Your PLSO distributions are includible in taxable income unless directly rolled over and are also subject to federal income tax withholding. A PLSO effectively reduces a retiree s initial benefit as compared with the benefit that would be received if they had not selected this option. Post-retirement increases are based on the amount of a retiree s benefit. Consequently, any future increases that may be approved would also be based on the member s current reduced benefit. You should consider the risk factor of investments you are thinking of making with any lump sum amount.
Riskier investments carry the possibility of permanent losses of principal.
The decision to take a partial lump sum payment is irrevocable, regardless of future circumstances or outcomes. Consider the options available to you on a monthly basis, and your family or personal situation. For example, if there is no one you wish to name for the purpose of receiving monthly benefits in the event of your death, you may be more likely to choose the partial lump sum option. However, if you intend to elect a person to receive monthly benefits in the event of your death, you should consider the effect that taking a lump sum payment will have on their benefit, since it will be lower. If you elect a partial lump sum option and do not roll it over to an IRA or another qualified plan, you will owe taxes on the lump sum.