PERS 1 COLA Election Washington: Plan 1 Cost-of-Living Adjustment

PERS 1 and TRS 1 retirees in Washington face a decision that most Plan 2 and Plan 3 members never have to think about: whether to take a permanent reduction in their starting pension benefit in exchange for an automatic annual cost-of-living adjustment.

Plan 1 was closed to new entrants on October 1, 1977, so every member still weighing this choice has decades of service behind them. The stakes are straightforward but the math is personal, and the election is permanent once made at retirement.

How the Plan 1 COLA Election Works

Unlike Plans 2 and 3, where a COLA indexed to the Seattle CPI (capped at 3% annually) kicks in automatically after a full year of retirement, PERS 1 and TRS 1 retirees receive no automatic cost-of-living adjustment unless they elect one at retirement.

The election works like this: at the time you file your DRS retirement application, you choose to reduce your initial monthly benefit by a fixed percentage. In exchange, your pension receives an annual adjustment based on the Consumer Price Index (CPI), capped at a 3% increase or decrease and never reduced below your initial benefit amount. The reduction is permanent—it applies from your very first check—and the COLA compounds annually.

If you skip the election, your monthly pension stays flat at the unreduced amount forever, unless the Washington State Legislature enacts an ad-hoc COLA adjustment.

Ad-Hoc Legislative COLAs

The Legislature has periodically approved one-time or temporary cost-of-living increases for Plan 1 retirees who did not elect the optional COLA. These are not guaranteed, not automatic, and not tied to any inflation index. They happen when the Legislature decides the state pension fund can support them.

Because these adjustments depend entirely on legislative action, you cannot plan around receiving them. Some years they appear; most years they do not.

The Math You Need to Run

The break-even calculation depends on three variables:

• Your unreduced monthly benefit — what DRS will pay without the COLA election
• The percentage reduction required for the automatic COLA
• How many years of retirement you expect — the longer you collect, the more the compounding COLA overtakes the reduction

A member with a higher starting benefit loses more dollars per month to the reduction. A member who retires at 65 and lives to 90 gets 25 years of compounding increases. A member who retires at 70 and lives to 78 gets only eight.

DRS will provide specific reduction percentages for your situation when you request your official benefit estimate. Run the numbers for your projected retirement length before making the election; the optional COLA is a permanent choice.

PERS 1 and TRS 1 Retirement Mechanics

Beyond the COLA question, Plan 1 operates under several rules that differ from Plans 2 and 3:

Benefit formula. Plan 1 uses a 2% multiplier applied to your highest 24 consecutive months of earnings (AFC). Plans 2 and 3 use the highest 60 consecutive months.

Service credit cap. Plan 1 carries a 30-year service credit cap for the standard formula calculation. Members who exceed 30 years can elect to stop making contributions and receive a refund of post-30-year contributions plus 7.5% interest upon retirement.

No early retirement factors. The 2008 ERF subsidies and the May 1, 2013 hire-date threshold apply only to Plans 2 and 3. Plan 1 members have their own age and service eligibility thresholds, which differ by system (PERS 1 vs. TRS 1).

Spousal consent and benefit options. Plan 1 retirees choose from the same four benefit options (Single Life, 100% Survivor, 50% Survivor, 66.67% Survivor) as all other plans. The spousal consent and notarization requirements are identical.

What to Do Before the Election Deadline

Request your official DRS benefit estimate through Online Account Access. The estimate will show your unreduced Option 1 benefit and the COLA election reduction amounts. Compare the two tracks over a 15-year, 20-year, and 25-year horizon.

If you have other inflation-protected income sources—Social Security (which has its own annual COLA), a spouse's pension, or investment income—the flat pension may make more sense. If your DRS pension is your primary retirement income and you expect a long retirement, the automatic COLA starts to look more valuable with each passing year.

The full COLA election mechanics, benefit option comparison worksheets, and the Plan 1 service credit rules are covered in the Washington DRS Retirement Guide.

See more Washington guides →