Wash. Admin. Code § 415-02-178

Current through Register Vol. 24-21, November 1, 2024

Section 415-02-178 - May I purchase an annuity?

(1)Am I eligible to purchase an annuity? You are eligible to purchase a defined benefit plan annuity at the time of retirement if you are a member of TRS (RCW 41.32.067), WSPRS (RCW 43.43.315), LEOFF Plan 1 (RCW 41.26.105), LEOFF Plan 2 (RCW 41.26.463), PERS (RCW 41.40.131), SERS (RCW 41.35.235), or PSERS Plan 2 (RCW 41.37.295). This annuity provides a lifetime increase to your monthly benefit. (For purchasing an annuity from your Plan 3 defined contribution account, refer to WAC 415-111-320.)

(2)Can I purchase an annuity if I take a lump sum payment? You may not purchase an annuity if you elect a lump sum payment instead of a monthly benefit.

(3)Are there limits to the annuity amount I may purchase? There is no maximum limit on the purchase amount. If you are a LEOFF or WSPRS member the minimum purchase amount is $25,000. If you are a PERS, SERS, or PSERS member, the minimum purchase amount is $5,000. There is no minimum required for TRS members.

(4)When can I apply to purchase an annuity? You must submit your request to purchase an annuity to the department at the time you apply for retirement.

(5)How much will my monthly benefit increase if I purchase an annuity? The increase in your monthly benefit will be calculated using the following formula:

Purchase Annuity Amount x Annuity Factor = Increase to Monthly Benefit

The annuity factor is determined by your age on the later of your retirement date or the date your retirement application is submitted to the department.

Example: John is a member of LEOFF Plan 2. He applies for retirement and requests to purchase an annuity for $45,000. For illustration purposes in this example only, we will use 0.0051025 as the corresponding annuity factor (factors change periodically). John's monthly benefit will increase by $229.61 per month, calculated as follows:

Purchase Annuity Amount x Annuity Factor = Increase to Monthly Benefit

$45,000 x 0.0051025 = $229.61

(6)How and when do I pay for the annuity? The department will generate a bill to you for the cost of the annuity after we receive your request to purchase.

(a) For all TRS members, payment may be made by making a one-time personal payment (however, IRS regulations limit the amount of aftertax dollars you may use); and you may roll over funds from another tax-deferred retirement account. To purchase the annuity with Roth dollars, you must request a distribution first, then pay the bill with a check.

(b) For LEOFF, WSPRS, PERS, SERS, and PSERS members, the annuity must be purchased by rolling over funds from an "eligible retirement plan" which is a tax qualified plan offered by a governmental employer (like the state of Washington's deferred compensation program) or rolling over tax-deferred funds that originated with a governmental employer. You cannot use a Roth balance (if applicable) for this payment. You can only use dollars from your pretax balance. The annuity payment is taxable income when you receive it.

(c) For PERS Plan 1 or TRS Plan 1 members, Post-30 year contributions withheld under the provisions of RCW 41.40.191 or 41.32.4986 respectively, may not be used to purchase the annuity.

(d) Payment must be made in full by 90 days after the later of your retirement date or bill issue date. Your annuity will begin once your payment is received and your retirement is processed. The effective date for the start of this benefit is the later of your retirement date or the payment in full date plus one day.

(7)What are the survivor options for my annuity? The survivor option you designate for your retirement benefit will also be used for your annuity purchase, with the exception of WSPRS Plan 1 Option A and LEOFF Plan 1.

If you are a WSPRS Plan 1 member who chose Option A or you are a LEOFF Plan 1 member, your annuity will be paid for your lifetime only. Under these two survivor options, even though the retirement benefit may be paid over two lifetimes, there is no actuarial reduction. No actuarial reduction can be applied to the annuity, therefore the annuity can only be treated as if a single life option was chosen.

If you choose a benefit option with a survivor feature and your survivor dies before you, your monthly annuity payment will increase to the amount it would have been had you not selected a survivor option.

(8)Will I receive a cost of living adjustment (COLA) on the portion of my benefit that is based on the purchased annuity? If you are eligible for an annual COLA adjustment on your monthly benefit, you will receive the same COLA percentage on this annuity.

(9)If I purchase an annuity and then return to work, how will the annuity portion of my benefit be affected? You will continue to receive the annuity portion of your monthly benefit payment even if you return to work, or return to membership.

(10)If I retire then return to membership and reretire, may I purchase another annuity? Yes. You may purchase another annuity when you reretire provided you are reretiring from an eligible plan that allows an annuity purchase.

(11)May I purchase an annuity from more than one retirement plan?

(a) If you are a dual member under chapter 415-113 WAC, Portability of public employment benefits, and you combine service credit to retire as a dual member, you may purchase an annuity from each dual member plan that allows an annuity purchase.

(b) If you are not a dual member and retire separately from more than one plan you may purchase an annuity from each eligible plan that allows an annuity purchase.

(12)What happens to my annuity upon my death (and the death of my survivor, if applicable)?

System Plan	Benefit Option	Annuity Payment Upon Death
TRS 1	Maximum Option	At the time of your death the annuity payment stops.
TRS 1, TRS 2, TRS 3, LEOFF 2, WSPRS 2, PERS 1, PERS 2, PERS 3, SERS 2, SERS 3, and PSERS 2 WSPRS 1 LEOFF 1	Option 1 (single life) Option A Automatic Survivor	At the time of your death the annuity payments stop. The original amount you paid for your annuity, less any payments you have received, will be paid to your designated beneficiary.
TRS 1, TRS 2, TRS 3, LEOFF 2, WSPRS 2, PERS 1, PERS 2, PERS 3, SERS 2, SERS 3, and PSERS 2 WSPRS 1	Option 2, 3, 4 (joint life) Option B (joint life)	At the time of your death, payments will continue to your survivor. At the time of your survivor's death, the original amount you paid for your annuity, less any payments you and your survivor have received, will be paid to your designated beneficiary.

Wash. Admin. Code § 415-02-178

Adopted by WSR 16-04-048, Filed 1/27/2016, effective 2/27/2016

Amended by WSR 17-07-021, Filed 3/7/2017, effective 4/7/2017

Amended by WSR 20-01-145, Filed 12/17/2019, effective 1/17/2020

Amended by WSR 21-22-047, Filed 10/28/2021, effective 11/28/2021

Amended by WSR 23-18-025, Filed 8/25/2023, effective 9/25/2023