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The University of Washington Retirement Options (UWRP, UW VIP, PERS)



As a graduate of the University of Washington, our firm is proud to work with several UW employees. Many of our clients at UW are physicians and other healthcare professionals.


The UW has a wide range of retirement benefit choices. For those looking to maximize these benefits, we wanted to outline a few actionable strategies.


Initial Retirement Plan Selection:


New hires have 30 days to select either the UW Retirement Plan (UWRP) or enroll in one of two pension choices offered by PERS (Public Employees’ Retirement System Plan). The UWRP is a 403(b) defined contribution plan. This means employees are in charge of selecting their investments. Your contribution and match are determined by your age. Contributions and matching funds are fully vested (owned) if you leave UW at any time.



The other option is enrolling in one of the pensions. There are 2 pension options, PERS 2 and the newer PERS 3. With PERS 2, you do not get to select how to invest the plan, while PERS 3 allows you to choose your investment allocation. The PERS 2 contribution from employees is 6.36% per paycheck, and UW contributes as well. The formula to determine your retirement benefit is (2% x service credit years x average final compensation). The PERS 2 funds are fully vested after 5 years of employment. However, if you leave before 5 years, you can access your cumulative 6.36% contributions in retirement.


PERS 3 is a hybrid pension plan. It’s a combination between the UWRP & PERS 2. PERS 3 allows you to pick your contribution, and it can range from 5% to 15% per paycheck. Contributions are irrevocable, meaning you cannot later adjust how much you contribute. Similar to the UWRP, you are allowed to customize and pick your specific investment allocation. The UWRP choices are on the Fidelity portal, while the PERS 3 is on the WA Department of Retirement Systems (DRS) portal.


The pension or defined benefit portion of PERS 3 is similar to PERS 2, but instead of 2% * your service credit, it is 1% of your service credit. You are always vested in your contributions if you leave early, but the vesting of the defined benefit portion of PERS 3 is a 10-year requirement. There is an exception if you have 5 years of service after the age of 44.


Which One Should I Pick:

There is no perfect answer. One thing we do with all of our UW clients is to explain the pros & cons of each plan. We then narrow down which one makes the most sense based on specific retirement income goals, budget, tax situation, and career goals.


On a high level, here is a starting point. The UWRP offers the greatest investment flexibility with the broadest selection of mutual fund choices. If electing the self-directed brokerage link option, there are thousands of investments to choose from. The PERS 3 offers a menu of funds on the WA DRS portal ranging from Retirement Strategy Funds to a build & monitor option of 7 mutual funds. PERS 2 offers the least amount of investment customization.


For an upfront tax reduction, the 15% contribution to PERS 3 is the largest contribution of all the plans. That entire contribution reduces your taxable income.


Both PERS options reward long-term employees with 5 and 10-year vesting requirements. The UWRP is the easiest plan logistically to do a rollover, i.e., consolidating one plan to another in the case of changing employers or retiring.


Additional Retirement Plans:


On top of this, UW employees have access to two additional retirement plans. The first is called the UW Voluntary Investment Plan (VIP). Like the UWRP, the VIP is a defined contribution plan, also called a 403(b) retirement plan. This is similar to a 401(k) plan at other companies. For 2024, the maximum contribution to all 403(b) plans for an individual is $23,000. There is a $7,500 catchup available for those over age 50. That means if you enroll in the UWRP, you must make sure your VIP contribution does not exceed the limit. For example, if your income is $100,000, and you are doing 10% to the UWRP, your remaining VIP contribution cannot exceed $13,000 ($10,000 to UWRP + $13,000 to VIP). There are no matching contributions to the VIP.


However, if you select either of the PERS options, you can do a full $23,000 to the VIP. The PERS 2 and 3 do not share a contribution limit with a 403(b) retirement plan.


For investment options, the VIP is very broad. There is a pre-selected many of funds on Fidelity, or you may select the self-directed brokerage link option for maximum flexibility.


The final retirement plan is called the Deferred Compensation Plan (DCP). A DCP is a 457(b). It is operated through the WA Department of Retirement Systems. This plan does not share a contribution limit with the VIP or UWRP. The maximum contribution is $23,000 for 2024 and an age 50-and-over catchup. For example, let’s assume your income is $100,000. You could do $10,000 to the UWRP, $13,000 to the VIP, and $23,000 to the DCP. Alternatively, you could do $15,000 to PERS 3, $23,000 to the VIP, and $23,000 to the DCP.


Tax Planning:

All of these retirement plans offer various tax benefits. The UWRP & VIP offers either pre-tax or Roth (after-tax) contributions. Pre-tax gives you a tax benefit for your contributions. Roth offers no upfront tax benefit, but the earnings will be tax-free when you take the funds out in retirement. The PERS contributions are pre-tax, and there is no Roth option available.


Choosing to contribute pre-tax or Roth largely depends on your marginal tax bracket, an estimate of your future tax bracket, tax preferences, as well as the entire makeup of your existing investments (existing Roth IRA & other accounts).

To illustrate an example of how to maximize pre-tax savings, let's assume your income is $200,000. You could do 15% to PERS 3, $23,000 to the VIP, & $23,000 to the DCP. Instead of reporting $200,000 of gross income on your tax return, you would report $124,000. For a single individual, this would save over $18,000 in taxes.


One common benefit with all of these plans is tax-free or tax-deferred investment growth. That means there are no dividend or capital gains taxes. Taxes for all pre-tax plans would be due upon distribution in retirement.


For guidance on which plans to enroll in, UW will offer sessions provided by representatives at Fidelity or TIAA. However, from our experience, this is no substitute for creating a personalized financial plan with a fiduciary and CERTIFIED FINANCIAL PLANNER™ Professional. If you’d like to learn more and discuss your options, schedule an initial consultation.


*All written content on this site is for information purposes only. Opinions expressed herein are solely those of Ignite Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources, and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation. This website may provide links to others for the convenience of our users. Our firm has no control over the accuracy or content of these other websites.































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