[WKU HUMAN RESOURCES:Employee Benefits]

Retirement Options (KTRS)

Selecting a retirement option is an important decision, requiring careful study regarding your future financial commitments. The staff of the Kentucky Teachers' Retirement System (KTRS) is available to assist you as much as possible in making a wise decision.

 You should be familiar with certain facts that apply to all optional methods of payment.

  1. Survivor benefits and beneficiary payments are not the same. Survivor benefits apply to survivors of active members only
  2. and are not available to survivors of retirees.
  3. The beneficiary of a retirement plan does not have to be related to the retiree. Members who select Option 1 or Option II may change their beneficiary under certain conditions without changing their retirement plan.
  4. Before selecting a plan of payment, you and your beneficiary should complete medical examinations. The plan selected may well depend on the physical condition of you and your beneficiary.

Changing Your Retirement Plan

Your retirement plan may be changed if you selected the Straight Life Annuity (SLA) or Joint - Survivor plan and one of these qualifying events occur:
  1. You have married or remarried since your effective date of retirement;
  2. Your beneficiary dies
  3. Your marriage ends by divorce, annulment, or dissolution.
If you have experienced one of these qualifying events and you are determined eligible to change your retirement plan, you will have 60 days from the date of the qualifying event to make the change with KTRS.

 The right to change your retirement plan depends on which plan you originally selected, and if you are eligible to make a change, you are not required to do so.

Option 1 Straight Life Annuity with Refundable Balance

The Straight Life Annuity (SLA) provides you with the maximum benefits over your lifetime, with annuity payments ceasing upon your death. Upon your death, if your total monthly payments are less than your account balance at retirement, a lump sum settlement will be made to your estate or beneficiary. You should select a SLA if you have to dependents to be supported after death.

 You may change to a joint-survivor annuity if you have married or remarried since retirement. A copy of your marriage certificate must accompany your application for a joint-survivor annuity. The effective date of your new option selection will be the first of the month following receipt of the application at KTRS.

 A joint-survivor annuity with your new spouse as beneficiary will reduce your monthly annuity, but it will provide a continuing benefit to your new spouse after your death. In come cases, the reduction is substantial. You have 60 days from the date of the marriage to make this change with KTRS.

 

Option II Ten Years Certain and Life Thereafter

Option II guarantees that either you or your beneficiary will receive a monthly annuity (somewhat smaller than under SLA) for ten years. If you survive the ten years, you will continue to receive the same annuity for life. However, after the expiration of the ten-year period, there will be no payment to your beneficiary. The age of your beneficiary is of no consequence under Option II. Years certain payment plans are also available for a five year period, a fifteen year certain period, or a twenty year certain period.

 This option is of particular value to you if you wish to insure that a guaranteed amount will be returned over a specified length of time. It is also useful to you if your health at retirement is expected to considerably reduce your life expectancy. Under certain conditions, you may be permitted to change your beneficiary designation. If your beneficiary predeceases you before the ten-year guaranteed period expires, you may name a new beneficiary.

 

Option III Joint-Survivor Annuity

This option provides guaranteed payments for two full lives. Because of this, you and your beneficiary's ages are taken into account. This option provides you with an annuity less than the SLA so that your designated beneficiary, upon your death, is provided an annuity equal to your annuity. This option is most useful when you have other income available that will cease upon your death or when your beneficiary's primary income will be the KTRS annuity.

 In the event of divorce, annulment, or marriage dissolution, you may return to the SLA (Option 1) plan. If you remarry after a divorce, you may select a new plan to provide benefits to your new spouse. The annuity will be actuarially equivalent to your SLA (Option 1) benefit. You have 60 days from the date of the divorce, annulment, or the marriage dissolution to make this change with KTRS and return to the SLA (Option 1) plan.

 If your beneficiary predeceases you, you cannot return to the SLA (Option 1) plan. You must continue receiving the reduced annuity. If you remarry after the death of your beneficiary, you can provide your new spouse with a joint-survivor annuity. The new annuity is based on your reduced annuity, adjusted to the ages of you and your new beneficiary. You have 60 days from the date of remarriage to make this change with KTRS.

 

Option III(a) Joint-Survivor Annuity with "Pop-Up" Option

This option is the same as Option III except if your beneficiary dies before you, your annuity will increase to the SLA amount. If you remarry after the death of your beneficiary, you may select a joint-survivor option to provide benefits to your new spouse. The annuity will be actuarially adjusted so that it is equal to the benefits you would receive under an SLA (Option I) plan. You have 60 days from the date of remarriage to make this change with KTRS.

 

Option IV Joint-Survivor Annuity One-Half Benefit to Beneficiary

Under the Joint-Survivor Annuity Plan, you elect a reduced lifetime annuity to provide a lifetime annuity to your beneficiary upon your death. You beneficiary's annuity is one-half of the amount that you were receiving.

 The theory behind this option is that it costs more for two to live than for one. Also, in many instances, upon you death, other income may be available to your beneficiary. This is a useful option since it provides larger benefits during your lifetime. Also, proceeds of life insurance policies or trust funds may be available to your beneficiary. Again, your beneficiary has a direct bearing on the annuity amount.

The restrictions that apply to Option III regarding changing plans also apply to this plan.

 

Option IV(a) Joint-Survivor Annuity One-Half Benefit to Beneficiary with "Pop-Up" Option

This option is the same as Option IV except if your beneficiary dies before you, your annuity increases to the SLA amount. The restrictions that apply to Option IIIa regarding changing plans also apply to this plan.

 

Option V Other Payment

In most instances the payment plans provided in Options I through IV(a) will meet the needs of the members and their estates. However, the Board of Trustees recognizes that there may be times when some alternate plan of payment is desirable. In such a case, you have the right to exercise Option V, which provides that you may request benefits be paid to a person(s) having an insurable interest in your life as you may designate. Such a plan shall be certified by the actuary to be of equivalent value to the annuity provided under and SLA and approved by the Board of Trustees.

 This option, when considered with the other plans available, make it possible for the member to provide almost any kind of payment plan desired.

The changes you make under this option should be provided to you at retirement. Please contact KTRS if you desire more information.

Beneficiary's Birth Record

The birth certificate of your beneficiary is required if you select a "Joint-Survivor Annuity" option.

 

Selecting an Option

For many of you, annuities form KTRS will constitute a major portion of your retirement income. Selecting the "option" which KTRS will pay your retirement income is one of the most important decisions you will make. The final decision must be made at the time of retirement, based upon your individual circumstances at that time. A thorough understanding of your rights and privileges in advance of retirement will assist you in deciding wisely. KTRS staff will work with you to assure that all retirement options are fully understood. The final decision, however, must rest with you.

 Comments or questions about this section of Western Online should be directed to Beth Littrell
Last Modified: September 22, 1998
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Western Kentucky University.