Bummer. And here I thought plan 3 couldn’t get any worse. Still worth double checking though.Yes, you're (partially) correct. I believe (almost 100% sure) she was in TRS Plan 3 (1/2 pension, 1/2 investment); however, that only becomes vested after 10 years of service. My understanding is that she had only completed eight years. It is probably worth making a phone call to confirm this information. I asked her if she had any desire to put in two more years, and... well, that was a clear no. Especially with the timing and all.. but I have a feeling her answer may have been the same even if I had asked her prior to all of this happening.Is she possibly also vested in a WA retirement system? (5 years in PERS/TRS/LEOFF, etc). As if she has WSIB TAP, that is usually tied into some kind of pension as well, small though it might be, and might not be able to access it without reduction until age 65- but WA does index at 3% per year in the meantime at least. I know Plan 3 is half pension, half investment, for example, with your default funds going into the TAP fund, which is why I ask. At some point she likely had her own pension lined up, but may not have vested- worth asking about as she might have not accounted for it one way or the other.
I will say that small chunk with the WSIB TAP she has is a well diversified fund, but the fee on it is rather high in my opinion. It is kind of a pain to dump it, compared to other online fund access/changes someone can do with WA DRS stuff, but she should be able to do so if she wants by submitting written notice, and then putting it in a lower fee fund if desired. The WA DRS S&P 500 fund by Blackrock is practically zero fee by comparison. If it is that small of a percent of the portfolio I would change it out.
Are you suggesting that it may be worth it to keep it with the State of Washington retirement system for now, but have them switch it to a more low-cost fund (e.g., the Blackrock S&P fund)? The reason for keeping it with them is that it would be worth it in the off-chance that she goes back and teaches in public schools for two years, as an additional defined benefit would be coming her way. If there is zero chance of returning to public ed, doesn't rolling the funds into her pre-tax Rollover IRA at Fidelity make sense, though?
Thanks. Will try to call DRS in the next few weeks.
But most likely, looks like good old TRS 3 plan strikes again…. Here is the vesting info:
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
(I pulled this off a UW website, as the state TRS 3 vesting graph actually has a typo where they plugged plan 2 info into the plan 3 spot).
So it kind of seems like she may indeed not be vested (yet) with the state and unlikely to fit either 5 year exemptions. Her 8 years = 8% earned so far, (if she added on enough to vest later), adjusted at 3% inflation rate per year from when she last worked. Kind of a chunk of change to give up, one reason I always say jumping pension plans can bite somebody. She could always do 2 years later if she wanted to lock down the pension I suppose, but at this point the state is just keeping all the funding from the defined benefit contributions. Ouch. Just another reason plan 3 sucks. It was the default for a while, but I think folks realized they could just do plan 2 and add some deferred comp, and end up a lot better off for less/same contributions potentially, so now plan 2 is the default again. Plan 3 usually locks new employees in at a rate from day 1, which is stupid as well, as most will choose the least contribution of 5% when just starting, and they can only change it when changing employers. Plan 3 basically just sucks compared to plan 2 in so many ways. (Probably you can guess which one my wife has!)
Her WSIB TAP funds are in the investment side, and she can withdraw that from the state plan and roll it over I think without it affecting her ability to gain vesting eligibility for the defined benefit side of the plan if she later goes back to work in a public teaching role. Or she can leave the funds with the state, and just move them around, like I said the TAP fund has a pretty high fee on it and they have much cheaper options. Voya is running the WA DRS investment side accounts currently, and TAP is the only fund you don’t have the ability to move anything into or out of without doing it via written notice, so it is just a weird fund there as well. And it is the default fund for plan 3 folks as well.
So she can change the allocation while leaving it with DRS/Voya, or roll it into something else, either way it won’t hurt her ability to later do 2 more years and get a (small) state pension if she does it. Just needs to decide if a 10% pension is worth doing 2 more years of public teaching I guess. Kind of a bummer to be that close and not get it, WA does give a COLA up to 3% per year as well, so it is a decent pension plan. On the other hand, if it was 8 years just at the starting pay up to year 8, her pay may not have amounted to that much and losing that 8% might be OK.
Statistics: Posted by MHA556 — Mon Oct 28, 2024 3:14 am