Nobody likes to think about it. But every one of us will die someday, and the people we leave behind will have to sort out what happens to our money. If you work for Washington State or a school district, a big part of that money is tied up in your DRS benefits.
I get questions about this all the time, especially at the start of each year. “If I die, does my spouse get my pension?” “What happens to the money I put in the TAP annuity?” “Do my kids get anything?” The answers depend on which plan you’re in and whether you had already started your pension.
This guide walks through it piece by piece. We’ll cover Plan 2, Plan 3, and the state’s annuities (like the TAP annuity). The same basic rules apply to pretty much every system: TRS, PERS, SERS, and LEOFF.
The two questions that decide everything
Before we get into the details, it helps to know that almost every answer comes down to two questions:
- Are you on Plan 2 or Plan 3? (Or did you buy a state annuity?)
- Did you die before you started collecting your pension, or after?
Think of it like a fork in the road. Before retirement, your family is mostly looking at a one-time check. After retirement, it depends on a choice you made on your retirement paperwork. Let’s take each path one at a time.
Plan 2: what happens if you die
First, a quick refresher on how Plan 2 works. On Plan 2, you pay into the state pension system out of every paycheck. Depending on your system, that’s around 7% to 8% of your pay each year. There’s no separate investment account. All of your money goes toward the pension.
Plan 2: death before you start collecting
If you die before your pension starts, your named beneficiary can get a refund. That refund is all the contributions you made over your career, plus any interest those contributions earned.
Here’s the catch. It’s a lump sum, and that’s the end of it. There’s no monthly pension that keeps going to your family. They get one check.
That check is also pre-tax money. You never paid income tax on those contributions, so whoever withdraws it will owe tax on it. Your beneficiaries should know this before they cash it out, so they aren’t surprised by a big tax bill in April.
One note: DRS can have extra options in some cases, depending on things like your years of service and whether you’re married. The refund is the basic rule, but it’s worth checking your exact situation with DRS.
Plan 2: death after you start collecting
Once your pension has started, everything depends on the survivor option you picked when you retired. You make this choice on your retirement application, and you can’t go back and change your mind later.
- Option 1 is the full benefit with no survivor. You get the biggest monthly check. When you die, the pension stops. Nobody else gets it.
- Options 2, 3, and 4 are survivor options. You take a smaller monthly check while you’re alive. In exchange, your named survivor keeps getting some of your pension after you die. How much they get depends on which option you picked.
A simple way to picture it: Option 1 is like buying a single movie ticket. Options 2, 3, and 4 are like buying a ticket for two. The two-person ticket costs more per person, but your partner gets to stay for the whole show.
Plan 3: what happens if you die
Plan 3 is built differently, so the death rules are different too. Plan 3 has two parts:
- The pension part. This is paid for entirely by Washington State. You don’t put a dime into it.
- The investment part. This is your own money. It comes out of your paycheck and gets invested.
Plan 3: death before you start collecting
If you die before your pension starts, your beneficiary gets your investment account. That’s it. They don’t get anything from the pension side.
Why? Because you never paid into the pension part. The state funded all of it. So even if you were technically vested, the pension money isn’t yours to pass on before you start collecting it. The investment money, on the other hand, was always yours. You put it in, so it goes to your beneficiary.
Just like Plan 2, this money comes out pre-tax. Your beneficiaries will owe income tax when they withdraw it. As with Plan 2, there can be extra options in some situations, so check your details with DRS.
Plan 3: death after you start collecting
After your pension starts, Plan 3 works the same way as Plan 2. If you chose Option 1, the pension stops when you die. If you chose Option 2, 3, or 4, your survivor keeps getting part of your pension, based on the option you picked and how the math worked out.
This is why the survivor choice is such a big deal. It’s one of the most important decisions you’ll make before you start collecting your pension. Once it’s made, it’s locked in.
Plan 2 vs. Plan 3 death benefits side by side
Here’s everything so far in one table:
| Situation | Plan 2 | Plan 3 |
|---|---|---|
| Die before collecting pension | Beneficiary gets a refund of your contributions plus interest (one lump sum) | Beneficiary gets your investment account only (nothing from the pension) |
| Die after collecting, chose Option 1 | Pension stops | Pension stops |
| Die after collecting, chose Option 2, 3, or 4 | Survivor keeps getting part of your pension | Survivor keeps getting part of your pension |
| Taxes on lump sum | Pre-tax, so beneficiary owes income tax | Pre-tax, so beneficiary owes income tax |
What happens to a state annuity (like TAP) when you die
Now let’s talk about the annuities you can buy from the state, like the TAP annuity or the TRS and PERS annuities. The state has several different ones, but they all have the same kind of death benefit.
Remember what an annuity does. You hand over a chunk of money, and in return you get a guaranteed monthly income for the rest of your life.
The death benefit follows a simple formula: what you put in, minus what you’ve taken out. Whatever is left over goes to your beneficiary.
A worked example with the TAP annuity
Let’s say you put $500,000 into the TAP annuity. A few years go by. You’ve been getting your monthly checks, and by now they add up to $100,000. Then you die.
| Step | Amount |
|---|---|
| Money you put into the TAP annuity | $500,000 |
| Monthly income you received before you died | – $100,000 |
| Amount left for your beneficiary | $400,000 |
Your beneficiary would get the remaining $400,000. Like the pension refunds, this money is pre-tax, so they’ll owe income tax when they take it out. A $400,000 withdrawal in a single year could push them into a much higher tax bracket, so it’s worth planning how and when they take it.
The exception: joint payout annuities
On the annuity application, you can choose a joint payout. That means the income is set up for you and your spouse (or another named person).
If you picked a joint payout and you die first, your spouse doesn’t get a lump sum. Instead, they keep getting monthly income, just like a pension survivor option. They won’t have the choice to cash out the account while they’re still alive and receiving payments.
Once both of you have died, the same formula kicks in. If there’s still money left from what you originally put in that hasn’t been paid out yet, the rest goes to your surviving beneficiaries. At that point, they can move the money out.
Why this matters for your retirement plan
Most of these rules come down to choices you make ahead of time. If you’re married, the survivor option you pick when you retire decides whether your spouse keeps getting a paycheck after you’re gone. Picking Option 1 to get a bigger check can feel great at first. But if your spouse counts on that income, it could leave them in a tough spot.
On the other hand, if you’re single or your spouse has plenty of income of their own, a survivor option might mean giving up money for no good reason. There’s no one right answer. It depends on your family, your health, and what other savings you have.
A few things you can do right now:
- Log into your DRS account and check who is listed as your beneficiary. Make sure it’s current, especially after a marriage, divorce, or new baby.
- If you’re close to retirement, sit down with your spouse and talk through the survivor options before you file your paperwork.
- If you have a TAP or other state annuity, look at whether you chose a single or joint payout.
- Tell your beneficiaries that anything they inherit from these accounts is pre-tax, so they plan for the tax bill.
If you’d like help thinking through your own numbers, you can schedule a personal meeting with us here. We work with Washington State employees every day, and these survivor decisions are some of the most common questions we help with.
Frequently Asked Questions
If I’m on Plan 2 and die before I retire, does my family get my pension?
Generally, no. Your named beneficiary gets a refund of your contributions plus interest as one lump sum. There’s no ongoing monthly pension in that case, though DRS may have extra options depending on your service and marital status.
If I’m on Plan 3 and vested, why doesn’t my beneficiary get the pension?
The Plan 3 pension is paid for 100% by Washington State. You never contributed to it. If you die before you start collecting, your beneficiary gets your investment account, which is the part you funded.
What happens to my pension if I chose Option 1?
Option 1 has no survivor benefit. When you die, the pension stops. This is true for both Plan 2 and Plan 3.
How much does my beneficiary get from the TAP annuity?
They get what you put in minus what you’ve already received. If you put in $500,000 and received $100,000 in payments, your beneficiary would get $400,000. If you chose a joint payout, your spouse keeps getting monthly payments first, and any leftover balance goes to your beneficiaries after you’ve both died.
Do my beneficiaries pay taxes on what they inherit?
Yes. The refunds from Plan 2, the investment account from Plan 3, and the leftover annuity balance are all pre-tax money. Your beneficiaries will owe income tax when they withdraw it.
Do these rules apply to PERS, TRS, SERS, and LEOFF?
The basic rules in this article apply to pretty much all of the state’s plans. The exact contribution rates and some details differ by system, so check your plan’s specifics with DRS.
The short version
For Plans 2 and 3, if you die before you start collecting your pension, your beneficiary gets the money you put in. On Plan 2 that’s your contributions plus interest. On Plan 3 it’s your investment account. After you’ve retired and started collecting, the pension either stops with you (Option 1) or your survivor keeps getting part of it (Options 2, 3, and 4).
For the state annuities, your beneficiary gets what you put in minus what you took out. If you chose a joint payout, your survivor keeps the monthly income first, and whatever is left goes to your beneficiaries after you’ve both died.
It’s not a fun topic. But ten minutes spent checking your beneficiaries and understanding your survivor options now can save your family a lot of confusion later.
P.S. It’s free to join. Over 150 members are already in it, plus you’ll get free courses and resources to help you plan your retirement with confidence.
