At retirement, in addition to selecting Plan A (maximum plan) or Plan B (survivorship plan), you may also elect to receive a one time lump-sum distribution (cash payment) in addition to your monthly retirement benefit.
In exchange for a reduced lifetime monthly benefit, you can elect to receive a Partial Lump-Sum Option Plan (PLOP). Your age and plan of retirement are used to determine the reduction in your benefit.
A PLOP distribution will be made as a single payment at the time your first monthly benefit is paid. Based on the amount of the PLOP, your monthly retirement benefit is then reduced to be the actuarial equivalent of the retirement benefit without a lump-sum distribution. You cannot elect a PLOP that will reduce your monthly benefit by fifty percent or more of the benefit you are eligible to receive under Plan A.
If you are interested in electing a PLOP, TRS encourages you to seek assistance from a financial advisor and/or a tax professional. A PLOP used to enhance retirement income or savings may merit consideration. A PLOP used to purchase depreciable assets or used for leisure should be given careful consideration as these purchases may compromise long-term retirement income.
- The amount of lump-sum distribution you are eligible to receive is based on the monthly benefit amount you are eligible to receive under Plan A.
- The smallest lump-sum distribution available to you is the amount of one month of your Plan A benefit. (Rounded up to the nearest $1000)
- The largest lump-sum distribution available to you is the sum of 36 months of your Plan A benefit. (Rounded down the nearest $1000)
- You cannot choose a lump-sum distribution amount that will reduce your monthly payment to less than 50% of your Plan A amount.
- All lump-sum distributions will be provided in $1,000 increments.
- Your monthly retirement benefit will be actuarially reduced due to the election of a PLOP distribution.
You are eligible to participate in the Partial Lump-Sum Option Plan if you meet the following criteria. You must:
- have 30 years of creditable service or 10 years of creditable service and attain age 60 (not early retirement); and
- not retire with disability benefits
When applying for retirement, you may choose a retirement plan that provides for survivorship benefits. If you elect a survivorship option, you may also choose to receive a lump-sum distribution. Once the lump-sum amount is determined, the reduced monthly benefit will be calculated based on your age and the age of your beneficiary(ies). If you elect a survivorship option and a PLOP distribution, at your death, the beneficiary’s benefit will be based on your reduced benefit.
At retirement, you may elect a lump-sum distribution in an amount between 1 and 36 months of your normal monthly retirement benefit. This amount will be calculated under Plan A – Maximum Plan of Retirement and will be rounded to the nearest $1,000. If a PLOP distribution is elected, your monthly benefit is actuarially reduced to reflect the value of the PLOP distribution. The combination of both the PLOP distribution and the reduced benefit are the same actuarial value as the unreduced normal benefit alone.
A PLOP distribution can be paid through direct deposit to a financial institution or by check. Generally, 20% of the lump-sum distribution will be withheld for federal income taxes. However, you may be required to pay more taxes on the distribution depending on your age at retirement. If you are a resident of Georgia, a PLOP is also subject to Georgia taxes.
To defer paying taxes on a lump-sum distribution, you may roll over all or a portion of the distribution to another qualified retirement plan or traditional Individual Retirement Account (Roth IRA). TRS encourages you to seek advice from a tax professional.
Before electing a PLOP distribution, TRS encourages you to consider the following:
- How much will you receive in a lump-sum distribution?
- How much will your monthly benefit be reduced?
- Will the reduced monthly benefit be sufficient to cover living expenses throughout retirement?
If you elect a PLOP distribution, you will receive an actuarially reduced monthly benefit. Your age at retirement, along with your beneficiary’s age (if you choose a survivorship option), is used to determine the reduction in your benefit if you elect a PLOP distribution.
A 60-year-old member with a $3,300 monthly retirement benefit under Plan A elects to take a lump-sum distribution at retirement. The member is eligible to choose a PLOP distribution, in $1,000 increments, from $4,000 – $118,000 (1 x $3,300 = $4,000 rounded up to the nearest $1,000; and 36 x $3,300 = $118,000 rounded down to the nearest $1,000). This member chooses a $50,000 lump-sum distribution.
Under the Maximum Plan, the cost per $1,000 of the lump-sum distribution for a member retiring at age 60 is $7.51 per month, as per the benefit reduction table. This member’s monthly cost for a $50,000 payment is $375.50 (50 x $7.51).
To determine the reduced benefit, subtract $375.50 from $3,300. The member would receive $2,924.50 per month as a result of electing the PLOP distribution.
A PLOP distribution is subject to federal income tax withholding. Since these payments have been identified as eligible rollover distributions, TRS must withhold 20 percent for income tax unless the eligible portion is rolled over into a qualified retirement plan.
If you are less than 59 ½ years of age at the time of the PLOP election, an additional 10 percent penalty may be imposed by the Internal Revenue Service (IRS) and is due at the end of the tax year. To defer paying taxes on these payments, you may roll over all or a portion of the entire “eligible rollover distribution” amount to another qualified retirement plan.
For additional information on taxes, please contact a tax consultant or the IRS at 800-829-1040.
A PLOP is also subject to Georgia taxes for residents of Georgia.
The table below identifies the amount a monthly benefit is reduced for each $1,000 of a lump-sum distribution. Amounts shown in this table are based on Plan A – Maximum Plan of Retirement. If you choose any of the other TRS retirement plans, the amounts shown will vary.
|Age||Reduction per $1,000|