Retirement Badge #09: Separation of Employment-Retirement Badge #09

Retirement Badge #09 - PowerPoint

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This presentation explains what happens in Washington State DRS retirement plans when a school employee separates from employment, including cash-outs, withdrawing contributions, death benefits, beneficiaries, and disability retirement.<br /><br />“Separation” means ending employment with a DRS-covered employer and does not always mean retirement; employees should notify DRS promptly when retiring. Types of separation include voluntary resignation, retirement, layoff/reduction in force (RIF), and termination for cause. Voluntary resignation (leaving before retirement eligibility) stops service credit accrual and may allow leaving contributions in the system or withdrawing them (with possible tax consequences). Retirement is based on plan eligibility (age/service) and requires an application through DRS; it differs from voluntary separation because it starts a monthly retirement benefit. Layoffs/RIFs preserve rights to contributions and service credit but may affect retirement timing. Termination for cause can, in severe situations (e.g., criminal conviction), reduce or eliminate certain benefits, though contributions may still be withdrawable.<br /><br />The training defines “cash-outs” as lump-sum payouts of earned leave (vacation, sick, personal). Depending on district agreements, cash-outs may be directed pre-tax to VEBA or taken as cash; sick leave cash-outs may be calculated at a 4-to-1 rate. Cash-outs generally do not count toward Reportable Compensation or Average Final Compensation (AFC) for Plans 2 and 3, but for Plan 1, eligible cash-outs (up to 240 hours) may count as reportable compensation and potentially AFC if earned during the fiscal years used to compute AFC. VEBA may allow retirees to use tax-free funds for qualified out-of-pocket medical expenses.<br /><br />Separated members may withdraw contributions; doing so removes future benefit rights for Plans 1 and 2, while Plan 3 members can withdraw after separation without affecting future benefits. Service credit may be purchased back if returning to service, subject to deadlines and potentially high costs. Death benefits differ if death occurs while employed versus after retirement and depend on vesting and the benefit option chosen; beneficiaries should be kept updated in the employee’s DRS account. Disability retirement (Plans 2 and 3) requires vesting, medical documentation, and can take months to process. Resources and DRS contact information are provided.

Keywords

Washington State DRS

school employee separation

retirement plan benefits

withdrawal of contributions

cash-out of leave

VEBA medical account

service credit purchase back

death benefits and beneficiaries

disability retirement application

average final compensation AFC