptember and working at least nine months of theschoolyear.
You earn six service credit months(0.5servicecreditfor each month) per school year.*
You work at least 630 hours, workingatleastfivemonthswithin a six-month period duringtheschoolyear.
You earn six service credit months per school year, beginning with the 2008/2009schoolyear.*
Your work situation isn’t coveredabove.
Youearn:• One service credit for
each month you work 90 or more hours
• 0.5servicecreditforeach month you work at least 70 but fewer than 90 hours
• 0.25servicecreditforeach month you work fewer than 70 but more thanzerohours.
*AschoolyearspansSept.1throughAug.31.
Claiming credit for substitute teachingIf you work as a classified substitute, your employer reports your hours and earnings to DRS.However,contributionsaren’tdeductedfromyourpaycheck.Ifyoumeeteligibilityrequirements and would like to receive credit for your service, you must enroll with DRS afterAug.31ofeachschoolyearandpaytheappropriatecontributions.
See SERSPlans2&3ClassifiedSubstitute’sSERSPlans2&3ClassifiedSubstitute’sGuideGuide.
Designating your beneficiaryThe beneficiary information you give DRS tells us the person(s) you want to receive your remainingbenefit,ifany,afteryourdeath.Youcansubmitorupdateyourbeneficiaryinformation at any time before retirement in your online retirement accountonline retirement account.
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Signupfororlogintoyouraccount.Thenselect My Account > View/Edit (beside Beneficiary).Youhavetheoptionofsubmittinga paper BeneficiaryDesignationBeneficiaryDesignation form instead, if youprefer.
If you don’t submit this information, any benefitsduewillbepaidtoyoursurvivingspouseorminorchild.Ifyoudon’thaveasurviving spouse or minor child, we will pay yourestate.
Besuretoreviewyourbeneficiarydesignationperiodically and update it in your online retirement account if you need to make a change.Ifyoumarry,divorceorhaveanothersignificantchangeinyourlife,besuretoupdateyourbeneficiarydesignationbecausethese life events might invalidate your previous choices.
State-registered domestic partners, according toRCW26.60.010,havethesamesurvivor and deathbenefitsasmarriedspouses.ContacttheSecretaryofState’sOfficeSecretaryofState’sOffice if you have questions aboutdomesticpartnerships.
When you will be vestedOnceyouhaveatleastfiveyearsofservice credit in SERS, you have a vested right to a retirementbenefit.
If you leave SERS employment before you’re eligible to retire, you can choose to either leave your contributions in the plan, where they will continue to earn interest, or you can withdraw yourcontributions.
If you decide to withdraw your contributions, you give up your right to a future SERS retirementbenefit.See“Returningtopublicservice”onpage8tofindoutmoreaboutre-establishingyourbenefitrightsincertaincircumstances.
When you will be eligible to retireYou are eligible to retire at age 65 if you have atleastfiveyearsofservice credit.
Options to retire earlier are available (see “Earlyretirement”onpage11),butyour
benefitwillbereducedtoreflectthatyou will be receiving it over a longer period of time.
• HiredonorbeforeApril30,2013:Toretire early, you must be at least 55 and have20ormoreyearsofservicecredit.Thereislessofabenefitreductionforearly retirement if you have 30 or more yearsofservicecredit.
• HiredonorafterMay1,2013:Toretireearly, you must be at least 55 and have 20 ormoreyearsofservicecredit.Ifyouareat least age 55 with 30 or more years of servicecredit,yourbenefitreductionwillbe 5% for each year (prorated monthly) beforeyouturnage65.
How your monthly benefit will be calculatedYourbenefitisdeterminedbyyourservice credityearsandcompensation.Whenyouretire, this formula will be used to calculate yourbenefit:
2% x service credit years x AFC = monthlybenefit
Average Final Compensation (AFC) is the average of your 60 consecutive highest paid servicecreditmonths.Anyseverancepayorlump sum payment for unused sick leave or vacation/annualleaveisnotincluded.
Example Usingtheformula
If you retire at age 65 with 32 years of service credit and a monthly Average Final Compensation of $5,000, your monthly benefitis$3,200,calculatedasfollows:
2% x 32 x $5,000 = $3,200
Planning for retirementEven though retirement might seem far away, planning for it now is one of the best things youcandoforyourselfandyourfamily.Yourmonthlybenefitwillbeanimportantpartof your income in retirement, but it is just a portionofwhatyouwillneed.
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How do you begin developing your personal plan for retirement? First, estimate how much moneyyouwillneed.Thatcanvarybasedonfactorsthatinclude:
• The lifestyle you’ll want to lead when you retire
• Your health • Whether you’ll carry any debt into
retirement • Your life expectancy
Next, estimate how much money you will receive from all sources, such as Social Security, personal savings and other employer pension plans.Whenyoucomparethisnumberwithwhat you think you will need, you can adjust yoursavingsplanaccordingly.
Manytoolscanhelpyouwithyourplanning.Here are some on the DRS websiteDRS website:
• Live webinarsLive webinars are available to attend online.TopicsincludePlan2,Plan3,plan choice, the Deferred Compensation Program (DCP), distributions from Plan 3, investment basics and Social Security basics.
• Retirement seminars are available to attendinperson.Youcanalsowatchseminars when it’s convenient for you on the DRS Retirement SeminarsRetirement Seminarswebpage.Topics include Plan 1, Plan 2, Plan 3, DCP, Social Security and health care options, andtheVoluntaryEmployees’BeneficiaryAssociation(VEBA).
• Thebenefitestimatorwithinyouronline online accountaccount can calculate your monthly benefitbasedonavarietyofscenarios(for example, different retirement dates) usingyouractualaccountdata.Ifyouhaven’t already registered for this service, ittakesjustafewminutestodoso.
• The Deferred Compensation ProgramDeferred Compensation Program (DCP) is a special type of savings program that helps you invest for the retirement lifestyleyouwanttoachieve.Unliketraditional savings accounts, DCP is tax-deferred.Thatmeansitlowersyourtaxable income while you are working and it delays payments of income on your investments until you withdraw your funds.Contributionsareautomatically
deducted from your paycheck, so saving iseasy.Youcanstartwithaslittleas$30permonth.Youcanalsoletyourcontributions grow with percentage deductions.
Be sure to revisit your plan periodically and adjust for any changes in your professional and personallife.
Milestones/life changes
Becoming vestedWhenyouhaveatleastfiveyearsofservice credit in SERS Plan 2, you have a vested right toaretirementbenefit.Thisisasignificantmilestoneinyourpublicservicecareer.
Option to transfer to SERS Plan 3If you became a member of SERS Plan 2 before Plan 3 began (that is, July 31, 2009), you have an opportunity each January, while you are employed,totransfertoPlan3.Plan3hastwo parts — a defined benefit and a defined contribution—andisreferredtoasa“hybridplan.”
If you decide to transfer, your Plan 2 contributions plus any interest they have earnedwillbemovedtoaPlan3definedcontributionaccount.IfyoutransfertoPlan3,youcannotreturntoPlan2.
Making a retirement plan choice is an individualdecision.Yourdecisionshouldbebasedonyourpersonalsituation.Formoreinformation, visit the Plan Choice sectionPlan Choice section or see the Plan 3 websitePlan 3 website.
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Leaving public serviceIf you leave SERS employment, you can choose to either leave your contributions in the plan until you’re eligible to retire or withdraw them.TheIRSrequiresthatyoubegintakingpaymentofyourmonthlybenefitnolaterthanage70½,unlessyouarestillemployed.
Leaving SERS-covered employment is the only circumstance in which you can withdraw your contributions.DoingsocancelsanyrightsandbenefityouhaveaccruedinSERS.Youcanrestore your contributions and re-establish yourbenefitonlyincertaincircumstances(seethenextsection).
There are tax implications to withdrawing your contributions, so you might want to contact the IRS or a tax advisor before making adecision.TheWithdrawal of Retirement Withdrawal of Retirement ContributionsContributions publication offers more detailed information.
Be sure to keep us up to date on any changes to your name, address or beneficiary.It’simportant that you keep your beneficiarydesignation current, because a divorce, marriage or other circumstance might invalidateit.
Returning to public serviceIf you leave your position, withdraw your contributions and later return to SERS work, you might be able to restore your previous service credit.Todoso,youmustrepaythetotal amount of the contributions you withdrew plusinterestwithinfiveyearsofreturningtowork or before you retire, whichever comes first.Contactustofindoutthatamount.
A dual member, or someone who belongs to more than one retirement system, might be able to restore service credit earned in a retirementsystemotherthanSERS.Eachtimeyou become a dual member, you’ll have 24 months to restore service credit earned in a previousretirementsystem.
It might still be possible to purchase service creditafterthedeadlinehaspassed.However,thecostinthatcaseisconsiderablyhigher.
Toexplorefinancialprojectionsandcomparisons of your estimated retirement benefits,tryusingPlan Choice CalculatorPlan Choice Calculator.Findout more at Plan 2 Recovery of Withdrawn or Plan 2 Recovery of Withdrawn or Optional Service Credit for PERS, SERS, TRS, Optional Service Credit for PERS, SERS, TRS, PSERSandLEOFF.PSERSandLEOFF.Youmightfindhelpfulinformation in What Is Dual Membership and What Is Dual Membership and How Does It Affect Me?How Does It Affect Me?aswell.
Marriage or divorceMarrying, divorcing or separating can affect yourmonthlybenefit.
Court-ordered property divisionA court-ordered property division could affect yourbenefit.Aslongastheordercomplieswith applicable laws, we will pay a monthly benefittoyourex-spouseaccordingtothedivision.TheDRSpublicationHow Can How Can a Property Division Affect My Retirement a Property Division Affect My Retirement Account?Account?containsdetailedinformation.
Updating your beneficiaryThe beneficiary information you give DRS tells us the person(s) you want to receive your remainingbenefit,ifany,afteryourdeath.Youcansubmitorupdateyourbeneficiaryinformation at any time before retirement in your online retirement accountonline retirement account.Signupfororlogintoyouraccount.ThenselectMy Account > View/Edit (beside Beneficiary).You have the option of submitting a paper BeneficiaryDesignationBeneficiaryDesignation form instead, if you prefer.
If you marry or divorce before you retire, you needtoupdateyourbeneficiaryinformation,evenifyourbeneficiaryremainsthesame.It’sveryimportantthatyoukeepyourbeneficiarydesignationuptodate.
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If the unexpected happensTemporary leave from your jobYou might need to take a temporary leave fromyourjobbecauseof:
• Military service • An authorized leave of absence • A temporary disability
If so, you might be able to obtain service credit forworktimemissedwhileyouwereonleave.
Service credit for military serviceIf you left your position for uniformed military service, you might be eligible to receive service creditforthatperiodofmilitaryservice.Toqualify,youmust:
• Apply for a position with the same SERS employer within 90 days of receiving an honorable discharge
• Paythecontributionswithinfiveyearsof returning to employment or before youretire,whichevercomesfirst;contributions might not be required if your military service occurred during certain periods of war and you earned a campaign medal
If you become totally incapacitated as a result ofservingintheUnitedStatesmilitary,you(oryour surviving spouse or children, in the case of your death) can apply for military service creditwithoutyourreturntoemployment.Read Military Service CreditMilitary Service Credit for more information.
Service credit for an unpaid, authorized leave of absenceYou could be able to earn up to two years of service credit for an authorized unpaid leave of absence.Todoso,youmust:
• Return to work in a SERS-covered position
• Pay your contributions with interest as well as your employer’s contributions with interest for the period of time you were on leave
Youmustcompletepaymentwithinfiveyearsof returning to employment or before you retire,whichevercomesfirst.Findoutmore
at Recovery of Withdrawn or Optional Service Recovery of Withdrawn or Optional Service Credit for PERS, SERS, TRS, PSERS and LEOFFCredit for PERS, SERS, TRS, PSERS and LEOFF.
Disability before retirementIn some cases, you can obtain service credit for work time missed while you were on leave foratemporarydisability.Ifyoubecometotallyincapacitated and leave your job as a result, you might be eligible for a disability retirement benefit.Tofindoutmore,readPERS/SERS/TRSPERS/SERS/TRSPlans 2 and 3Plans 2 and 3DisabilityBenefitsorcallusforinformation.
Death before retirementIf you have fewer than 10 years of service credit at the time of your death, your accumulated contributions plus interest will be paid to your beneficiary.
If you have 10 or more years of service credit at the time of your death, your spouse (or the guardian of your minor children, if you aren’t married) can choose to receive either a lump sum payment of your contributions plus interestoramonthlybenefit.Ifyoudon’thavea surviving spouse or minor children, your contributions plus interest will be paid to your beneficiaryorestate.
Themonthlybenefitwillbecalculatedasifyouhadretiredandchosena100%survivorbenefit(seeOption2onpage12inthe“Readytoretire”sectionofthishandbook).
If your surviving spouse dies while receiving thebenefit,yourminorchildrenwillreceivethebenefitthatwasbeingpaidtoyoursurvivingspouse.Thebenefitwillbedividedequallyamong the children, and each will receive their portionuntiltheyturn18.
Death as a result of an injury or occupational disease sustained during employmentIf the Department of Labor & IndustriesDepartment of Labor & Industries determines that your death was the result of injuries sustained during the course of employment or an occupational disease or infection that arose from your employment, your beneficiary will be entitled to a one-time, duty-relateddeathbenefit.
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Using sick leave to qualify for retirement You may use up to 45 days of unused sick leavetohelpyouqualifyforretirement.Sickleave not cashed out by your employer may be converted into a maximum of two months of servicecredit.However,thisservicecreditisn’tusedinthecalculationofyourbenefit.Itcanonlybeusedtoqualifyforretirement.
Approaching retirementRetirement planning checkupConsider taking time to check in on your retirementplanning.Haveyouanalyzedhowmuch you will need and how much you will have in retirement? Has anything in your plan changed? Have you joined the state’s Deferred Compensation Program (DCP) or another supplemental savings program?
Thingstoconsider: • Identifyyourretirementlifestylegoals.
Will you want to travel the world or stay close to home? Different lifestyle choices canmeandifferentfinancialgoals.
• Takecareofyourhealth.Thecostofmedical care can be one of the largest expensesyouincurinretirement.Gettingregular checkups now and maintaining a healthy lifestyle can have an impact on whatthosecostswillbewhenyouretire.
• Paydowndebt.Debtlessensthemoneyyouhaveavailabletosave.Payingoffdebt while you’re still generating a paycheck will affect how much you have tosaveandgiveyougreaterflexibilityinretirement.
• Sign up for DCP or another similar savingsvehicle.(It’snevertoolatetogetstarted.)Ifyou’realreadysavingwithDCP or another plan, consider increasing yourcontributionamount.Makingevenasmall increase can make a big difference overthelongrun.Usethecalculatorcalculator
on the DCP website to see the impact different contribution amounts could have.Here’sanimportanttip:Ifyou’reage 50 or older, the IRS allows a higher contribution limit, which enables you to save even more in your DCP account if youchoose.
These questions are key as you approach retirement:
• How much income will you need in retirement?
• Whatwillyourmonthlybenefitbe? • Howwillyourbenefitchangeifyouwork
past age 65 or you decide to retire early? • Willyouwanttoincreaseyourbenefitby
purchasing additional service credit? • What other income will you have
available to you in retirement?
Thissectioncanhelpyoufindtheanswers.If you haven’t already signed up for an online accountonline account,considerdoingso.Withthisaccount,youcancalculateyourbenefitusingdifferent scenarios and your individual account information.
Service retirementYou are eligible to retire when you are age 65 andhaveatleastfiveservice credityears.Thisformula will be used to calculate your monthly benefit:
2% x service credit years x AFC = monthlybenefit
AFC is the average of your 60 consecutive highestpaidservicecreditmonths.Anyseverance pay or lump sum payment for unusedsickleaveorvacation/annualleaveisnotincluded.
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Example Service retirement
If you retire at age 65 with 20 years of service credit and a monthly Average Final Compensation of $3,700, your monthly benefitis$1,480eachmonth,calculatedasfollows:
2% x 20 x $3,700 = $1,480
Ifyourmonthlybenefitislessthan$50,youcan choose to take a lump sum retirement benefit.(It’slikelythatonlyamemberwhoretires early on disability or as a dual member wouldreceivethistypeofpayment.)Ifyou receive a lump sum payment, you are consideredretiredfromSERS.
Early retirementAny retirement before age 65 is an early retirement.Ifyouretireearly,yourbenefitwillbereducedtoreflectthatyouwillbereceivingitoveralongerperiodoftime.Yourbenefitdepends on how much service credit you have earned, your age and the Early Retirement Factors(ERFs)applied.
Early Retirement Factors
Retirement age
At least 20 years
of service credit*
30 years or more of service credit
(prorated monthly)3%
ERFs2008 ERFs
5% ERFs
55 0.386 0.70 0.80 0.5056 0.423 0.73 0.83 0.5557 0.463 0.76 0.86 0.6058 0.507 0.79 0.89 0.6559 0.556 0.82 0.92 0.7060 0.611 0.85 0.95 0.7561 0.672 0.88 0.98 0.8062 0.741 0.91 1.00 0.8563 0.817 0.94 1.00 0.9064 0.903 0.97 1.00 0.95
*The20-yearERFsaresubjecttochangebasedonStateActuaryfigures.Toreviewthefactorsindetail,visitthecomplete table complete table online.
Herearetheearly-retirementoptions: • HiredonorbeforeApril30,2013:To
retire early, you must be at least 55 and have 20 or more years of service credit.If you have 30 or more years of service credit,yourbenefitreductionwillbesmaller.With30ormoreyearsofservicecredit, you can retire at or after age 55 underoneoftwoprovisions:1. Yourbenefitisreducedby3%for
eachyearbeforeyouturn65.2. A smaller (or no) reduction is made
toyourbenefit,butyouagreetostricter rules about returning to public service employment (that is, your pension payments stop if you return to public service and don’t start again until you leave employmentorreachage65).Thissecond provision is referred to as the2008ERFs.
• HiredonorafterMay1,2013:Toretireearly, you must be at least 55 and have 20 ormoreyearsofservicecredit.Ifyouareage 55 with 30 or more years of service credit,yourbenefitreductionwillbe5%for each year (prorated monthly) before youturnage65.
Thinking About Retiring Early?Thinking About Retiring Early? offers in-depth information on what you’ll need to know if you arethinkingaboutretiringearly.
Retiring as a dual memberIf you are a member of more than one Washington state retirement system, you are a dual member.Youcancombineservice credit earned in all dual member systems to become eligibleforretirement.
Inmostcases,yourmonthlybenefitwillbebased on the highest base salary you earned, regardlessofwhichsystemyouearneditin.Base salary includes your wages and overtime and can include other cash payments if those payments are included as base salary in all the retirementsystemsyouareretiringfrom.
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Example Dual member
If you retire at age 65 with three years of service credit from SERS Plan 2 and four from the Public Employees’ Retirement System (PERS) Plan 2, you are a dual member.Withoutdualmembership,your service wouldn’t be eligible for a monthlybenefitfromeithersystem.Withdual membership, your service credit is combined,givingyouenoughtoretire.Yourbenefitiscalculatedwithservicefromthatsystemalone.Here’sthecalculation:
2% x 3 (SERS service credit years) x Average Final Compensation (AFC) = SERSbenefit
2% x 4 (PERS service credit years) xAFC=PERSbenefit
SERSbenefit+PERSbenefit=total monthlybenefit
For more information, read What Is Dual What Is Dual Membership and How Does It Affect Me?Membership and How Does It Affect Me?
EstimatingyourbenefitIfyouarewithinfiveyearsofretirement,weencourage you to review your online accountonline account andusetheonlinebenefitestimatortodeterminehowmuchyourbenefitmightbe.You can use this estimator at any point in your career.
If you expect to retire within the next year, contact us through your online accountonline account or call torequestawrittenestimateofyourbenefit.
Annuity optionsAn annuity is a guaranteed income plan you purchase.Whenretiring,SERSPlan2membershave two available annuitiesavailable annuities.
SERS Plan annuity:Withthisannuity,theretirementbenefitincreaseyoureceiveisbased on the dollar amount you choose to purchase.Whilethereisnomaximumamount,aminimumpurchaseof$5,000isrequired.Thefunds to purchase this annuity must come from an eligible governmental plan, such as your DCPsavings.Estimatethemonthlyretirementincomeincreasethroughthe“PurchaseanAnnuity” calculator in your online accountonline account.
Service credit annuity: This annuity allows you to add up to 60 months to your service in thefinalpensioncalculation.Purchasedservicecredit does not actually increase the number of years you’ve worked and won’t help you qualify for retirement, but it can make a big impactwhenitcomestoyourpensionbenefit!Estimate the monthly retirement income increase as well as the annuity cost through the “PurchasingService”calculatorinyouronline online accountaccount.
So how do you fund these annuities? Many membersusetheirDCPsavingsaccount.Formore information about these annuities, see DRS annuitiesDRS annuities.
Ready to retireApplying for retirement online To apply online, go to your online account online account and eithersignupfororlogintoyouraccount.
The online retirement application will display only what you need based on your retirement system,planandretirementeligibilityrules.Follow the step-by-step instructions and electronically submit the application to us whenyou’reready.
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Applying for retirement on paperRequestaretirementapplicationfromus.Turnin the completed application with all required signatures and documentation, including proof of age for your survivor if you choose a SurvivorOption(seeOptions2,3and4).
If you’re purchasing service credit, complete and turn in your Request to Purchase Retirement Service Credit form with your application.
YourbenefitoptionsWhen you apply for retirement, you will choose oneofthefourbenefitoptionsshownbelow.Once you retire, you can change your option onlyinlimited,specificcircumstances,soselectcarefully.
Option 1Single LifeThis option pays the highest monthly amount of the four choices, but it is for your lifetime only.Noonewillreceiveanongoingbenefitafteryoudie.Ifyoudiebeforethebenefityouhave received equals your contributions plus interest (as of the date of your retirement), the difference will be paid in a lump sum to your designated beneficiary.
Option 2Joint and 100% survivorYourmonthlybenefitunderthisoptionislessthantheSingleLifeOption.Butafteryourdeath, your survivor will receive the same benefityouwerereceivingfortheirlifetime.
Option 3Joint and 50% survivorThis option applies a smaller reduction to your monthlybenefitthanOption2.Afteryourdeath,yoursurvivorwillreceivehalfthebenefityouwerereceivingfortheirlifetime.
Option 4Joint and 66.67% survivorThis option applies a smaller reduction to your benefitthanOption2andalargerreduction
thanOption3.Afteryourdeath,yoursurvivorwillreceive66.67%(orroughlytwo-thirds)ofthebenefityouwerereceivingfortheirlifetime.
You must get consent in certain circumstancesIf you are married, legally separated or a registered domestic partner and do not leave asurvivoroptionforyourspouse/partner,thelawrequirestheirconsenttoyourchoice.If their notarized consent is not provided on yourretirementapplication,yourbenefitwill be calculated at Option 3 and they will be the designatedsurvivor.
Health insurance coverageAsk your employer if you will be eligible for health insurance coverage through the PublicEmployeesBenefitsBoard(PEBB)PublicEmployeesBenefitsBoard(PEBB) once youretire.YoucanalsocalltheHealthCareAuthority at 800-200-1004 or visit www.hca.wa.govwww.hca.wa.gov.
If you qualify for continuing coverage, you must meet strict timelines to apply or request adeferral.IfyouarenotentitledtoPEBBcoverage, you might be eligible for health insuranceyouremployerprovides.Formoreinformation,consultyouremployer.
Federalbenefitlimit
Whenyouretire,yourbenefitcouldbelimitedifitexceedsthefederallyallowedamount.Itcanbeadjustedannuallyforinflation(seethecurrent IRS limitsIRS limits).MembershiredbeforeJan.1,1990,havedifferentlimits.Whenweprocessyourbenefitestimate,wewillnotifyyouifyourbenefitexceedsthelimit.
Few retirement system members should be impactedbythislimit.Ifyouthinkitcouldimpact you, please call us for additional information.
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FederaltaxonyourmonthlybenefitMost,ifnotall,ofyourbenefitwillbesubjecttofederalincometax.Theonlyexceptionwillbe any portion that was taxed before it was contributed.Whenyouretire,wewillletyouknow if any portion of your contributions has alreadybeentaxed.
Since most public employers deduct contributions before taxes, it’s likely your entire retirementbenefitwillbetaxable.
At retirement, you must complete and submit a federal W-4P formW-4P form to let us know how much ofyourbenefitshouldbewithheldfortaxes.If you don’t, IRS rules require withholding as if you are married and claiming three exemptions.Youcanadjustyourwithholdingamount at any time during retirement by completing a new W-4P formW-4P form.
For each tax year you receive a retirement benefit,wewillprovideyouwitha1099-Rformto use in preparing your tax return (see the 1099-R guide1099-R guide).TheseformsareusuallymailedattheendofJanuaryforthepreviousyear.The information is also available through your online accountonline account.
It is your responsibility to declare the proper amount of taxable income on your income tax return.
Legal actionsIngeneral,yourmonthlybenefitisnotsubjecttoassignmentorattachment.However,itcould be subject to court and administrative orders issued under federal law or for spousal maintenanceandchildsupport.
YoucanfindmoreinformationinCan Legal Can Legal Action Affect My Retirement Account?Action Affect My Retirement Account?
Whenandhowyourbenefitwill be paidAfteryouretire,yourretirementbenefitwillbe paid at the end of each month and directly depositedinyourfinancialinstitutionaccount.You must enter your banking information in your online retirement accountonline retirement account or complete the Direct Deposit AuthorizationDirect Deposit Authorization form as part ofyourretirementapplication.
Ifyouneedtochangeyourfinancialinstitutiononce you’ve started your retirement, just update your information in your online account orsendusanewauthorizationform.Inrarecases, if you are unable to receive payment by direct deposit, payment will be mailed at the endofeachmonth.
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Once you retireCost-of-Living Adjustment (COLA)OnJuly1ofeveryyearfollowingyourfirstfullyearofretirement,yourmonthlybenefitwillbe adjusted to a maximum of 3% per year, as determined by the ConsumerPriceIndex.ConsumerPriceIndex.
Working after retirementIf you return to public service in Washington stateafteryouretire,yourbenefitcouldbeaffected, depending on the position and numberofhoursyouwork.
In certain circumstances, you might be required to become a member of, and pay contributions to, another retirement system.Youmightbeable to work limited hours with no impact to yourbenefit.Ifyouretireearlyunderprovisionsputinplacein2008(see“Earlyretirement”onpage11),yourbenefitcouldbestoppedifyoureturntopublicservice.
If you think you might be returning to work afterretirement,callustoseeifyourbenefitwillbeaffected.ConsiderreviewingThinking Thinking About Working After Retirement?About Working After Retirement?
Benefitoverpaymentsor underpaymentsIf you ever receive an overpayment of your monthlybenefit,youarerequiredtorepayit.Ifwediscoveryourbenefithasbeenunderpaid,we will correct the error and award you a retroactivepayment,ifapplicable.
Changingabenefitoptionor survivor after you retireOnce you retire, you may change your benefitoptionorsurvivor in the following circumstancesonly:
• If you designate someone other than your spouse to receive your survivor benefit,youcanchangetoanOption1(nosurvivor)benefitatanytimeafterretirement.
• If you choose a Survivor Option (Option 2, 3 or 4) and your designated survivor diesbeforeyoudo,yourmonthlybenefitcan be adjusted to the higher Option 1 paymentlevel.Besuretonotifyustobeginthischange.
• If you marry or remarry after retirement and remain married for at least one year, you might be able to change your benefitoptionandprovideasurvivorbenefitforyournewspouse.Toqualifyfor this opportunity, you must request the change during your second year of marriage.Contactusforestimatesonhowthiswillaffectyourmonthlybenefit.Also, be aware that this opportunity might not be available if a court-ordered property division has impacted your benefit.
• If you re-enter SERS membership and earn 24 months of uninterrupted service credit, you can select a different Survivor Optionwhenyouretireagain.
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Glossary of termsAverage Final Compensation (AFC): The monthly average of your 60 consecutive highest paidservicecreditmonths.YourAverageFinalCompensation is used in determining your monthlybenefit.
Beneficiary: The person(s), estate, organization or trustyouhavedesignatedtoreceiveanybenefitpayableuponyourdeath.YourbeneficiarymusthaveafederaltaxidentificationnumberoraSocialSecuritynumber.
Classified substitute: An employee of a school district or an Educational Service District who is employed exclusively as a substitute for an absent employeeorworkinginanineligibleposition.Aclassifiedsubstitutemayapplyforservicecreditafter each school year and pay the appropriate contributions.
Cost-of-Living Adjustment (COLA): On July 1ofeveryyearfollowingyourfirstfullyearofretirement,yourmonthlybenefitwillbeadjustedtoreflectthepercentage change in the Consumer Price Index — to a maximum of 3%peryear.
Defined benefit: A retirement plan in which yourbenefitisbasedonaformula rather than an accountbalance.Theformulaprovidesamonthly benefit based on your years of service and your AverageFinalCompensation.
Defined contribution (a component of Plan 3 only;somemembersofPlan2havetheoption totransfertoPlan3):Abenefitthatconsists solely of the money you contribute and any investment gains, losses or expenses applied to youraccount.
Domestic partner: In a registered domestic partnership, both individuals have met the state’s legal requirements and registered their partnershipwiththeSecretaryofState’sOfficeoranotherjurisdiction.ContacttheSecretaryofState’sOfficeifyouhavequestionsabouttherequirements. Registered domestic partners have thesamesurvivoranddeathbenefitsasmarriedspouses.However,differencescouldoccurinhowtaxesarehandledatthefederallevel.
Dual member: You are a dual member if you have established membership in more than one Washington state retirement system, including First Class City retirement systems for Seattle, Spokane and Tacoma, but excluding Plan 1 of theLawEnforcementOfficers’andFireFighters’Retirement System.
Early retirement: Retiringbeforeage65.
Membership status: The status of your retirement membership.Thiscanbe:
• Active, which means you are currently employed in a position covered by one of the state retirement systems
• Inactive, which means you no longer are actively contributing to the state retirement system and have not withdrawn your contributions after leaving employment (which might leave you eligible to receive a benefitonceyoureachretirementage)
• Withdrawn, which means you were employed in a position covered by one of the state retirement systems and you withdrew your contributions after leaving employment
Reduced benefit: AbenefitthathasbeendecreasedbyafactorprovidedbytheOfficeoftheStateActuary.A benefit is reduced in two situations: when you retire early or you retire and select a Survivor Option (which paysabenefittoyour survivor after your death).
Service credit: The credit you receive each month for working in a position covered by one of the stateretirementsystems.Servicecreditisusedtodetermine your eligibility for retirement and your benefitamount.
Survivor: The individual you choose — when picking Option 2, 3 or 4 at retirement — to receive benefitpaymentsafteryourdeath.
System/plan: The retirement system and plan in whichyouareamember.
Vested: You have earned the right to receive a retirementbenefitonceyoureachaneligibleage.
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AApplying for retirement, 12Approaching retirement, 10Authorized leave of absence, 8Average Final
Compensation, 2, 4, 6, 10, 12
BBecoming vested, 7Beneficiary,5,8,13Benefitcalculation,4,5Benefitoptions,13,15
CChangingabenefitoptionor
survivor after you retire, 15Compensation, 4, 5, 6Contribution rate, 2, 5Contributions, 2, 4, 6, 7,
9, 13, 15Cost-of-Living Adjustment
(COLA), 15, 16
DDeath, 2, 13, 16Deferred Compensation
Program (DCP), 3, 10Definedbenefit,4,7,16Definedcontribution,7,16Designating your beneficiary,5Disability, 2, 9, 11Divorce, 8Domestic partner, 6, 16Dual member, 8, 11, 11, 16
EEarly retirement, 2, 6, 11, 12, 16Earning service credit, 5Eligible to retire, 2, 6, 8, 10Estimatingyourbenefit,12
FFederalbenefitlimit,13Federal tax, 14Formula, 2, 6, 10, 16
GGlossary of terms, 16
HHealth insurance coverage, 13How to contact DRS, 3How your plan works, 4
IIf the unexpected happens, 9
LLeaving public service, 8Legal actions, 14Life changes, 7
MMarriage, 8, 15Milestones, 7Military service, 9
OOnce you retire, 13, 15Online account, 7, 10Option to transfer to
SERS Plan 3, 7Overpayments, 15
PPlan summary, 2Planning for retirement, 6, 12Privacy of your
information, 3Property division, 8, 15PublicEmployeesBenefitsBoard
(PEBB), 3, 13Purchasing additional service
credit, 12
RReady to retire, 12Retirement planning
checkup, 10Retiring as a dual
member,”Retiring as a dual member” on page 11
Returning to public service, 8
SSeminar, 13Service credit, 2, 5, 7, 9, 10,
11, 16Service retirement, 10Survivor, 6, 13, 15, 16
TTemporary disability, 9
UUnderpayments,15Updatingyourplanfor
retirement, 12
VVested, 2, 6, 7, 16
WWhenandhowyourbenefitwill
be paid, 14Withdraw, 2, 5, 6, 8Working after retirement, 15
Index
SERS2HB 1/20