Plan 3 members, whether you’re TRS 3, PERS 3, or SERS 3, get a combination benefit that’s genuinely rare: a small guaranteed pension you don’t pay a dime for, plus a forced savings account that builds real wealth over a career. Here’s what Plan 3 actually gives you and how the pieces fit together.
The Guaranteed Pension: 1% a Year, Completely Free
Plan 3 gives you a guaranteed pension of 1% for every year you work, based on the average of your highest five years of salary. Work 30 years and you’re guaranteed 30% of your top-five average salary for the rest of your life. On a $70,000 average salary, that’s $21,000 a year, guaranteed, no matter what the stock market does.
Here’s the part that stands out: this piece of the benefit is entirely free. You don’t contribute anything toward it. Compare that to most private-sector jobs, where a 401(k) is the whole retirement plan and there’s no guaranteed paycheck waiting for you at all. Just by showing up to work, Washington state Plan 3 members earn this benefit on top of whatever else they save.
The Forced Savings Feature
The second piece of Plan 3 is a defined contribution account, essentially your own personal investment account inside the plan. Every Plan 3 member is automatically enrolled at a 5% contribution rate, and you can elect to contribute up to 15% instead. That money comes out of your paycheck every month and gets invested for your future.
This matters more than it might seem, because a lot of people simply don’t start saving early enough on their own. By building the saving into the paycheck automatically, Plan 3 members often end up with meaningfully more saved by retirement than they would have managed alone. Here’s roughly what that looks like over a 30-year career on a $60,000 salary, assuming a 7% average annual return.
| Contribution Rate | Annual Contribution | Approximate Value After 30 Years |
|---|---|---|
| 5% (default) | $3,000 | $283,000 |
| 15% (maximum elected) | $9,000 | $850,000 |
It’s not unusual to see Plan 3 members retire after 30 years with $300,000 to $500,000 or more built up in this account, largely because the saving habit was built in from day one rather than left up to willpower alone.
There’s a behavioral reason this works so well. Most people intend to save for retirement, but life gets in the way, a car needs repairs, a vacation comes up, and the “I’ll start next year” habit quietly repeats for a decade. By taking the decision out of your hands at a 5% default, Plan 3 sidesteps that pattern for the baseline amount, while still leaving room for you to be more aggressive if you choose to be.
You Control How the Investment Account Is Invested
Unlike the guaranteed pension portion, your defined contribution account is invested based on choices you make. You can typically choose from a range of options, from more conservative fixed-income funds to more growth-oriented stock funds, or a mix of both that adjusts automatically as you get closer to retirement.
How you invest this account matters. A portfolio that’s too conservative early in your career can leave meaningful growth on the table over 20 or 30 years, while a portfolio that’s too aggressive right before retirement can expose you to a poorly timed downturn. This is one area where it’s worth periodically checking that your investment mix still matches how many years you have left until retirement.
Your Pension Still Grows Even If You Leave Early
Here’s a lesser-known feature of Plan 3: if you separate from service before retirement age, but after working at least 20 years, your pension benefit doesn’t just sit frozen. It keeps growing by 3% per year until you actually start collecting it.
Say you work 20 years and then leave to do something else at age 55. You’ve earned 20% of your top-five average salary, which we’ll say works out to $1,000 a month. That $1,000 doesn’t just wait for you. It grows by 3% every year until you turn 65 and start collecting.
| Age | Monthly Benefit |
|---|---|
| 55 (separation) | $1,000 |
| 60 | $1,159 |
| 65 (start collecting) | $1,344 |
By waiting the full 10 years, that same 20-year benefit grows by about 34%, entirely from this built-in increase. This is easy to miss if you leave state service early and forget to factor in how the benefit continues working for you in the background.
The TAP Annuity Option
Once you reach retirement, you also have the option to convert some or all of your defined contribution balance into a TAP annuity through Washington state. Instead of managing that lump sum yourself, you trade it for a guaranteed lifetime payment on top of the 1% pension you’ve already earned.
This is worth considering if you’d rather have steady, predictable income than manage market risk on your own in retirement. You’re not required to use the state’s TAP annuity specifically. You could also use that lump sum to purchase an annuity from a private company instead, so the choice of who to buy it from, and whether to buy one at all, is entirely yours.
How Plan 3 Compares to Plan 2
Plan 2 members get a bigger guaranteed pension, 2% per year instead of 1%, but no investment account and no forced savings feature built in. Plan 3 members get a smaller guaranteed pension, but they also get an investment account that they control, contribute to, and can grow well beyond what the pension alone provides.
| Plan 2 | Plan 3 | |
|---|---|---|
| Pension multiplier | 2% per year | 1% per year |
| Employee cost for pension | Required contribution (~7-8%) | Free |
| Investment account | None built in | Yes, 5-15% contribution |
| Who controls investment choices | Not applicable | The member |
Neither structure is automatically better. Plan 2 leans more heavily on guaranteed income, while Plan 3 splits the difference between a smaller guarantee and a personal account you have more control over. If you’re deciding between the two, or trying to make the most of whichever one you’re already in, it helps to look at both side by side rather than in isolation.
The Bottom Line: What Plan 3 Gives You
Pulling it all together, here’s the short version of what makes Plan 3 valuable.
- A guaranteed pension of 1% times your years worked, with no cost to you
- An investment account you control, with a 5% default contribution you can raise to 15%
- Pension growth of 3% per year if you separate early with at least 20 years of service
- The option to convert your investment balance into guaranteed lifetime income through a TAP annuity
- Flexibility to invest more conservatively or more aggressively based on your own timeline
Where Plan 2 members lean almost entirely on their guaranteed pension, Plan 3 members share the responsibility with the state. That split can work out very well, but only if you actually engage with the parts you control, namely your contribution rate and your investment choices.
Common Mistakes Plan 3 Members Make
The first mistake is staying at the default 5% contribution rate without ever revisiting it. If your budget allows for more, pushing toward the 15% maximum can make a dramatic difference by the time you retire, as the earlier table shows.
The second mistake is forgetting about the 3% annual growth on your pension benefit after leaving service early. Some people assume once they leave, that piece is locked in place, when it’s actually still working for them until they start collecting. That misunderstanding sometimes leads people to start collecting their benefit earlier than they need to, missing out on years of built-in growth they didn’t realize they still had coming.
The third mistake is not comparing the TAP annuity against other options before committing. An annuity trades flexibility for guaranteed income, which is a great fit for some people and not the right choice for others. It’s worth running the numbers both ways before deciding.
The fourth mistake is setting the investment account allocation once at hire and never looking at it again. A mix that made sense at age 25 usually isn’t the right mix at age 60. Reviewing it every few years, or at least whenever your life circumstances change significantly, keeps your investment risk lined up with how close you actually are to needing the money.
Plan 3 gives you a strong combination of guaranteed income and personal savings, but getting the most out of it means being intentional about your contribution rate and understanding how each piece works. Small decisions made consistently over a full career, like your contribution rate and your investment mix, tend to matter more than any single big move you make right before retirement. If you want help reviewing your own numbers, you can schedule a personal meeting and we’ll go through it together.
Frequently Asked Questions
Do I have to contribute anything toward my Plan 3 pension?
No. The 1% guaranteed pension portion of Plan 3 is entirely funded by the state. Your own contributions go toward the separate defined contribution investment account.
What’s the default contribution rate for the investment account?
You’re automatically enrolled at 5%, and you can elect to increase that up to 15% of your paycheck.
What happens to my pension if I leave state service before retirement age?
As long as you’ve worked at least 20 years, your pension benefit continues growing by 3% a year until you start collecting it, even after you’ve separated from service.
What is a TAP annuity?
It’s an option to convert some or all of your Plan 3 defined contribution balance into a guaranteed lifetime payment through Washington state, on top of your 1% pension benefit.
Am I required to use the state’s TAP annuity instead of a private one?
No. You can use your defined contribution balance to purchase the state’s TAP annuity or one from a private insurance company. The choice, including whether to buy an annuity at all, is yours.
Should I increase my contribution above the 5% default?
It depends on your budget, but increasing your contribution rate, even gradually, can meaningfully grow your investment account by retirement, as shown in the comparison between the 5% and 15% contribution levels above. If you can afford to increase it, it’s generally worth doing.
P.S. Plan 3 rewards people who take the driver’s seat on their own contribution rate. Come learn alongside other Washington state employees figuring out how to make the most of both halves of this plan.
