Your decision to retire will be based on your individual plans
and goals. There are two decisions all prospective retirees make
that warrant thoughtful consideration.
You must review your choice of beneficiary.
Your beneficiary is the person who will receive benefits from
your retirement plan upon your death. If you are married, or in
a registered domestic partnership, by law, your beneficiary
must be your spouse or registered domestic partner unless your
spouse/domestic partner provides a notarized signature waiving
his/her benefits on page 2 of the
Beneficiary Designation Form (Form 102). If
you choose the Unmodified Option, or Option 1, you may change
your beneficiary any time you wish, throughout your retirement.
If you choose Option 2, 3, or 4, you may not change your
beneficiary, even if the named person(s) dies before you.
You must choose a retirement benefit option.
The CERL has five options (methods of disbursing your
retirement benefit payments).
Once your retirement application has been processed, CCCERA will
send you an option election form along with tax withholding forms
approximately 8 to 12 weeks after your retirement
date. Your option election is irrevocable once your first
payment has been issued. Make sure you understand these
options completely before making this crucial choice.
The Unmodified Option
The unmodified option pays the highest monthly benefit to
Upon your death after retirement, your eligible spouse
or registered domestic partner will receive 60 percent of your
monthly benefit for the rest of his or her lifetime. If you do
not have an eligible spouse/registered domestic partner, but do
have minor children, the 60 percent continuance is paid to them
until the youngest (dependent, unmarried) child reaches age 18
(age 22 if a full-time student). If you do not have either an
eligible spouse or dependent children, the balance of your
contributions and interest remaining in your retirement account
will be paid in a lump sum to your designated beneficiary.
Eligible spouses/domestic partners must have been married to you,
or registered with the State of California as your domestic
partner, at least one year prior to your retirement
date or after retirement, have been married/registered as a
domestic partner for at least two years prior to your
death, and be at least 55 years old.
Option 1 reduces your monthly benefit,
but potentially leaves a lump sum for your survivor.
This option reduces your monthly retirement benefit, in
comparison to the Unmodified Option, in order to “save” some
funds in your account for your surviving beneficiary. Option 1
pays a reduced monthly benefit until death of the member, then
pays any remaining accumulated contributions to the member’s
estate or survivor* in a lump sum.
Your retirement plan is a defined benefit plan, meaning your
benefit is not based on your account balance. Your monthly
benefit continues regardless of the balance in your account.
However, benefit funds are partially drawn against your accrued
contributions. Depending on the member’s lifespan, there may
not be any contributions left at death for a survivor to
*Your beneficiary must have an insurable interest in
your life. An insurable interest is defined as an
interest based upon a reasonable expectation of pecuniary
(financial) advantage through the continued life, health, or
bodily safety of another person and consequent loss by reason of
that person’s death or disability, or a substantial interest
engendered by love and affection, as in the case of individuals
closely related by blood or law.
Note: All four optional provisions require that the designated
beneficiary be a person with an insurable interest in the
Option 2 reduces your monthly benefit, but provides the same
monthly benefit for the lifetime of your survivor.
Option 2 reduces* your monthly retirement benefit, but after your
death, pays the same reduced benefit to your named
beneficiary for the rest of their lifetime. Trusts cannot be
named as beneficiaries of this option; by 1937 Act statute,
trusts may be named beneficiaries to lump sum payments only.
*The amount your monthly benefit is reduced depends on your age
at retirement, the age of your beneficiary at your retirement
date, and the life expectancy of both parties.
Option 3 allows you to provide a monthly benefit to your
beneficiary that is equal to 50% of the benefit you received
during retirement. Your benefit reduction is based on the life
expectancy of you and your beneficiary.
Option 3 reduces your monthly benefit, as compared to the
Unmodified Option, but after your death pays 50% of the same
reduced monthly retirement benefit to your beneficiary for the
rest of their lifetime. Trusts cannot be named as beneficiaries
of this option; by 1937 Act statute, trusts may be named as
beneficiaries to lump sum payments only.
The amount of reduction for Option 2 and 3 is based on your age
at retirement, the age of your beneficiary at your retirement
date, and life expectancy of all parties.
Option 4 allows you to make an election to receive a reduced
retirement allowance during your lifetime, and to name one or
more beneficiaries who would receive an allowance for their
lifetime(s) upon your death. Your reduced allowance is calculated
using your age at retirement and the age of your
If one of your beneficiaries dies before you, the reduction to
your retirement allowance remains in effect. You cannot name
another beneficiary to receive the previous beneficiary’s portion
of your monthly allowance.
Several conditions must be met to qualify for this option:
- The election must be made in writing by the member.
- The designated persons must have an “insurable interest” in
the member’s life.
- Total benefits must be the actuarial equivalent of an
unmodifed retirement allowance.
- The designations must not put any additional financial burden
on the system.
- CCCERA must consult with our actuaries, The Segal Company, to
determine the benefit amounts and qualifications for each
- The processing and approving of one request to estimate
benefit allowances under Option 4 shall be processed free of
charge to the member. Additional estimate requests requiring
actuarial services to determine the benefit amount(s) and
qualifications will be charged at $500.00 for each verification.
(This fee provision, including the fee amount, is subject to
change based on the Board’s determination of the financial and
administrative burden to the system.)
As required by law, retirement benefit reduction factors are
calculated using life expectancy estimates developed by licensed,
professional actuaries, who specialize in retirement and benefit
issues. For text of the Retirement Board’s Option 4
Policy, please Download the Optional Settlement policy PDF.
At retirement, each member and chosen beneficiary have specific,
individual demographic information used to actuarially calculate
the prospective reduced monthly benefits and potential survivor
benefits associated with Options 2, 3 or 4. Therefore, without
actual data, it is impossible to estimate what a given benefit
may be for any option.
For more information about Retirement Options,
Download the Optional Settlements PDF slides from a Board of Retirement educational
presentation on Options, IRS benefit limitations (minimum
distribution rules), and sample age difference calculations for
non-spouse beneficiaries under specific option choices.