Retirement Options

When you file your retirement application, you must elect one of five retirement “options.” Each option will affect your retirement benefit amount differently, but in all cases, your benefit will be paid throughout your lifetime. The survivor benefits available to your eligible beneficiary(ies) may also be impacted by your election. Upon receipt of your first benefit payment, your retirement option becomes irrevocable, so consider your choices carefully. For assistance in better understanding the retirement options listed below, please contact VCERA.

Unmodified Option

The Unmodified Option pays you the highest monthly retirement benefit with the provision that 60% of the benefit continues after your death to an eligible beneficiary, such as a surviving spouse. To be eligible for a monthly continuance, your surviving spouse must have been:

Married to you for one year prior to your retirement date, or
Age 55 or older and married to you for two years prior to your date of death

If you do not have an eligible spouse, the monthly continuance may be payable to your unmarried minor children until age 18 (continuing through age 21 if they remain unmarried and regularly enrolled as full-time students in an accredited school).

If there is no surviving spouse or minor child at your death, and if the total retirement benefits paid to you do not exceed your accumulated contributions on deposit at VCERA when you retired, your designated beneficiary (or estate if no beneficiary is named) will receive a lump-sum payment of the remaining balance.

Option 1

This option pays you a slightly reduced monthly retirement benefit with the provision that your accumulated contributions, less the sum of the monthly annuity payments received by you, will be paid to your beneficiary as a lump sum upon your death. In other words, if at your death there are any remaining retirement contributions that have not been “paid out” to you as monthly benefit payments, the remaining funds would be paid to your designated beneficiary. However, your VCERA benefit is still payable for life, regardless of your contribution balance.

Option 1 allows you to designate your estate as your beneficiary and to name a new beneficiary after retiring.

Option 2

This option pays you a reduced monthly retirement benefit with the provision that up to 100% of the benefit continues after your death to your spouse or beneficiary, who must have an insurable interest in your life. The amount of your retirement benefit is directly affected by the age of your beneficiary: the younger your beneficiary, the greater the benefit reduction because of their longer actuarial life expectancy. The 100% lifetime continuance is payable only to the beneficiary you name at retirement and may not be changed later, even if the beneficiary pre-deceases you.

Upon the death of you and your beneficiary, VCERA will issue no additional benefit payments. Also, there is no provision to refund any remaining contributions if you and your beneficiary die before VCERA pays out your accumulated contributions.

Option 3

This option pays you a reduced monthly retirement benefit with the provision that 50% of the benefit continues after your death to your beneficiary, who must have an insurable interest in your life. The amount of your retirement benefit is directly affected by the age of your beneficiary: the younger your beneficiary, the greater the benefit reduction because of their longer actuarial life expectancy. The 50% lifetime continuance is payable only to the beneficiary you name at retirement and may not be changed later, even if the beneficiary pre-deceases you.

Option 4

This option is similar to Option 2, but provides for multiple beneficiaries. Option 4 pays you a reduced retirement benefit with the provision that up to 100% of the benefit continues after your death to your surviving beneficiaries, who must have an insurable interest in your life. At retirement, you specify the percentage each beneficiary will receive upon your death. The amount of your retirement benefit will depend on the age of your youngest beneficiary. The 100% continuance is payable only to the beneficiaries you name at retirement and may not be changed later, even if they pre-decease you.

If one of your beneficiaries dies, his or her benefit is not distributed among the remaining beneficiary(ies). Upon the death of you and your beneficiaries, VCERA will issue no additional benefit payments. Also, there is no provision to refund any remaining contributions if you and your beneficiaries die before VCERA pays out your accumulated contributions.

Level Income Option

The Level Income Option is administered by VCERA and is independent of the retirement options listed above. This option offers you a short-term “pension advance,” in which VCERA pays an increased monthly retirement benefit until you reach age 62. At that time, VCERA will reduce your monthly benefit by an amount that has an actuarially equivalent value. However, if you file for Social Security at age 62, your adjusted VCERA benefit plus your Social Security benefit should represent a level income throughout your retirement.

If you plan to elect the Level Income Option, please supply VCERA with a recent Earnings and Benefits Statement from Social Security. To be eligible for this option, you must retire for service before age 62 and be fully insured under Social Security.

Your VCERA benefit will be reduced by the full amount of your estimated Social Security benefit at age 62 in accordance with Government Code section 31810. It is your responsibility to apply for Social Security benefits at that time to ensure a level income. VCERA shall not be responsible for financial hardship caused by the election of this option and the resulting benefit decrease at age 62.