Do all state and local workers receive lifetime annuities?

They archetypal focused connected defined payment (DB) plans, successful which 88% of each authorities and section workers and 98% of noncovered workers participate. Within this “annuity-first “framework, the 4 astir communal payout options are:

• Single-life annuity: The retiree receives benefits for life. 

• Joint-survivor beingness annuity: The retiree receives benefits for life. When the retiree dies, the designated subsister — usually a spouse — receives an annuity for life.

• Joint-survivor play definite annuity: This enactment guarantees subsister benefits for a circumstantial play — often 10 years. If the retiree dies aft the warrant period, the subsister receives nary benefits.
• Partial lump sum: The retiree receives a information of the promised annuity arsenic a one-time payment, which is often deposited into a status relationship specified arsenic an IRA.

Figure 1 shows that virtually each authorities and section workers are offered a single- and joint-life annuity. About 40% are offered a play definite annuity, and astir a 4th are offered a lump-sum option.

The lump sum enactment sounds much threatening than it is. Most of the plans bounds the lump-sum magnitude to 36 months (roughly 20%) of the retiree’s promised annuity payments. Moreover, fixed the tiny fraction of workers successful plans that connection a lump sum and the comparatively debased take-up complaint (roughly 20%), lone 6% of each authorities and section workers — and 8% of noncovered workers — take this option. 

In summation to the tiny stock of authorities and section workers that “un-annuitize” portion of their DB benefit, 12% of each authorities and section workers (and 2% of noncovered workers) presently enactment successful thing different than a accepted DB arsenic their superior status plan. These alternatives include:

• a currency equilibrium program (a DB program that defines benefits based connected a defined publication (DC)-like account).
• a stand-alone DC plan; or
• a hybrid program (a DC program combined with a reduced DB plan);

Similar to accepted DB plans, the default payout enactment for nationalist assemblage currency equilibrium plans — which presently screen conscionable 3% of authorities and section workers — is an annuity. However, among the nationalist assemblage DC plans — which presently screen 9% of authorities and section workers — annuitization is ne'er the default. In fact, 3% of authorities and section workers enactment successful DC plans that bash not connection an annuity enactment astatine all.

In short, portion astir authorities and section workers volition person a beingness pension annuity successful retirement, a tiny stock of each authorities and section workers — astir 6% — person a information of their pension annuity into a lump sum and different 8% volition perchance participate status with un-annuitized DC assets. 

Among authorities and section workers who bash not enactment successful Social Security, astir 8% instrumentality a partial lump sum portion 1% volition perchance participate status with un-annuitized DC assets. 

So, the accepted contented is fundamentally right. But immoderate exceptions exist, and these are apt to summation arsenic enrollment successful superior DC plans grows.