Can You Roll Your WA DRS Plan 3 DC Account into a Gold IRA?
Yes. When you separate from Washington state employment, the defined contribution (DC) portion of your Plan 3 account is eligible for a direct trustee-to-trustee rollover into a self-directed IRA, including a precious metals IRA. Washington has no state income tax, so no state withholding applies. The defined benefit (DB) pension and any Total Allocation Portfolio (TAP) annuity balances are not rollable. Verify your current DC balance and request rollover forms directly from the Department of Retirement Systems (DRS) at drs.wa.gov before initiating any transfer.
Washington state public employees in PERS 3, TRS 3, and SERS 3 carry a retirement account that most people on the outside do not fully understand. Unlike a traditional pension, Plan 3 pairs a defined benefit with a defined contribution account that you fund yourself and that you can take with you. When you leave state employment, that DC account becomes eligible for rollover, and the destination can be a self-directed IRA holding IRS-approved gold or silver.
This guide maps the exact rollover path for Plan 3 members. It explains which portion of your balance moves, which portion stays, why the TAP annuity requires separate treatment, and what Washington’s zero state income tax means for the mechanics of your transfer. Tax rules are complex and individual situations vary. Consult your tax advisor for guidance specific to your circumstances.
What Is Washington DRS Plan 3?
Washington’s Department of Retirement Systems administers several public employee retirement plans. Plan 3 is a hybrid design: it combines a smaller defined benefit component with a defined contribution account that functions more like a 401(k). The employer builds your DB pension, and you build your own DC account through payroll contributions that you direct into investment options.
The DB side of Plan 3 pays a monthly pension at retirement based on a formula that uses your years of service and average final compensation. You do not fund the DB component directly. Your employer’s contributions, and the plan’s investment returns over decades, cover that obligation.
The DC side is yours. You choose a contribution rate from a set of options published by DRS, and those dollars are deposited into an investment account that you manage through the DRS investment platform. At separation, the DC balance belongs to you unconditionally, regardless of how long you worked for the state.
Which Plans Fall Under Plan 3?
Three retirement systems in Washington use the Plan 3 hybrid structure:
| System | Covers | Eligible for DC rollover? |
|---|---|---|
| PERS 3 | General state, county, and city employees | Yes, at separation |
| TRS 3 | K-12 teachers and most certificated staff | Yes, at separation |
| SERS 3 | School classified staff (bus drivers, custodians, para-educators) | Yes, at separation |
Other DRS plans (LEOFF 2, WSPRS 2) have DC-like components but operate under different rules. Verify your specific plan’s rollover options at drs.wa.gov before requesting a distribution.
If you are unsure which plan you belong to, log in to your DRS member account at drs.wa.gov or check your annual statement. Your plan designation appears on every piece of official DRS correspondence.
What You Can Roll Over (and What You Cannot)
This is the most important distinction in the entire process. Plan 3 has two components, and they follow completely different rules when you leave employment.
- Your DC account balance (employee contributions + investment gains)
- DC funds invested in any standard fund option
- The full accumulated value including market appreciation
- The DB pension (it pays monthly, not as a lump sum)
- TAP annuity balances (see next section)
- Future DB benefit accruals
When you separate from employment, you do not lose access to your DB pension. It remains with DRS and begins paying at your qualifying retirement age based on your years of service. The rollover opportunity applies only to the DC account balance that you personally funded.
The TAP Annuity: Why It Stays Behind
The Total Allocation Portfolio (TAP) is a fixed-value investment option available within the Plan 3 DC account. Unlike the standard market-based fund options, TAP credits a declared rate of return, functioning more like a stable value product. When a member purchases TAP units, those funds are converted into a future annuity, not a portable lump sum.
This matters enormously at rollover time. If a portion of your DC account is in TAP, that portion cannot be included in a lump-sum rollover to an IRA. The TAP component remains with DRS and pays out as a monthly income stream beginning at your retirement date, separate from your DB pension.
Practical implication: before you request your rollover forms from DRS, review your current investment allocation. If you have TAP balances, work with DRS to understand exactly how much of your DC account is in standard investment funds versus TAP units. Only the standard fund portion is eligible for transfer to a self-directed IRA.
DRS member services can provide a current breakdown. Contact them at drs.wa.gov/contact before submitting any rollover request to confirm the exact rollable amount.
Washington’s No-Income-Tax Advantage
Washington is one of nine states with no personal income tax. This has a direct effect on your rollover mechanics.
When you take a distribution from a retirement plan, federal rules may require mandatory withholding. State rules may add a second layer of withholding. In Washington, there is no state income tax layer. A rollover from a WA DRS Plan 3 DC account carries no state income tax withholding obligation, regardless of whether you complete a direct rollover or an indirect one.
Compare this with a state like Oregon, which imposes a state income tax rate above 9% on ordinary income including IRA distributions, or California, which can push combined federal and state withholding past 40% on indirect rollovers. Washington residents navigating a Plan 3 rollover face only the federal withholding rules described below.
For a detailed look at how Washington’s tax landscape affects gold IRA ownership more broadly, see our guide to gold IRAs for Washington state residents.
Direct vs. Indirect Rollover: The Critical Difference
The IRS recognizes two ways to move money from a qualified plan into an IRA. Choosing the right method determines whether you pay tax now or pay nothing until retirement.
Direct (Trustee-to-Trustee) Rollover
DRS transfers your DC balance directly to your new IRA custodian. You never touch the money. No mandatory federal withholding applies. There is no 60-day clock. This is the preferred method and the standard approach for plan-to-IRA transfers. Under IRS rollover rules, direct rollovers generate no taxable event when moving between qualifying accounts.
Indirect (60-Day) Rollover
DRS issues the distribution check to you. Federal law requires DRS to withhold 20% for federal income taxes before sending the check. You have 60 calendar days to deposit the full pre-tax amount, including the withheld 20%, into a qualifying IRA. If you deposit only the net amount received (after the 20% withholding), the withheld portion is treated as a taxable distribution for the year and may trigger a 10% early withdrawal penalty if you are under age 59.5.
The 20% withholding rules come from IRS Publication 590-A. Consult your tax advisor to understand which method fits your situation.
For most Plan 3 members moving funds into a gold IRA, the direct rollover is the standard path. Your new custodian will request a transfer letter or rollover form from DRS, and DRS will wire or transfer the funds to the custodian without passing through your personal account.
Step-by-Step: Rolling Your Plan 3 DC Account to a Gold IRA
The following steps reflect the general process. DRS may update its procedures; always confirm the current requirements at drs.wa.gov before initiating a transfer.
- Separate from employment. Rollover eligibility for the DC account generally begins when you leave covered employment. In-service distributions before separation are generally not available under Plan 3 outside of age-based or hardship exceptions. Verify your specific eligibility window with DRS.
- Review your DC balance and TAP allocation. Log in to your DRS member account or contact DRS member services to get a current statement showing how much of your DC account is in standard investment funds versus TAP units. Only the standard fund balance is eligible for rollover.
- Open a self-directed IRA (SDIRA) with an IRS-approved custodian. A standard IRA at a brokerage does not allow physical precious metals. A self-directed IRA requires a specialized custodian that handles alternative assets. Your gold IRA company will typically help you identify a custodian and complete the account application. This step must be completed before you request funds from DRS.
- Obtain rollover forms from DRS. Contact DRS and request the distribution/rollover paperwork for your Plan 3 DC account. Specify that you want a direct rollover to an IRA to avoid mandatory 20% withholding. DRS will require the name, address, and account number of your receiving IRA custodian.
- Submit the rollover request. Return completed forms to DRS. Processing timelines vary. Check with DRS member services for current estimates. Do not request a distribution check issued to you personally if you intend to complete a tax-free rollover.
- Fund your precious metals purchase. Once your custodian confirms the funds have arrived in your new self-directed IRA, work with your gold IRA dealer to select IRS-approved metals and instruct the custodian to purchase them. Metals must meet IRS fineness standards under IRC Section 408(m): gold must be at least .995 fine (or qualifying coins), silver at least .999 fine.
- Metals are stored at an IRS-approved depository. You cannot take personal possession of IRA-owned metals. Your custodian arranges segregated or commingled storage at a qualifying depository. Verify the depository is IRS-approved before completing any purchase.
What Happens to Your DB Pension?
Nothing changes for the DB side when you roll your DC account. The defined benefit pension remains with DRS and accrues until you reach your plan’s normal retirement age or meet the early retirement criteria. Rolling the DC component does not reduce, delay, or eliminate your future monthly DB benefit.
Plan 3 was designed so that the DB pension covers a portion of your retirement income at a lower rate than Plan 2, while the DC account is intended to supplement it. The rollover decision affects only the DC side. Your years of service credit, final average salary calculation, and DB retirement date remain unchanged regardless of what you do with the DC funds.
If you have questions about how a DC rollover might interact with your specific DB benefit timing, contact DRS directly. They can provide a benefit estimate for your DB side and confirm that the DC distribution does not affect your pension eligibility.
Eligibility Checklist for Plan 3 Members
Before you request a rollover, confirm each point
- You are enrolled in PERS 3, TRS 3, or SERS 3 (not Plan 1 or Plan 2)
- You have separated from covered employment (or meet an applicable exception for in-service distributions)
- You have confirmed your DC balance excludes or accounts for any TAP annuity purchases
- You have opened a self-directed IRA account with an IRS-approved custodian before requesting the transfer
- You have specified a direct (trustee-to-trustee) rollover on the DRS distribution request form to avoid 20% withholding
- You understand that only IRS-approved metals meeting fineness requirements can be held in a precious metals IRA
- You have consulted a tax advisor about the tax treatment in your specific situation
Selecting a Self-Directed IRA Company
A gold IRA requires two parties that a standard brokerage rollover does not: an IRS-approved custodian (to hold the account) and a precious metals dealer (to source and sell the metals). These are distinct entities. Reputable gold IRA companies help coordinate both, but the custodian is the legally required account holder under IRS rules.
When evaluating companies, look for transparent fee disclosure, clear separation between the dealer and custodian functions, and published buyback policies. The Federal Trade Commission has published consumer guidance on retirement account decisions at consumer.ftc.gov. FINRA maintains a BrokerCheck tool at brokercheck.finra.org for verifying registered representatives.
Augusta Precious Metals (founded 2012) is one company with a track record in gold IRA education. Augusta uses a salaried, non-commissioned education team and has earned recognition from Money Magazine (Best Overall Gold IRA Company, 2022-2026) and Investopedia (Most Transparent Gold IRA Company, 2022-2026), along with a BBB A+ rating. Augusta serves clients with $50,000 or more in eligible retirement assets and focuses on an education-first process before any purchase decision is made. Past performance in the precious metals market is not a guarantee of future results. Consult a licensed financial advisor before making any retirement account decisions.
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Frequently Asked Questions
Can I roll my Plan 3 DC account to a gold IRA while still employed by the state?
In most cases, no. In-service distributions from Plan 3 DC accounts are generally not available while you remain in covered employment, outside of specific hardship or age-based provisions. The rollover window typically opens at separation from employment. Verify your specific eligibility with DRS before planning any transfer while still working.
Does rolling my DC account affect my DB pension benefit?
No. The DB pension and DC account are separate components. Rolling or withdrawing the DC balance does not reduce your DB pension amount, change your retirement eligibility date, or alter your years of service credit. The DB benefit remains with DRS and pays at the applicable retirement age based on your service record.
What is the TAP annuity and why can’t I roll it over?
The Total Allocation Portfolio (TAP) is a conservative, fixed-return investment option within the Plan 3 DC account. When you purchase TAP units, those funds are converted into a future annuity rather than remaining as a portable lump-sum balance. Because TAP is structured as an annuity, it does not qualify as an eligible rollover distribution for IRA purposes. TAP balances pay out as a monthly income stream beginning at your retirement date, separate from your DB pension. Only the portion of your DC account held in standard fund options is rollable.
Will I owe Washington state tax on my Plan 3 DC rollover?
Washington has no personal income tax, so there is no state income tax withholding on retirement distributions. A direct rollover from your Plan 3 DC account to an IRA is also not a federally taxable event when completed as a trustee-to-trustee transfer. If you choose an indirect rollover (check issued to you), federal 20% mandatory withholding applies to the gross distribution, even though Washington adds no state layer. Consult your tax advisor for guidance on your specific situation.
How long does a Plan 3 DC rollover to a gold IRA typically take?
The total timeline depends on three steps: DRS processing your distribution request, the funds transferring to your new IRA custodian, and your custodian settling the metals purchase. Each step can take one to three weeks. The entire process from DRS request to metals in storage often runs four to eight weeks. Contact DRS for current processing estimates before submitting your request, and confirm your custodian’s incoming transfer timelines as well.
What metals are IRS-approved for a precious metals IRA?
Under IRC Section 408(m), a precious metals IRA may hold gold coins and bars meeting a minimum .995 fineness (with exceptions for certain government-minted coins such as American Gold Eagles at .9167), silver at .999 fineness, platinum at .9995, and palladium at .9995. Collectibles and most numismatic coins do not qualify. Your gold IRA company can provide the current list of eligible products. The IRS has published guidance on eligible metals in Publication 590-B and related rulings.
Can I roll a Plan 3 DC account to a Roth gold IRA instead of a traditional IRA?
Yes, but a conversion from a pre-tax Plan 3 DC account to a Roth IRA is a taxable event. The converted amount is added to your gross income for the year and taxed at your ordinary income rate. Because Washington has no state income tax, only federal income tax applies. There is no 10% early withdrawal penalty on a conversion, but the income tax impact can be substantial depending on your account size and other income. Consult your tax advisor to model the conversion before proceeding. This is one of the more consequential decisions in the rollover process and warrants professional guidance.
Is there a minimum amount I need to roll over?
DRS does not impose a minimum rollover amount, but the gold IRA company and custodian may have their own minimums. Dealers serving the self-directed IRA market often have account minimums ranging from $10,000 to $50,000. Verify the minimums with your chosen custodian and dealer before initiating the DRS rollover request. If your Plan 3 DC balance is below those thresholds, you may want to explore whether to combine with other rollable accounts or evaluate alternative IRA options first.
Sources
- Washington Department of Retirement Systems (drs.wa.gov): Plan 3 plan descriptions, member resources, and separation procedures
- IRS: Rollovers of Retirement Plan and IRA Distributions: overview of rollover rules, 60-day requirement, and eligible rollover distributions
- IRS Publication 590-A: Contributions to Individual Retirement Arrangements: rollover rules, withholding, and eligibility requirements
- IRS Publication 590-B: Distributions from Individual Retirement Arrangements: distribution rules including required minimum distributions and early withdrawal rules
- IRC Section 408(m): Investments in Collectibles: IRS guidance on eligible precious metals for IRA accounts
- FINRA: Self-Directed IRAs and the Risk of Fraud: investor guidance on SDIRA due diligence
- Federal Trade Commission: Investing in Precious Metals: consumer guidance on precious metals purchases and common pitfalls
- Washington State Department of Revenue: confirmation that Washington does not impose a personal income tax
We are not financial advisors. This guide is for informational purposes only. Consult a licensed financial advisor and your tax advisor before making retirement account decisions. Past performance of any investment, including precious metals, is not a guarantee of future results.