Employers' Pensions and Benefits Administration Manual (EPBAM)
   

 

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Pension Options Available to
PERS and TPAF Members upon Retirement


Option Features in Detail
(Click to View)

OPTION A

OPTION B

OPTION C

OPTION D

OPTION 1

OPTION 2

OPTION 3

OPTION 4


Effective July 1, 2001, there are nine retirement allowance options available to members of the Public Employees' Retirement System and the Teachers' Pension and Annuity Fund. In addition to the five pre-existing payment options (Maximum Option, and Options 1, 2, 3, and 4), there are four additional pension options that are available: Option A, Option B, Option C, and Option D.

Scroll down this page to become familiar with each option; or, click on the option of interest to you in the above chart to see the specific features of that option in more detail.

Option A
At the time of retirement, the member names a beneficiary on the Application for Retirement Allowance. If the member should pass away after retiring, the named beneficiary receives 100% of the member's monthly penison allowance for life. If the beneficiary dies first, the member's pension increases to the amount payable under the Maximum Option, which the member receives for the remainder of his or her lifetime.

Option B
Option B pays the beneficiary, whom the member chooses at retirement, 75% of the retired member's monthly pension allowance upon the member's death. If the beneficiary precedes the retiree in death, the member's pension allowance reverts to the increased amount offered under the Maximum Option, for the lifetime of the member.

Option C
This option pays 50% of the member's monthly pension allowance to the beneficiary upon the retired member's death. If the beneficiary predeceases the member, the member's monthly allowance increases to the amount calculated for the Maximum Option, which the member receives for life.

Option D
Option D pays a lifetime monthly pension allowance to the beneficiary named by the member equal to 25% of the monthly pension allowance paid to the retired member, should the member die after retiring. If the beneficiary dies before the retired member, the amount of the monthly pension allowance paid to the member would revert to that calculated for the Maximum Option.

Under all of the pension options added under Chapter 120 P.L. 2001, (Option A, Option B, Option C, and Option D), the member can name only one beneficiary, and that beneficiary can not be changed once the retirement becomes "due and payable". ( The pension becomes "due and payable" 30 days after the retirement date, or 30 days after the Board of Trustees approves the retirement, whichever occurs later.) Proof-of-age must be submitted for both the member and the named beneficiary. Finally, as explained above, if the named beneficiary dies before the member, the member's monthly pension allowance increases to the amount payable under the Maximum Option.

See also Age Limits on Non-spouse Beneficiaries (below).

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Option A Features

  • The member names one beneficiary on the Application for Retirement Allowance when applying for retirement.
  • The chosen beneficiary must be an individual, not a charity, an institution, or an estate.
  • Proof of age for both the member and the beneficiary must be submitted in order to process the retirement.
  • If the member names someone other than a spouse as a beneficiary, the chosen beneficiary cannot be more than ten years younger than the member, as determined by Internal Revenue Service regulations (See also Age Limits on Non-spouse Beneficiaries*.)
  • Once the pension is "due and payable", the named beneficiary cannot be changed. The pension becomes "due and payable" 30 days after the retirement date, or 30 days after the Board of Trustees approves the retirement, whichever occurs later.
  • If the member dies after retiring, the named beneficiary receives 100% of the member's monthly pension allowance.
  • If the named beneficiary dies before the member, the member's monthly pension allowance is increased to the amount payable under the Maximum Option, for the member's life.


Option B Features

  • The member names one beneficiary on the Application for Retirement Allowance when applying for retirement.
  • The chosen beneficiary must be an individual, not a charity, an institution, or an estate.
  • Proof of age for both the member and the beneficiary must be submitted in order to process the retirement.
  • If the member names someone other than a spouse as a beneficiary, the chosen beneficiary cannot be more than 19 years younger than the member, as determined by Internal Revenue Service regulations. (See also Age Limits on Non-spouse Beneficiaries*.)
  • Once the pension is "due and payable", the named beneficiary cannot be changed. The pension becomes "due and payable" 30 days after the retirement date, or 30 days after the Board of Trustees approves the retirement, whichever occurs later.
  • If the member dies after retiring, the named beneficiary receives 75% of the member's monthly pension allowance.
  • If the named beneficiary dies before the member, the member's monthly pension allowance is increased to the amount payable under the Maximum Option, for the member's life.


Option C Features

  • The member names one beneficiary on the Application for Retirement Allowance when applying for retirement.
  • The chosen beneficiary must be an individual, not a charity, an institution, or an estate.
  • Proof of age for both the member and the beneficiary must be submitted in order to process the retirement.
  • Once the pension is "due and payable", the named beneficiary cannot be changed. The pension becomes "due and payable" 30 days after the retirement date, or 30 days after the Board of Trustees approves the retirement, whichever occurs later.
  • If the member dies after retiring, the named beneficiary receives 50% of the member's monthly pension allowance.
  • If the named beneficiary dies before the member, the member's monthly pension allowance is increased to the amount payable under the Maximum Option, for the member's life.


Option D Features

  • The member names one beneficiary on the Application for Retirement Allowance, when applying for retirement.
  • The chosen beneficiary must be an individual, not a charity, an institution, or an estate.
  • Proof of age for both the member and the beneficiary must be submitted in order to process the retirement.
  • Once the pension is "due and payable", the named beneficiary cannot be changed. The pension becomes "due and payable" 30 days after the retirement date, or 30 days after the Board of Trustees approves the retirement, whichever occurs later.
  • If the member dies after retiring, the named beneficiary receives 25% of the member's monthly pension allowance.
  • If the named beneficiary dies before the member, the member's monthly pension allowance is increased to the amount payable under the Maximum Option, for the member's life.


Maximum Option Features

  • The Maximum Option pays the highest monthly pension allowance of all of the options available, for the lifetime of the member.
  • There is no monthly pension allowance paid to a beneficiary when the member dies.
  • The member does name a beneficiary on the Application for Retirement Allowance.
  • If the member dies before receiving the balance of his or her contributions to the pension system in the form of the monthly pension allowance, the balance of contributions is paid to the named beneficiary, along with the last check.
  • Proof of age is required for the member only.


Option 1 Features

  • The member names a beneficiary on the Application for Retirement Allowance.
  • More than one beneficiary may be chosen, and the beneficiary may be a person, a charity, an institution, or the member's estate.
  • The beneficiary can be changed at any time.
  • A retirement reserve is calculated for the member at retirement, based on the member's retirement allowance and life expectancy. The retirement reserve is the amount expected to be paid to the member in retirement for the member's lifetime.
  • If the member dies before receiving the entire retirement reserve, the amount of money remaining in the retirement reserve is paid to the beneficiary (or beneficiaries).
  • Proof of age is required for the member only.

For Example:

$100.000 Reserve fund

-

$ 60,000 Paid to retiree

=

$ 40,000 Paid to beneficiary after member's death

OR

$100,000 Reserve fund

-

$124,000 Paid to retiree

=

$ - 0 - paid to beneficiary after member's death since the entire Reserve fund was paid out to the member.




Option 2 Features

  • The member names one beneficiary on the Application for Retirement Allowance, when applying for retirement.
  • The chosen beneficiary must be an individual, not a charity, an institution, or an estate.
  • If the member names someone other than a spouse as a beneficiary, the chosen beneficiary cannot be more than ten years younger than the member, as determined by Internal Revenue Service regulations. (See also Age Limits on Non-spouse Beneficiaries*.)
  • Proof of age for both the member and the beneficiary must be submitted in order to process the retirement.
  • Once the pension is "due and payable", the named beneficiary cannot be changed. The pension becomes "due and payable" 30 days after the retirement date, or 30 days after the Board of Trustees approves the retirement, whichever occurs later.
  • If the member dies after retiring, the named beneficiary receives 100% of the member's monthly pension allowance.
  • If the named beneficiary dies before the member, the member continues to receive the same monthly pension allowance, not an increased amount as in Option A.

Option 3 Features

  • The member names one beneficiary on the Application for Retirement Allowance, when applying for retirement.
  • The chosen beneficiary must be an individual, not a charity, an institution, or an estate.
  • Proof of age for both the member and the beneficiary must be submitted in order to process the retirement.
  • Once the pension is "due and payable", the named beneficiary cannot be changed. The pension becomes "due and payable" 30 days after the retirement date, or 30 days after the Board of Trustees approves the retirement, whichever occurs later.
  • If the member dies after retiring, the named beneficiary receives 50% of the member's monthly pension allowance.
  • If the named beneficiary dies before the member, the member continues to receive the same monthly pension allowance, not an increased amount as under Option C.

Option 4 Features

  • The member names a beneficiary on the Application for Retirement Allowance, when applying for retirement.
  • The member can choose one or more than one beneficiary.
  • The beneficiary must be an individual, not a charity, an institution, or an estate.
  • Proof of age for both the member and the beneficiary must be submitted in order to process the retirement.
  • Once the pension is "due and payable", the named beneficiary cannot be changed. The pension becomes "due and payable" 30 days after the retirement date, or 30 days after the Board of Trustees approves the retirement, whichever occurs later.
  • If the member dies after retiring, the named beneficiary receives an amount which is pre-determined by the member and which is less than the member's monthly pension allowance.
  • If the named beneficiary dies before the member, the member continues to receive the same monthly pension allowance, not an increased amount as under Options A, B, C or D.
  • When the dollar amount specified for the beneficiary's pension upon the member's death is more than half of the member's monthly allowance, age restrictions apply if the beneficiary is a non-spouse. (See also Age Limits on Non-spouse Beneficiaries*).

Age Limits on Nonspouse Beneficiaries

For all options, you can name your spouse* as your beneficiary regardless of your spouse's age. For Options 1, 3, C, or D, you can name someone other than your spouse as beneficiary regardless of age.

For Options 2 and A (100% to beneficiary), if you are naming a beneficiary who is not your spouse, Internal Revenue Service regulations restrict the age of your beneficiary to no more than 10 years younger than you.

For Option B (75% to beneficiary) you can name a non-spouse who is no more than 19 years younger than you.

If you name a non-spouse beneficiary under Option 4, if the dollar amount of your beneficiary's pension is more than half of your allowance, restrictions on your beneficiary's age apply.

*Since the Internal Revenue Service is a federal agency, a civil union partner or domestic partner as defined under New Jersey State law does not qualify as a spouse under these circumstances and would be subject to the age limitations described.

 

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Last Updated: March 7, 2007