How can I determine if selecting a PLSO will meet my needs?
Each member may have unique needs in retirement. It is important to note that selecting a PLSO distribution results in a permanent reduction of a retiree's monthly annuity. Members should carefully consider the uses of any PLSO distribution and the amount of reduction to their annuity. You may wish to consult with your professional tax advisor before selecting a PLSO.
Will my standard annuity be reduced if I select a PLSO?
Yes. When a PLSO is selected, the member's monthly annuity is reduced to reflect the PLSO distribution. The reduced annuity will continue throughout the life of the member.
How will PLSO distributions be taxed?
Your PLSO distributions are subject to federal income tax withholding. Since PLSO are eligible rollover distributions, TRS must withhold 20% for income tax unless the eligible portion is rolled over into another eligible retirement plan. For additional information on this topic, please review the Special Tax Notice Regarding Rollover Options under TRS (pdf).
What payment options are available with PLSO?
Eligible members may select a PLSO equal to 12, 24, or 36 months of a standard service retirement annuity. When a PLSO is selected, the member's monthly annuity is reduced to reflect the PLSO distribution. The reduced annuity will continue throughout the life of the member.
If I select a two or three-year PLSO, would it be better for me to take a payout or immediately roll proceeds into another tax-sheltered investment?
If you select a 24-month or 36-month PLSO and elect to have it paid out over multiple years, the distribution is taxable and reportable to the IRS in the year it is distributed.
TRS does not pay interest on PLSO balances during distribution.
TRS does not make investment recommendations or offer financial planning services, so members should consult with their own tax and financial advisor on investment options.
How will selecting a PLSO impact future annuity increases for retirees should increases be provided?
The selection of a PLSO reduces a retiree's annuity as compared with the annuity that would be received if they had not selected a PLSO. Post-retirement increases are based on the amount of a retiree's annuity. Consequently, any future increases that may be approved by the legislature would be calculated on the reduced annuity. Given the longer life span of retirees today, this factor should be considered when deciding whether to select a PLSO.
For a complete statement of the laws and administrative rules that pertain to PLSO, please consult the TRS Laws and Rules (Laws, Chapter 824, and Rules, Chapter 29).