Payment Options

LAGERS offers a variety of payment options that give retirees flexibility in how you choose to receive your payments.

Once you’ve submitted the application for retirement, you’ll 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 Life payout option pays an unreduced benefit to you for your lifetime.  Upon your death, the monthly payments will cease. If you haven’t withdrawn at least your accumulated contributions before death, a refund of the balance of the account is made to your beneficiary of record.

 

Option B

The Option B payout option is the second of two spousal payment options available to LAGERS retirees. This option not only provides a monthly benefit for your lifetime, but also provides an additional monthly payment to your spouse should you predecease your spouse.

If you elect Option B you will receive 90% of your Life allowance for your lifetime, and should you predecease your spouse, your spouse then receives 50% of your benefit for life.

An eligible beneficiary under Option B is a spouse of 2 or more years or an adult who is 40 or older and has been more than half financially dependent on you for 2 or more years. Once you elect Option B, your beneficiary cannot be changed in the future.

Option C

The Option C payout option pays 95% of your Life allowance for your lifetime with the added provision that if you 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 you live more than ten years into retirement, you will continue to receive the same monthly benefit payments until death, but your beneficiary(ies) would not be eligible for a monthly benefit.

For example:

95% X $1,125 (Life Option Amount) = $1,068.75 per month for the your lifetime

If you die and only 60 payments have been made:
$1,068.75 per month is payable to your beneficiary of record for 60 months
(60 payments to you + 60 payments to you beneficiary = 120 total payments)

If you die and 118 payments have been made:
$1,068.75 per month is payable to your beneficiary of record for 2 months
(118 payments to you + 2 payments to your beneficiary = 120 total payments)

If you die 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.

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.

For example:

A retiree, age 60, could elect the Life Payout Option of $1,125 per month, with no lump sum
OR
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 PLUS 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 PLUS 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