Delaware State Pension Options: 100% Survivor Cuts Pension 6%

Updated October 2, 2026. Quick answer: Delaware State Employees’ Pension Plan members choose a survivor option at retirement: no reduction for a 50% survivor pension, or reductions of 2%, 3% or 6% for 66.67%, 75% or 100%. That election is irrevocable and must be made before the first pension direct deposit. A refund of contributions ends membership and voids future benefits, and a cash payout generally has 20% federal tax withheld, which is not the tax owed. Vesting takes five consecutive years if hired before 1/1/2012, and ten years if hired on or after that date. Buy-ins are priced and paid at retirement.

More on public pension systems, topic by topic: Delaware SEPP disability pension and Delaware SEPP early retirement.

What this page covers and what it does not

This page works from one document: the Summary Plan Description for the State Employees’ Pension Plan (SEPP), published by the State of Delaware Office of Pensions. It follows the decisions a member faces: how the benefit is built, when it can start, which survivor option to elect, whether to take a refund, and whether to buy service. On conflicts the booklet says “If there is any conflict between a provision in this booklet and the Plan (29 Del. C. Ch. 55), the Plan will take precedence”. Confirm anything consequential with the Office of Pensions before a form is signed.

The pages read do not describe a lump sum retirement option, a deferred retirement option program, or a partial lump sum, so this page does not cover them. For the state tax side of a Delaware pension, see Delaware retirement taxes and does Delaware tax pensions.

How the pension is built

The plan describes the benefit in terms of two inputs. “Your pension amount is primarily based on your years of credited service and your Final Average Compensation”. The averaging period is spelled out: “Your FAE is 1/36 of the total compensation paid to you during the three (3) periods of twelve (12) consecutive months during which your compensation was the highest”. The statement a member receives each year helps with the arithmetic: “you will receive a Comprehensive Annual Statement (CAS) detailing your contributions towards the pension plan, the interest earned on those contributions, and future benefit amount”.

For a hire on or after 1/1/2012 the statute defines compensation differently from the booklet sentence. 29 Del. C. 5501(c) says: “For any post-2011 employee “compensation” means all salary, wages and fees, including special payments for extra duties, excluding overtime payments payable to such individual for service credited under paragraphs (e)(1), (2) and (3) of this section and the value of any maintenance provided for the individual as part of such payments.” The definition of final average compensation in 5501(g)(1) is wider than the three-period wording: ““Final average compensation” shall mean 1/36 of the compensation paid to an employee during any period of 36 consecutive months or any 36 months comprised of 3 periods of 12 consecutive months in that employee’s years of service credited under paragraphs (e)(1), (2), and (3) of this section in which that employee’s compensation was highest, or the average monthly compensation paid to an employee during the period of that employee’s service credited under paragraphs (e)(1), (2), and (3) of this section if such period is less than 36 months.”

The service pension multiplies that average by a factor for each year of service, with a different factor for service before and after 1997. The plan prints the pieces as .02 for pre-1997 service and .0185 for post-1996 service, and then the sum: “Pre-1997 Benefit + Post-1996 Benefit = Total Gross Benefit”.

A computed example from an assumed final average compensation of $60,000, not a Delaware figure: a member with 5 years of pre-1997 service and 25 years of post-1996 service would have a pre-1997 benefit of 60,000 x .02 x 5, a computed $6,000, and a post-1996 benefit of 60,000 x .0185 x 25, a computed $27,750. Added together, the computed total gross benefit is $33,750. Because the average is built from annual pay, this is an annual amount in the arithmetic. The Office of Pensions online calculator confirms actual results. Separate factor lines for 911 operators and correctional or specified peace officers are not reproduced here.

When the pension can start

The booklet tabulates eligibility by hire date.

For the later hire group the table lists “Ten (10) years of credited service and has attained age 65”, or “Twenty (20) years of credited service and has attained age 60”. A hire date on either side of 1/1/2012 changes both the earliest age and the number of years that must be completed.

The statute adds an exclusion to the years in that table. 29 Del. C. 5522(a)(1) says: “The employee has 5 years of credited service, exclusive of service credited under § 5501(e)(4), (5) and (12) of this title, and has attained age 62.” Those years count toward the benefit amount but not toward the years needed to qualify, and for a later hire 5522(e)(1) and (2) exclude only the union-leave service under 5501(e)(12), while the 30-year test in 5522(e)(3) has no exclusion.

Two groups have a service-only path. For 911 operators the table gives a 25 year path described as “regardless of age”, and correctional and specified peace officers have a similar 25 year path with conditions about the job held at retirement.

The statute adds a years-in-the-role test to the job condition. 29 Del. C. 5522(a)(5) says: “The employee must have 20 years of credited service as a correction officer or specified peace officer.” And 5522(a)(6) says: “The employee must have 25 years of credit service as a 911 operator.”

Early retirement and what the reduction costs

A member who does not meet the full-pension tests can sometimes retire early at a lower benefit. The entry points are 15 years of service at age 55, or 25 years at any age. The booklet explains why the benefit is smaller: “In effect, the member receives less each month because the benefit will be received over a longer period”.

The reduction is a formula, not a table: “Total Gross Benefit x (1- Reduction Factor) = Final Benefit”. The reduction factor is .002 per month for members hired before 1/1/2012 and .004 per month for members hired on or after that date. The month count is defined this way: “The number of months away from 30 years of service or from the age of 60, whichever is closest”.

A computed example from assumed inputs, not a Delaware figure: take a final average compensation of $60,000 and 25 years, all of it after 1996. The gross benefit is 60,000 x .0185 x 25, a computed $27,750. Retiring at 25 years is 60 months short of 30 years. For a member hired on or after 1/1/2012 the reduction factor is .004 x 60, a computed 0.24, so the final benefit is 27,750 x (1 minus 0.24), a computed $21,090. For a member hired before 1/1/2012 the factor is .002 x 60, a computed 0.12, and the final benefit is a computed $24,420. The same retirement date costs the later hire group twice as much, which is why the hire date belongs in any comparison.

The survivor election and what is irrevocable

At retirement a member chooses how much of the pension a survivor will receive after death. The mechanics are short. “At retirement, a member has the option of electing their survivor option”. “This election is irrevocable and must be made before the issuance of the first pension direct deposit”. The election deserves close attention for that reason. The general trade is covered in single-life versus joint-and-survivor pension and survivor benefit with a government pension.

The plan states the range as “The monthly survivor pension amount can equal 50%, 66.67%, 75%, or 100% of the employee benefit calculation, depending on circumstance and/or member election at the time of retirement”. One of the four choices pays “6% reduction to member’s pension = 100% survivor’s pension”.

A computed example from an assumed $2,500 monthly benefit, not a Delaware figure: under the 6% reduction the member’s pension would be 2,500 x (1 minus 6%), a computed $2,350 a month, and the survivor’s share at 100% would be a computed $2,350 a month, because the statute applies the 100% to the reduced pension. The reduction costs the member a computed $150 a month for that protection. Under the no reduction choice the survivor share at 50% of the same amount would be a computed $1,250 a month. The booklet says the survivor percentage applies to the “employee benefit calculation” and also to “the retiree’s pension elected at the time of retirement”. The statute settles the base for the reduced options. 29 Del. C. 5527(g)(4) says: “Notwithstanding provisions of this chapter to the contrary, an employee may elect to have the employee’s service or disability pension computed under this chapter reduced by 6% thereby providing a survivor’s pension equal to 100% of such reduced amount to the employee’s eligible survivor or survivors at the time of the employee’s death.” And 5528(b)(1)d says: “If such pension was computed under the provisions of § 5527(g)(4) of this title, 100% of such service or disability pension.” The same wording in 5527(g)(1) to (3) applies the 2/3 and 75% survivor pensions to the reduced amount. The Office of Pensions can confirm the figures for a real election.

A spouse comes first, then dependent children, a disabled child, and dependent parents, and the plan says “The retiree may change the order of priority by submitting a notarized Survivor Order of Priority (SOP-1) form”. A spouse under 50 faces a reduction: “If your spouse is under the age of 50 at the time of your death, the survivor’s pension will be actuarially reduced for each month they are under age 50”.

The statute measures the age when the survivor’s pension begins and has an exception. 29 Del. C. 5528(e) says: “The amount payable to a widow or widower who has not attained age 50 at the time the survivor’s pension begins shall be actuarially reduced, in accordance with actuarial tables approved by the Board, for each month the survivor is under age 50 at such time.” “However, the actuarial reduction for any such widow or widower shall not apply for the period during which such widow or widower has in his or her care a son or daughter who is unmarried and either: (1) Has not attained age 18; (2) Has attained age 18 but not age 22 and is attending school on a full-time basis; or (3) Has attained age 18 and has a permanent disability as the result of a disability which began before the child attained age 18.”

If a member dies before retiring, and when there is no survivor

The election above applies at retirement. Before that, the plan pays automatically in two cases. “Upon the death of an active member who has at least five (5) consecutive years of credited service, a monthly survivor’s pension shall be payable to the survivor or survivors equal to 75% of the service pension the member would have been eligible to receive”. “If a member is currently in a vested status, a survivor’s pension is payable based on the future effective date and 50% of the amount the vested member would have been eligible to receive”.

The statute states the active-member rule without a consecutive-years condition and with a base. 29 Del. C. 5528(a)(1) says: “Upon the death of an employee who has 5 years of credited service, exclusive of service credited under § 5501(e)(4), (5) and (12) of this title, a monthly survivor’s pension shall be payable to his or her eligible survivor or survivors equal to ¾ of the service pension the employee would have been eligible to receive had he or she elected the option provided under § 5527(g) of this title.”

If no one qualifies as an eligible survivor, a beneficiary named on the form is paid something different: “If you die leaving no eligible survivors, your named beneficiary or beneficiaries will be paid a lump sum equal to the excess, if any, of your accumulated contributions with interest less all pension payments made, including survivor’s benefits”. The designation can be updated on the Designation/Change of Beneficiary Form at any time, which is a separate and reversible step from the irrevocable survivor election.

The statute also pays the lump sum when a survivor’s pension is payable and later ends. 29 Del. C. 5529 says: “Upon the death of an employee, former employee or pensioner or if a survivor’s pension is payable upon such death, when such pension ceases to be payable, there shall be paid to the designated beneficiary or, in the absence of a designated beneficiary, to the estate of the employee, former employee or pensioner a lump sum equal to the excess, if any, of the accumulated employee contributions with interest over the aggregate of all pension payments made.”

Refund of contributions versus leaving them in the plan

A member who leaves covered employment before retiring has two paths. For someone who is not vested, “If you are not vested, you have the option of either leaving your contributions in if you may return to state service or withdrawing your contributions and interest”. The vesting tests are different by hire date. A member hired before 1/1/2012 is fully vested after five consecutive years of credited service. For later hires, “If you were hired on or after 1/1/2012 you are not fully vested until you have completed ten 10 years of service (five [5] must be consecutive)”.

The statute states the vesting test without a consecutive-years condition. 29 Del. C. 5523(a) says: “An employee who is not a post-2011 employee and who has 5 years of credited service exclusive of service under § 5501(e)(4), (5) and (12) of this title shall have a vested right to a pension.” “A post-2011 employee who has 10 years of credited service exclusive of service under § 5501(d)(12) of this title shall have a vested right to a pension.” The consecutive-years wording may come from the booklet or from Board rules; ask the Office of Pensions before relying on it. For a member hired before 1/1/2012, a vested former employee’s pension age is set in 5522(b): “A former employee with a vested right to a service pension shall become eligible to receive such pension, computed in accordance with this chapter beginning with the first month after the former employee’s attainment of: (1) Age 60 if credited service is equal to or greater than 20 years and includes service prior to July 1, 1976; or (2) Age 62 if credited service is equal to or greater than 5 years.” For a post-2011 employee, 5522(g) sets age 65 with at least 10 years of credited service.

The two paths apply to a member who is not yet eligible for a pension. 29 Del. C. 5530 says: “Upon the withdrawal from service of an employee who is not eligible for a service or disability pension, the accumulated contributions with interest shall be paid to the employee.”

Leaving the money has a default. “If you do nothing or complete the Contributions Retention Notice form, then all monies will stay in the fund and continue to accrue interest”. The refund is a deliberate act: “If you complete the Application for Withdrawal of Benefits, then contributions and interest will be paid out”. The general trade between cash now and a deferred pension is covered in pension refund versus leaving it.

The cost of a refund is stated bluntly: “Withdrawal of your contributions will terminate your membership in the Plan and will void any rights you have to future benefits in the Plan”.

The pages read do not state the interest rate credited on contributions, though a refund pays out contributions and interest.

Taking the refund: cash, rollover, and timing

The payout mechanics are short. “Monies can be paid out in a check or transferred to a qualifying retirement account”. The tax consequence of the cash route: “If you choose to get a cash payout, it will be taxed 20% for federal taxes”. And on timing: “Refunds cannot be paid out until at least 45 days after your final paycheck”.

A computed example from an assumed $15,000 refund paid in cash, not a Delaware figure: the 20% withheld would be a computed $3,000, leaving a computed $12,000 in the check. The 10% additional tax on early distributions can apply on top, as the IRS section below explains.

Changing course after a refund is possible but costs money. “you may re-establish this service upon returning to active membership and must repay the amount you withdrew plus interest to the date your request is received”. “Previously withdrawn earned service that is re-established is considered creditable service and can be used to determine minimum service requirements for benefit eligibility”. The booklet adds a caution for anyone who may return: “you should contact the Office of Pensions for information relative to the options available to you regarding prior service credit”.

Getting service back: restoration and buying more

Two different things share the name buyback in Delaware. The first is restoring service that was lost. The plan lists ways a break does not forfeit credit: “You again become an employee within four (4) months after you leave State employment”, or “You subsequently acquire five (5) consecutive years of credited service, if you repay any contributions you have withdrawn plus interest”.

The statute lists more routes than the two quoted. 29 Del. C. 5501(e)(6) says: “If an individual ceases to be an employee before the individual has acquired 5 years of credited service, the individual’s service credits to the date of termination shall be cancelled but shall be restored if: (i) The cessation of employment is due to absence on account of military service, disability or approved leave, under such rules as the Board may adopt, and the individual again becomes an employee within 4 months after such absence, or (ii) the individual again becomes an employee within 4 months after such cessation of employment, or (iii) the individual subsequently acquires 5 years of credited service, or (iv) the individual has been involuntarily terminated for reason other than cause and is rehired within 2 years of the involuntary termination, or (v) the individual has joined another state pension plan which provides for a unified state service pension, or (vi) the individual is subsequently employed in the rehabilitation aide program of the Division of Vocational Rehabilitation of the Department of Labor, provided that if the individual has withdrawn such contributions the individual repays them with interest at a rate determined by the Board.”

The second is buying additional service at retirement. “Buy-ins are offered at the time of retirement, and, if purchased, will increase the amount of pension creditable service time used to calculate your gross monthly pension”. The price is not fixed in advance: “Payment for the purchase of an approved buy-in is calculated at the time of retirement”, and “All payments must be paid before issuance of the first monthly benefit”. One of the three ways to pay is “Deducted from the first monthly pension, if sufficient to cover the entire cost”. The others are a personal check and a rollover from a qualified tax-sheltered account. A planning tool is covered in the pension buyback calculator.

The military buy-in reads “You may purchase up to five (5) years of credit for full-time active duty in the armed forces, by paying into the plan an amount equal to the actuarial value of the credits purchased as determined by the Board of Trustees”. A cap applies across several categories: “You may not acquire more than ten years of credited service for military service, other governmental service, and professional educational employment”.

The statute is stricter than the booklet sentence on what the bought years do. 29 Del. C. 5501(e) says of military service: “An individual may not accrue a total of more than 10 years of credited service under this paragraph and under paragraphs (e)(4) and (5) of this section, and any credited service purchased under this paragraph shall not be used to determine eligibility for benefits under this chapter.” It says of medical leave: “Any credited service purchased for medical leave shall not be used to determine eligibility for benefits under this chapter.” A member who is short of a 15, 20, 25 or 30 year test cannot make up the shortfall with these purchases.

For sick leave the booklet gives a formula. “One month of credited service will be granted for every 21 days (18 days if you are a 10-month employee) of accrued unpaid sick leave up to a maximum of 12 months”. “The cost of this buy-in is calculated by multiplying your final average compensation by 5% and then by the number of months you are purchasing”. A computed example from an assumed final average compensation of $60,000, not a Delaware figure: purchasing 6 months would cost 60,000 x 5% x 6, a computed $18,000, worded as the booklet words it. The online calculator the booklet points to is the safer source for a real quote.

The statute’s sick leave conversion starts later than the booklet sentence. 29 Del. C. 5501(e)(20) says: “Periods of accrued sick leave beyond 90 days or the balance for which the employee received payment may be converted to creditable service; 1 month of credited service will be granted for each 21 days of accrued sick leave beyond 90 days or the balance for which the employee received payment.” “Educational employees will receive credited service based on the contract establishing the employee’s school year.” The 18-day figure for a 10-month employee is not in the statute sentences read. For union-leave service the payment is monthly, not at retirement. 29 Del. C. 5501(e)(12) says: “Approved leave granted to an employee without pay, for a definite period of time, inclusive of approved extensions, authorized by the head of the employee’s department or agency to assume an elected position in an employee organization as defined in Chapter 40 of Title 14, Chapter 13 of Title 19 and Chapter 16 of Title 19; provided, that within 15 days following the end of each month that such an employee is on such leave, the employee pays contributions equal to the sum of the employee contributions and employer appropriations that would have been made to the Fund based on the salary that would have been paid to the employee had the employee continued to be employed in the capacity in which such employee was employed immediately prior to such leave by an entity described in paragraph (a)(1) of this section during such approved leave of absence.”

Applying, and when deadlines bite

The application starts early. “At least four (4) months before you plan to retire, you should contact your human resources office to begin the application process”. There is a second deadline for the paperwork: “The signed pension application and required documents should be in our office 45 days before the effective date of pension”. These dates sit alongside the irrevocable survivor election and the buy-in payment rule, since both fall before the first pension payment.

Cost of living adjustments

The plan is short on this point. “Pension law does not provide for automatic post-retirement increases”. “Increases are only granted upon legislative approval”. A member planning around a fixed monthly amount should therefore treat future increases as uncertain and not as a feature of the formula.

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 Delaware plan’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 Delaware booklet describes the payout choice as a check or a transfer to a qualifying retirement account, and says a cash payout is taxed 20% for federal taxes. 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”.

The IRS says in the same Topic: “Note that the default rate of withholding may be too low for your tax situation.” The 20% is a withholding rate on a taxable distribution paid to you, not the tax owed, so the Delaware booklet’s wording that a cash payout is taxed 20% is better read as withholding.

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.

The public safety exception has a condition. IRS Topic 558 says: “Distributions made to a qualified public safety employee from a governmental plan (within in the meaning of section 414(d)) provided that the qualified public safety employee has separated from service during or after the year in which they attained age 50 or 25 years of service under the plan, whichever is earlier.”

What this page could not settle

• The pages read do not state the interest rate credited on contributions, or the dollar amount of a typical refund.
• The pages read do not describe a lump sum retirement option, a partial lump sum, or a deferred retirement option program.
• The booklet wording on the base for the survivor percentage is ambiguous; 29 Del. C. 5527(g) and 5528(b)(1) apply the 2/3, 75% and 100% survivor pensions to the reduced amount.
• The pages read do not state whether a spouse must consent to a refund or to a survivor choice below 100%.
• The pages read do not state buy-in costs in dollars; they depend on an actuarial value or an amount set at retirement.
• The eligibility table was read from extracted text that lists the hire-date columns in sequence, so check it against the printed booklet.

Common mistakes

• Treating the survivor election as changeable after the first pension direct deposit; the booklet calls it irrevocable and requires it before that deposit.
• Taking a refund after vesting without recognizing that withdrawal terminates membership and voids rights to future benefits in the plan.
• Assuming a cash refund arrives whole; the booklet says a cash payout is taxed 20% for federal taxes, and the refund cannot be paid until at least 45 days after the final paycheck.
• Expecting an early buy-in price; the plan calculates the cost at retirement and requires payment before the first monthly benefit.
• Comparing early retirement dates without the hire date; the reduction factor is .002 per month before 1/1/2012 and .004 per month on or after.

Related on this site: Delaware retirement taxes, does Delaware tax pensions, single-life versus joint-and-survivor pension, survivor benefit with a government pension, pension refund versus leaving it, pension buyback calculator and public pension retirement decisions by system.

Sources

• Delaware Office of Pensions, State Employees’ Pension Plan Summary Plan Description (2026): https://open.omb.delaware.gov/PDF/2026/State-Employees-Pension-Plan-Summary-Plan-Description.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.