Payment Options & Final Compensation

When you retire, SCERS will ask you to select a retirement payment option. This is a one-time, irrevocable decision that determines how your monthly benefit is paid—and what happens to it after your death.

This section explains your options and the financial impacts on you and your survivors.

Understanding Your Retirement Payment Options

Each SCERS member must select one of the following options on their  Retirement Application. 

For a personalized estimate of your retirement benefit under each payment option, please use the Benefit calculator. 

Unmodified Option

Maximizes your monthly benefit and provides a continuing survivor benefit, if eligible. 

• You receive the highest monthly benefit SCERS can pay
• Upon your death:
  • A 60% lifetime continuance is paid to your eligible spouse or registered domestic partner, to whom you were married/registered for at least one year prior to retirement. 
  • If no eligible spouse or partner, minor children may collectively receive the 60% continuance until the minor child(ren) reaches age 18 (or reaches age 22 if regularly enrolled as a full-time student) or marries, whichever comes first. 
  • If no continuance beneficiary is eligible, any remaining member contributions (if applicable) are paid as a lump sum to your designated beneficiary. 

Option 1 – Refund Option

Provides a lump-sum refund of remaining contributions.

• Your monthly benefit is slightly reduced compared to the Unmodified Option.
• Your remaining member contributions, if any, will be paid out to your beneficiary upon your death. 
• No monthly survivor benefit continues after your death.
• Most often selected by members with no financial dependents or who do not wish to provide continuing income 

Option 2 – 100% Continuance

Provides a lifetime monthly benefit to your beneficiary.

• Your monthly benefit is reduced to account for the continuing benefit
• After your death, your beneficiary receives 100% of your monthly benefit for the rest of their life
• Commonly selected by members with a spouse, registered domestic partner, or other financially dependent individual

Eligibility Notes:

• Your beneficiary must have an insurable interest in your life (typically a spouse or dependent).
• You must provide proof of your beneficiary’s age.
• If your beneficiary dies before you, your benefit amount does not increase and any newly designated beneficiary only receives a payment of your remaining member contributions, if any, upon your death. 

Option 3 – 50% Continuance

Provides a reduced monthly benefit to your beneficiary.

• Your monthly benefit is reduced to account for the continuing benefit
• After your death, your beneficiary receives 50% of your monthly benefit
• The same eligibility requirements and irrevocability rules apply as with Option 2

Option 4 – Custom or Special Option

Allows a non-standard arrangement based on actuarial approval.

• Available only in limited cases (e.g., dividing a benefit between two beneficiaries)
• Must be approved by SCERS and meet actuarial equivalence requirements
• Most members will not use Option 4 unless special circumstances apply (such as court-ordered division under a Domestic Relations Order)

Temporary Annuity Option

The Temporary Annuity Option is a specialized feature that may provide a temporary increase in your SCERS benefit before age 62, followed by a permanent reduction after age 62. It is intended to “level out” income until Social Security begins. 

Important Considerations

• The reduction after age 62 is permanent, regardless of when or whether you claim Social Security. 
• This is not an automatic coordination with the Social Security Administration — you are responsible for applying for Social Security separately. 
• For many members, this option can result in a significant decrease in income beginning at age 62. 
• This option is available for service retirement only and does not apply to disability retirement. 
• PEPRA members are not eligible for the Temporary Annuity Option. 

SCERS strongly encourages you to discuss this option with a financial advisor before considering it. 

Important Considerations When Choosing a Payment Option

• Your choice is permanent. Once your retirement is effective, your option cannot be changed, even if your beneficiary passes away. 
• Your beneficiary’s age affects the amount of your reduction for Options 2 and 3—the younger the beneficiary, the greater the reduction. 
• Only one person may be named to receive a continuance under Option 2 or 3. 
• Options that include continuance benefits generally reduce your monthly benefit to account for the added liability to the system. 
• SCERS cannot provide financial advice but encourages you to discuss your choices with a financial advisor. 

Summary: Selecting the Right Option for You

The best payment option depends on your individual goals and family situation. Consider:

• Do you need to provide financial support for a spouse or dependent after your death?
• Would a refund of contributions be meaningful to your heirs?
• Do you want to maximize your monthly income for as long as you live?

If you’re unsure, schedule an appointment with SCERS before making your selection. 

Calculating Final Compensation

Calculating your final compensation is the first step in estimating your retirement benefit allowance. SCERS calculates final compensation based on your benefit tier. For Tier 1 members, SCERS averages the most recent consecutive 12 months of pension-eligible compensation earned. For members in all other benefit tiers, SCERS averages the most recent consecutive 36 months of pension-eligible compensation earned. Most members’ highest final compensation occurs in the last years of employment. If that is not the case in your employment history, be sure to bring that to the attention of SCERS. A written request is required to select an alternate final compensation period.

Final Compensation Examples:

Scenario 1: Benefit Tier 1 –
One-Year Final Compensation Calculation:

Use the most recent 26 consecutive biweekly pay periods of pension-eligible compensation, divided by 12 months, to determine monthly final compensation.

Mr. Smith was a Tier 1 member whose biweekly pay rate for the last eight months was $960. For the four months before that, his biweekly pay rate was $880. His average monthly compensation is calculated by adding his monthly compensation for his last 12 months of service (26 biweekly pay periods) and dividing the sum by 12.