Subject to paragraph (2) of this subsection, instead of the basic allowance provided under the State system of a member, the member may elect a reduced allowance to be paid as one of the options under § 21–403 of this subtitle. Paragraph (1) of this subsection applies to a member of: the Law Enforcement Officers’ Pension System or State Police Retirement System only if, at retirement, the member does not have a spouse; and the Judges’ Retirement System only if, at retirement, the member does not have a spouse or a child who is under the age of 26 years or is disabled. To elect an optional form of allowance, a member shall: complete the appropriate form that the Board of Trustees provides; and file the form with the Board of Trustees before the first allowance payment normally becomes due. A member who has elected an optional form of allowance may change the election only if the member notifies the Board of Trustees before the first allowance payment normally becomes due. If a member dies before the effective date of retirement, the Board of Trustees shall pay the benefits payable on the member’s behalf as if the member had not elected an optional form of allowance.

Each optional form of allowance shall be the actuarial equivalent of the basic allowance under the State system of a member. Subject to paragraph (2) of this subsection, for an optional form of allowance providing for payment to a designated beneficiary for life, the designated beneficiary must be an individual. If the designated beneficiary is a minor or an individual with a disability, the allowance may be paid into a trust for the benefit of the individual. A member who elects to receive a reduced optional allowance under § 21-403 of this subtitle may designate an individual other than the member’s child as the member’s designated beneficiary. This subsection applies to a member who selects an optional form of allowance as provided in § 21-403(b) or (e) of this subtitle. If a member designates a beneficiary other than the member’s spouse or disabled child as defined under § 72(m)(7) of the Internal Revenue Code, a member may not designate a beneficiary who is more than 10 years younger than the member.

Under Option 1, if a retiree dies before receiving payments equal to the actuarial equivalent present value of the retiree’s basic allowance computed at the time of retirement, the Board of Trustees shall pay the balance as a single payment: to the designated beneficiary; or if there is no designated beneficiary, to the retiree’s estate. At the time of retirement, a member may designate more than one beneficiary for the optional benefit provided in paragraph (1) of this subsection. If, at the time of retirement, a member does designate more than one beneficiary for the optional benefit provided in paragraph (1) of this subsection, the single payment will be paid in equal shares to each of the designated beneficiaries. Under Option 2, when a retiree dies, the Board of Trustees shall pay the retiree’s reduced allowance to the designated beneficiary for the designated beneficiary’s life. Under Option 3, when a retiree dies, the Board of Trustees shall pay 50% of the retiree’s reduced allowance to the designated beneficiary for the designated beneficiary’s life. Under Option 4, if a retiree dies before receiving payments equal to the value of the retiree’s accumulated contributions at the time of retirement, the Board of Trustees shall pay the balance as a single payment: to the designated beneficiary; or if there is no designated beneficiary, to the retiree’s estate. At the time of retirement, a member may designate more than one beneficiary for the optional benefit provided in paragraph (1) of this subsection. If, at the time of retirement, a member does designate more than one beneficiary for the optional benefit provided in paragraph (1) of this subsection, the single payment will be paid in equal shares to each of the designated beneficiaries. Subject to paragraph (2) of this subsection, under Option 5, when a retiree dies, the Board of Trustees shall pay the retiree’s reduced allowance to the designated beneficiary for the designated beneficiary’s life. If the designated beneficiary dies before the retiree, then: beginning in the month following the date of death of the designated beneficiary, the Board of Trustees shall pay the retiree the basic allowance; or the retiree may designate a new beneficiary in accordance with § 21–404 of this subtitle; and the Board of Trustees shall pay the retiree an allowance as provided in § 21–404(e)(2) of this subtitle. Subject to paragraph (2) of this subsection, under Option 6, when a retiree dies, the Board of Trustees shall pay 50% of the retiree’s reduced allowance to the designated beneficiary for the designated beneficiary’s life. If the designated beneficiary dies before the retiree, then: beginning in the month following the date of death of the designated beneficiary, the Board of Trustees shall pay the retiree the basic allowance; or the retiree may designate a new beneficiary in accordance with § 21–404 of this subtitle; and the Board of Trustees shall pay the retiree an allowance as provided in § 21–404(e)(2) of this subtitle.

This section does not apply to the Judges’ Retirement System. To change a designated beneficiary, a retiree shall: complete the appropriate form that the Board of Trustees provides; and file the form with the Board of Trustees. Subject to subsections (d) and (e) of this section, if a retiree changes a designated beneficiary, the Board of Trustees shall recompute the allowance for the election based on the value of the balance in the retiree’s annuity reserve and pension reserve when the change is made. This subsection applies only to a retiree who elected the optional form of allowance payable under § 21–403(b) (Option 2), § 21–403(c) (Option 3), § 21–403(e) (Option 5), or § 21–403(f) (Option 6) of this subtitle. A retiree may rescind a request to change the designated beneficiary and restore the retiree’s prior designation of beneficiary by sending written notice to the State Retirement Agency that is received by the State Retirement Agency before the second allowance payment normally becomes due after the change of beneficiary. A retiree who rescinds a change of designated beneficiary in a timely manner under paragraph (2) of this subsection shall receive, after the rescission, the allowance payable prior to the change of designated beneficiary, without retroactive adjustment of any allowance payment made while the rescinded designation of beneficiary was in effect. This subsection applies to a retiree if: the retiree elected the optional form of allowance payable under § 21–403(e) (Option 5) or § 21–403(f) (Option 6) of this subtitle; the retiree’s designated beneficiary dies before the retiree; and after the death of the designated beneficiary, the retiree elects to change the designated beneficiary. The Board of Trustees shall recompute the reduced allowance payable to a retiree and the retiree’s new designated beneficiary using: the retiree’s basic allowance at the time of the new beneficiary designation; the retiree’s age at the time of the new beneficiary designation; and the age of the new designated beneficiary.

A retiree of the Judges’ Retirement System who has elected an optional form of an allowance under this subtitle may not change the designated beneficiary.

If a designated beneficiary who is receiving payments for life dies on or before the 15th day of a month, the Board of Trustees may not pay any portion of the designated beneficiary’s allowance to the designated beneficiary’s estate for the month in which the death occurs. If a designated beneficiary who is receiving payments for life dies on or after the 16th day of a month, the Board of Trustees shall pay to the designated beneficiary’s estate the entire allowance due to the designated beneficiary for the month in which the death occurs. If a retiree dies on or before the 15th day of a month, the Board of Trustees may not pay any portion of the retiree’s allowance to the designated beneficiary or the retiree’s estate for the month in which the death occurs. If a retiree dies on or after the 16th day of a month, the Board of Trustees shall pay the entire allowance due to the retiree for the month in which the death occurs: to the designated beneficiary; or if there is no designated beneficiary, to the retiree’s estate.