ASRS Retirement Options: Partial Lump Sum Up to 36 Months

Updated October 2, 2026. Quick answer: At retirement an Arizona State Retirement System (ASRS) member may elect an optional form instead of the straight life annuity: a joint and survivor annuity, a period certain and life annuity, or a partial lump sum of not more than thirty-six months of benefit, each actuarially reduced. A married member must elect a joint and survivor annuity naming the spouse unless the spouse consents to a waiver. The survivor election can be revoked before the retirement date and, in set cases, afterward. This page is built from the Arizona statutes; the ASRS handbook with its reduction factors could not be retrieved.

Phoenix city employees have their own system with its own options and refund rules: Phoenix COPERS retirement decisions.

Another Arizona system, for public safety employees, with its own decision page: PSPRS retirement decisions.

The standard benefit, and what an option changes

A.R.S. 38-757 gives the normal retirement benefit: “Except as provided in section 38-768, a member who meets the requirements for retirement benefits at normal retirement shall receive a straight life annuity” computed from credited service and average monthly compensation. The percentage per year of service rises with service:

A.R.S. 38-757, the straight life annuity formula
Credited service	Percent of average monthly compensation per year
Not more than 19.99 years	2.10 percent
20.00 to 24.99 years	2.15 percent
25.00 to 29.99 years	2.20 percent
30.00 years or more	2.30 percent

A worked example from assumed inputs, not an ASRS figure: 25 years of credited service and average monthly compensation of $5,000 is 25 x 2.20 percent x $5,000, or $2,750 a month as a straight life annuity. This applies the statute’s formula to those inputs and ignores any exception the statute names. One is the minimum monthly benefit in A.R.S. 38-768: “a retired member or beneficiary who is entitled to a benefit under this article shall receive at least a minimum monthly benefit that is computed pursuant to subsection B of this section if the retired member or beneficiary is at least seventy-five years of age” The rest of that sentence lists who qualifies, beginning with a retiree who retired with at least twenty years of credited service. The minimum for retired members is stated in subsection B: “For retired members, is $600.”

The optional forms

Section 38-760 opens: “A. On retirement, members may elect an optional form of retirement benefit as provided in this section.” Its list of forms includes the joint and survivor annuity, the period certain and life annuity and the partial lump sum, and ends with “4. Other forms of actuarially reduced optional benefits prescribed by the board.”

The optional forms named in A.R.S. 38-760
Form in 38-760	What it does	How the benefit is set
Joint and survivor annuity	The member’s income is reduced, and a contingent annuitant continues to receive all, two-thirds or one-half of it, as the member elects, after the member dies	Reduced to the actuarial equivalent of the normal or early retirement income
Period certain and life annuity	Payments for five, ten or fifteen years that do not depend on the member staying alive, and the member’s own payments continue for life	Actuarially reduced; any unpaid part of the term goes to named contingent annuitants, or the member’s estate if none survives
Partial lump sum	A lump sum at retirement of not more than thirty-six months of the member’s benefits	The ongoing benefit is actuarially reduced to pay for it

The statute’s own words for the survivor share: “after the member’s death all, two-thirds or one-half of the retirement income, as the member elects, shall be continued during the lifetime of the contingent annuitant”. On the reduction: “The amount of retirement income shall be the actuarial equivalent of the retirement income to which the member would be entitled under normal or early retirement.” For the period certain form, “the member shall name one or more period certain contingent annuitants who are entitled to receive the payments for any portion of the period certain beyond the lifetime of the member” The member may change the period certain beneficiary: “The member may name a different contingent annuitant at any time.” The statute also lets some members undo a period certain choice: “A member who retires after August 9, 2001 and before July 1, 2008 may rescind the election of a period certain and life annuity.” For a later retirement it says “A member whose original date of retirement is on or after July 1, 2008 may exercise a onetime election to rescind the period certain and life annuity option elected by the member if the contingent annuitant dies or ceases to be a contingent annuitant pursuant to the terms of a qualified domestic relations order or at the expiration of the member’s period certain term.”

Is the election final?

Not entirely, and the statute is specific. Before retirement: “The election may be revoked at any time before the member’s effective date of retirement.” After benefits start the member can still act: “At any time after benefits have commenced, the member may name a different contingent annuitant or rescind the election by written notice to the board as follows:” Rescinding leaves the member with a straight life annuity: “the member shall thereafter receive a straight life annuity equal to what the member would otherwise be entitled to receive if the member had not elected the joint and survivor life annuity option”. For later retirements the statute narrows it: “A member whose original date of retirement is on or after July 1, 2008 may exercise a onetime election to rescind the joint and survivor life annuity option elected by the member if the contingent annuitant dies or ceases to be a contingent annuitant pursuant to the terms of a qualified domestic relations order.” The onetime election therefore depends on one of those two events; it is not a free choice. A current spouse’s consent is part of the process: “the member shall obtain the consent of the contingent annuitant pursuant to section 38-776 before the member names a new contingent annuitant or before the member rescinds the election, except that consent is not required if the rescission is pursuant to subdivision (d) of this paragraph”. The statute states that requirement for a contingent annuitant who is the member’s current spouse (A.R.S. 38-760(B)(1)(e)).

A married member cannot simply skip the survivor option. The statute says “A member who is married at the time of retirement shall elect a joint and survivor life annuity pursuant to subsection B, paragraph 1 of this section”. The current spouse is the contingent annuitant “unless the member’s current spouse consents to a waiver of this requirement” or the election would violate another law, an existing contract or a court order. If the member neither elects nor has a waiver, the consequence is stated: “ASRS shall cancel the member’s retirement. The member may reapply for retirement at any time in a manner established by ASRS.”

The retirement itself can also be changed after it takes effect. A.R.S. 38-764(G) says “Notwithstanding subsection H of this section, a member may elect to cancel the effective date of retirement within thirty days of retirement or before the member’s receipt of retirement benefits, whichever is later.” Subsection (H) adds: “A member may exercise a onetime election to make changes to the retirement application within sixty days after the member’s retirement date.” “The member may not change the member’s retirement date, and any changes made to the retirement application are retroactive to the member’s retirement date.”

The partial lump sum

The statute describes the lump sum as “a lump sum payment equal to not more than thirty-six months of the member’s retirement benefits based on the actuarial equivalent of the retirement income to which the member would be entitled under normal or early retirement.” “The member’s benefit shall be actuarially reduced to provide for the lump sum payment. The lump sum payment shall be made at the time of retirement.” Increases are handled in two steps: The statute conditions how a later increase works for a member who takes the lump sum: “Any benefit increase granted to a member who elects a lump sum payment pursuant to this paragraph is subject to the following conditions:” Under (a), “If the benefit increase is a percentage increase of the member’s retirement benefit, the increase shall be based on the actuarially reduced retirement benefit of the member.” Under (b), “If the benefit increase is pursuant to section 38-767, the amount of the member’s benefit increase shall be calculated without regard to the lump sum payment pursuant to this paragraph.” The withholding applies only to a member with an overpayment: “If a member has received an overpayment pursuant to section 38-765 or 38-797.08, ASRS shall withhold the overpayment amount plus any required income tax withholding from the partial lump sum.” The statute does not say how the reduction is computed; that is in board actuarial tables, not in the sections read for this page. Federal rules on withholding for a lump sum are covered on the withholding page.

Refund of contributions

A member who leaves other than by retirement or death may take contributions back. The statute splits members by their membership date. For membership before July 1, 2011, a member with less than five years of credited service gets all of the member’s own contributions. With five or more years the member also gets a share of the employer contributions, which rises with service:

A.R.S. 38-740(A)(2), the employer-contribution share
Credited service (membership before July 1, 2011)	Share of employer contributions paid on the member’s behalf
5.0 to 5.9 years	Twenty-five percent
6.0 to 6.9 years	Forty percent
7.0 to 7.9 years	Fifty-five percent
8.0 to 8.9 years	Seventy percent
9.0 to 9.9 years	Eighty-five percent
10.0 or more years	One hundred percent

The statute leaves one kind of employer payment out of that share: “This amount excludes payments made by an employer pursuant to section 38-738, subsection B, paragraph 3, unless the member has made the payment required by section 38-738, subsection B, paragraph 1.” Interest is added: “Interest on the returned contributions as determined by the board.” For membership on or after July 1, 2011 the rule is different: “B. A member whose membership commenced on or after July 1, 2011 and who leaves employment other than by retirement or death may elect to receive a return of all of the member’s contributions with interest as determined by the board.” The statute states the price of either: “D. Withdrawal of contributions with interest constitutes a withdrawal from membership in ASRS and results in a forfeiture of all other benefits under ASRS.” A member terminated by an employer reduction in force with five or more years of credited service is entitled to the earlier schedule: “the member is terminated solely because of an employer reduction in force by reason of a lack of monies or elimination of the member’s position”.

Buying service credit

Section 38-743 lets an active member, or one receiving benefits under section 38-797.07, who was previously employed by the United States government, a state, territory, commonwealth, overseas possession or insular area of the United States, or a political subdivision of one of them, buy credit for that employment, “excluding any time worked for a prison while the member was incarcerated”. “the member may receive credited service for this prior employment if the member pays into ASRS the amount prescribed in subsection B of this section.” The price: “shall pay to ASRS an amount equal to the present value of the additional benefit that is derived from the purchased credited service using the actuarial assumptions that are approved by the board.”

Limits in the same section: for membership on or after July 20, 2011, the statute says “the member may receive not more than sixty months of credited service”. For membership on or after July 1, 2010, “the member shall have at least five years of credited service in ASRS before electing to receive credit for service pursuant to this section.” And a member cannot count the same period twice: a member who receives or is eligible for benefits from another public system for a period “is ineligible to receive retirement benefits from ASRS for the same period.” See the pension buyback calculator for whether a purchase pays for itself.

Benefit increases

Section 38-767 applies to “a member whose membership commenced before the effective date of this amendment”, a date the section itself does not state. For those members the statute grants “a permanent benefit increase in the base benefit” each July 1, to retirees and beneficiaries who were already receiving benefits by the cutoff it names.

The increase is not automatic in any year. The percentage is paid from excess investment earnings only: “The excess investment earnings on accounts associated with those persons eligible for an annual benefit increase pursuant to subsection A of this section are zero if the yield rate on ASRS assets is less than or equal to eight per cent.” “The total amount of the percentage increase provided in subsection A of this section shall not exceed four per cent in aggregate for all persons eligible for an increase.” And the statute’s test ends: “If the quotient is less than one, no benefit increases shall be granted.” In plain words, no increase is granted when excess earnings fall short of the threshold the statute sets.

A year with a yield at or below eight per cent does not end the matter, because unused earnings carry forward. A.R.S. 38-767(E) says “Any excess investment earnings on accounts associated with those persons eligible for an annual benefit increase pursuant to subsection A of this section from any year that are not used for benefit adjustments for that year are available for future benefit increases in the following years.” Subsection (F) adds: “Monies available for future benefit increases shall earn interest at a rate of eight per cent per year.” That interest pays the additional increases in subsection G.

The amount per person scales with years of credited service. Retirees with more than ten years of credited service can also receive a second increase that steps up with years since retirement, from at least five years to at least thirty years.

What this page could not settle

The ASRS handbook and retirement guide were not retrievable (the site blocks automated fetches), so the actuarial reduction factors for each optional form and the lump sum are not stated.
No section read gives a general vesting period; the only service thresholds here are in the refund and purchase rules.
Retirement ages are in A.R.S. 38-711, paragraph 27, which names the earliest of several tests. For membership before July 1, 2011: “A member’s sixty-fifth birthday.” “A member’s sixty-second birthday and completion of at least ten years of credited service.” “The first day that the sum of a member’s age and years of total credited service equals eighty.” For membership on or after July 1, 2011 the same first two tests apply, plus “A member’s sixtieth birthday and completion of at least twenty-five years of credited service.” and “A member’s fifty-fifth birthday and completion of at least thirty years of credited service.”
Section 38-767 applies to members whose membership began before an amendment date that the section itself does not state. No section of A.R.S. 38-711 to 38-797.15 grants a later member a permanent benefit increase: that phrase appears only in 38-767, and the cost of living wording in 38-747, 38-764, 38-769, 38-775 and 38-797.07 concerns federal dollar limits, lump sum requests, a distribution index and the long-term disability offset for social security benefits.
Early retirement is in A.R.S. 38-758. Subsection A says “A member who has attained age fifty, who has terminated employment with all employers and who has five years of total credited service is eligible to elect, in a form and manner prescribed by the board, to receive a reduced retirement income.” For membership on or after July 1, 2011, subsection C says “For a member whose membership in ASRS commenced on or after July 1, 2011, the benefit payable to a member electing early retirement shall be determined by reducing the normal retirement benefit computed in accordance with section 38-757 at the rate of three percent per year from age sixty to age sixty-five and five percent per year from age fifty to age sixty.” The reduction runs to the member’s sixty-second birthday with at least ten years of total credited service, or the sixty-fifth birthday with at least five but less than ten. Subsection B has a different rule for earlier members.
Contribution rates and the ASRS long-term disability and defined contribution programs are out of scope.

Common mistakes

Assuming a spouse’s consent is optional. A married member must elect a survivor annuity unless the spouse consents to a waiver, or the retirement is cancelled. A signed consent is not the only route, though: A.R.S. 38-776(C) says “The member may affirm in writing under penalty of perjury in a manner determined by ASRS that spousal consent is not required because of one of the following reasons:” it lists five, namely that the member is not married, that the current spouse has no identifiable community property interest in the benefits, that the member does not know the spouse’s location after taking all reasonable steps to determine it, that an acceptable domestic relations order requires payment contrary to section 38-760, or that obtaining consent violates another law, an existing contract or a court order.
Treating the survivor election as permanent in every case. The statute allows revocation before the effective date and limited changes afterward.
Expecting the lump sum to leave the monthly benefit untouched. It is actuarially reduced to provide for the lump sum.
Taking a refund without noticing it ends membership and forfeits all other ASRS benefits.
Counting on a yearly increase. The statute pays one only when excess investment earnings are enough.

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Sources

Arizona Revised Statutes 38-760, optional forms of benefits (Arizona Legislature): https://www.azleg.gov/ars/38/00760.htm
Arizona Revised Statutes 38-740, return of contributions (Arizona Legislature): https://www.azleg.gov/ars/38/00740.htm
Arizona Revised Statutes 38-743, credited service for prior public employment (Arizona Legislature): https://www.azleg.gov/ars/38/00743.htm
Arizona Revised Statutes 38-764, commencement, cancellation and changes to the application (Arizona Legislature): https://www.azleg.gov/ars/38/00764.htm
Arizona Revised Statutes 38-776, spousal consent and affirmation (Arizona Legislature): https://www.azleg.gov/ars/38/00776.htm
Arizona Revised Statutes 38-767, benefit increases (Arizona Legislature): https://www.azleg.gov/ars/38/00767.htm
Arizona Revised Statutes 38-757, normal retirement (Arizona Legislature): https://www.azleg.gov/ars/38/00757.htm
Arizona Revised Statutes 38-711, definitions, including normal retirement date (Arizona Legislature): https://www.azleg.gov/ars/38/00711.htm
Arizona Revised Statutes 38-758, early retirement (Arizona Legislature): https://www.azleg.gov/ars/38/00758.htm

Sources: the primary documents linked above, read on October 2, 2026. General information from each system’s own published materials, not legal, tax or financial advice. Your own member statement and the system’s current rules decide your benefit, and a pension counsellor at the system or a fee-only adviser is the right place to confirm anything consequential.

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