A decision guide for Oregon public employees
How to Evaluate Your Oregon PERS Pension Options
Your pension election determines more than the first monthly payment. It can also determine whether income continues to a beneficiary and whether your own payment may increase if that beneficiary dies first.
Fairchild Capital is not affiliated with or endorsed by Oregon PERS or the State of Oregon. Confirm available options, estimates and deadlines directly with PERS.
Make a household decision
How should you choose an Oregon PERS pension option?
Begin with official estimates for every option available to you. Then compare the income needed while both spouses or partners are alive, the income needed after either person’s death and the other assets available to support the survivor.
The election with the highest starting payment is not automatically best. Neither is the election with the largest survivor benefit. The right fit depends on the size of the reduction, the beneficiary’s needs, both parties’ health and longevity, age differences, Social Security, life insurance and other savings.
The short answer
Use PERS estimates to quantify the choices, evaluate each option across both lifetimes and understand when the election becomes difficult or impossible to change. Do not make the decision from a single monthly number.
Start with membership
Tier One, Tier Two and OPSRP options are different
Oregon PERS provides different election structures for Tier One/Tier Two members and OPSRP members. Terminology that applies to one program should not be assumed to apply to another.
Thirteen options
Current PERS materials describe nonsurvivorship, survivorship and lump-sum settlement choices. Most option changes must occur within 60 days after the first benefit payment.
Five options
Current PERS materials describe one Single Life and four survivorship choices. The option and beneficiary generally cannot be changed after the effective retirement date.
OPSRP members generally have less post-retirement flexibility than Tier One/Tier Two members. Verify current deadlines and change procedures directly with PERS before relying on them.
Tier One and Tier Two
Understanding the primary pension-option categories
Option 1
A nonrefund benefit paid for the member’s lifetime. PERS describes it as the highest monthly benefit, with no benefit paid to anyone after the member dies.
Refund Annuity
A lifetime member benefit. After death, a beneficiary receives any amount remaining in the member account as a lump-sum refund. The account may be exhausted during the member’s lifetime.
15-Year Certain
A lifetime member benefit with a guarantee of 180 monthly payments. If the member dies before receiving all 180 payments, the beneficiary receives the remaining payments.
Option 2
A full joint-and-survivor benefit. After the member’s death, the surviving beneficiary generally receives the same monthly amount for life, subject to applicable limits.
Option 2A
Full survivorship with an Option 1 contingency. If the beneficiary dies first—or qualifying divorce provisions apply—the member may request an increase to the adjusted Option 1 amount.
Option 3
A half joint-and-survivor benefit. After the member’s death, the surviving beneficiary receives one-half of the member’s monthly amount for life.
Option 3A
Half survivorship with an Option 1 contingency. It provides the half survivor benefit plus the potential member increase described by PERS if the beneficiary dies first or qualifying divorce provisions apply.
PERS also describes lump-sum settlement versions and a Total, or double, Lump-sum Option. Those elections can materially change or eliminate future monthly benefits and may create immediate tax consequences. They require separate analysis using current PERS estimates and tax guidance.
The highest monthly payment answers only one part of the question.
Evaluate what the household receives while both people are alive, after the member dies and if the beneficiary dies first.
OPSRP members
Understanding the five OPSRP pension options
| Option | While the member is alive | After the member dies | If the beneficiary dies first |
|---|---|---|---|
| Single Life | Monthly lifetime payment. | No continuing benefit. | Not applicable. |
| Full Survivorship | Actuarially reduced lifetime payment. | Beneficiary generally receives the same monthly amount for life. | Member’s amount does not increase. |
| Full Survivorship Increase | Lower starting payment than standard Full Survivorship. | Beneficiary generally receives the same monthly amount for life. | Member may request the higher Single Life amount under applicable provisions. |
| Half Survivorship | Actuarially reduced lifetime payment. | Beneficiary receives one-half of the member’s monthly amount for life. | Member’s amount does not increase. |
| Half Survivorship Increase | Lower starting payment than standard Half Survivorship. | Beneficiary receives one-half of the member’s monthly amount for life. | Member may request the higher Single Life amount under applicable provisions. |
Special rules can apply when a nonspouse beneficiary is significantly younger than the member. The increase provisions also require documentation and a written request; the adjustment is not necessarily automatic.
Plan for both lifetimes
How much survivor income does the household need?
A survivor may need less gross income than the couple needed together, but expenses rarely fall by half. Housing, utilities, property taxes, healthcare and many daily costs can continue. Meanwhile, one Social Security payment may stop, tax filing status can change and the survivor may lose access to one person’s earnings or benefits.
Start with a survivor budget rather than guessing. Then identify income and assets that would remain available under each order of death.
What continues?
List the proposed PERS survivor benefit, Social Security survivor income, other pensions, annuities and continuing earnings.
What fills the gap?
Review life insurance, the IAP, OSGP, IRAs, investments, cash and other property available to the survivor.
What remains?
Estimate housing, healthcare, taxes, debt, caregiving and the survivor’s desired lifestyle.
What could change?
Consider age differences, health, longevity, family responsibilities and each person’s comfort managing money.
Understand the default
Spousal consent and beneficiary restrictions matter
Current Tier One/Tier Two guidance states that a married member’s spouse must consent to the selected option; otherwise, the benefit defaults to Option 3. Current OPSRP guidance states that a married member or registered domestic partner generally defaults to Half Survivorship with that person as beneficiary unless the spouse or partner consents to a different option or beneficiary. Many consent situations require notarization.
Survivorship options generally require one living-person beneficiary, and age differences can affect the monthly benefit. A trust, estate or charity may not qualify as the beneficiary for a lifetime survivor option even though other benefit types may allow different beneficiary designations.
Confirm the person, spelling, relationship, age verification, required consent and what happens under death or divorce before submitting the application.
A survivor election should be tested—not chosen from instinct alone.
Compare the pension reduction with the actual income gap, other assets and protection the beneficiary would have.
A disciplined comparison
Seven questions to evaluate each pension option
1. What are the official amounts?
Use a current PERS estimate showing the options available to you. Do not compare percentages without comparing actual monthly payments.
2. What does the survivor need?
Build a realistic survivor budget and account for changes in Social Security, taxes, healthcare and household expenses.
3. What other income continues?
Identify the survivor’s Social Security, pension, employment or other reliable income under both possible orders of death.
4. What assets can support the gap?
Evaluate the IAP, OSGP, IRAs, investments, cash and life insurance rather than asking the pension to solve every need.
5. What is the cost of protection?
Measure the difference between the member-only and survivor payments, but do not reduce the analysis to a simplistic break-even age.
6. What happens if the beneficiary dies first?
Understand whether the member’s payment remains unchanged or may increase, and what documentation and request PERS requires.
7. When does the decision lock?
Apply the correct Tier One/Tier Two or OPSRP change rules and complete the analysis before the applicable deadline.
Worked example: measure the survivor income gap
Hypothetical illustration, not an actual client result or PERS benefit quote. Assume a survivor would need $3,500 a month for living costs and would receive $2,000 a month of other spendable income. The remaining gap is $1,500 a month, or $18,000 a year.
For planning purposes, suppose one pension election would leave the survivor with an estimated $1,800 a month after taxes and another with $1,100. The first assumption leaves a $300 monthly margin; the second leaves a $400 monthly shortfall, or $4,800 a year, to cover from other resources. These fictional after-tax amounts are not official option percentages, calculated benefits or tax estimates.
The smaller survivor gap does not automatically identify the better election. Compare the member’s payment while both people are alive, both possible orders of death, the assets available to fill a shortfall, inflation and the cost of giving up current income. Obtain the actual available payments from PERS and build a separate tax projection before using them in a household budget.
A pension comparison worksheet
- Write down the estimate date, retirement date, plan and each available election’s gross monthly payment.
- For each election, record what would continue after the member dies and what happens if the beneficiary dies first.
- Prepare a survivor spending estimate and identify which other income sources would continue.
- Convert the projected income to a consistent after-tax basis, then calculate any monthly and annual gap.
- Compare the result with accessible assets, debts, healthcare needs and the household’s ability to absorb uncertainty.
- Confirm the beneficiary details, required consent and applicable election deadline directly with PERS.
Keep this pension worksheet separate from your IAP distribution decision; then connect both to your household retirement income plan.
Avoid common shortcuts
Mistakes to avoid when choosing a PERS option
Choosing the largest check
The highest member payment may leave a financially dependent survivor without pension income.
Defaulting to maximum protection
A survivor option may provide more protection than the household needs while permanently reducing current income.
Ignoring the rest of the balance sheet
Life insurance and retirement assets can change how much survivor pension income is necessary.
Assuming the option can be changed
Deadlines differ, and some elections become irrevocable sooner than members expect.
From estimates to an election
A practical pension-option evaluation process
Confirm your program and choices
Verify whether you are Tier One, Tier Two or OPSRP and obtain current PERS estimates for applicable options.
Map both lifetime scenarios
Calculate household cash flow while both people are alive, after the member dies and after the beneficiary dies.
Test risks and assumptions
Stress-test longevity, inflation, taxes, investment returns, healthcare and changes in household spending.
Review other protection
Include Social Security, insurance, the IAP and other assets before determining how much survivor pension is needed.
Verify and submit correctly
Confirm the election, beneficiary, consent, documents and deadline directly with PERS before submitting the application.
Continue your Oregon PERS research
Read the complete Oregon PERS retirement planning guide, understand Oregon PERS tiers and OPSRP, compare IAP retirement options, or explore retirement income planning.
Verify before electing
Official Oregon PERS resources
Tier One and Tier Two
Review the current Tier One/Tier Two and IAP Preretirement Guide.
OPSRP
Review the current OPSRP Pension Program and IAP Preretirement Guide.
Common questions
Oregon PERS pension-option FAQs
Which Oregon PERS pension option pays the most each month?
For Tier One/Tier Two, PERS describes Option 1 as the highest monthly benefit. For OPSRP, Single Life generally produces the highest member-only payment. Neither provides a continuing beneficiary benefit after the member dies.
What is a full-survivorship pension option?
A full-survivorship option pays the member for life and generally continues the same monthly amount to the named beneficiary for that beneficiary’s life after the member dies, subject to applicable limits.
What is a half-survivorship pension option?
It pays the member for life and, after the member dies, pays the surviving beneficiary one-half of the member’s monthly benefit for the beneficiary’s lifetime.
What does the “increase” or contingency feature do?
Under applicable options, the member may request an increase toward the member-only benefit if the beneficiary dies first or qualifying spouse-divorce provisions apply. Documentation and a written request are generally required.
What is the Tier One/Tier Two 15-Year Certain Option?
It pays the member for life and guarantees 180 monthly payments. If the member dies before all 180 payments are made, the beneficiary receives the remaining payments.
Does a survivor option reduce my monthly PERS benefit?
Generally, yes. PERS actuarially adjusts the member payment to provide the survivor benefit. The reduction depends on the option and member and beneficiary information.
Does my spouse have to approve my pension option?
Spousal or registered-domestic-partner consent rules can apply when choosing something other than the plan’s default survivor arrangement. Review current PERS forms; consent may need to be notarized.
Can I change my PERS pension option after retiring?
Current rules differ. Tier One/Tier Two members can generally change within 60 days after the first benefit payment. OPSRP options and beneficiaries generally cannot be changed after the effective retirement date. Verify the rules directly with PERS.
Should I choose a pension option using a break-even calculation?
A break-even calculation can provide context but does not capture survivor needs, taxes, longevity uncertainty, insurance, investment risk or the value of guaranteed lifetime income.
Is Fairchild Capital affiliated with Oregon PERS?
No. Fairchild Capital is an independent investment adviser and is not affiliated with or endorsed by Oregon PERS or the State of Oregon.
Take the next step
Choose a pension option with the entire household in view.
Schedule an introductory conversation about your PERS questions and whether Fairchild Capital may be able to help.
