Pop-up Options

 

Pop-up Options are like the regular two-life pensions (50% Husband and Wife; 66 2/3% Joint and Survivor Option; 75% Joint and Survivor Option and 100% Joint Life Option), in that they pay a certain amount for the life of the participant and, in the event the spouse survives the participant, pays the specified percentage to the surviving spouse.  However, unlike the regular two-life pensions where in the event the spouse dies before the participant, no change in the payment to the participant occurs, the Pop-up form of benefit gives the participant their single life pension amount.  In other words, in the event the spouse dies before the participant, the participant’s benefit “pops up” to his 100 payment guarantee amount (although the 100 payment guarantee does not apply to the Pop-up form of benefit.

 

In retirement planning, you generally try to choose the benefit that will provide the best level of financial support while you both live and then make sure there is enough benefit to the survivor.  Generally, it costs less for one person to live than it does for two.  Why, then, would you choose a pension option that pays more money when only one lives than when you both were alive?  In most cases, you wouldn’t make that choice.  However, perhaps you have information about your spouse’s health that makes it likely that you will outlive your spouse.  You still want to provide financial protection in the event you are wrong, so a joint and survivor pension still makes sense, but you really expect that it is more likely that you, the participant, will outlive your spouse.  In that case, the Pop-up can make a lot of sense.  You don’t want to simply choose the single life pension, because to do so would leave your spouse with nothing but the remainder of the 100 payment guarantee in the event you did die before your spouse.  The Pop-up lets you choose a form that both protects your spouse financially and recognizes the probability that you will outlive your spouse.

 

If you elect a Pop-up option, your monthly pension amount will be actuarially reduced to pay the cost of the option. This additional reduction is as follows:  1% reduction for the Husband-and-Wife form of benefit; 1.2% for the 66 2/3% Joint and Survivor Option; 1.3% for the 75% Joint and Survivorship Option and 1.6% for the 100% Joint Life Option.

 

You can see the amount that would be payable to you under the Pop-up options based on your current pension credits by using the NASI Pension Fund’s Pension Estimator.

 

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