A cost-of-living adjustment (COLA) is an annual adjustment applied to your retirement income to reflect changes in the economy (inflation). Most DRS retirement plans offer a COLA, but Plan 1 members in PERS and TRS only have a COLA if they selected it during retirement. View the 2025 COLA percentages by retirement date and plan. When will I receive the 2025 COLA? LEOFF Plan 1 COLAs take effect April 1 and start with April 30 benefit payments. All other DRS Plan COLAs take effect July 1 and start with July 31 benefit payments. You need to be retired by July 1 for at least one year to be eligible for a COLA. Once you’re eligible, you’ll receive any COLA starting with the pension payment issued at the end of July, and every year after. You don’t need to apply to receive the COLA – it’s automatic. How much will the COLA be? The maximum annual COLA you can receive for most DRS plans is 3%. If inflation that year is above 3%, the additional amount is applied to future adjustments (called COLA banking). Any year inflation is lower than 3%, the COLA can pull from banked amounts in prior years. This happens automatically and the adjustment is made for you. You could receive a different adjustment each year, depending on the amount available in your COLA bank. Will PERS 1 and TRS 1 receive a benefit increase? If the legislature changes the current law, most of these retirees could receive a one-time increase in July. There are several bills that could affect this decision. You can track all bills here.

In today’s climate of economic uncertainty and budgetary challenges, many public employees in Washington State are facing difficult decisions regarding their careers and financial futures. Whether due to organizational restructuring, budget cuts, or personal considerations, transitioning out of public service can be a daunting prospect. Understanding the implications of such transitions on your retirement benefits is crucial. This article discusses the retirement impacts of career transitions. The Employment Security Department covers additional information about benefits and reemployment services for state workers. If you leave your public service employment, you’ll have choices to make about your DRS retirement accounts. Here are the three big ones: Leaving your money in the account Withdrawing or rolling over the account funds Retiring Here is helpful information to have about each of these options. First a question for you. Are you vested? Vesting means you’ve earned the minimum amount of service credit you need to be eligible to retire with a lifetime monthly pension from your plan. For Plan 2, this is 5 years. For Plan 3, you need 10 years or 5 years if at least one year is earned over age 44. The service credit you earn toward vesting is cumulative. This means if you separate but later return to public service, you can continue to earn service credit toward your vested status even if you didn’t yet qualify when you separated. If you are in Plan 2, and you withdraw your contributions when you separate, your service credit balance goes to zero. If you are in Plan 3 and you separate, you might not yet qualify for the pension part of Plan 3, but if you were to return to service at a later date, you would keep earning credit toward that vested pension amount. Leaving your money in the account Let’s look at what happens if you leave your money in your account after you leave public service. How much is in your account? You can look at your account balance through your online account. Select your plan summary to see the pension balance. You can also review the investment balances if you have DCP or Plan 3. Is your account balance at least $1,000? If yes, you are eligible to leave your money in the account when you separate. If you are inactive and non-vested with a balance of less than $1,000, DRS is required to close your account and return the funds to you. Plans 1 and 2 members: After you meet age and service requirements, you will be entitled to a monthly benefit for the rest of your life as long as you remain a member of your retirement plan. The money in your account will continue to earn interest until you retire or withdraw it. Plan 3 members: Because you have both a pension and investment part of your plan, you have more options when you separate. Your investment contributions (funded by you): If you leave money in your investment account, it will stay invested while you maintain control of your investment choices. Your pension account (funded by your employer): Once you meet age and service requirements, you qualify for a lifetime monthly pension. See the vesting section above for what it means to meet service requirements. If you have at least 20 years of service credit when you leave employment and do not start to receive your pension, it will increase by approximately 3% for each year you delay receiving it up to age 65 (this is called indexing and is exclusively available to Plan 3 and LEOFF 2). Withdrawing or rolling over retirement account funds Plans 1 and 2 members: Withdrawing your money means you are no longer a member of your retirement plan and, therefore, ineligible to receive a retirement benefit. There is no partial withdrawal option. Plan 3 members: You can withdraw your investment contributions and investment earnings without affecting your pension income eligibility. If you meet the vesting requirements when you separate, you will still receive a monthly pension benefit when you are eligible to retire. Taxes: If I withdraw my retirement or DCP funds, will they be taxed? Yes. Payments you receive are subject to income tax. Rollovers are not subject to income tax. To find out more about how taxes could affect you, contact a tax advisor. Retiring If you are 55 or older, you might be eligible to retire. Review the requirements for your retirement system on your plan page. DRS has several resources for retiring members including a retirement planning checklist and available seminars. DCP account options If you retire or leave your public service job, you can leave your money in your DCP account or choose to receive or roll over some or all of your account balance. If you continue public employment, you can continue, increase, reduce or stop your DCP contributions. In limited circumstances, the Internal Revenue Service allows for hardship withdrawals while you are still employed. Contact the DCP record keeper Voya at 800-547-6657 to find out more about this option. More career change information What happens if I change to another public employer? If you go directly to another DRS-covered eligible position with the state or a participating public employer, you will continue to contribute to your retirement account. What happens to my account if I return to public service? If a DRS-covered retirement system is offered for your position, the choice you made when you left employment will determine the answer: You retired: You might be able work limited hours without affecting your benefit. Contact us to hear your options. You’re a Plan 3 member and you left your money in your account or withdrew it: You will begin contributing to your retirement account again. Plan 3 members can withdraw their investment funds but not the pension funds their employers contribute. You withdrew from Plan 1 or 2: You will begin contributing to your account again. For a limited time, you will have the option to repay the money you withdrew plus interest to restore your service credit. This retirement benefit is a monthly pension based on your service credit years as well as your earnings.

At the end of July, state employees under PERS may notice a 3% increase to their paycheck. This increase is thanks to legislation that passed in April 2025 and is intended to help you with the cost of inflation. One of the best things about getting a paycheck increase is that it gives you more flexibility with your budget. Use the extra money to:  increase your DCP contributions for retirement pay off credit card debt save for a big vacation open an account or add to your child’s 529 college savings fund No matter how you decide to use the extra funds, setting aside a small amount of $50 or $100 to an account every month can add up overtime and help you achieve any goal. Consider a percentage increase for your DCP contributions If you could get $100 with $20, would you? That’s basically what happens when you invest your money. On average, the global stock market has grown at a rate of 10% per year over the last 100 years. Which means investments have doubled every 7-10 years. So, the money you put in DCP today has the potential to grow significantly by the time you retire. The earlier you invest, the more time your money has to multiply. Example: if you’re contributing 5% now, increase it to 6%. How to change your contributions: Log in and select your DCP account At the Voya main menu select Accounts and then Washington State DCP Select Contributions & Savings, then Manage Contributions The page will show what your current contribution rate is. Select Update My Contributions to make the change. Log into your account Don’t have a DCP account? It only takes 3 minutes to enroll online. Got a few minutes? Listen to the DCP podcast episode In episode 11, you’ll find out how DCP can help you save for retirement. This short episode explains how taxes are applied, the importance of contributing with a percentage of your income and tools for maximizing your investment. You can also read the transcript of the episode.

Your pension is designed to grow over time to help keep up with inflation. All Plan 2 and Plan 3 retirees are eligible for a cost-of-living adjustment (COLA) every July. However, only Plan 3 and LEOFF 2 members can qualify for benefit indexing, which helps your pension grow with inflation before you retire.Here are the key differences between COLAs and benefit indexing. Cost-of-living adjustment (for all Plan 2 and 3 members) When the cost of living rises, pensions receive a cost-of-living adjustment (COLA), no matter how many years of service credit you have. The adjustment amount is based on the previous year’s Seattle area inflation index (CPI-W) and may be less than 3% if inflation was lower. Find out more about COLAs Benefit indexing (for Plan 3 and LEOFF Plan 2 members) Benefit indexing is a type of inflation protection that you may be eligible for depending on your plan and years of service. For every month you delay collecting your pension, your benefit amount will increase by 0.25%. Benefit indexing stops once you’ve reached your normal retirement age. Once you retire, you’ll be eligible to receive an annual maximum 3% COLA, as described above. Eligibility for benefit indexing requires you to: Be in Plan 3 or LEOFF Plan 2 Have at least 20 service credit years before you stop working. Separate before reaching normal retirement and delay receiving your pension benefit. Example Francis is a Plan 3 member who is 64 years old, with 20 service years and an average monthly salary of $5,000. Their Plan 3 benefit calculation is: 1% x 20 years x $5000. This would provide Francis with $1,000 per month. In addition to a monthly pension, Francis also has an investment account to draw from in retirement. Francis also has the option to stop working prior to age 65 but choose not to receive a pension benefit until their first eligible unreduced date of age 65. During that time, their pension will grow. Here are two scenarios of how that could look: Scenario 1: Stop working at age 64Start collecting a pension at age 65The pension benefit increases about 3% in one year (.25 x 12 months = 3)The pension is $1,030/month Scenario 2: Stop working at age 65Start collecting a pension at age 65The pension benefit calculations is: 1% x 21 years of service x $5,000The pension is $1,050/month A note about Plan 3: Plan 3 has two separate accounts: An employer-funded pension, and an investment account you fund with your contributions. The main reason customers choose Plan 3 are: personal control and growth potential. Plan 3 customers have separate pension and investment accounts, which means they can withdraw funds from one without affecting the other. In the example above, Francis could withdraw an income from the investment account at any age once they separate from service.