TRS 3 retirement plan
At UW, the Teachers’ Retirement System (TRS) 3 retirement plan is generally available only to teaching faculty. For other employees, the equivalent is the PERS 3 retirement plan.
TRS 3 is a two-part, hybrid retirement plan that combines a traditional pension plan, where your receive a defined benefit at retirement, with investment options that work like a typical retirement plan, such as a 401(k).
Both parts of the TRS 3 retirement plan play a significant role in your income at retirement.
With the defined benefit part of the plan, you’re guaranteed a monthly benefit for the rest of your life once you meet the plan requirements and retire.
With the defined contribution part of the plan, you invest part of each paycheck into a retirement fund. When you retire, the amount you earn depends on the performance of your investments.
Enroll in TRS 3
New faculty (or faculty who are newly eligible for benefits) have 30 days from their start date to choose their retirement plan by electing either TRS 3 or the UW Retirement Plan (UWRP). Once you elect a plan you cannot change it.
To enroll in the TRS 3 retirement plan:
- Fill out the DRS Enrollment (PDF) form
- Submit the completed form to the Benefits office
Part 1: Your defined benefit
At retirement, your defined benefit makes up part of the income you receive from TRS 3. This income is guaranteed for the rest of your life. The formula for calculating your monthly retirement benefit is:
1% x service credit years x average final compensation
While this income is guaranteed, you’re not eligible to receive it until you’ve worked long enough to become vested.
When you become vested
Your defined benefit funds are fully vested once any of the following apply:
- You have 10 years of service credit
- You have five years of service credit, and you earned at least 12 months of that service credit after age 44
- You earned five years of service credit before July 1, 1996
The vesting period only applies to the defined benefit part of TRS 3. You always have access to your defined contributions.
Service credit is based on the number of hours you work each month and how long you have participated in the retirement plan. The UW reports your hours and earnings to the Washington state Department of Retirement Systems (DRS) every payday.
There’s no limit to the amount of service credit that you can earn. Plus, you keep your service credit if you leave your job. That way, you can continue to build your service credit should you return to work at UW or another state agency.
You earn service credit on a monthly basis. Generally, you need to work at least 90 hours per month to earn one month of credit. Twelve months of service credit equal a service credit year. In some cases, you can earn a service credit year for working a minimum number of hours during a nine-month-long “school year.”
Average final compensation
This is your average monthly salary calculated over the 60 consecutive months (five years) where your salary was the highest. In most cases, this is your final five years before retiring; though, some people may have higher salaries during other points in their career.
Suppose you’re 65 years old, and in 2017 after working at UW for 32 years, you’re retiring. This is what you would need to know to calculate your TRS 3 retirement income:
|Years of service credit:||32|
|Average final compensation:||$8,333.33 per month|
|Defined benefit retirement income:||$2,666.67 per month (0.01 x 32 x $8,333.33)|
Part 2: Your defined contribution
At retirement, part of your TRS 3 income comes from your defined benefit. The other part comes from your defined contribution. The amount you receive from this part depends on two factors: how much you’ve contributed over the years and how well your investments have performed.
You’re required to contribute a portion of your salary to your TRS 3 plan. When enrolling, you must choose from among six contribution options. Choose carefully, though, because once you enroll you can’t change your contribution percentage.
These contributions are automatically taken out of your paycheck on a pretax basis. This lowers your taxable income, which in turn lowers the amount of taxes your pay. Your contributions are then invested in your retirement fund.
|Options||You contribute from your paycheck:|
|B||5% to age 35
6% ages 35 – 44
7.5% age 45 and older
|C||6% to age 35
7.5% ages 35 – 44
8.5% age 45 and older
What’s your approach to investing for retirement? Whether you’re a hands-on investor or prefer a simpler target-date fund, you’ve got several options for investing your TRS 3 defined contribution.
For help determining which investing approach is best for you, visit the TRS Plan 3 investment page, which contains investment guides, fund descriptions, quarterly reports, and other retirement planning tips.
Leaving UW before you’re vested
Leaving your job at the UW before you’re vested affects each part of your TRS 3 plan differently.
Defined benefit funds
If you aren’t vested and you leave your job at UW, then you won’t be eligible to receive any portion of your TRS 3 defined benefit. You do, however, maintain the service credit that you’ve earned, which you can later use should you go back to work for UW or for another state agency.
Defined contribution funds
Once you leave your job at UW, you can either withdraw the funds from your TRS 3 investment account or leave them in the account.
There are IRS tax implications to withdrawing your contributions, so check with a tax advisor before withdrawing. In most cases, you can transfer your funds to a qualified retirement account, such as an IRA, without facing a tax penalty.
If you’re vested, you’re eligible to retire at age 65. You also have the option to retire earlier, but your defined benefit will be reduced. To retire early, you must be at least 55 and have 10 or more years of service credit. For full details about early retirement, read the TRS Plan 3 Handbook.
If you’re ready to start planning your retirement from UW, see preparing to retire with TRS 3.
Retirement plan loans
You can’t take out a loan from your TRS 3 funds or otherwise access your funds while you’re working at UW. You can only access your funds after you’ve left your job at UW or have retired from UW.