§ 3-554. OPTIONAL MODIFICATION OF ALLOWANCES AT RETIREMENT.  


Latest version.
  • (a) For purposes of determining actuarial equivalence under this Section, the following terms will be used:

    (1) "Basic retirement allowance" shall mean the sum of a member's service retirement annuity and service pension as determined under Section 3-541, payable as a single life annuity, or the sum of the member's disability annuity and disability pension as determined under Section 3-547, payable as a single life annuity.

    (2) "Basic retirement allowance plus continuance" shall mean a member's basic retirement allowance plus any one-half continuation payments that would be payable under Section 3-550 as determined at the effective date of the member's retirement.

    (3) "Accumulated contributions" shall mean accumulated contributions as defined in Section 3-501(k)(i).

    (4) "Adjusted accumulated contributions" shall be calculated as follows:

    (i) The amount of the member's accumulated contributions at the effective date of retirement will be converted to an actuarially equivalent monthly annuity payable for the life of the member with a one half continuance of that monthly annuity for the life of the member's beneficiary.

    (ii) The difference between the member's monthly annuity and the beneficiary's monthly continuance shall be determined.

    (iii) The amount determined in subsection (ii) will be converted to an actuarially equivalent lump sum present value, which amount is defined to be the member's "adjusted accumulated contributions".

    (5) "Monthly uncontinued annuity payments" shall mean the difference calculated in subsection 4(ii).

    (6) All actuarial calculations shall be done using the actuarial factors in effect on a member's effective date of retirement, and shall not take into account any future cost of living increases. Actuarial calculations shall also not take into account the possibility that the marriage of a member could be dissolved.

    (b) If at the effective date of retirement the member has no spouse, children or dependent parents who would qualify for the one-half's continuation under Section 3-550, then, instead of receiving a retirement allowance only over the member's lifetime, the member may elect any of the following options:

    (1) Option 1A. The member may elect a lower service or disability annuity for the member's life, which also provides that if the member dies before receiving in such lower service or disability annuity payments the amount of the member's accumulated contributions, then the balance of such accumulated contributions shall be paid upon the member's death in a lump sum to a beneficiary designated by the member, as provided in subsection (d). This optional form shall be the actuarial equivalent of the member's service or disability annuity for the member's lifetime at the effective date of retirement. Under this option, no elections may be made with respect to the pension portion of the member's service or disability retirement allowance.

    (2) Option 2A, 100% Optional Continuance. The member may elect that a lower retirement allowance will be paid over the member's lifetime and that after the member's death the same lower benefit will be continued for life to a beneficiary designated by the member as provided in subsection (d). This option shall be actuarially equivalent to the member's basic retirement allowance at the effective date of retirement.

    (3) Option 3A, 50% Optional Continuance. The member may elect that a lower retirement allowance will be paid over the member's lifetime and that after the member's death one-half of the lower benefit will be continued for life to a beneficiary designated by the member as provided in subsection (d). This option will be actuarially equivalent to the member's basic retirement allowance at the effective date of retirement.

    (c) If at the effective date of retirement the member has a spouse, children or dependent parents who would qualify for a one-half's continuance under Section 3-550, then, instead of receiving a retirement allowance only over the member's lifetime, with a continuance after the member's death to certain beneficiaries, the member may elect any of the following options:

    (1) Option 1B. The member may elect a lower service or disability annuity for the member's life, which also provides that if the member dies before receiving in monthly uncontinued annuity payments (as defined in Section 3-554(a)(5)) the amount of the member's adjusted accumulated contributions (as defined in Section 3-554(a)(4)), then the balance of such adjusted accumulated contributions shall be paid upon the member's death in a lump sum to a beneficiary designated by the member as provided in subsection (d). Under this option, no elections may be made with respect to the pension portion of the member's service or disability allowance.

    (2) Option 2B, 100% Optional Continuance. The member may elect that a lower retirement allowance will be paid over the member's lifetime with an optional continuance payable for a beneficiary's lifetime after the member's death in such an amount that the sum of the optional continuance plus the one-half continuance under Section 3-550 will be equal to the lower retirement allowance payable for the member's lifetime. This option shall be actuarially equivalent to the member's basic retirement allowance plus continuance as defined in subsection (a)(2) above at the effective date of retirement.

    (3) Option 3B, 50% Optional Continuance. The member may elect that a lower retirement allowance will be paid over the member's lifetime with an optional continuance payable for life to a beneficiary designated by the member as provided in subsection (d) in such amount that the optional continuance shall equal one-half of the difference between the lower retirement allowance payable for the member's lifetime and the one-half continuance under Section 3-550. This option shall be actuarially equivalent to the member's basic retirement allowance plus continuance as defined in subsection (a)(2) above at the effective date of retirement.

    (d) The beneficiaries under any of the options shall be determined as follows:

    (1) Under all options, either the lump sum or optional continuances, if any, shall be payable only to such beneficiary as the member shall nominate by written designation duly executed and filed with the Retirement Board. Lifetime benefits are payable to beneficiaries only if they survive the member, and in the case of spouses, only if they were married to the member on the date of the member's death, and in the case of domestic partners, only if the domestic partnership with the member had been established on or before the date of the member's death. For purposes of this Section, a member's beneficiary shall be limited to the following classes of individuals:

    (i) spouse;

    (ii) domestic partner;

    (iii) children;

    (iv) grandchildren;

    (v) parents;

    (vi) any person who depends on the member wholly or in part for education or support; or

    (vii) a trust, provided that (I) the beneficiaries of the trust comes within categories (i)—(vi) and are identifiable, (II) the trust is valid under state law, (III) the trust is irrevocable no later than upon the death of the member, and (IV) a copy of the trust agreement is provided to the retirement office.

    (2) With respect to Options 1A and 1B,

    (i) The individual or entity designated as beneficiary of the lump sum amount may be changed by the member at any time, but only if the change is received by the Retirement Board prior to the member's death;

    (ii) In addition to the classes of individuals or entities listed in section 3-554(d)(1), a member may select as a beneficiary under Options 1A and 1B any of the following: a corporation, unincorporated association, or governmental unit; and

    (iii) If the member has not designated a beneficiary, or if an individual is designated and is not living at the time of payment or if an entity is designated and is not in existence at the time of payment (including through merger with another entity), the unpaid balance of accumulated contributions shall be payable in a lump sum to the member's estate.

    (3) With respect to Options 2A, 3A, 2B and 3B, a member's lifetime beneficiary must be designated not later than the effective date of retirement and cannot be changed thereafter, unless the designation of a new spouse or domestic partner as beneficiary is permitted under Section 3-555 upon the member's marriage or establishment of a domestic partnership after retirement.

    (4) With respect to all Options in which the member names his or her spouse or domestic partner as contingent lifetime beneficiary to receive benefits after the member's death, upon the death of the spouse or domestic partner or dissolution of marriage of the member and spouse or termination of the domestic partnership of the member and the domestic partner before the member's death, the designation of the former spouse or former domestic partner as contingent lifetime beneficiary is automatically revoked and such former spouse or former domestic partner shall receive no survivor benefits after the member's death.

    (e) Any election under this Section shall be made prior to the making of the first payment on account of any retirement allowance. However, if at the effective date of retirement (1) a member has a spouse or domestic partner who is a designated beneficiary under any lifetime option, and (2) the member dies within 30 days after the member's effective date of retirement, then the member's surviving spouse or surviving domestic partner shall have the option to either elect benefits under this Section or elect the benefits provided to a surviving spouse or surviving domestic partner for a member who dies before retirement. (Added Ord. 5313, 1958, based on former Sec. 2-841; Am. Ord. 95-40, § 8, eff. 6-23-95; Am. Ord. 2004-99, §§ 1, 2, eff. 11-15-04; Am. Ord. 2006-17, § 5, eff. 3-10-06; Am. Ord. 2006-140, § 1, eff. 10-27-06).