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Paxton Powell

Understanding City of Spokane’s Pension Plan

Paxton Powell, Civil Service Marketing Coordinator, No Phone Number Available

Thursday, January 2, 2025 at 3:18 p.m.

Understanding City of Spokane’s Pension Plan

What is a defined benefit pension?

A defined benefit pension plan is a type of retirement plan that guarantees you a specific monthly income for life once you retire. Unlike 401(k)s or other defined contribution plans, the amount you receive isn’t determined by how much you’ve contributed or the performance of investments. Instead, your benefits are calculated using a formula that typically factors in your salary history, years of service, and age at retirement.

Vesting means that the employee will have the right to future retirement payments. Most employers require an employee to work for 5-7 years before they are considered vested and can collect future payments.

City of Spokane Defined Pension Plan

The Spokane Employees’ Retirement System (SERS) is a defined benefit pension plan covering non-uniformed permanent employees. As a participant, you contribute a set percentage of your salary, and the City also contributes the same percentage to the fund. Contributions are tax-deferred, and participation is mandatory with employment. Employees hired on or after Jan. 1, 2015 become vested (eligible for a monthly benefit at retirement age) at 7 years of service.

Differences Between a 401(k) and a Defined Pension Plan

Guaranteed Income

  • Pension: Provides a predictable, steady income for life after retirement, regardless of market conditions or individual contributions.
  • 401(k): Income depends on how much you contribute, how investments perform, and how long your savings last. There's no guarantee of income for life.

Risk

  • Pension: Your retirement income isn’t affected by stock market fluctuations or economic downturns
  • 401(k): Account value can drop significantly during market declines

Longevity

  • Pension: Payments last for the retiree’s lifetime (and sometimes a beneficiary’s).
  • 401(k): Funds may run out if not managed carefully or if the retiree lives longer than expected.

Stability in Retirement Planning

  • Pension: Employees can plan retirement confidently, knowing exactly how much they’ll receive.
  • 401(k): Uncertainty in market returns and longevity risks make it harder to predict future income.

For more information about the benefits the City of Spokane offers its employees, please visit our benefits page. 

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