Planchoice

Frequently Asked Questions

General Information

Q1: Deciding between TRS Plan 2 and TRS Plan 3 is an important decision. What resources are available to assist me in making the best choice?
A1: Several resources are available to help you evaluate your individual situation and make the choice that is best for you. The following resources are available:


Q2: What is a defined benefit plan?
A2: A defined benefit plan is a guaranteed retirement benefit based on service credit and average final compensation. The amount you or your employer contributes does not determine your retirement benefit.


Q3: What is a defined contribution plan?
A3: A defined contribution plan is a retirement benefit based on the amount contributed and the performance of the investments. Investment returns (both gains and losses) are credited to your Defined Contribution account.


Q4: What are the differences between TRS Plan 2 and TRS Plan 3?
A4: TRS Plan 2 is a defined benefit plan. TRS Plan 3 consists of two components: 1) a defined contribution plan and 2) a defined benefit plan. See the comparison chart between TRS Plan 2 and TRS Plan 3.

The formulas for calculating a retirement benefit for each of the defined benefit plans are as follows:

  • Plan 2 = 2% × Average Final Compensation × Service Credit Years
  • Plan 3 = 1% × Average Final Compensation × Service Credit Years
The defined benefit portion is guaranteed, regardless of the contributions made by the member or the employer.

As a Plan 2 member you are eligible to receive a full retirement benefit at age 65 if you have at least five service credit years. You are eligible to retire early at 62 with an unreduced benefit if you have 30 years of service credit* and you are eligible for a reduced benefit as early as 55 if you have 20 service credit years. Under Plan 2, if you terminate and withdraw your contributions, you forfeit your right to a retirement benefit unless you return to eligible employment and re-establish service credit.

Under Plan 3, you are eligible to receive a full retirement benefit from the defined benefit component at age 65 if you have at least 10 service credit years. You are eligible to receive a full benefit with 5 service credit years if it includes 12 service credit months after reaching age 44. You are eligible to retire early at 62 with an unreduced benefit if you have 30 years of service credit* and you are eligible for a reduced benefit as early as 55 if you have 10 years of service.

The Plan 3 defined benefit component also has a provision for members with 20 service credit years who wish to leave covered employment prior to age 65. This provision helps protect the value of your defined benefit by adjusting it for inflation (approximately 3 percent per year) until you begin collecting it (or at age 65, whichever is less).

Once you begin drawing your defined benefit, both TRS plans provide for a cost of living adjustment (COLA) each July 1, of up to 3 percent per year. The COLA begins once you have been receiving your defined benefit for one full year.

The defined contribution component of Plan 3 is based entirely on your contributions, the investment earnings on those contributions, and, if an annuity is taken, the age at which you decide to take payment. If you terminate and withdraw your contributions, you still have a right to the defined benefit component.

* This early retirement benefit is effective September 1, 2008. If a court of law decides the repeal of gain sharing is invalid, the reductions for early retirement that were in place before passage of the new law will apply. See Gain Sharing.


Q5: Will my contributions to Plan 3 affect my ability to maximize contributions to the Deferred Compensation Program (DCP)?
A5: If you earn $20,039 or more annually, your contributions to TRS Plan 3 will not affect the maximum amount you're allowed to defer to DCP. For 2007, you're allowed to defer up to $15,500 to DCP.

If you earn less than $20,039 a year, the maximum amount you can defer to DCP could be affected by your contributions to TRS Plan 3. Here's how to determine that:

  • Multiply the FICA (Social Security) rate of 7.65% by your annual salary.
  • Multiply your TRS contribution rate by your annual salary.
  • Subtract #1 and #2 from your annual salary. This figure is your adjusted gross salary.
  • Compare the answer from #3 (your adjusted gross salary) to $15,500. Which is less? The lesser number is the maximum amount you can defer to DCP.

Here's an example:

  • Julie's annual salary is $20,000.
    • $20,000 x .0765 = $1,530 (FICA rate)
  • Julie's Plan 3 contribution rate is five percent.
    • $20,000 x .05 = $1,000 (Plan 3 contribution rate)
  • To find her adjusted gross salary, she subtracts her FICA and Plan 3 rates from her annual salary.
    • $20,000 - $1,530 - $1,000 = $17,470
  • $17,470 is more than the $15,500 maximum contribution allowed. That means she can defer up to $15,500 annually (or $1,291 monthly) to DCP.


New Employees

Q6: What are my choices as a new member of TRS?
A6: Anyone first hired into an eligible position on or after July 1, 2007, has 90 days from the date of hire to choose between TRS Plan 2 or TRS Plan 3 membership**. The choice you make is irrevocable — you cannot change plans in the future. If you have not chosen a plan within 90 days, you will automatically default to TRS Plan 3 and will not have the option of changing plans in the future.

**If a court of law decides the repeal of gain sharing is invalid, new members hired after the court decision will be mandated into plan 3. See Gain Sharing.

Q7: I’ve made my decision. What do I need to do?
A7: Complete and submit a Member Information Form to your employer. At the same time complete your Beneficiary Designation Form and send it to DRS.


Q8: I have completed my paper work to join TRS Plan 3. Can I review my Plan 3 account through the Internet? Will I be able to establish my allocations through the Internet?
A8: Yes, you can access your TRS Plan 3 account online. Visit www.icmarc.org/trs and select the Account Access link. To access your account, you will need a password. To request a password online select the link “Request an Initial Password”. One of the identifying items to request a password is the 6 digit plan number which is 109513 for the Self-Directed program and 109492 for the WSIB program. Please also note that you will select your own User ID.

If you are in the Self-Directed program, you may establish your allocations online through Account Access. If you are ready to review your account online now, you may select account access here.


Q9: Can I change my mind later?
A9: Your plan decision is irrevocable. Whichever plan you choose, you will not be able to transfer to the other one at a later date.


Q10: Am I in a retirement plan during the time I’m making my choice between TRS Plan 2 and TRS Plan 3?
A10: When you are hired into an eligible position, your employer will report you in TRS Plan 2 until you’ve made your decision.


Comparison of Plan 2 and Plan 3

Q11: What is my contribution rate in Plan 2? What contribution rate will I have to pay in TRS Plan 3?
A11: TRS Plan 2 members currently contribute 4.26 percent of their compensation earnable (salary that can be reported into TRS). View a history of employee contribution rates.

The Employee Retirement Benefits Board (ERBB) determines the contribution rate options available to TRS Plan 3 members. Members are allowed to elect any one of the following contribution rate options:

Option Contribution Rate
A 5% - Fixed rate for all ages
B 5% up to age 35
6% ages 35 - 44
7.5% age 45 and older
C 6% up to age 35
7.5% ages 35 - 44
8.5% age 45 and older
D 7% - Fixed rate for all ages
E 10% - Fixed rate for all ages
F 15% - Fixed rate for all ages

If you are a new member and you choose TRS Plan 3, you must choose a contribution rate at the same time you make your plan choice. If you are a Plan 3 member who is changing employers, you have up to 90 days from the date you begin working in an eligible position to select a contribution rate. If you do not select a rate option within the time allowed, the law requires that Option A (5 percent of pay at all ages) be assigned automatically.


Q12: Who sets member Defined Benefit contribution rates for Plan 2 and Plan 3?
A12: The Office of the State Actuary recommends actuarial assumptions to the Pension Funding Council based on the most recent actuarial valuation. The Pension Funding Council reviews the valuation with the assistance of an independent actuary and adopts the contribution rates.


Q13: Do my Plan 3 contributions to my defined contribution impact my employer’s contribution to my defined benefit?
A13: No, the amount you contribute to Plan 3 does not affect what your employer contributes. The amount your employer contributes funds the Defined Benefit portion of your benefit.


Q14: How are new Plan 3 Defined Contribution investment funds established?
A14: The Washington State Investment Board (WSIB) establishes fund options based on recommendations received from the Employee Retirement Benefits Board (ERBB).


Q15: When can I withdraw my balance under Plan 3?
A15: You can elect to withdraw the funds in your TRS Plan 3 defined contribution account any time you separate from all TRS-covered employment.


Q16: Will I be able to change my contribution rate?
A16: Once your contribution rate option has been established, it can only be changed when you change employers or during contribution rate flexibility periods each January as permitted by the Internal Revenue Service (IRS).

Changing employers means working for a different employer — not just working for a different division or department of your current employer.


Q17: If I choose TRS Plan 3, how will my contributions be invested?
A17: As a TRS Plan 3 member you will have a choice to invest your contributions with two different investment programs: the Washington State Investment Board (WSIB) Investment Program or the Self-Directed Investment Program.

The WSIB Investment Program is invested in the Total Allocation Portfolio (also called the TAP Fund). The TAP Fund is a diversified portfolio of U.S. and international stocks, bonds, private equity and real estate investments and is a monthly valued fund.

The Self-Directed Investment Program has a menu of funds and pre-set portfolios. TRS Plan 3 members will be able to choose among several different investments that will have varying degrees of risk and rates of return.


Q18: What is the Employee Retirement Benefits Board?
A18: The ERBB was created in 1995 as part of the Teachers’ Retirement System (TRS) Plan 3 law and established an eight-member benefits board appointed by the Governor and chaired by the director of the Department of Retirement Systems (DRS). The ERBB’s responsibilities include authorization for investments and distribution options and establishing additional contribution rates. With the passage of the School Employees Retirement System (SERS), the board membership was expanded to include three additional members representing SERS, bringing the total to eleven. The make-up is as follows:

  • Two members with experience administering defined contribution plans
  • Three members representing TRS (one retired and two active members)
  • Three members representing PERS (one retired and two active members)
  • Three members representing SERS (one retired and two active members)

Q19: Can I receive continuing health coverage when I retire? Is there a difference in coverage between TRS Plan 2 and TRS Plan 3?
A19:There is no difference in coverage between TRS Plan 2 and TRS Plan 3; however, there is a difference in how you qualify for health care coverage.

If you are employed by a Public Employees Benefits Board (PEBB) covered employer, then you (and your dependants) may be eligible for the PEBB Retiree Health Coverage offered through the Health Care Authority. Please confirm with your employer that PEBB Health Care Coverage is offered through your employer.

If qualified, you must:

TRS Plan 3
• Elect PEBB coverage within 60 days of separation from employment. This is true even if you do not immediately begin receiving your retirement benefit. If you miss this 60-day window, you forfeit all future rights to enroll in the PEBB program. Please note that your employer is not required to remind you about this window.
• You must be 55 years of age and have 10 years of service credit.
TRS Plan 2
• You must begin drawing a retirement benefit immediately after separation from employment. If you delay receiving your retirement benefit upon separation, you are not eligible for PEBB Retiree Health Care coverage.
• You must be age 65 or older with at least 5 service credit years, or age 55 or older with at least 20 service credit years.

You can also contact the Health Care Authority at 1-800-700-1555, or their Web site (www.pebb.hca.wa.gov)


What happens if I die?

Q20: What happens if I die in service?
A20: The defined benefit is different for Plan 2 and Plan 3:

Plan 2 — Defined Benefit
If you die while in service, your designated beneficiary may be eligible for benefits as follows:
Fewer than 10 service credit years and ineligible to retire:
If you die before you have 10 service credit years and before retirement eligibility, your beneficiary(s) receives your contributions, plus interest.
Ten or more service credit years or eligible to retire:
If you die after becoming eligible to retire or after accumulating 10 or more service credit years, your surviving spouse, or if none, the guardian of your minor children, may choose between the following two benefits:
  • The sum of your contributions, plus interest, or
  • A monthly benefit calculated as if you had:
    • Elected an Option 2 benefit; and
    • Retired on the date of your death. The benefit is actuarially reduced if you are under age 65 at death.
A Joint and 100 percent Survivor option provides a benefit that is actuarially reduced. If your designated beneficiary survives you, the benefit amount remains the same and your beneficiary receives it over his or her lifetime.
If your spouse dies while receiving a survivor’s retirement benefit and leaves a minor child or children, the children will continue to receive the benefit that was paid to your spouse. The benefit will be shared equally among the children and paid until they reach the age of majority.
If there is no surviving spouse at the time of your death, and you have minor children, their guardian will choose between the two payment options.
If there are no minor children or surviving spouse, your designated beneficiary will receive your accrued contributions plus interest.

Plan 3
There are two parts to the Plan 3 benefit, the Defined Benefit and the Defined Contribution. The benefits are different for each:
Plan 3 — Defined Benefit
If you die before you retire, your surviving spouse, or if none, your minor children will receive a benefit calculated as if you had:
  • Elected a Joint and 100 percent Survivor; and
  • Separated from service on the date of death.
A Joint and 100 percent Survivor option provides a benefit that is actuarially reduced. If your designated beneficiary survives you, the benefit amount remains the same and your beneficiary receives it over his or her lifetime.
If your spouse dies while receiving a survivor’s retirement benefit and you have a minor child or children, the children will continue to receive the benefit that was being paid to your surviving spouse. The benefit will be shared equally among the children and paid until they reach the age of 18. If you have no surviving spouse or minor children at the time of death, no defined benefit will paid.
Plan 3 — Defined Contribution benefit
If you die before initiating payment of your defined contribution account, your spouse can take payment in a lump sum or roll it over into an approved Individual Retirement Account (IRA) or a qualified employer retirement plan— if they are your beneficiary. Beneficiaries who are not spoused cannot roll over defined contribution funds; they must take payment of the funds.

Q21: What happens if I die after I begin receiving benefits?
A21: The Defined Benefit is the same in both TRS Plan 2 and TRS Plan 3. However, TRS Plan 3 has a second benefit, the Defined Contribution.

Defined Benefit for TRS Plan 2 and TRS Plan 3:
If you die after you begin retirement, your survivors are eligible to receive benefits according to the retirement option that you choose.

When you apply for a service or disability retirement, you must select a benefit option. If you are married, the law requires that you provide the written consent of your spouse for the benefit option you choose. This consent must be witnessed by a notary. If consent is not provided, the law requires that an Option 3 benefit be paid with your spouse as beneficiary.

Option 1 Single Life
This option pays you a benefit for your lifetime. If you die before the total benefits you receive equal your contributions plus interest at the date of retirement, the balance will be paid in a lump sum to your named beneficiary.
Option 2 Joint and 100 percent survivor
This option provides you with a reduced benefit. If your designated beneficiary survives you, the benefit amount remains the same and your beneficiary continues to receive it for his or her lifetime.
Option 3 Joint and 50 percent survivor
This option provides you with a reduced benefit. If your designated beneficiary survives you, 50 percent of your benefit is paid to your beneficiary for his or her lifetime.
Option 4 Joint and 66.67 percent survivor
This option provides you with a reduced benefit. If your designated beneficiary survives you, 66.67 percent of your benefit is paid to your beneficiary for his or her lifetime.

TRS Plan 3 also has a Defined Contribution benefit: If you die after initiating payment of your defined contribution account and you still have money in the account, your beneficiary should contact DRS. DRS and the record keeper will work together to pay your beneficiary the remainder of the defined contribution funds. If retirement funds are in the form of an annuity, payments continue or stop based on the terms of the annuity.