D a l l a s P o l i c e a n d F i r e P e n s i o n S y s t e m  

FAQ (Frequently Asked Questions) Regarding the 100% Joint and Survivor Option

Q. What is the 100% joint and survivor annuity option?

A: The 100% joint and survivor annuity option is a pension payment method that will pay you an actuarially reduced pension and continue 100% of your monthly benefit to your Spouse after your death. The Spouse remains eligible for the benefit supplement and annual adjustments. Neither the Pensioner nor the Spouse is eligible for minimum benefits. With this option, you would receive less money while alive, but your Spouse would receive a larger benefit amount after your death than under the standard survivor benefit. With the standard benefit provision, you would receive more while alive, but your Spouse would receive less benefit after your death.

Q: Why is the 100% joint and survivor annuity option benefit reduced from the standard benefit amount?

A: Under the standard benefit and survivor provisions, the Pension System pays an unreduced benefit over your lifetime, but only one-half of that benefit to your Spouse after your death. Your pension benefit in the 100% joint and survivor annuity option is reduced from the standard benefit amount so that the System can continue full payment in the same amount to your Spouse after your death without increasing the cost to the Pension System. If your benefit under this new option were not reduced, the Pension System would pay out a greater amount over the two lifetimes than under the standard benefit and survivor provisions.

Q: What is the standard survivor benefit to a Spouse?

A: The survivor benefit under the standard benefit payment pays 50% of a Pensioner's pension amount to the Pensioner's Spouse after the Pensioner's death. Any eligible Children (generally under age 19) share in the remaining 50% of the Pensioner's benefit.

Q: How would my benefit be reduced under the 100% joint and survivor annuity option?

A: The monthly benefit is actuarially reduced based on your and your Spouse's ages and life expectancies. The intention is that the value of the total amount the Pension System would pay on your behalf under the joint and survivor annuity option, considering the greater amount paid out as survivor benefits, would equal the value of what would have been paid on your behalf under the standard benefit and survivor provisions.

Q: How much would my benefit be reduced?

A: Our actuary has provided age-based actuarial tables for calculating the reduction. The reduction reflects the adjustment needed to make the total projected payments under the 100% joint and survivor annuity option equivalent to what would be paid under the standard benefit provision. Generally, the younger your Spouse, the greater the reduction from the unreduced benefit.

Q: When can I choose this option?

A: You can choose the joint and survivor option when you retire or at any time after you retire under the conditions explained below:

1. You may elect the option when you leave Active Service and apply for pension benefits. You cannot make the election at the time you go into DROP or while in DROP.

2. You also may elect this option after you retire, however, you must meet a one-year qualifying period. If you die within one year after making the election, the option becomes void and your Spouse is not eligible for the 100% J&S option. In this event, any survivor benefit payable to your Spouse would revert back to the 50% benefit, or special survivor benefit, if eligible and the total amount of the benefit reduction resulting from the selection of the 100% J&S option during this period will be refunded to your designated beneficiary.

3. If you are retired and elect, or previously elected, the Spouse Wed after Retirement (SWAR) option to provide a 50% survivor benefit to your spouse, you may increase the benefit to the 100% joint and survivor option at the same time or any time thereafter. You must meet a one-year qualifying period – if you die within one year after making the election, the option becomes void and your Spouse is not eligible for the 100% J&S option. In this event, any survivor benefit payable to your Spouse would revert back to the 50% benefit, or special survivor benefit, if eligible and the total amount of the benefit reduction resulting from the selection of the 100% J&S option during this period will be refunded to your designated beneficiary.

4. A surviving spouse of a Member who met the age and Pension service requirements for Normal Retirement (age 50 with at least 5 years of pension service) and who dies while in Active Service may elect the 100% Joint and Survivor option as if the Member had left Active Service immediately before death and made this election.

Q: I am already in DROP. Can I still select the 100% joint and survivor annuity option?

A: Yes. You select your benefit option when you leave Active Service and apply for pension benefits. You must make the election at the time you leave Active Service even if you choose to defer your pension benefits into your DROP account.

Q: How does the 100% joint and survivor annuity option work?

A: If you choose the 100% joint and survivor annuity option, you will receive a reduced monthly benefit. In exchange for the reduction, your Spouse will receive a monthly survivor benefit after your death in the same monthly amount you had been receiving before your death. If there are eligible surviving Children, your Spouse receives one-half of the Pensioner's monthly benefit and the eligible Children share in the remainder of your benefit. When the Children are no longer eligible, the full amount of the payment becomes payable to your Spouse.

Under the standard benefit provision (when not eligible for the special survivor benefit), a surviving Spouse typically receives only 50% of the Pensioner's benefit, whether or not there are Children eligible to receive survivor benefits. If otherwise eligible, you and your Spouse remain eligible for the benefit supplement and annual benefit adjustments. (See example below.)

 


EXAMPLE: With 20 years of service and average Computation Pay of $4,137, Officer Smith is entitled to a standard benefit of $2,482 per month ($4,137 x 3% x 20). Smith elects the 100% joint and survivor annuity option when he leaves Active Service, and his benefit is reduced to $2,299 ($2,482 x 92.6080%, the reduction factor, based on Smith's and his Spouse's ages). By the time Smith dies in his 10th year of retirement, his benefit, including annual adjustments, grows to about $3,218 per month. Upon Smith's death, his Spouse would continue to receive the same $3,218 per month benefit that Smith had been receiving before his death.

The Spouse would be entitled to annual adjustments in subsequent years on the same basis as Officer Smith. In this example, Smith is eligible to receive a benefit supplement. The surviving Spouse is also eligible for a benefit supplement upon attaining age 55, reduced by the same percentage as the reduction in the basic pension benefit and annual adjustments. If this option is elected, minimum benefits do not apply. (Under the standard pension payment method, Smith's benefit would have grown to about $3,475 per month at the time of his death. With the standard benefit, Smith's Spouse would receive one-half of his benefit amount, approximately $1,738 (assuming the Spouse does not qualify for the special survivor benefit).

Eligible surviving Children, if there are any, would share in the remaining $1,738.)

 


Q: How can my Spouse benefit from this option?

A: The survivor benefit under the 100% joint and survivor annuity option would pay your Spouse a greater benefit amount after your death than would be paid under the standard benefit option. If you elect the 100% joint and survivor annuity option, your benefit is reduced during your lifetime, but would continue in the same amount to your Spouse after your death.

Under the standard benefit option (if not eligible for the special survivor benefit), you would receive a full benefit, but your Spouse would receive only 50% of your benefit. Which method is better for you depends on your personal circumstances. You will need to look at both options to see which is better for you and your family in the long run.

Q: Under what circumstances might the 100% joint and survivor annuity option be better for my family and me?

A: If it is more important to you to maximize the amount your Spouse will receive after your death than the amount you receive while alive, the 100% joint and survivor annuity option might be for you. We cannot tell you which option is better. You are taking a risk. The 100% joint and survivor annuity option will always pay you less during your lifetime and, except when you have eligible surviving Children, more to your Spouse after your death than the standard benefit provision would pay. The question is whether the exchange is to your advantage--will the extra benefits to your Spouse outweigh what you will have to give up before your death?

The 100% joint and survivor annuity option might work to your advantage if:

• Your Spouse has little or no other source of income.

• Your Spouse will not be eligible for the special survivor benefit.

• At the time of your death, you have no Children eligible to receive survivor benefits.

• If you have Children eligible to receive survivor benefits, they likely would receive them for a relatively short period. (Unlike the standard survivor benefit, when surviving Children are no longer eligible for these benefits (to age 19), the entire amount of the Pensioner's former benefit is paid to the surviving Spouse.)

• You have health issues that likely would shorten your life span.

Q: Under what circumstances might the 100% joint and survivor benefit not be to my advantage?

A: The survivor benefit payable to your Spouse under the 100% joint and survivor annuity option likely might not be worth the risks in the following situations:

• Your Spouse has sufficient other sources of income.

• Your Spouse is eligible for the special survivor benefit. (The special survivor benefit also pays a larger survivor benefit than the standard 50% survivor benefit. Therefore, the payoff from the 100% joint and survivor annuity option is lessened because the increase over the special survivor benefit is much smaller.)

• At the time of your death, you have young Children eligible to receive survivor benefits. (The combined amount paid to the Spouse and surviving Children under the standard provisions, while the Children are eligible, would be larger than the amount payable under the 100% joint and survivor annuity option.)

• You expect to live longer than an average life expectancy. • You or your Spouse probably would qualify for the minimum benefit.

• You have an impending divorce.

• Your Spouse has health problems that may seriously shorten his or her life expectancy.

• You do not want to give up current income for the prospects of larger payments in the future.

Q: How does the special survivor benefit affect the decision to elect the 100% joint and survivor annuity option?

A: If eligible, the special survivor benefit would entitle your surviving Spouse to a survivor benefit that is a percentage of your benefit at the time of your death. This percentage is the same as the percentage used to determine your pension benefit. The special survivor benefit pays a much larger survivor benefit to your Spouse than the standard 50% survivor benefit.

Because the survivor benefit payable under the 100% joint and survivor annuity option may be only marginally higher than what is payable under the special survivor benefit provision (much less of an increase than over the standard survivor benefit), the required reduction for the 100% joint and survivor annuity option would be relatively small. Consequently, the potential payoff (increased benefit for your Spouse after your death) is not as large as for the standard 50% survivor benefit.


EXAMPLE: Fire Fighter Jones had 28.5 years of pension service at retirement, his pension benefit is 85.5% (3% x 28.5 years) of his Computation Pay. His Spouse's special survivor benefit would be 85.5% of the amount he is receiving when he dies.

If his standard benefit is $4,233 per month when he dies, the special survivor benefit amount payable to his Spouse would be $3,619 ($4,233 x .855-- this is a simplification of the calculation for example purposes only). Fire Fighter Jones' 100% joint and survivor annuity option benefit before his death would be approximately $4,159 ($4,233 x joint and survivor reduction factor of 98.2629% based on his age and his Spouse's age). His Spouse would receive the same amount after his death. (See the Member Handbook for information on the eligibility requirements for the special survivor benefit.)

 


If you are or will become eligible for the special survivor benefit, you should consider your health, ages of any Children, age of your Spouse, expected future income, and personal financial situation to determine if the special survivor benefit or the 100% joint and survivor annuity option would provide the most advantage to you and your Spouse.

Q: What factors should I consider in making the decision?

A: We recommend that you carefully consider your health, ages of any Children, whether your Children are handicapped, age of your Spouse, your and your Spouse's life expectancies, expected future income, your Spouse's financial dependence on your pension, and other personal financial issues to determine whether this new option is appropriate for you and your Spouse.

Perhaps most importantly, you should consider whether extra dollars later for your Spouse are worth taking fewer dollars while you are alive. You will have to weigh whether the additional benefit amount your Spouse will receive after your death likely will be greater than the extra dollars you give up while alive.

The facts and circumstances related to your particular situation could create a situation in which you and/or your eligible survivors could ultimately receive less benefits under this new option than under standard survivor provisions.

Q: What happens if my Spouse dies before me?

A: This is a risk you take in choosing the 100% joint and survivor annuity option. As with the standard benefit provision, no surviving Spouse benefit would be paid, but you would continue to receive the reduced benefit. Eligible surviving Children or Dependent Parents and SWAR (Spouse Wed After Retirement) provisions still would apply.

Q: What happens if I remarry after I leave Active Service?

A: If you were married when you left Active Service and chose the 100% joint and survivor annuity option, only the spouse you were married to at the time of your retirement is covered by the 100% joint and survivor annuity option. If you remarry, your new spouse is not eligible for pension benefits, unless you purchase them. You can purchase a SWAR benefit (Spouse Wed After Retirement) to provide a survivor benefit to your new Spouse. With the SWAR option, your new Spouse will only be eligible for the 50% survivor benefit. When you choose the SWAR option, the Pension System will actuarially reduce the benefit you were receiving at the time of the election.

Q: Can I change my mind after choosing my payment option?

A: No. After you elect your payment option, either the standard monthly benefit or the new 100% joint and survivor annuity option, your decision cannot be changed. It is important that you meet with a Benefits Counselor as soon as possible to review your options. Members entering DROP do not elect a payment option until actually leaving Active Service.

Q: If I am interested, what should I do?

A: Choosing between the regular payment method and the 100% joint and survivor annuity option is an important and complicated decision. As you approach retirement, we strongly recommend that you contact one of our Benefit Counselors at 214.638.3863 or 1.800.638.3861 for an appointment to discuss your options. Although the Pension System staff cannot tell you which option is better for you, our Benefits Counselors will help you work through various scenarios to assist you in making your decision.

 


We Are Here to Help

We do our best to provide clear, understandable information to you. For more Member or Pensioner information, please contact us via e-mail at info@dpfp.org. You also call the Pension System office at 214.638.3863 or 1.800.638.3861, and ask for a Benefits Counselor. Our Benefits Counselors are trained to answer all your pension questions.

 

Dallas Police & Fire Pension System
4100 Harry Hines Boulevard, Ste. 100
Dallas, Texas 75219
214-638-3863
1-800-638-3861

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