SFERS Retirement Decisions: Options, Refund, Buyback (2026)

Updated October 7, 2026. Quick answer: A San Francisco Employees’ Retirement System member retiring chooses the unmodified option or one of three enhanced options. The enhanced options permanently reduce the monthly benefit to give a survivor more. The election can change until the retirement date and not after. Every option carries a 50% continuation for a qualified survivor, plus a death lump sum of $100 per year of service, up to $3,000. Leaving early means a refund of contributions plus interest, with 20% federal withholding on the taxable part, or vesting after five years of service. The documents read describe no lump-sum retirement option.

What this page covers and what it does not

This page works from documents published by the retirement system for San Francisco city employees, which calls itself the “San Francisco Employees’ Retirement System (SFERS)”. Its other documents use other wording: “City and County of San Francisco Employees’ Retirement System” on the termination form, and “San Francisco City and County Employees’ Retirement System (SFERS)” on the survivor page. The Miscellaneous plan summaries used are for plan year July 1, 2026 to June 30, 2027.

Only the Miscellaneous plans were read, so the rules of SFERS’s other membership groups are not covered. The tiers differ on several decisions: the A8.603 summary covers a Miscellaneous employee “hired on or after January 7, 2012”, and the A8.587 summary covers one “who became a member on or after November 2, 1976 and before July 1, 2010”. Figures below are labeled with their section. State tax questions are on California retirement taxes and does California tax pensions.

When a pension can start and how it is figured

Under Section A8.603, service retirement is available at “Age 53 with 20 or more years of service”, at “Age 60 with 10 or more years of service”, or at “Age 65 regardless of service”. Under Section A8.587 the first test is lower: “Age 50 with 20 or more years of service”. The formula in both summaries is “Service Credit x Age Factor x Final Pensionable Compensation = Monthly Service Retirement Benefit”. The cap: “Maximum annual benefit is 75% of average final pensionable compensation”. Final pensionable compensation is a highest average over three consecutive fiscal years or the last 36 months under A8.603, and over one fiscal year or the last 12 months under A8.587.

The A8.603 age factor table starts at 1.000% at age 53 and lists 1.756% at age 60, 1.972% at age 62 and 2.300% at age 65 or older. A computed example from assumed inputs, not an SFERS figure: a member retiring at age 60 with 20 years of service credit and an assumed final pensionable compensation of $6,000 a month has 20 times 1.756%, a computed 35.12% of that pay, which is a computed $2,107.20 a month. Confirm the real figure with the member’s own SFERS estimate.

The election: four payment options

SFERS frames the election this way: “you may choose from four retirement options: the unmodified option, or one of three enhanced options”. “Each of the three enhanced options will permanently reduce your monthly benefit while you are alive but provides an enhanced benefit to your survivor(s).” The amount of the cut depends on benefit amount, age, and the survivor’s status and age. The sheet adds that “You will select a retirement option during the retirement application process”.

The sheet states no percentage or dollar amount for how much any option cuts the monthly benefit. See also single-life versus joint-and-survivor pension.

What each option does for a survivor

The Miscellaneous plan summary gives the standard death benefit: “A continuation benefit equal to 50% of member’s unmodified retirement benefit at date of death paid to qualified survivors”. Option 1 works differently from the others: it pays out “any unused contributions in your member account” to the beneficiary as a lump sum, after offset of annuity payments received.

Option 2 “actuarially reduces your monthly allowance during your lifetime and, at the time of your death, provides a 100% continuation benefit to be paid to your named beneficiary who survives you”. Option 3’s text says it “provides a continuation benefit to be paid to your named beneficiary who survives you equal to 50% of the reduced monthly allowance you were receiving at the time of your death”, while the comparison table lists “75% Continuation of monthly benefit to Qualified Survivor (rather than 50%)”. The text and the table state Option 3 differently, and the sheet does not reconcile them, so a member weighing Option 3 should ask SFERS for a written illustration.

A computed example from assumed figures, not SFERS figures: with an assumed unmodified benefit of $3,000 a month, the plan’s 50% continuation is a computed $1,500 a month. If an enhanced option produced an assumed reduced benefit of $2,400 a month (the reduction is not published), the table’s 100% for Option 2 would be a computed $2,400 a month to a qualified survivor, and its 75% for Option 3 a computed $1,800 a month.

What is irrevocable, and the spouse’s role

The election is made on the retirement application. “Once you submit your retirement application to SFERS, you are permitted to change your benefit option any time before your retirement date.” “You are not permitted to change your benefit option after your retirement date, even if the beneficiary you name predeceases you (except for Option one).”

With Option 2 or 3 a member may name any person, but “your spouse/domestic partner must agree to your designation in writing in the presence of a SFERS staff member or a notary public”.

The qualified survivor receives the plan share under every option. For a Miscellaneous member the survivor page says “A qualified spouse/domestic partner must also be designated as your sole primary beneficiary to receive a continuation allowance upon your death”. It tests an eligible spouse or partner “for at least one full year immediately prior to your date of retirement”. Payment lasts only as long as the person stays qualified. The payment options sheet words the spouse rule differently: a spouse who meets the definition is “automatically eligible for the Plan-provided 50% continuation benefit”. The documents do not reconcile the two, so confirm the designation with SFERS before retiring. The general framework is on survivor benefit with a government pension.

Lump sums: what the documents describe

After retirement the plan summary lists “$100 per year of credited service up to maximum of $3,000 paid in lump sum to designated beneficiary”. For a member who dies before retirement, not qualified for service retirement and with no survivor continuation benefits payable, it lists “A lump sum distribution of member contributions and interest plus 6 months compensation earnable” paid to the designated beneficiary or estate. If there is no qualified survivor, the survivor page says “a lump sum benefit will be paid to your designated beneficiary or beneficiaries”. A computed example: 25 full years of service at $100 a year is a computed $2,500, under the $3,000 cap, which is reached at 30 years.

The pages read do not describe a lump-sum retirement option, a partial lump sum or a deferred option plan. The cash payouts they describe are the death benefits, the Option 1 balance and the refund below. See pension lump sum versus monthly annuity break-even.

Leaving before retirement: three choices

A member who separates makes one of three elections on the Termination Options Form: a refund of the retirement account, vesting in it, or reciprocity. “You have 90 days from your date of separation to submit a completed Termination Options Form, selecting one of the above options.”

A refund is not always available: “You must be completely separated from City employment to be eligible for a withdrawal”. The decision framework is on pension refund versus leaving it.

Taking a refund

“You may receive a full refund of your retirement account, which includes your employee contributions plus interest.” What the member gives up depends on service: “If you have five (5) or more years of credited service, or have reciprocal status, you will be required to sign a waiver acknowledging that you are forfeiting any rights to future benefits.”

Payment comes as “a distribution paid directly to you, or a direct rollover to your San Francisco Deferred Compensation Plan (SFDCP) account, a qualified pre-tax IRA, or other qualified retirement plan”. On timing: “Please allow up to eight (8) weeks for your distribution to be processed” “Checks are mailed on the last day of the month, and no exceptions will be made.” The form adds that “You have 10 days from the date you file this form with SFERS to change your distribution election”.

What is withheld from a refund

“SFERS must withhold a mandatory 20% of the taxable portion of your distribution for federal income taxes.” “California state income tax withholding is optional, however, SFERS will withhold 2% by default if you do not specify a withholding percentage.” On early distributions the form says “a 10% federal tax penalty and 2½% California tax penalty may apply if you are under the age of 59½ at the time of distribution”.

A computed example from an assumed $10,000 taxable refund paid directly to the member, not an SFERS figure: 20% federal withholding is a computed $2,000, the default 2% California withholding is $200, and the cash received is $7,800 (22% total withheld). A member under age 59½ who did not roll over could also owe the 10% federal early distribution tax, a computed $1,000 on $10,000, and withholding is not the final tax. See 20% withholding on a pension lump sum.

Vesting: leaving the money in

A member with enough service can leave the account alone: “If you have at least five (5) years of credited service, you may leave your contributions and interest in your retirement account.” “The vesting election is made without the right of revocation.” Because the election cannot be revoked, confirm the future benefit before signing.

What vesting is worth differs by tier. The A8.603 summary describes “a vesting retirement benefit equal to actuarial equivalent of member contribution account”, plus “an amount paid by the City equal to 50% of member contribution account paid as an annuity beginning no earlier than age 53”. The A8.587 summary says “an amount paid by the City equal to 100% of member contribution account paid as an annuity beginning no earlier than age 50”. The form puts the claiming age as: “I may claim my vesting allowance at age 50 or 53, or later, depending on my plan”.

Reciprocity is a separate route for a member who joins another reciprocal California public system or another SFERS plan, with a window of “within six (6) months after termination of employment with the City and County of San Francisco”.

A member rehired after a refund: “If you are rehired, you can redeposit the withdrawn contributions with interest, and your prior service will be credited back to you”.

Buying service credit

A purchase adds to the service used in the formula. The plan summary lists what can be bought: “Service as a Temporary City Employee”; “Qualifying Public Service”; and “Military Service”, among others. “You may purchase eligible service at any time before you retire, however, the purchase must be completed before your retirement date.”

Cost is calculated, not scheduled. “Your service purchase cost is the amount of contributions equal to the years of service being purchased plus interest.” For public service before SFERS membership, the application prices it as “the number of months of public service to be purchased, multiplied by your monthly earnable salary”, “multiplied by the normal cost percentage of the Miscellaneous Plan in effect at the time the purchase is made”. Note for the vesting route: “contributions purchased with public service will be credited to your account, but will not be matched with City contributions should a vesting allowance be payable”.

A computed example from assumed figures, not SFERS figures: 12 months of purchased public service at an assumed $5,000 monthly earnable salary and an assumed 10% normal cost would cost 12 times $5,000 times 10%, a computed $6,000. One more year of credit at the A8.603 age 60 factor of 1.756% on an assumed $6,000 of final pay adds a computed $105.36 a month, so the cost divided by the gain is a computed 56.9 months to recover, ignoring COLA and survivor effects. The real inputs come from SFERS’s own cost calculation. See the pension buyback calculator.

Paying for a purchase, and what cannot be undone

“The service purchase agreement using pre-tax payroll deductions is irrevocable.” After-tax is more flexible: “You can start an after-tax purchase agreement and later change the amount, term, or timing of the payments, switch the agreement to a pre-tax purchase agreement, or stop the purchase agreement altogether.” Either way: “Please note that payments made under a service purchase agreement cannot be refunded.”

Cost-of-living adjustments

Retired members may receive “a Basic COLA and a Supplemental COLA”. The Basic COLA follows local inflation “rounded to the nearest 1%” (“up to a maximum of 2%”) and is “subject to approval by the Retirement Board”.

The Supplemental COLA depends on fund results: for hires on and after January 7, 2012 it may be paid after a year with “sufficient excess investment earnings” when the fund is fully funded on a market value basis. The Supplemental COLA is paid in increments of 0.5% “up to a maximum of 1.5%”, and “When combined with the Basic COLA, the Supplemental COLA can increase your monthly retirement benefit up to a maximum of 3.5% over the amount of your previous June 30th retirement allowance” Members hired before January 7, 2012 “will continue to receive the Supplemental COLAs paid in previous years”, while for later hires “retirement allowances will revert to the level they would have been if Supplemental COLA adjustments had never been made”.

A computed example from an assumed $3,000 monthly benefit, not an SFERS figure: a 2% Basic COLA makes it a computed $3,060 a month, and the combined 3.5% maximum a computed $3,105 a month.

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 SFERS’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 Termination Options FAQ describes direct rollovers to a deferred compensation account, an IRA or another qualified plan, which is the route that avoids withholding on the rolled amount. 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.

What this page could not settle

• The pages read do not state how much Option 1, 2 or 3 reduces the monthly benefit.
• The Payment Options text gives Option 3 as 50% of the reduced allowance, while its table lists 75% for a qualified survivor; the pages read do not reconcile the two.
• The survivor page requires a spouse to be designated sole primary beneficiary, while the Payment Options sheet calls a qualifying spouse automatically eligible; the pages read do not reconcile the two.
• The pages read do not describe a lump-sum retirement option, a partial lump sum or a deferred option plan.
• The pages read do not state the interest rate credited on member contributions in a refund or vesting account.
• The pages read do not give the normal cost percentage used to price a public service purchase.
• The A8.603 and A8.587 summaries cover Miscellaneous members hired on or after January 7, 2012 and between November 2, 1976 and July 1, 2010; members outside those ranges and the safety groups were not read.
• The refund form says that for a member with five or more years of credited service the refund terminates the right to receive any SFERS and San Francisco Health Services System benefits for this service, and SFERS refers members to SFHSS for details on how a refund may affect health benefits.

Common mistakes

• Treating a payment option as changeable after the retirement date; the options sheet says it is not permitted.
• Signing a vesting election without checking the tier; the A8.603 and A8.587 summaries differ and the election cannot be revoked.
• Missing the 90 days after separation to file the Termination Options Form.
• Taking a refund with five or more years of service without noticing that the waiver forfeits future benefits.
• Starting a pre-tax service purchase agreement that cannot be changed or stopped.

Related on this site: California retirement taxes, does California tax pensions, pension refund versus leaving it, single-life versus joint-and-survivor pension, pension buyback calculator, 20% withholding on a pension lump sum, pension lump sum versus monthly annuity break-even, survivor benefit with a government pension and public pension retirement decisions by system.

Sources

• San Francisco Employees’ Retirement System, Termination Options Frequently Asked Questions and Termination Options Form (form dated 09/25/26): https://cdn.mysfers.org/uploads/2026/09/FORM-Termination-Options-Form-with-FAQ-092526-FINAL.pdf
• SFERS, Summary of Key Plan Provisions, Miscellaneous Plan Charter Section A8.603 (hired on or after January 7, 2012; plan year July 1, 2026 to June 30, 2027): https://cdn.mysfers.org/uploads/2026/07/Plan-Provisions-Misc-603-2027.pdf
• SFERS, Summary of Key Plan Provisions, Miscellaneous Plan Charter Section A8.587 (members on or after November 2, 1976 and before July 1, 2010; plan year July 1, 2026 to June 30, 2027): https://cdn.mysfers.org/uploads/2026/07/Plan-Provisions-Misc-587-2027.pdf
• SFERS, A Guide to Service Purchases (10/2025): https://cdn.mysfers.org/uploads/2025/10/SFERS-Service-Purchase-Guide-f-102025.pdf
• SFERS, Survivor Benefits (web page, read October 2026): https://mysfers.org/retired-members/survivor-benefits/
• SFERS, Retirement Benefits (web page, read October 2026): https://mysfers.org/retired-members/retirement-benefits/
• SFERS, Application to Purchase Public Service Including Military Service Before City Employment (revised 3/2025): https://cdn.mysfers.org/uploads/2025/03/FORM-Application-to-Purchase-Public-Service-Including-Military-Service-Before-City-Employment-w-FAQ-f-032025.pdf
• SFERS, Retirement Benefit Payment Options (2026 edition): https://cdn.mysfers.org/uploads/2026/01/Benefit-Payment-Options-2026.pdf
• SFERS, Cost of Living Adjustments (web page, read October 2026): https://mysfers.org/retired-members/cola/
• SFERS, Retired Miscellaneous Survivor Benefits (web page, read October 2026): https://mysfers.org/retired-members/miscellaneous-survivor-benefits/
• 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 7, 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.