Glossary

Asset mix:

An investment portfolio that is invested in any combination of the three major classes of assets: (1) cash and equivalents, (2) fixed income instruments (bonds) and, (3) equity instruments (common stocks or ordinary shares).

Automatic rebalancing:

For Plan 3 members who choose One-Step Investing, a feature that adjusts your asset mix as you move toward a target date that meets your needs and lifestyle.

Average final compensation:

The monthly average of your 60 highest paid consecutive service credit months.

Contribution rate flexibility period:

For Plan 3 teachers, the period each January when you may change your Plan 3 contribution rate. The IRS may change or eliminate rate flexibility at any time.

Cost-of-Living Adjustment:

In Plan 2 and in the defined benefit part of Plan 3, on July 1 of every year following your first full year of retirement, your monthly benefit is adjusted by the percentage change in the Consumer Price Index, to a maximum of three percent per year. This percentage change can increase or decrease your benefit.

Defined benefit:

A predetermined retirement benefit, also called a pension plan.

For Plan 2, your defined benefit equals: 2 percent x your years of service credit x your average final compensation. Both you and your employer make contributions to your defined benefit.
For Plan 3, your defined benefit equals: 1 percent x your years of service credit x your average final compensation. Your employer makes contributions to the defined benefit part of your plan.

Defined contribution:

For Plan 3 members, an amount based on your contributions and the performance of the investments you choose. Investment returns (both gains and losses) are applied to your account.

Early retirement:

In most cases, if you retire before age 65, your benefit is reduced to reflect the fact that you will receive it over a longer period of time. The amount of the reduction depends on how much younger than age 65 you are when you retire and the amount of service credit you have.

Full retirement:

For all members, a retirement benefit that is not reduced to reflect that you retired from public service earlier than age 65, or in some cases, ages 62 to 64.

Interest:

An amount that your contributions earn. Also called interest rate.

Lump sum payment:

A single payment to you for the total amount due.

Normal retirement:

The age you’re entitled to receive a full retirement benefit.

Pension:

Your retirement benefit.

Portfolio:

A collection of investments.

Public sector employer:

Government businesses (school districts, state agencies, cities, counties, etc.)

Public service:

Governmental employment.

Return:

A measure of how your investments perform. Returns consist of interest, dividends and gains or losses in the value of the principal. Your investment returns can be positive or negative.

Risk:

The probability that an investment will lose value or fail to gain in value.

Service credit months for Public Employees:

Members earn:

One month of service credit for each calendar month they were paid for 90 hours or more.
One half of a service credit for any calendar month they were paid for fewer than 90 but at least 70 hours.
One quarter of a service credit for any calendar month they were paid for fewer than 70 hours in a calendar month. Members cannot earn more than one service credit during one calendar month.

Service credit months for Teachers and School Employees:

Members earn 12 months of service credit for each school year (these are the nine months from September 1 through August 31). To earn the service credit, the member must:

Begin work in September;
Work at least nine months of the school year; and
Be paid for at least 810 hours.

To earn six service credit months for a school year, the member must:

Begin working in September;
Work at least nine months of the school year; and
Be paid for at least 630 hours but fewer than 810 hours.

Beginning with the 2008/2009 school year, to earn six service credit months for a school year, the member must:

Work at least five months within a six-month period; and
Be paid for at least 630 hours.

If a member does not meet any of the other service credit requirements, service credit will be determined as follows:

One service credit month for any calendar month the member is paid for at least 90 hours.
One half of a service credit month for any calendar month the member is paid for fewer than 90 but at least 70 hours.
One quarter of a service credit month for fewer than 70 hours in a calendar month.

Service credit years:

We calculate your service credit years by dividing your total service credit months by 12 (12 months equals one year of service credit).

Target date:

The year you plan to retire or begin receiving money from your Plan 3 account.

Total Allocation Portfolio:

An investment program that is determined, managed and continuously rebalanced by the Washington State Investment Board. For Plan 3 members, if you do not select an investment program, your contributions will be directed here.

Vesting:

The point at which you have earned a defined benefit. Plan 2 members are vested after earning five years of service credit. In Plan 3, you are vested after 10 years of service credit in most cases; or after five years of service credit, depending on your age and when your service credit was earned. However, you have no vesting requirements for the defined contribution part of your benefit and may take distributions at any time after you leave public employment.