Ohio Public Employees Retirement System (OPERS) serves over one million current and former Ohio public employees. It is one of the few large state pension systems that offers a genuine partial lump sum option at retirement. If you are an Ohio state or local government employee approaching retirement, here is how the OPERS lump sum works and when it makes sense.
How OPERS is structured
OPERS offers three plan types: the Traditional Pension Plan, the Member-Directed Plan, and the Combined Plan. The lump sum option is the Partial Lump Sum Option (PLSO) available under the Traditional Pension Plan.
Traditional Pension Plan formula: 2.2% times years of service times final average salary, where final average salary is the average of your three highest consecutive years. A 30-year employee with a $70,000 final average salary earns 66% of that salary, or $46,200/year ($3,850/month). Five-year vesting applies.
How the Partial Lump Sum Option works
OPERS members who choose the PLSO receive a one-time lump sum payment equal to 12, 24, or 36 months of their calculated monthly base benefit. In exchange, their ongoing monthly pension is permanently reduced by an actuarially calculated amount, typically 7 to 12% depending on age at election.
Using the example above at $3,850/month: electing the 36-month PLSO provides a one-time lump sum of approximately $138,600. The monthly benefit is then permanently reduced. The exact reduction factor comes from OPERS actuarial tables. The PLSO is taxable unless rolled directly to an IRA. Request a direct rollover to avoid the 20% mandatory withholding. OPERS provides rollover documentation with the election materials.
Member-Directed Plan
OPERS members in the Member-Directed Plan have a defined contribution account they can withdraw as a lump sum at retirement or roll to an IRA. If you entered OPERS after the Member-Directed Plan became available and chose that option, your retirement benefit is your account balance, fully portable, with no monthly annuity component. This plan more closely resembles a 401(k) than a traditional pension.
When the PLSO makes sense
The PLSO makes sense if you have a specific, productive use for the lump sum: paying off a mortgage, funding a business transition, or supplementing a spouse's income gap. It also makes more sense in poorer health where you are concerned about break-even age.
Run the break-even: if your monthly benefit is $3,850 and the PLSO reduces it by 10% to $3,465, you are giving up $385/month permanently to receive $138,600 upfront. At $385/month foregone, the break-even on the lump sum is 360 months, or 30 years. That is a very long break-even. For most OPERS members, the PLSO is worth taking only when there is a specific use for the capital, not simply a preference for having a large account balance.
OPERS and the Social Security Fairness Act
Ohio OPERS is a non-SS-covered system. Most OPERS members do not pay Social Security taxes during their OPERS employment. Before January 2025, this meant any Social Security earned from other jobs was reduced by WEP, and spousal SS benefits were reduced by GPO. The Social Security Fairness Act repealed both. OPERS retirees who had SS earnings reduced by WEP should now receive their full SS benefit. Check your my Social Security account to verify the updated amount.