Selecting a Plan of Payment

Plans of Payment
To plan successfully for retirement, it is important to be familiar with your payment options and to consider your financial needs in retirement.

Your considerations should include:

• Your health and age at retirement

• The need for survivor benefits

• Availability of other financial resources

• Anticipated financial obligations

• Reemployment opportunities

• Potential Social Security benefits

• Whether or not you are obligated under a court order to select a particular plan of payment or name a beneficiary or beneficiaries

At retirement, you will select a plan of payment from among several different actuarially equivalent plans. For your defined benefit and defined contribution payments, you may elect a different plan of payment and beneficiary for each benefit. All plans provide you with lifetime benefits but vary in the protection provided to survivors. If you are married, please review the spousal consent requirement.

If a court order requires you to leave a continuing monthly benefit to a former spouse or spouses upon your death, you must submit a copy of the court order to STRS Ohio with your Service Retirement Application. Any amounts payable due to court orders must remain in place during the lifetime of that beneficiary.

There are four basic plans of payment:

Plan I — Single Life Annuity
Plan II — Joint and Survivor Annuity
Plan III — Annuity Certain
Plan IV — Partial Lump-Sum Option Plan

Plan I — Single Life Annuity
The Single Life Annuity plan provides maximum monthly benefits for your lifetime. This plan does not provide any payment to a survivor upon your death.

At your death, if your total monthly benefit payments were less than your contributions, your remaining contributions will be paid to your beneficiary.

If you choose a Single Life Annuity plan at retirement and later marry, you may change your plan to a Joint and Survivor Annuity with your spouse as beneficiary within the first year of your marriage. This is the only circumstance in which you may change a Single Life Annuity plan.

A copy of your marriage certificate must accompany the application to change to a Joint and Survivor Annuity. The new selection is effective on the date the application is received by STRS Ohio and the new benefit amount is paid the first of the following month.

Plan II — Joint and Survivor Annuity
Under the Joint and Survivor Annuity, you receive a lifetime benefit. Upon your death, one or multiple primary beneficiaries receive lifetime monthly benefits. There are four options under this plan of payment:

• Options 1, 2 and 3 apply to a single primary beneficiary (see below).

• Option 4 applies to multiple primary beneficiaries (see below).

Under this plan of payment, if you and your primary beneficiary(ies) die and the total benefit payments were less than your contributions, the difference will be paid to your secondary beneficiary or your estate. Upon electing a Joint and Survivor Annuity, your defined contribution account balance is converted to a lifetime annuity for you and your primary beneficiary(ies). There is no refundable amount or payment if the total annuity payments are less than the converted defined contribution account balance.

Single primary beneficiary

• Option 1:
  Upon your death, the primary beneficiary receives the same monthly benefit you received.

• Option 2:
  Upon your death, the primary beneficiary receives one-half the monthly benefit you received.

• Option 3:
  Upon your death, the primary beneficiary receives a specific dollar amount or percentage that you designate. The amount you designate must be at least $50 per month and cannot exceed 100% of your benefit.

If the primary beneficiary is not your spouse, the Internal Revenue Service may limit the percentage of the benefit that you can designate to this person. Contact STRS Ohio for additional information on these limitations.

Under these three Joint and Survivor Annuity options, there are two basic choices.

With reversion: If you select this choice, you may revert to the Single Life Annuity plan of payment if:

• Your beneficiary dies before you. A copy of the death certificate must accompany the application to revert to the Single Life Annuity plan. The effective date of the new benefit amount is the first day of the month following the beneficiary’s death.

• Your marriage to the beneficiary terminates, provided that you have written consent from your former spouse or the appropriate court documentation authorizing such a change. The new selection is effective on the latter of the date the application is received by STRS Ohio or the date of divorce. The new benefit amount is paid the first of the following month.

• A non-spouse is named at retirement and you later marry. You may reselect your new spouse as the new beneficiary within the first year of your marriage.

Without reversion: With this choice you may never revert to a Single Life Annuity payment. Neither the plan of payment nor the primary beneficiary may be changed after retirement. You maintain this plan of payment even if your beneficiary dies or your marriage to the beneficiary terminates.

With Options 1 and 2 you can select a guarantee feature that provides benefit protection to a secondary beneficiary for a specific number of years from your retirement date. A guaranteed period is provided at no cost based on the age of both you and your beneficiary. You may extend the guaranteed period by taking a reduction in your monthly benefit amount. The guaranteed period may be any number of years up to an actuarially determined maximum.

If both you and your primary beneficiary die before the end of the guaranteed period, a monthly benefit is paid to the secondary beneficiary for the remainder of the guaranteed period. If you name more than one secondary beneficiary, a lump-sum payment representing the present value of the remaining payments is divided equally and paid to the beneficiaries.

If you or your primary beneficiary outlive the guaranteed period, benefits continue for your lifetime and the lifetime of your primary beneficiary, but the secondary beneficiary is no longer protected.

Multiple primary beneficiaries

Option 4:
Members who retire Nov. 1, 2006, or later may elect a reduced benefit to provide continuing lifetime benefits for up to four primary beneficiaries under a Joint and Survivor Annuity. You may specify percentages of your benefit or a flat dollar amount for each beneficiary; however, the total payable to all beneficiaries cannot exceed the amount payable to you.

For example, upon your death, one beneficiary could continue to receive 30% of your benefit, while a second could continue at 20%, and a third and fourth could continue at 10% each. Your benefit will be reduced based on the ages of the beneficiaries and the amount of the survivor benefit provided to each. The percentages designated to beneficiaries do not have to equal 100%.

Unless directed by a court order, you cannot provide a benefit that is less than 10% of the benefit you will receive. If a beneficiary is not your spouse, the Internal Revenue Service may limit the percentage of the benefit that you can designate to this person.

At your death, monthly benefits will be paid to the beneficiaries you designated at retirement. If a beneficiary dies before you, contact STRS Ohio to increase your monthly benefit by the amount of the reduction taken for that beneficiary. Benefits paid to the other beneficiaries will not change.

If you select this choice, you may only change your plan of payment if:

• One of the beneficiaries is your spouse and your marriage terminates, provided you have written consent from your former spouse or the appropriate court documentation authorizing such a change. The new selection is effective the latter of the date the application is received by STRS Ohio or the date of divorce. The new benefit amount is paid the first of the following month.

• All beneficiaries named at retirement are non-spouses and you get married after retirement. Within the first year of marriage, you may reselect a plan of payment with your new spouse as beneficiary. You may retain up to three beneficiaries you selected at retirement; however, the total amount payable to all beneficiaries at your death cannot exceed the monthly benefit paid to you.

Plan III — Annuity Certain
The Annuity Certain plan provides monthly benefits for your lifetime. In addition, your beneficiary is protected for a specific number of years from your retirement date. The guaranteed period may be any number of years up to an actuarially determined maximum.

If your death occurs before the guaranteed period ends, your beneficiary receives the same monthly benefit until the guaranteed period expires. If you name more than one person as beneficiary, a lump-sum payment, representing the present value of the remaining payments, is divided equally and paid to the beneficiaries.

If the beneficiary is a legal entity such as a trust, charity or church, then a lump-sum payment of the present value of any remaining payments will be made.

If you outlive the guaranteed period, benefits continue for your lifetime but the named beneficiary is no longer protected.

If you choose the Annuity Certain plan at retirement, you cannot reselect a different plan after retirement. However, you may name a different beneficiary for the remaining years on the guaranteed period.

Plan IV — Partial Lump-Sum Option Plan
The Partial Lump-Sum Option Plan (PLOP) allows you to take an amount from six to 36 times the monthly Single Life Annuity (SLA) benefit based on the defined benefit portion of the account only in a lump sum at retirement. The PLOP must be elected in $1,000 increments, unless the minimum or maximum amount is selected. Monthly benefits still begin with your retirement date and are payable for life, but they are reduced to reflect the amount taken up front in a single payment. A plan of payment for your lifetime retirement benefits — Single Life Annuity, Joint and Survivor Annuity or Annuity Certain — must be selected for determining the remainder of your lifetime benefits.

Click here for more information on the Partial Lump-Sum Option Plan.

Spousal Consent
If you are married on your benefit effective date, your spouse must consent to your selection if you have chosen one of the following plans of payment:

Plan I — Single Life Annuity
Plan II — Joint and Survivor Annuity:

• Protecting your spouse with less than one-half of the benefit,

• Protecting a non-spouse beneficiary, or

• Protecting multiple beneficiaries.

Plan III — Annuity Certain
Plan IV — Partial Lump-Sum Option Plan:

• Any plan that includes a PLOP payment.

Your spouse may consent to your selection of any of these plans by signing the spousal consent on the Service Retirement Application before a notary public.

Without a spousal consent for the plans listed above, a Joint and Survivor Annuity with one-half to beneficiary with reversion will be automatically selected for you.

Spousal consent is not required if:

• You are required to elect a plan of payment pursuant to a court order and your current spouse is also a beneficiary under that plan; or

• You are required to provide an amount to a former spouse or spouses pursuant to a court order or orders that is the maximum amount payable in a Joint and Survivor plan of payment.