Updated October 8, 2026. Quick answer: A Cambridge Retirement System member picks Option A, B or C on the board’s Choice of Option form, and the form says the choice cannot be changed once retirement becomes effective. Option A pays the highest monthly allowance and nothing continues to anyone. Option C continues two-thirds of the allowance to one named person. Without a choice, the allowance is paid under Option B. A refund after leaving ends membership, and 20% of the taxable part is withheld unless rolled over; under 10 years of service and a voluntary exit, the form says the refund carries 3% interest.
What this page covers and what it does not
This page works from documents the Cambridge Retirement Board (the board that runs the Cambridge Retirement System for City of Cambridge employees in Massachusetts) posts on its own website, read on October 8, 2026: its refund application with the special tax notice, the Choice of Option form, the superannuation retirement application, three beneficiary forms, a military service purchase application, and several of its answers to frequently asked questions. Several are standard forms from the state Public Employee Retirement Administration Commission (PERAC) with the Cambridge board’s details filled in. The state retirement guides the board links were not among the documents read, so this page gives no benefit rate tables. Disability retirement is not covered. Neighboring systems are on Boston Retirement System retirement decisions and Massachusetts state retirement decisions.
When a pension can start
The superannuation application says: “This retirement allowance is based upon your age, years of service, group classification, and salary”. Its minimum requirements depend on the date of joining and the group.
| Group | Creditable service | Minimum age |
|---|---|---|
| Group 1 | 10 years of creditable service | 60 |
| Group 2 | 10 years of creditable service | 55 |
| Group 4 | 10 years of creditable service | 50 |
| Group 4 | Any amount, subject to certain minimums | 55 |
For members who joined before April 2, 2012, the form lists 20 years or more at any age, or age 55 with 10 years or more in Groups 1 and 2, or age 55 with any amount of service in Group 4 only, subject to certain minimums. The board’s refund FAQ describes the 2012 changes as “Increase in the minimum retirement age from 55 to 60” and “Retirement calculations to be based on the average of 5 years of earnings, rather than 3 years of earnings”, and says “For most members, these factors will result in a requirement to work until age 67, rather than 65, in order to reach maximum benefits”. The FAQ on the maximum adds “The most anyone can collect as an annual retirement allowance is approximately 80%”. A computed example from an assumed $60,000 average pay, not a Cambridge figure: 80% of $60,000 is $48,000 a year. The board’s own estimate for an actual member decides the number.
The election: Option A, B or C
A member who applies for retirement chooses one of three payment options. The Choice of Option form says “you may select one of three retirement allowance payment Options (A, B or C)”. The options decide what a survivor receives.
| Option | What the member receives | What a survivor receives |
|---|---|---|
| Option A | The highest possible monthly allowance | Nothing continues. All payments stop, and no balance in the annuity account is paid out |
| Option B | Smaller than Option A | A lump sum of the unexpended annuity account to named beneficiaries; nothing is paid if the account has been fully depleted |
| Option C | Smaller than Option A or Option B | Two-thirds of the allowance continues for life to one named beneficiary; the allowance returns to the Option A amount if that person dies first |
On Option A the form says “Of all three options, Option A provides the highest possible monthly allowance to a retiree” and “No pay out of the remaining balance in the annuity account (if any) will be made”.
On Option B the form says “The payments under this Option are smaller than under Option (A)” and “The annuity portion of your allowance is reduced to allow a lump sum benefit for your named beneficiary(ies)”. The form warns that “the contributions comprising the annuity account will be depleted within approximately twelve to fifteen years depending upon your age at retirement”, and that “If your account has been fully depleted, nothing will be paid to your named beneficiary(ies)”.
On Option C the form says it “provides for a monthly retirement allowance during your lifetime that is less than you would receive under either Option (A) or Option (B)”. “That allowance will be equal to two-thirds of the allowance that you were receiving at the time of your death”. The form adds that “The younger your beneficiary, the smaller your retirement allowance will be”. The beneficiary is restricted: “Only your spouse, former spouse who has not remarried, mother, father, sister, brother or child may be designated as your Option (C) beneficiary”. A computed example from an assumed $2,100 monthly Option C allowance, not a Cambridge figure: two-thirds of $2,100 is $1,400 a month to the beneficiary after the member’s death. The reduction from Option A depends on the ages involved, so the board’s estimate decides. The general trade-off is at single-life versus joint-and-survivor pension.
The board also published a count of superannuation retirees. “Looking at members who have retired since January 1, 2005”, it reports “223 retirees selected Option A”, “198 retirees selected Option B” and “298 retirees selected Option C”. The count describes past choices by others, not a recommendation.
What is irrevocable and the deadline
The form states: “You may not change your Option selection once your retirement becomes effective”. Before then, “You may change your Option selection before your retirement becomes effective by filing a new form”. Failing to choose is itself a choice: “If no Option selection is made, your allowance will be paid under Option (B)”. For the selection to be valid, the form must be filed “On or before the date the board receives your written application for retirement”, “On or before the date your allowance becomes effective”, or “Not more than 15 days after the board receives a written application for your involuntary retirement from your department head”.
If the Option C beneficiary dies first, the board’s FAQ says “If your Option C beneficiary pre-deceases you your retirement allowance will pop-up to Option A”. The form limits that: “you may not name another Option (C) beneficiary or choose another Option”. The choice of person for Option C therefore deserves thought before the retirement date.
Spouse acknowledgement
For a married member, the form says: “Unless there is a Domestic Relations Order in effect, if a member is married, the election of an option shall not be valid unless it is accompanied by the signature of the member’s spouse”. It adds: “If an option selection of a married member is not accompanied by a spouse’s signature, the retirement board will take steps, outlined in the statute, to contact the member’s spouse directly”. The form also tells the spouse that “Your signature is not consent or approval, only an acknowledgement of the Option chosen by your spouse”. Plans that require true spousal consent to a waiver are covered at spousal consent to waive a joint and survivor annuity; the Cambridge form describes an acknowledgement.
Lump sums: what the documents describe
In the documents read, a lump sum appears as the refund after leaving service and as the lump sum payable to a beneficiary under Option B or on death before retirement. The pages read do not describe a lump-sum retirement option, a partial lump sum or a deferred retirement option plan. The cash-or-pension question for someone who has left service is the refund decision, framed generally at pension lump sum versus monthly annuity break-even.
Leaving before retirement: leave the money or take a refund
The board’s FAQ on leaving the money answers: “Yes, your account will continue to accrue interest for two years”. The refund application’s footnote says “In general, two years after leaving service, a member stops accruing interest on any money in their account”. The board’s refund answer adds that “Members who leave their funds in the retirement system are entitled to preserve their old membership date, and would not be affected by the changes listed above”. By contrast, the application warns “YOU WILL BE CONSIDERED A NEW EMPLOYEE” for anyone who takes a refund and returns to Massachusetts public service on or after April 2, 2012. See pension refund versus leaving it.
The application says: “The amount of interest that members receive will vary, depending upon the years of creditable service and the nature of the separation from employment”. For members who entered service on or after January 1, 1984:
| Situation | Interest on the refund |
|---|---|
| Fewer than 120 months of service, left voluntarily | 3% interest on accumulated total deductions |
| More than 120 months of service, left voluntarily | Full regular interest as set out in the statute |
| Involuntarily terminated | Full regular interest as set out in the statute, regardless of service |
The 120 months is 10 years (a computed 120 months divided by 12 months a year), as the form’s own parenthesis shows. The pages read do not state the statutory regular interest rate.
What taking a refund gives up
The application asks the member to initial statements including “In consideration of the return of my accumulated total deductions, my membership in the Retirement System shall terminate” and “I am also giving up any rights any beneficiary may have on my account in the Retirement System”. A refund is a final exit from the pension, not a loan against it.
A later return does not restore the service automatically: “I will need to repay the amounts withdrawn by me, with interest, if I wish to be credited with the service associated with this withdrawal”. The release adds “In order to purchase prior creditable service it will be necessary to comply with the Retirement System’s policies related to the potential repurchase with interest assessed in accordance with the statute”. See the pension buyback calculator to set up the comparison.
Who can take a refund, and the paperwork
The board’s FAQ says “Members of the Cambridge Retirement System (CRS) who terminate their employment are eligible to apply for a refund of their accounts”. It adds that “You are not eligible to withdraw any portion of your funds if you are actively employed by any unit of the CRB, or on an authorized leave of absence, or collecting Workers’ Compensation benefits”, and that “if you are a member of another Massachusetts retirement system due to employment with another city or town, or with the Commonwealth, your funds must be transferred to your new retirement system”. The application says “Your retirement board will determine if you are eligible for a refund of your accumulated total deductions” and that “Your employer must certify the termination of your employment, that you owe no obligation to the employer under an employee benefit plan, and sign this application”.
On filing, the FAQ says “If you submit your form in person at our office, bring a photo ID”, and “If you submit your form by mail, have your signature notarized”; “We cannot accept forms submitted by fax or email”. For timing, “refund checks will be issued within 30 to 90 days”.
How a refund is taxed and paid
The FAQ says “If you choose to take the money yourself, the CRB will withhold 20% of the balance as a Federal tax withholding” and that “if you are under age 59 ½ at the time that you receive your refund, you may be subject to additional penalties”. The application has the member initial: “I understand that my accumulated total deductions may have both a taxable and non-taxable component, due to changes in the law which took effect in 1988”. Its payment methods are a direct rollover, payment to the member with 20% withheld, or a partial direct rollover of a stated percent or dollar amount.
A computed example from an assumed $10,000 taxable refund paid to the member, not a Cambridge figure: 20% of $10,000 is $2,000 withheld for federal tax, leaving $8,000 in cash before any further tax or penalty. See 20% withholding on a pension lump sum.
A rollover avoids the withholding: “If you choose to roll over your funds, your refund will not be subject to any tax withholding”. The FAQ says “Federal law allows the CRB to move funds directly to a traditional IRA, a 403(b) plan or a 457 governmental deferred compensation plan”, but also “We are not able to make direct rollovers to 401(k) plans or Roth IRAs”. On state tax, the FAQ says “Refunds are not currently subject to Massachusetts state income tax”. Further background is at Massachusetts retirement taxes and does Massachusetts tax pensions. The board will issue a 1099-R tax statement in January of the following year.
Buying service credit
The board’s FAQ on buying back previous service says only “Contact the retirement office”. The one purchase form it posts is for military service; it states “Application must be received no later than 180 days from receipt of this notice” and says the board will notify the member of the years and months that may be bought, “Not to exceed four years”. The pages read do not state an interest rate or cost formula for a purchase, so a price needs a written quote from the board before a buyback is weighed against its benefit.
If the member dies before retirement
The board’s FAQ says “Active members of the Cambridge Retirement System have two options as to how beneficiaries will be paid out should the member die prior to retirement”. The first: “The first option is for the balance of the member’s Annuity Savings Fund to be paid out in a lump sum to any named beneficiary or beneficiaries”. The second, Option D, “allows for continuing monthly payments to a single beneficiary for the rest of that person’s life”.
On eligibility, “Eligible beneficiaries are limited to the member’s spouse, child, parent or sibling”. On the amount: “The amount of the Option D benefit is the same as what the member would have received had the member retired on the date of death, and elected Option C”. The Option D form says “You may name only one person as the Option D beneficiary”. Both beneficiary forms say “This form becomes void upon your retirement”.
Cost-of-living adjustments
The documents read do not describe a cost-of-living adjustment, so this page does not state one. A member should ask the board how an adjustment is voted and applied before counting on one.
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 the Cambridge Retirement Board’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”. The board’s refund application describes the same 20% withholding on a direct payment and offers a direct rollover as the alternative. 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” if the employee separated from service during or after the year they attained age 50 or 25 years of service under the plan, whichever is earlier. 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.
Where the sources disagree
On rollover destinations. The board’s FAQ says “We are not able to make direct rollovers to 401(k) plans or Roth IRAs”, while the refund application’s method-of-payment page asks for the name of an eligible 401(a), 401(k), 403(b), governmental 457(b), IRA, Roth IRA or SIMPLE IRA. The board should confirm which receiving accounts it accepts before an account is chosen.
What this page could not settle
- The pages read do not state how much Option B or Option C reduces a particular member’s allowance; the form says only that the payments are smaller and that Option C depends on both ages.
- The pages read do not give the benefit rate tables by age and group or the formula for the allowance; the state retirement guides the board links were not among the documents read.
- The pages read do not describe a lump-sum retirement option, a partial lump sum or a deferred retirement option plan.
- The pages read do not state the statutory regular interest rate credited to accounts or whether a cost-of-living adjustment has been granted.
- The pages read do not give a cost or interest rate for buying service credit, and the board’s FAQ on buybacks says only to contact the retirement office.
- Disability retirement, working after retirement and retiree health insurance were not examined.
- M.G.L. c. 32 was seen only through these documents.
Common mistakes
- Assuming a choice can be revisited after the retirement date; the form says it cannot be changed once the retirement becomes effective.
- Naming an Option C beneficiary and expecting to replace that person later; the form says another beneficiary or option cannot be chosen after the pop-up.
- Taking a refund without weighing that membership and the right to a pension end, and that a return to public service later makes the member new.
- Expecting the full refund check; 20% of the taxable portion is withheld unless rolled over.
- Treating a spouse’s signature on the option form as consent to a waiver; the form calls it an acknowledgement.
Related on this site: Boston Retirement System retirement decisions, Massachusetts state retirement decisions, Massachusetts retirement taxes, does Massachusetts tax pensions, pension refund versus leaving it, single-life versus joint-and-survivor pension, pension buyback calculator, 20% withholding on a pension lump sum and public pension retirement decisions by system.
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Answer againSources
- Cambridge Retirement Board, Application for Withdrawal of Accumulated Total Deductions with Special Tax Notice (PERAC form last revised June 2025): https://cambridgeretirementma.gov/wp-content/uploads/refund-application-2025.pdf
- Cambridge Retirement Board, Choice of Option at Retirement (PERAC form last revised February 2020): https://cambridgeretirementma.gov/wp-content/uploads/option-selection-form_0.pdf
- Cambridge Retirement Board, Beneficiary Selection Form for Refund of Accumulated Deductions (PERAC form last revised February 2020): https://cambridgeretirementma.gov/wp-content/uploads/lump-sum-payment.pdf
- Cambridge Retirement Board, Application for Voluntary Superannuation Retirement (PERAC form last revised February 2020): https://cambridgeretirementma.gov/wp-content/uploads/superannuation-retirement-application.pdf
- Cambridge Retirement Board, Beneficiary Selection Form Option D (PERAC form last revised February 2020): https://cambridgeretirementma.gov/wp-content/uploads/option-d-form-primary-beneficiary.pdf
- Cambridge Retirement Board, Beneficiary Change Form Option B (PERAC form): https://cambridgeretirementma.gov/wp-content/uploads/beneficiary-change-form-option-b.pdf
- Cambridge Retirement Board, Application to Purchase Creditable Service, Military Service: https://cambridgeretirementma.gov/wp-content/uploads/application-purchase-military-service.pdf
- Cambridge Retirement Board, FAQ: Which option do most people take (web page, read October 8, 2026): https://cambridgeretirementma.gov/resources/faq/which-option-do-most-people-take/
- Cambridge Retirement Board, FAQ: What is the process to apply for a refund (web page, read October 8, 2026): https://cambridgeretirementma.gov/resources/faq/what-is-the-process-to-apply-for-a-refund/
- Cambridge Retirement Board, FAQ: What is the procedure if I want to buy back previous service time (web page, read October 8, 2026): https://cambridgeretirementma.gov/resources/faq/what-is-the-procedure-if-i-want-to-buy-back-previous-service-time/
- Cambridge Retirement Board, FAQ: Will there be any change to my retirement allowance if my spouse dies (web page, read October 8, 2026): https://cambridgeretirementma.gov/resources/faq/will-there-be-any-change-to-may-retirement-allowance-if-my-spouse-dies/
- Cambridge Retirement Board, FAQ: What should I know about naming a beneficiary (web page, read October 8, 2026): https://cambridgeretirementma.gov/resources/faq/what-should-i-know-about-naming-a-beneficiary/
- Cambridge Retirement Board, FAQ: If I leave employment can I leave my money in the system (web page, read October 8, 2026): https://cambridgeretirementma.gov/resources/faq/if-i-leave-employment-can-i-leave-my-money-in-the-system/
- Cambridge Retirement Board, FAQ: What is the most I can get as a retirement allowance (web page, read October 8, 2026): https://cambridgeretirementma.gov/resources/faq/what-is-the-most-i-can-get-as-a-retirement-allowance/
- 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 8, 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.