Retirement Options

Selecting a Retirement Option

Selecting a retirement option is an important decision, requiring a thorough understanding of the various options and careful consideration of your future financial commitments. The staff of the Teachers’ Retirement System (TRS) is available to assist you as much as possible in making a wise decision by providing you with information about how the various retirement options work. TRS staff will work with you to help you understand the various options. The final decision, however, is yours.

 

Some important general facts about TRS retirement options:

1. Most TRS retirement options will provide, in the event of your death, a survivor annuity in the form of a lifetime monthly payment to your designated beneficiary. This postretirement survivor annuity should not be confused with preretirement survivor benefits that are payable to eligible survivors upon the death of an active contributing member who has not yet retired. If you wish to provide a postretirement survivor annuity for a beneficiary, you must designate on your retirement application one of the retirement options that will provide an annuity to your beneficiary in the event of your death as a retiree. If you select such a retirement option, you will need to provide TRS a copy of your beneficiary’s official, government certified birth certificate and signed Social Security card.

2. The beneficiary of a retirement option does not have to be related to you.

3.  If you wish to provide a post-retirement survivor annuity for a beneficiary, the age of the beneficiary will directly affect the amount of your retirement annuity.

4.  For most TRS members, the TRS annuity will constitute the major source of their retirement income. This may be true for you as well. You will want to consider your individual financial circumstance at the time you make your option selection.

OPTION I
Straight Life Annuity (SLA) with Refundable Balance

The Straight Life Annuity (SLA) provides you with the greatest retirement allowance over your lifetime, but annuity payments cease upon your death. Unlike a joint-survivor annuity, a straight life annuity is not payable to a surviving beneficiary. If, upon your death, the total amount of money you received in monthly retirement payments is less than the amount you contributed, a lump sum refund of the difference will be made to your estate or beneficiary.

You later may switch to a joint-survivor annuity if you marry or remarry after retirement. A joint-survivor annuity designating your new spouse as beneficiary will reduce your monthly annuity, but it will provide a continuing benefit to your new spouse after your death. In some cases, the reduction is substantial. You have 60 days from the date of the marriage to file the necessary paperwork with TRS to change your retirement option.

OPTION II
Ten Years Certain and Life Thereafter

This option provides you with a monthly retirement annuity that is somewhat smaller than the annuity provided under Option I. Under Option II, in the event of your death within the first 10 years of your retirement, your beneficiary would receive the same monthly annuity that you were receiving at the time of your death until the expiration of the 10-year period. If you live beyond the 10-year period, you will continue to receive the monthly retirement annuity for the rest of your life, but your beneficiary will no longer be eligible for a monthly annuity in the event of your death. The age of the beneficiary does not matter under this option.

This option is of value if you wish to insure that a guaranteed amount will be returned over a specified length of time.

Besides the 10-year period, “years certain” payment options also are available for periods of five, 15 and 20 years.

OPTION III
Joint-Survivor Annuity

This option provides you with a smaller annuity than that provided under Option I, but provides your designated beneficiary, if still living at the time of your death, with a lifetime annuity equal to the annuity that you were receiving at the time of your death. As this option provides a retirement allowance to your surviving beneficiary for the rest of their life, the greater the difference between your age and your beneficiary’s age, the smaller the retirement allowance that you will receive. This option is most useful when you have other income available that will cease upon your death or when your beneficiary’s primary income will be the TRS annuity.

In the event of divorce, annulment or marriage dissolution, you may only return to Option I if your spouse was named as the beneficiary. If your beneficiary predeceases you under this option, you cannot return to Option I. You will continue receiving the reduced annuity.

NOTE: Under this option, if you select as your beneficiary a person other than your spouse, an Internal Revenue Service regulation may require a substantial reduction in the annuity your beneficiary would be eligible to receive. Please contact TRS to determine whether your non-spouse beneficiary designation is affected by this regulation.

OPTION III(a)
Joint-Survivor Annuity with “Pop-Up” Option

This option is the same as Option III except that if your beneficiary dies before you, your annuity will increase to the Option I amount that was available to you at retirement. If you marry after the death of your beneficiary, you may select a joint-survivor option to provide a survivor annuity to your new spouse. The annuity will be adjusted so that it is actuarially equivalent to the benefits you would receive under Option I. You have 60 days from the date of marriage to make this change with TRS.

NOTE: Under this option, if you select as your beneficiary a person other than your spouse, an Internal Revenue Service regulation may require a substantial reduction in the annuity your beneficiary would be eligible to receive. Please contact TRS to determine whether your non-spouse beneficiary designation is affected by this regulation.

OPTION IV
Joint-Survivor Annuity One-Half Annuity to Surviving Beneficiary

This option provides you with a smaller annuity than provided under Option I, but it provides your designated beneficiary, if still living at the time of your death, with a lifetime annuity. Your beneficiary’s annuity would be one-half of the annuity that you were receiving.

This option is based upon the theory that it costs more for two to live than for one. Also, in some instances, other income may become available to the beneficiary upon the member’s death, such as life insurance and/or trust proceeds. This option provides a larger retirement allowance during your lifetime than Option III does and still provides something for your beneficiary. The age of your beneficiary has a direct bearing on the annuity amount.

The restrictions that apply to Option III regarding changing options also apply to this option.

OPTION IV(a)
Joint-Survivor Annuity One-Half Benefit to Beneficiary with “Pop-Up” Option

This option is the same as Option IV except that if your beneficiary dies before you, your annuity increases to the Option I amount. The restrictions that apply to Option IIIa regarding changing plans also apply to this plan.

OPTION V
Other Payment

In most cases the options provided in Options I through IV(a) will meet the needs of the members and their beneficiaries. However, the Board of Trustees recognizes that there may be situations where some alternate plan of payment is desirable.

Option V allows you to create an alternative retirement option and designate as beneficiary any person(s) having an insurable interest in your life. Such an option shall be certified by the actuary to be of an actuarial equivalent value to the annuity provided under Option I and must be approved by the Board of Trustees. Information regarding this option can be provided to you at retirement.

Changing a Retirement Option

The retirement option you choose at the time of retirement shall remain in force unless you experience one of the following qualifying events:

1. You marry or remarry after your effective date of retirement;

2. Your beneficiary dies;

3. Your marriage ends by divorce, annulment or dissolution and your spouse is the named beneficiary. This qualifying event is effective on the first day that an order is entered by a court terminating your marriage and restoring you to the status of a non-married person.

If you experienced one of these qualifying events and are determined eligible to change your retirement option, you will have 60 days from the date of the qualifying event to make the change by filing the appropriate form with TRS. In addition to the appropriate TRS form, you will also be required to file copies of any relevant documentation establishing that a qualified event has occurred such as an order of the court terminating your marriage or a certificate of marriage.

There are several conditions and limitations in changing retirement options. Accordingly, if you experience a qualifying event and are interested in changing your retirement option, you should contact TRS immediately for further details.

Beneficiary’s Birth Record and Social Security Card Needed

An official, government certified birth certificate and signed Social Security card of your beneficiary is required if you select a “Joint-Survivor Annuity” [Options III, III(a), IV, IV(a), or V].