Plan 3 Investment Options Voya: Washington DRS Defined Contribution Choices

If you are in PERS Plan 3, TRS Plan 3, or SERS Plan 3, your retirement income comes from two sources: a defined benefit pension (calculated at 1% per year of service times your AFC) and a defined contribution account that you fund and direct through Voya Financial. The pension side is straightforward—DRS handles it. The investment account side is where the decisions pile up.

Contribution Rates

When you first entered Plan 3, you selected a contribution rate from Options A through F, ranging from 5% to 15% of your salary. Some employees chose during mandatory or elective enrollment windows years ago and have not revisited the decision since.

Your contribution rate determines how much of each paycheck goes into the defined contribution account. Unlike the defined benefit portion (funded by your employer), the DC account is entirely employee-funded. A higher rate means a larger retirement account balance but less take-home pay now.

Once set, you can change your contribution rate only when you change Plan 3-covered employers. Moving to another division or department within the same workplace does not count as changing employers.

Investment Funds and Allocation

Voya is the DRS record keeper for Plan 3 investment accounts. The investment choices include target-date Retirement Strategy Funds, self-directed investment options, and the Washington State Investment Board's (WSIB) TAP fund. You can change investment selections at any time through your account.

The WSIB TAP fund is a diversified investment option. This is separate from the TAP Annuity (described below), which is a distribution option you choose at retirement.

The key point: your investment returns are not guaranteed. Unlike the defined benefit pension, which pays a fixed formula regardless of market performance, your DC account balance depends on how much you contributed, how you invested, and how the markets performed over your career.

What Happens at Retirement

When you separate from DRS-covered employment, your DC account balance becomes available for distribution. You do not have to withdraw immediately—you can leave the balance invested with Voya while you decide on a strategy.

Your distribution options include:

• Systematic withdrawals — monthly, quarterly, or annual payments from the Voya account
• Lump-sum withdrawal — partial or full, subject to mandatory 20% federal tax withholding on cash distributions. An additional 10% IRS early withdrawal penalty may apply if you are under age 59½
• Direct rollover — transfer all or part of the balance to an IRA, 401(k), 403(b), or 457(b) without triggering immediate taxes
• TAP Annuity purchase — convert some or all of the balance into a guaranteed lifetime annuity through DRS/WSIB, with a fixed 3% annual COLA

Each option has different tax implications. Systematic and lump-sum withdrawals are taxed as ordinary income. Direct rollovers defer taxes until you withdraw from the receiving account. The TAP Annuity is taxed as pension income as you receive each monthly payment.

Required Minimum Distributions at Age 73

If you separate from Plan 3-covered employment at age 73 or older, DRS requires you to begin taking Required Minimum Distributions (RMDs) from your Plan 3 account. If you are still employed by the same DRS-covered employer, the minimum distribution requirement does not apply to your Plan 3 account.

RMDs are calculated based on your account balance and IRS life expectancy tables. A missed RMD can trigger a 25% IRS excise tax on the shortfall, reduced to 10% if corrected within the IRS correction window.

If you rolled your Plan 3 balance into an IRA, RMDs apply there too under the same age-73 threshold.

The TAP Annuity Option

The Total Allocation Portfolio Annuity deserves separate attention because it is unique to Washington's Plan 3. When you purchase a TAP Annuity, DRS converts your DC balance into a guaranteed monthly payment for life. DRS administers the annuity and WSIB invests the funds; it is not a private insurance contract.

The standout feature is a fixed 3% annual COLA. While the defined benefit pension COLA is indexed to the Seattle CPI and capped at 3% (meaning it can be lower in low-inflation years), the TAP Annuity increases by exactly 3% every year regardless of inflation.

There is a minimum purchase amount, and once you buy the annuity, the decision is irreversible. The monthly payment depends on your balance at the time of purchase and your age. Younger purchasers receive a lower starting payment (because the annuity must last longer) but benefit from more years of compounding 3% increases.

Making the Decision

The DC account is entirely separate from your defined benefit pension. You can take one strategy with the pension (choosing a benefit option) and a completely different strategy with the DC account. Many retirees combine approaches—rolling part of the balance to an IRA for flexibility while converting part to a TAP Annuity for guaranteed income with inflation protection.

For a detailed comparison of all distribution strategies and how they interact with your defined benefit pension payments, see the Washington DRS Retirement Guide.

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