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SERS explains COLA buyout, level‑income and reversionary options and Social Security offset
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Summary
The workshop covered the temporary COLA buyout offer, how level‑income and reversionary elections work, and the Social Security survivor‑offset removal option that reduces a pension by 3.825% to eliminate future survivor offsets.
At its Countdown to Retirement workshop, a State Employees Retirement System representative described several retiree election options that affect lifetime income: the COLA buyout, level‑income, reversionary elections, and Social Security offset removal.
The representative said SERS currently offers a COLA (cost‑of‑living adjustment) buyout that allows eligible members retiring before June 1, 2026, to take a lump sum in place of future COLA increases; the presenter cautioned that the buyout has been extended previously and could end if funds are exhausted. The workshop presented an example buyout amount and a break‑even analysis showing when retaining annual compounding COLAs would be financially preferable to taking the lump sum.
Level‑income was explained as an irrevocable election for members who choose to have SERS supplement their pension until Social Security begins. The presenter said members must obtain a Personal Earnings and Benefit Estimate (PEB) statement from the Social Security Administration and that the election is made on the retirement application. Examples at the workshop showed how level‑income increases monthly SERS payouts until the member begins Social Security, after which SERS reduces the pension by the Social Security amount being received.
Reversionary elections — where a retiree permanently reduces their monthly pension to provide a one‑time reversionary payment to a designated dependent — were described as irrevocable and noted that reversionary amounts do not receive COLA increases. The workshop illustrated 100% and 50% reversionary examples and explained the effect on survivor totals.
On survivor offsets, the presenter described the Social Security offset removal: a member may elect to permanently reduce their pension by 3.825% to remove the half‑of‑gain Social Security offset on a survivor annuity. The representative advised members to compare their spouse’s likely Social Security benefits before choosing the removal election because the choice is irreversible and affects lifetime amounts.
Members were told that taking the COLA buyout precludes selecting some other options (for example, the workshop said the buyout is not compatible with level income or certain reversionary elections) and that formal details and individualized estimates are available through SERS member services.
