Partial Lump Sum allows you to receive a portion of your
retirement benefit as a one-time payment in exchange for a
permanently reduced monthly retirement allowance. The Partial
Lump Sum payment you receive will reduce your account balance
dollar for dollar, and, therefore, the refundable cash value
of your account will also be reduced. Reducing your account
balance will not affect the length of time your monthly benefit
is payable.
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You will be qualified to receive a PLS benefit at retirement
if you retire before January 1, 2011 and the PLS calculation
for your age, service credit, and final compensation yields
an amount.
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No, the original amount that you elected for the Partial
Lump Sum payment becomes irrevocable after the last day of
the month of your benefit effective date.
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Yes, there are limits on how much you may request for a Partial
Lump Sum. If you choose a direct transfer to a qualified trust
plan, rather than having it paid directly to you, the minimum
Partial Lump Sum amount must be at least twice the amount
of your reduced monthly retirement allowance. The maximum
amount you may request depends on the amount of your retirement
benefit and your age at retirement.
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A Partial Lump Sum will limit your initial retirement allowance.
Post-retirement increases are based on the amount of your
retirement allowance. Consequently, any future increases would
be less, because they would be calculated on a smaller allowance.
You should consider this factor when deciding whether to elect
a Partial Lump Sum.
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It is a good idea to use the Retirement
Benefits Calculator for a personalized estimate of the
Partial Lump Sum and its impact on your monthly allowance
because the amount is specific for each member's account.
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Yes. While your actual lump-sum distribution will be based
on your unmodified monthly allowance, your monthly benefit
payments will be actuarially reduced due to the election of
the Partial Lump Sum. A further reduction will be made if
an option allowance is elected.
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You may only cancel or change the amount of your Partial
Lump Sum prior to the last day of the month of your benefit
effective date. After that date, your election decision and/or
the amount of the Partial Lump Sum become irrevocable.
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If you are thinking about a Partial Lump Sum, you should
carefully consider its impact on your lifetime retirement
allowance. It is important to thoroughly evaluate your financial
needs, because your ongoing monthly retirement allowance will
be permanently decreased if you elect the Partial Lump Sum.
You will not want to jeopardize your ability to receive an
adequate retirement income. There may be significant income
tax consequences as a result of receiving a Partial Lump Sum.
Once you elect Partial Lump Sum, this is an irrevocable decision
as of your benefit effective date. CalSTRS cannot offer financial
advice on this issue. You may wish to consult an independent
financial advisor if you are considering participation in
the Partial Lump Sum.
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If you are thinking about the Partial Lump Sum, you should
seek assistance from a financial advisor as needed. It is
important to note that selection of a Partial Lump Sum payment
results in a reduction of your lifetime retirement allowance.
You should consider the uses of any lump-sum payment you will
receive. Generally, a use that enhances retirement income
or savings may merit consideration on electing the Partial
Lump Sum. On the other hand, uses that involve expenditures
in depreciable assets or that are for leisure should be given
careful consideration because they may compromise your long-term
retirement income.
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Prior to your benefit effective date, you will need to obtain
a personalized estimate of the Partial Lump Sum that you are
qualified to receive. (Please see “Can
I estimate the Partial Lump Sum amount that I would receive”
above.) Once you have obtained your PLS estimate and the estimate
of the impact that it will have on your service retirement
allowance, you must designate a dollar amount on the Partial
Lump Sum Section of the Retirement Application.
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Yes. The Partial Lump Sum payment you receive is eligible
to be "rolled-over" directly to another qualified
retirement plan. You must designate the rollover when electing
the Partial Lump Sum. The financial institution must also
complete a portion of the application before the Partial Lump
Sum can be rolled over.
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CalSTRS does not make investment recommendations, so you
should consult with your own tax and financial advisors on
investment options. See the next question, however, for information
on how different distribution payables are taxed.
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Your Partial Lump Sum distribution is subject to federal
and state income tax withholding. As a general guideline,
if you choose a distribution payable to you, approximately
4 percent of the Partial Lump Sum payment is non-taxable because
the Partial Lump Sum payment is made up of both pre tax contributions
and post tax contributions (already taxed). To defer paying
taxes on this payment, you may roll over the Partial Lump
Sum amount to another qualified plan or Individual Retirement
Arrangement only by a direct trustee-to-trustee transfer.
If the Partial Lump Sum is not rolled over into an eligible
plan, CalSTRS must withhold 20 percent for federal income
tax and 6 percent California State income tax unless you specify
that no State income tax is to be withheld on the taxable
portion of the distribution. For additional information on
this topic, please contact your tax consultant or the Internal
Revenue Service at 1-800-829-1040.
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Your Partial Lump Sum payment will be issued on the first
of the month following your benefit effective date (date of
retirement), or, within 45 days from the date CalSTRS receives
your completed service retirement application, whichever is
later.
Here is an example of a CalSTRS member who retired at age
61 and one-half. In the first row of this chart, the $87,650
is the maximum amount that this member can elect for a Partial
Lump Sum. Following across the chart is the new unmodified
allowance of $3,441, which will be what the member would receive
if the Partial Lump Sum is elected. The amount of $607 shown
is the amount of the permanent decrease in the monthly retirement
allowance. For simplicity purposes, the general amounts of
$75,000, $50, 000, $25,000 or $10,000 is for information only.
Please note that this is only an example.
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