Utah URS Retirement Options: Payment Options, PLSO and Buyback

Updated October 2, 2026. Quick answer: A Utah Retirement Systems (URS) member picks one of six payment options at retirement. Option One pays a beneficiary nothing unless the member dies within 90 days of retiring, Option Two lets the beneficiary be changed, and Options Three to Six lock the spouse in. A Tier 1 member can also take a partial lump sum equal to 12 or 24 months of the monthly benefit, which permanently reduces that benefit. The application window is 90 days either side of a retirement date on the 1st or 16th, and every participating job must end first.

Which tier you are in

Utah Retirement Systems runs its pensions in two tiers. For the older one URS says: “If you were hired prior to July 1, 2011, your Pension Plan is Tier 1.” The newer one has a hybrid design: “The pension gives you a lifetime monthly payment determined by a benefit formula based on your salary and years of service.” “Any amount above the pension contribution rate goes to your 401(k).” On vesting in that Tier 2 Hybrid system, URS says: “Pension and employer contributions to your 401(k) are vested after four years.” Most of the election rules below come from the Tier 1 Retirement Guidebook, and the Tier 2 Retirement Guidebook repeats the option rules for its contributory systems.

The partial lump sum described later is published by URS under the title “Tier 1 Partial Lump-Sum Option”. The Tier 2 guidebook’s application checklist also carries a PLSO line, but Utah Code 49-11-1001(5) settles it: a member or participant of a system or plan under Chapter 22 or Chapter 23, the Tier II acts, “is not eligible to make an election under this section.” A member also gets only one: “A member who has received a lump-sum payment under this section is not eligible for another lump-sum payment under this section.”

The six payment options and who is locked in

The guidebook does not describe the six options one by one, but the Utah Code does: section 49-12-402 defines each of them for the Public Employees Contributory Retirement System, and section 49-13-402 repeats the definitions for the Noncontributory system. The guidebook says: “For a detailed description of the six different pension payout options, please see the Six Retirement Options section in the Highlights brochure.” What it does state is how the choice affects a beneficiary: “The option you select at retirement will determine what, if anything, is payable to a beneficiary.” “If you select option three, four, five, or six, your spouse, at the time of your retirement, will receive a continuing benefit after your death.”

The two ends of the range are spelled out. “If you select Option One, your beneficiary(ies) receive(s) no monthly benefit or refund of member contributions (if applicable), unless death occurs within 90 days after your retirement date.” “If you select Option Two, you may name whomever you choose as beneficiary(ies) to receive the remaining balance of member contributions (if applicable) upon your death. You may change your beneficiary(ies) at anytime.”

The four spouse options are the irrevocable ones, and Utah Code 49-12-402 defines them. “Option Three is a reduced allowance paid to and throughout the lifetime of the retiree, and, upon the death of the retiree, the same reduced allowance paid to and throughout the lifetime of the retiree’s lawful spouse at the time of retirement.” “Option Four is a reduced allowance paid to and throughout the lifetime of the retiree, and upon the death of the retiree, an amount equal to 1/2 of the retiree’s allowance paid to and throughout the lifetime of the retiree’s lawful spouse at the time of retirement.” Option Five modifies Option Three and Option Six modifies Option Four: if the spouse at retirement dies first, the retiree’s allowance returns to the amount payable under Option One for the rest of the retiree’s life, starting the first day of the month after the spouse died when the office receives notice and supporting documents within 90 days of the death, and otherwise the first day of the month after they are received. “If you select Options Three, Four, Five, or Six, your spouse at the time of retirement is designated as your beneficiary. This beneficiary cannot be changed.” The Tier 2 guidebook repeats the same rule. On divorce, URS says “a divorce or annulment will revoke your designation of a former spouse as a beneficiary for any URS benefit.” For the locked Option Five and Six elections the Utah Code does answer part of this: “If a retiree retires under either Option Five or Six and subsequently divorces, the retiree may elect to convert the benefit to a Option One benefit at the time of divorce, if there is no court order filed in the matter.” The same section carries no divorce conversion for Options Three and Four, so ask URS about those.

The percentage a surviving spouse receives depends on the system. For Public Safety and Judges: “Your surviving spouse will receive 65% or 75% of your monthly benefit depending on the pension payment option you select at retirement.” For Firefighters: “Your surviving spouse will receive 75% of your monthly benefit.” For Legislators: “Your surviving spouse will receive 50% of your monthly benefit.” For the general trade between a single-life and a survivor benefit, see single life versus joint and survivor. The guidebook does not give the size of the reduction that Options Three to Six take from the member’s own check, so an estimate from URS is the only way to compare them.

Retiree life insurance is decided once

Life insurance sits beside the pension election and has its own deadline. “You may cancel your election for life insurance at anytime. However, you may only elect to purchase retiree and/or spouse life insurance at retirement.” “you may name whomever you wish as beneficiary(ies). Beneficiary(ies) on the life insurance can be changed at any time.” Because cancelling is allowed but buying later is not, the decision at the retirement date is the only chance to take the coverage.

Application, retirement date and the bona fide termination

The window is two-sided. “Your application setting your retirement date must be filed with our office not more than 90 days before or after your retirement date.” The date itself is restricted: “You may set your retirement date for the first or the 16th day of the month when you cease all actual work for every participating employer before your retirement date” The checklist includes “Partial Lump-Sum Option (PLSO) » complete and sign, if elected.” and “Notice of Bona Fide Termination Requirements » sign.”

Ending employment is a condition, not a formality, although Utah Code 49-12-401(3) does not require some members to give up a second role: a member who is also an elected official need not leave that office unless retiring from it, and a part-time appointed board member, or an affiliated emergency services worker or part-time board member for a different agency, need not leave that role. All other employment still has to end. Subsection (4) makes this exemption available only to a member who, at retirement, is at least 55, or at least 50 if retiring from a public safety or firefighter system. “You must terminate all employment, regardless of benefits, with every URS participating employer/agency, before your retirement date with URS, and we must receive confirmation, in writing, from your employer.” The kinds of work that count are broad: “Part-time, full-time, seasonal, temporary, adjunct, substitute, hourly, contract arrangements or any employment in which you receive compensation, stipends or grants, regardless of benefits.” The consequence of getting it wrong is stated plainly: “your monthly retirement benefit will be canceled and you will be required to reimburse URS for any retirement benefits you received when you were not eligible.”

Cash flow starts late. “However, your first monthly benefit and your PLSO payment, if applicable, may be delayed up to three months following your retirement date or the date your application is filed with URS, whichever is later.” “You should plan to cover this interim period with some form of income.” “Your first payment may be estimated.” “The difference between the estimated benefit and the finalized benefit will be paid to you.”

Going back to work after retiring

URS sets time-based rules for reemployment. In the first stretch: “If you are employed by a participating employer within 60 days of your retirement date with URS, your retirement benefit will be canceled, you will be returned to active status” Between 60 days and one year after the retirement date, a salary cap applies: “Your salary is limited to the lesser of $21,000 or half of your final average salary during a calendar year.” For a retiree reemployed within one year of retirement, Utah Code 49-11-1205(1) writes this cap as “the lesser of $15,000 or one-half of the retiree’s final average salary”, and subsection (1)(b) requires the board to adjust that dollar amount each year by the annual change in the Consumer Price Index, so the dollar figure in force in a given year is the board’s adjusted amount, not the $15,000 written in the statute. The statute also bars employer-paid retirement service credit, medical, dental, other insurance (workers’ compensation and required withholdings aside) and paid time off during this reemployment. “If you exceed the earnings’ limitation or receive benefits, your retirement allowance will be canceled.” Utah Code 49-11-1207 adds that the office must keep the allowance cancelled for the rest of the calendar year when the earnings limit was exceeded, and must recover any overpayment before the allowance can be reinstated. As an alternative after 90 days and within a year, URS describes a reduced benefit: “You’ll continue to receive a reduced retirement benefit (reduction of 15% if you retired from a public safety or firefighter system, or 20% if you retired from another system).” “You will not receive a cost-of-living adjustment to your retirement benefit while reemployed.”

A longer break changes the choice. The separation requirement reads: “You must separate from employment (including part time and contract arrangements) with any participating employer for one year from your retirement date with URS.” When it is met, the retiree can do one of two things: “earn a salary and continue to receive the retirement benefit” or “earn a salary and cancel the retirement benefit in order to earn additional service credit” The exact dates at which each rule applies, and how the caps interact with the 60-day and 90-day lines, are laid out in the guidebook, so read that section before accepting any job offer from a participating employer.

The partial lump-sum option (PLSO)

The PLSO trades monthly income for cash on day one. URS describes it as follows: “At retirement, you can decide to take a lump-sum payment equal to 12 months or 24 months of your lifetime monthly retirement benefit.” The cost is stated in two sentences: “By deciding to receive a lump-sum payment, your lifetime monthly benefit will be permanently reduced.” “The monthly benefit reduction for taking a PLSO is permanent.” URS adds: “Carefully consider the reduced benefit to be sure you can meet future financial obligations.”

A separate form is involved. “In addition, to apply for a PLSO, you must complete a PLSO application to select the option and payout method.” On timing, “If you selected the Partial Lump‐Sum Option (PLSO), it will be paid when we issue your first check.” “If your retirement benefit is estimated, we will only pay you 80% of your PLSO. At the time your benefit is finalized, we will then pay the remaining 20%.” An extra credit exists for older accounts: “You may receive an additional 3% added to your lifetime monthly retirement benefit and your lump- sum payment if you had retirement contributions in your account on January 1, 1989.”

A computed example from an assumed $3,000 monthly benefit, not a URS figure: a lump sum of 12 months is 3,000 multiplied by 12, which is $36,000, and a lump sum of 24 months is 3,000 multiplied by 24, which is $72,000. The 3,000 is an assumed input. The documents read do not say whether the 12 or 24 months is counted on the benefit before or after the permanent reduction, so the example only shows the multiplication URS describes, and URS’s own estimate controls the actual dollar amount.

Taxes on the PLSO and the 401(k) rollover

URS lays out the tax treatment. “Your PLSO payment is fully taxable.” The federal items it lists begin with “20% federal income tax withholding on the eligible portion of the distribution”. It also says “When you receive a PLSO, the IRS requires 20% of the amount withdrawn be withheld for federal income taxes.” The penalty line reads: “A 10% early withdrawal tax penalty if the PLSO is taken before age 59 1/2, unless your employment ends during the year you turn age 55 or later.” “If you are a qualified public safety employee* and have attained at least age 50 or 25 years of service, whichever is earlier, the IRS may waive the 10% early withdrawal penalty tax.”

State tax is separate. URS lists “State of Utah income tax” and “Possible taxes of the state where you live if other than Utah.” For how Utah treats pensions generally, see Utah retirement taxes and does Utah tax pensions.

The deferral route is a rollover. “To defer paying immediate taxes on your PLSO payment, you may rollover all or an eligible portion of your PLSO to a URS 401(k) Plan.” URS says what it does to the bill: “A rollover to the URS 401(k) Plan will not be taxed on the balance in the current year and may defer your taxable distributions over your lifetime.” It also warns: “If you roll over to the URS 401(k) Plan, those funds will be subject to the rules and tax treatment of the plan. Thus, you may be subject to the additional 10% penalty tax.” More on the withholding mechanics is on the 20 percent withholding rule.

What the IRS adds on tax

A refund or lump sum from a public pension is a distribution, so the IRS rules apply on top of URS’s own. On withholding, the IRS says that a taxable eligible rollover distribution paid to you “is subject to mandatory income tax withholding (generally at a rate of 20%), even if you intend to roll it over later”, and that if you roll it over yourself “you’ll have to add funds from other sources equal to the amount withheld”. URS’s own PLSO page names a URS 401(k) Plan as the place to roll an eligible portion. The rollover clock, if the money is paid to you: “you have 60 days from the date you receive it to roll it over to another eligible retirement plan”.

On early distributions the IRS says “the law imposes a 10% additional tax on certain early distributions from certain retirement plans”. Its list of exceptions includes “Distributions made to you after you separated from service with your employer after attainment of age 55” and “Distributions made to a qualified public safety employee from a governmental plan”. Whether an exception fits a particular refund depends on your own plan and facts, so confirm it with a tax preparer before you take one.

Monthly benefit taxes and cost-of-living adjustments

The monthly benefit has its own tax notes. “Your retirement benefits are generally taxable.” “Federal and State of Utah income tax may be withheld beginning with your first retirement check, unless you tell us otherwise.” “If you had after-tax contributions withheld from your paycheck, you may exclude a percentage of your monthly benefit from taxation.”

On inflation, URS says: “Your COLA is based on the consumer price index (CPI) as determined by the U.S. Bureau of Labor Statistics and approved by the Retirement Board.” “It’s calculated using the average CPI for the calendar year compared to the average CPI for the previous calendar year.” “You will be eligible for a COLA based on the system from which you retire. COLAs are paid on the anniversary of your retirement date.” Utah Code 49-12-407 sets the terms for the Public Employees Contributory system, and 49-13-407 repeats them: the adjustment applies to an allowance that has been paid for at least one year, and “The original allowance shall be increased by the annual increase in the Consumer Price Index up to a maximum of 4%.” Increases above 4% are accumulated and used in later years when the annual increase is under 4%, and the adjustment “may not decrease the allowance”. The Tier 2 guidebook adds: “Please visit www.urs.org for more information and historical COLAs on URS pension benefits.”

Buying future service credit

A member close to retirement can buy years that have not been worked yet. For members of the Public Employees Contributory or Noncontributory Retirement System: “Be an active member in the Public Employees Contributory or Noncontributory Retirement System and have 25 years of service or be age 65 with five years of service.” Utah Code 49-12-409 sets its own condition for a contributory-system member: “have at least five years of service credit” and “otherwise meet federal eligibility requirements”, and the employer must first adopt a purchase policy with nondiscriminatory participation standards. The size limit and the floor: “may purchase up to five years, even if it exceeds the years you need to retire with an unreduced retirement allowance”. “At a minimum, the number of years of service credit you purchased must be enough to allow you to retire without an early age reduction.”

The split of cost is lopsided by design. “You must pay at least 5% of the total cost and retire immediately after your purchase. Your employer may pay up to 95%.” The price comes late: “It may take up to 45 days to give you an exact cost.”

Payment and risk: “Payment will only be accepted within 15 days of your retirement date set with URS.” “In all cases we must receive the total purchase amount before your retirement date.” On funding, “Direct rollover is limited to pretax dollars only from your 401(k) or other qualified plan” The downside is stated outright: “If you do not retire on your retirement date, we’ll refund the total purchase and you’ll forfeit your purchased service.” To compare the price against the extra benefit, use the pension buyback calculator.

Buying other public service credit

A different purchase covers earlier public work. URS says: “You may be able to retire earlier or get more in retirement by buying other public service credit or reinstating eligible service.” The conditions: “You must have at least 4 years of eligible service with URS to purchase service credit” “Contact URS to request forms at least 6 months before you want to purchase service” Where service is missing from the record, “the adjustment process may delay your retirement. It’s important that you initiate any adjustment action six months or more before your retirement date.” Utah Code 49-11-403 says “The amount of the payment shall be determined by the office based on a formula that is: recommended by the actuary; and adopted by the board.” The exact price therefore still has to be requested from URS. “Total payment must be completed prior to the member’s effective date of retirement or service credit will be prorated in accordance with the amount paid.” The section also requires at least four years of service credit before a purchase, and the member must forfeit any other plan’s service credit, and any defined contribution balance based on employer contributions, built on the same period of employment.

What this page could not settle

• The guidebook points to a Highlights brochure for the six options; Utah Code 49-12-402 defines what each option pays, but it leaves each reduction to actuarial computation, so the documents read do not state how big the reduction is for each, or which number goes with which survivor percentage.
• The documents read do not state the size of the survivor reduction for Options Three to Six in dollars or percent of the member’s own benefit.
• The documents read do not state whether a spouse must consent to a choice of Option One or Two.
• Utah Code 49-11-501 states the refund rules: the application is in writing, and “A refund of member contributions may not be made to a member within 60 days from the last date of the pay period for which contributions are made by or on behalf of the member.” “A member who receives a refund of member contributions forfeits the service credit based on those contributions.” Refund interest is paid on refunds. What the documents read do not state is the interest rate.
• Utah Code 49-12-401 states the Tier 1 retirement ages for the Public Employees Contributory system: four years of service credit and age 65, 10 years and age 62, 20 years and age 60, or 30 years of service credit at any age; 49-13-401 adds a 25-year route for the Noncontributory system that carries a reduction. The documents read do not state a Tier 1 vesting rule.
• URS’s own documents read do not state the cost-of-living cap; Utah Code 49-12-407 and 49-13-407 set it at 4% a year with the excess accumulated for later years.
• The documents read do not state whether the 12 or 24 months of the PLSO is counted before or after the permanent reduction, or how large that reduction is.
• The Tier 2 checklist lists the PLSO form, but Utah Code 49-11-1001(5) makes Tier II members ineligible for the partial lump-sum option.

Common mistakes

• Treating Options Three to Six as changeable. The spouse at retirement is the beneficiary and that beneficiary cannot be changed.
• Skipping retiree life insurance at the retirement date and expecting to add it later; it can only be elected at retirement.
• Taking a PLSO without weighing the permanent reduction to the monthly benefit against future obligations.
• Working for any participating employer, even part time or on contract, before the retirement date or inside the separation period.
• Buying future service credit and then not retiring on the retirement date, which refunds the purchase and forfeits the service.
• Rolling a PLSO into the URS 401(k) and forgetting that those funds follow that plan’s rules and can still face the 10% additional tax.

Related on this site: Utah retirement taxes, does Utah tax pensions, pension buyback calculator, pension lump sum versus monthly annuity and public pension retirement decisions by system.

Sources

• Utah Retirement Systems, Tier 1 Retiring Soon: https://www.urs.org/Members/Tier1RetiringSoon
• Utah Retirement Systems, Tier 1 Retirement Guidebook: https://www.urs.org/documents/byfilename/@Public%20Web%20Documents@URS@DB@RetiringSoon@T1RetirementGuidebook@@application@pdf/
• Utah Retirement Systems, Tier 1 Partial Lump-Sum Option: https://www.urs.org/documents/byfilename/%7CPublic%20Web%20Documents%7CURS%7CDB%7CRetiringSoon%7CPLSO%7C%7Capplication%7Cpdf/
• Utah Retirement Systems, Tier 1 Pension: https://www.urs.org/Content/Members/PensionTier1
• Utah Retirement Systems, Tier 2 Hybrid: https://www.urs.org/Content/Members/Tier2Hybrid
• Utah Retirement Systems, Purchasing Future Service Credit: https://www.urs.org/documents/byfilename/@Public%20Web%20Documents@URS@DB@RetiringSoon@PurchasingFutureServiceCredit@@application@pdf/
• Utah Retirement Systems, Tier 2 Retirement Guidebook: https://www.urs.org/documents/byfilename/@Public%20Web%20Documents@URS@DB@RetiringSoon@T2RetirementGuidebook@@application@pdf/
• Utah Retirement Systems, What to Expect When Completing a Service Purchase: https://www.urs.org/mango/pdf/urs/Miscellaneous/completingServicePurchase.pdf
• IRS, Topic no. 413, Rollovers from retirement plans (irs.gov): https://www.irs.gov/taxtopics/tc413
• IRS, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (irs.gov): https://www.irs.gov/taxtopics/tc558

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.