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 2024 COLA percentages by retirement date and plan. When will I receive the 2024 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 percentages 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? Certain retirees in Plan 1 of the Public Employees’ Retirement System and Plan 1 of the Teachers’ Retirement System (PERS 1 and TRS 1) will receive a one-time benefit increase in July 2024 as a result of House Bill 1985 (pending the governor’s signature). More about COLAs [reblex id='14232']

These are the tax questions we’re asked most often. Keep in mind you’ll need to work with a tax advisor if you have questions beyond the information we can provide. DRS and the investment record keeper Voya are not able to offer tax advice. Will my monthly DRS pension payments be taxed? Yes. Whether you are in Plan 1, 2 or 3, your retirement contributions are generally deducted from your before-tax salary. This means these amounts have not been federally taxed. When you withdraw these funds, you will pay federal income tax on the money you receive. When we issue payment, DRS withholds any required IRS federal income taxes for your distribution type. Will Social Security taxes be withheld from my pension or DCP payments? No. Since you pay Social Security taxes when you make pension and DCP contributions into those accounts, Social Security taxes will not be withheld from those payments when they are paid to you in retirement. Any benefits you expect to receive from Social Security will not be impacted by your pension or DCP income. How do I change my pension withholding amount? You can change your withholding amount by completing a W4P form.  Use this form for periodic (monthly/annual) payments. You can send this to the DRS mailing address (Department of Retirement Systems, PO Box 48380, Olympia, WA 98504-8380). View this short W4P Withholding video for tips on using the withholding calculator to estimate your tax withholding amount. Will my Plan 3 investment withdrawals be subject to income tax? Yes. You make these contributions before tax and you will owe federal income tax for these payments when you receive them. Depending on the type of withdrawal, we will withhold a percentage required by the federal government. Sometimes customers ask whether their Plan 3 contributions can be made as Roth, or taxed contributions. The answer is no. Plan 3 is a governmental 401(a) hybrid plan with a pension and investment. The 401(a) does not allow taxed contributions. If you want to make Roth contributions, check out DCP. Will my DCP withdrawals be subject to income tax? If your contributions were pretax, yes. These withdrawals will have federal income tax. October 2023, DCP introduced a Roth option. With DCP Roth, you will pay the tax when you make the contribution. As long as you meet withdrawal requirements, DCP Roth withdrawals will be tax-free. The tax-free requirements include a five-year holding period from the year of your first contribution and a minimum age of 59½. If you withdraw before meeting these requirements, any investment earnings will be taxed. More about DCP. What tax form will I receive in retirement? While you are employed, you receive a form W-2 for tax season. After you retire, the form you receive is a 1099-R. You can download this form from your online account each tax season. You will also receive a copy in the mail, so it is important to keep your contact information up to date—even in retirement (update your address online or use this form). If you have DCP or Plan 3 investments in addition to a DRS plan pension, you will also receive a 1099-R form for any withdrawals you make from those accounts. You also might want to read this article about deductions in retirement, or listen to this podcast episode. If I live in another state, will state income tax be withheld? Washington does not have state income tax, and outside of DCP withdrawals, DRS does not withhold state income tax. If you live in a state with state income tax, you will be responsible for determining any additional taxes owed when you receive a withdrawal or monthly pension payment. As of March 2024, there are nine states that do not have state income tax: Washington, Texas, Florida, New Hampshire, Tennessee, Wyoming, Alaska, South Dakota and Nevada. If you aren't sure where you will live when you retire, add this information to your retirement planning. How can the Washington Deferred Compensation Program (DCP) help you save on taxes? It depends on whether your DCP contributions are pretax or Roth. Pretax contributions lower your overall taxable income in the year you make the contributions. Roth contributions are taxed when you make them, but tax-free in retirement when you meet the minimum requirements. Find out more about the differences between the DCP options. There is also something called the Federal Tax Savers credit where you can write off a portion of your annual DCP contributions if you qualify. Visit the IRS website to find out more about this credit. If your employer doesn't offer Washington's DCP, find out what retirement savings options you do have, such as a 457 or 403b. Or look into opening a traditional or Roth IRA. [reblex id='14232']

Changes are coming to the Socially Responsible Investment (SRI) Balanced Fund  for those with an investment account in DCP, Plan 3 or JRA. In April 2024, the SRI changes from a balanced fund – invested in both stocks and bonds – to a new SRI that solely invests in stocks. This represents higher potential long-term return but also more risk, more volatility and less protection in down markets. Aren’t sure whether an all-stock approach is right for you? Contact a financial advisor, or learn more about how stocks and bonds differ at forbes.com/advisor/investing/stocks-vs-bonds. Those who are invested may move any or all their funds to other investment options prior to the change. They also have the option to move funds from the new SRI fund to other investment options after the change. Managed by AllianceBernstein, the new Socially Responsible Equity Fund’s strategy uses the UN Sustainable Development Goals to identify and invest in key sustainability themes. The 17 goals address a range of social needs while also tackling climate change and environmental protection. Learn more at sdgs.un.org/goals. If you’re a DCP, Plan 3 or JRA customer who plans on investing or remaining invested in the SRI, it's important to know there are fees associated with the plan’s services and investments. Investment details and associated fees are included within each fund’s fact sheet. Just select your plan at drs.wa.gov/plan and choose “Available Investments” in the table of contents on the left side of the page for a full list of fund fact sheets. Want to make a change? You can change your investment selections at any time through your online account (drs.wa.gov/login) or by contacting Voya at 888 -327 -5596. For questions about these changes, please contact Voya directly. [reblex id='14232']

Do you have ideas for making our communications clearer? We are looking to build a bank of members and retirees to participate in upcoming focus groups designed to improve our systems and how we communicate with you. What will we ask you to do? We may ask you to review benefit information – such as letters or other materials – navigate the DRS website or chime in on the best ways to reach you. We may also ask what information you’d like to see when it comes to growing your retirement. Who are we looking for? We’re looking for active and retired state employees, teachers, first responders and employees of local municipalities – anyone who has a retirement account managed by the Washington State Department of Retirement Systems. What’s the time commitment? We estimate that each session will last about an hour. They may be in-person or via a Zoom webinar. If you join our focus group pool, you can choose the topics that are most relevant or most important to you. You will not be required to join them all. We’re anticipating holding focus groups periodically over the next 3 years. How do I join? Please send an email with your name and the best way to reach you. Let us know you want to participate, and which retirement system you belong to (PERS, SERS, TRS, PSERS, LEOFF, WSPRS and Judges). You can also share any retirement topics you’re most interested in. Join the focus group pool by emailing drs.communications@drs.wa.gov. For security reasons, please do not include personal information (such as your Social Security number). We are unable to answer questions you submit here. For account help, contact DRS directly. Thank you for your interest in helping us improve; we look forward to learning from you. [reblex id='14232']