NC TSERS Payout Options After Death: Option 2, Option 3 and the Pop-Up Provisions

The Choice Was Made at Retirement

When a TSERS member retires, they select a payment option on Form 6E that determines their monthly pension amount and what happens to that pension when they die. Once the first pension payment is issued, the election is irrevocable — no one can change it afterward, including the survivor.

This means the survivor benefits available to your family were locked in years or decades ago. Understanding which option the retiree chose is the first step in knowing what you are entitled to.

Maximum Allowance (Unreduced Single Life)

The Maximum Allowance gives the retiree the highest possible monthly pension for their lifetime. The trade-off: all monthly payments stop when the retiree dies. No monthly survivor pension is payable to anyone.

The Guaranteed Refund provision still applies (see below), and the retiree may have enrolled in the optional $10,000 Contributory Death Benefit. But for ongoing monthly income, a Maximum Allowance selection means the surviving family gets nothing from the pension system after the month of death.

Option 2: 100% Joint and Survivor

The retiree received a reduced monthly pension during their lifetime. When the retiree dies, 100% of that reduced monthly amount continues to the designated survivor beneficiary for the rest of their life.

This is the option that provides the most financial continuity for a surviving spouse. The survivor receives the exact same dollar amount the retiree was getting, deposited on the same schedule. The only change is whose name is on the 1099-R at tax time.

The survivor pension is retroactive to the first day of the month following the retiree's death.

Option 3: 50% Joint and Survivor

The retiree received a reduced monthly pension, but the reduction was smaller than under Option 2. When the retiree dies, 50% of the monthly amount continues to the designated survivor for life.

Option 3 represents a middle ground: the retiree got a larger check while alive, and the survivor gets half of it afterward. For couples where the surviving spouse has their own income or pension, this may have been a reasonable balance.

Option 6-2: Modified 100% Joint and Survivor (Pop-Up)

Option 6-2 works like Option 2 — the survivor gets 100% of the monthly benefit — with one critical addition. If the designated survivor beneficiary dies before the retiree, the retiree's monthly pension "pops up" to the full Maximum Allowance for the rest of their life.

For survivors, Option 6-2 functions identically to Option 2: you receive 100% of the monthly benefit for your lifetime after the retiree dies. The pop-up provision only matters if you had predeceased the retiree.

Option 6-3: Modified 50% Joint and Survivor (Pop-Up)

The same pop-up structure as Option 6-2, but the survivor receives 50% of the monthly benefit. If the survivor predeceased the retiree, the retiree's pension pops up to the Maximum Allowance.

Option 4: Social Security Leveling

Option 4 adjusts the monthly pension based on the retiree's age relative to Social Security eligibility. It pays a higher TSERS pension before age 62 (or 65) and a lower pension afterward, so the combined TSERS plus Social Security income stays roughly level.

Option 4 provides no monthly survivor pension. All payments terminate at the retiree's death, similar to the Maximum Allowance.

The Guaranteed Refund (Applies to Every Option)

Every retirement option includes the Guaranteed Refund as an automatic backstop. It works like this: if the total pension payments received by the retiree (plus any monthly payments to the Option 2/3/6-2/6-3 survivor) are less than the member's accumulated contributions plus interest at the date of retirement, RSD pays the remaining balance as a lump sum.

The lump sum goes to the person named on Form 336 — the Guaranteed Refund beneficiary. By statute, this cannot be the same person as the monthly survivor beneficiary.

In practice, the Guaranteed Refund only pays out when the retiree (and survivor) die relatively soon after retirement, before enough monthly checks have been issued to exhaust the contributions balance.

How to Find Out Which Option Was Selected

If you don't know which option the retiree chose, call the Retirement Systems Division at (919) 814-4590 or (877) 627-3287. RSD can confirm the payout option on file and explain what it means for your specific situation.

The NC TSERS Survivor Benefits Guide walks through every option's survivor implications, the Guaranteed Refund calculation, and the tax forms you will receive as a survivor beneficiary.

See more North Carolina guides →