Employers make pension contributions too
As a Plan 2 member of a Washington state retirement plan, you contribute a certain percentage amount from your paycheck toward your pension. That percentage amount is called a member contribution rate and is set each biennium. If you’re a Plan 3 member, you contribute a certain percentage amount to your investment account.
But did you know that Plan 2 and Plan 3 employers also pay a percentage amount toward your pension?
In Washington, both state and local governments and their employees fund employee retirement benefits. The state Pension Funding Council (PFC) sets contribution rates for the defined benefit systems every two years based on analysis and recommendations from the state actuary and input from the Select Committee on Pension Policy (SCPP). The actuary regularly recommends updates to assumptions so policymakers can adjust contribution rates as needed to fund the retirement benefits earned by members. The legislature has the authority to revise the rates and assumptions adopted by the Pension Funding Council but is not required to do so. Law Enforcement Officers’ and Fire Fighters’ Retirement Plan 2 (LEOFF) is different; it has a retirement board that fills the role of the SCPP and the PFC.
Here are some answers to questions customers have been asking about employer contributions:
Where can I see what my employer is contributing?
For detailed information on both employer and member contribution rates, see the Contribution Rate Tables in the DRS Employer Handbook. One thing to note: the actual contributions are invested in the trust fund and are not viewable in your account, but you can see them on your paystub.
Can I withdraw the contributions from my employer?
No. The only way you receive your employer’s contributions is by receiving a monthly retirement pension from DRS.
Do employers provide matching funds for the Deferred Compensation Program (DCP)?
No. State employers do not offer matching funds in DCP. Although there are some local governments that offer matching funds to DCP or their own separate 457(b) or similar 401(k) or 403(b) plans.
When do you get employer contributions?
The only way you get your employer’s contributions is by receiving a monthly retirement pension from DRS.
How are employer contributions different for Plan 2 and Plan 3?
While both plans include employer contributions, Plan 2 is a 2% pension benefit plan, and Plan 3 is a 1% pension benefit plan.
Plan 2: Once Plan 2 members meet age and service requirements and have applied for retirement, they’ll receive a guaranteed monthly benefit for their lifetime. Their benefit is based on years of service credit and the pay they’ve earned.
Plan 2 is funded by mandatory contributions members and employers make. The Washington State Investment Board (WSIB) invests those contributions. Member contributions are deducted from the member’s pay. Contribution rates can change every two years, based on the plan’s funding needs.
Plan 3: There are two parts that make up Plan 3. The 1% pension benefit part of Plan 3 is funded by mandatory contributions made by employers and invested by the WSIB. Plan 3 members also have an investment account that is performance dependent. They choose their investment program and contribution rate for the investment part of their plan. Once chosen, the investment account rate is permanent unless they change employers.
All DRS pension benefits are guaranteed and are not dependent on investment performance.
