LAGERS offers a variety of payout options that give retirees flexibility in how they choose to receive their payments. Once a member has submitted the application for retirement, he or she will be asked to select one of the following options. The selection that an applicant makes during the retirement process is permanent and cannot be changed.
* The member's benefit amount is adjusted for the age difference between the member and the member's beneficiary for Option A and B. For Option A, 0.75% is subtracted from the member's 85% benefit for each year the beneficiary is younger than the member. For each year the beneficiary is older than the member, 0.75% is added to the member's benefit. The same is true for Option B, except the adjustment is 0.50% for each year of age difference.
The Life payout option pays an unreduced benefit to the retiree for his or her lifetime. Upon death of the retiree, the monthly payments will cease. If he or she has not withdrawn at least his or her accumulated contributions before death, a refund of the balance of the account is made to the beneficiary of record.
A member with 25 years of service at the L-7 (1.50%) benefit program and a final average salary of $3000/month would receive a benefit based on the following calculation:
1.50% X $3,000 X 25 years = $1,125 per month from member's retirement to death
The Option A payout option is one of two spousal payout options available to LAGERS retirees. This option not only provides a monthly benefit for the member’s lifetime, but also provides an additional monthly payment to the member’s spouse should the member predecease the spouse.
A member who elects Option A will receive 85% of his or her Life allowance for life, and should the member predecease the spouse, the spouse then receives 75% of the member’s benefit for life.
85% X $1,125 (Life Option Amount) = $956.25 per month for the lifetime of the member
If the member predeceases the spouse:
75% X $956.25 (Member’s Option A Amount) = $717.19 for the lifetime of the spouse
The Option B payout option is the second of two spousal payout options available to LAGERS retirees. This option not only provides a monthly benefit for the member’s lifetime, but also provides an additional monthly payment to the member’s spouse should the member predeceases the spouse.
A member who elects Option B will receive 90% of his or her Life allowance for life, and should the member predecease the spouse, the spouse then receives 50% of the member’s benefit for life.
90% X $1,125 (Life Option Amount) = $1,012.50 per month for the lifetime of the member
If the member predeceases the spouse:
50% X $1,012.50 (Member’s Option A Amount) = $506.25 for the lifetime of the spouse
All members retiring after September 1, 1992 who elect either Option A or B are covered under LAGERS Pop-Up Provision. This provision allows a member who elected Option A or B and is receiving a reduced monthly benefit to 'pop up' to 100% of their Life Option, upon notification to the system, should their spouse predecease them.
The Option C payout option pays 95% of a member's Life allowance for the member's lifetime with the added provision that if the member should die before receiving 120 monthly payments, a designated beneficiary(ies) will receive the same monthly allowance until a total of 120 monthly payments have been made. If the retiree lives more than ten years into retirement, he or she would continue to receive the same monthly benefit payments until death, but the beneficiary(ies) would not be eligible for a monthly benefit.
95% X $1,125 (Life Option Amount) = $1,068.75 per month for the lifetime of the member
If the member dies and only 60 payments have been made:
$1,68.75 per month is payable to the beneficiary of record for 60 months
(60 payments to the member + 60 payments to the beneficiary = 120 total payments)
If the member dies and 118 payments have been made:
$1,068.75 per month is payable to the beneficiary of record for 2 months
(118 payments to the member + 2 payments to the beneficiary = 120 total payments)
If the member dies and 120+ payments have been made:
No further benefit is payable.
Unlike Options A and B, you can change your beneficiary designation under Option C at any time, even after you are retired.
Under Option C, should you and your primary beneficiary die before 120 monthly benefit payments have been made, the remaining payments will be made to the primary beneficiary's estate, unless you have designated a contingent beneficiary. If the contingent beneficiary is living at the time of the primary beneficiary's death, the remainder of the 120 monthly benefit payments will be paid to the contingent beneficiary.
If no beneficiaries are living at the time of your death within the 120-month period, the remaining payments will be paid in a lump sum to the personal representative of your estate.
Partial Lump Sum Payment (PLUS)
The Partial Lump Sum feature provides the option to elect a lump sum distribution coupled with a reduced monthly benefit. A member can elect to add the PLUS feature to the Life, Option A, Option B, or Option C Payout Options.
The lump sum distribution is equal to 24 monthly payments of the Life Option amount (does not include any temporary allowance payable under a Life and Temporary plan). Electing the Partial Lump Sum results in a reduction (approximately 16 percent) of the retiree's future monthly benefit.
A retiree, age 60, could elect the Life Payout Option of $1,125 per month, with no lump sum
The retiree could elect the Life Plus Option, and receive $27,000 lump sum (24 x $1,125)
and a reduced monthly benefit of $945 per month ($1,125 x 84%)
When is the Partial Lump Sum Payable?
Lump-sum payments made under the PLUS option will be paid no sooner than ninety (90) days after the effective date of retirement, and no later than one-hundred fifty (150) days after the effective date of retirement. Deferral of the lump-sum payment to the next calendar year is not permitted unless the deferred payment falls within the 90-150 day period. In the event a retiree dies before receiving the partial lump sum payment, the lump sum will be paid to the retiree's beneficiary of record.
Is the Partial Lump Sum taxable?
Lump sum payments are subject to all applicable taxes, unless directly rolled into another eligible retirement account. LAGERS is required by law to withhold 20% of the taxable distribution, which is forwarded to the IRS. You may also be subject to early distribution penalties, if you receive the payment before attaining age 55 if you are a general employee and age 50 if you are a public safety employee. As LAGERS staff cannot provide you with tax advice, we urge you to contact a licensed tax professional.
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