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Procedures Manual

11.1: Initial Lump-Sum Benefit (ILSB)

Last Revised: Jan 1, 2010


Purpose

This section should be used when a member elects to receive a one-time, lump-sum payment (not to exceed 36 times their Maximum Option monthly benefit) from their projected lifetime retirement benefit and receive an actuarially reduced monthly lifetime benefit. The Initial Lump-Sum Benefit (ILSB), became effective January 1, 1996. It is available to members who have not participated in the Deferred Retirement Option Plan (DROP). ILSB is not a retirement option but rather an alternative to refunding or to participating in DROP. If a lump-sum distribution is chosen, it may be: (1) paid to the member subject to taxes and penalties; (2) rolled over into an IRA or other qualified plan; or (3) treated as a DROP-like account with interest being paid by TRSL.

NOTE: A member must live at least 30 days after the effective date of retirement to be considered retired. If a member dies before that time, he or she will be considered to have died in active service, and only survivor benefits, not retirement benefits, will be paid. Refer to Index 13.0 for information about survivor benefits.
Action to be Taken
  1. Procedures to follow when a member wants to consider receiving a one-time, lump-sum payment under ILSB.
    • Refer to Index 11.0 for information and procedures pertaining to applying for Service Retirement.
       
    • The member must complete an Application for Service Retirement, ILSB, or DROP (Form 11).
       
    • The member must elect ILSB in Section 3 and specify either the maximum withdrawal or a specific withdrawal amount.
       
    • All members that elect ILSB must complete a DROP or ILSB Account Spousal Consent (Form 11G) if their spouse is not at least a 50% beneficiary of their ILSB distribution and/or the member chooses less than a life-expectancy withdrawal method.
       
  2. Procedures to follow if re-employment of an ILSB retiree occurs.
    • Refer to Index 15.0 for reemployment of retirees returning to work.
For eligibility requirements and calculation formulas, see the TRSL Member Handbook: Regular Plan, Plan A, and Plan B.
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