Retirees who have a life-threatening illness or other critical medical condition can choose to receive an “alternative form of annuity”—more commonly known as the “lump-sum option.” In the alternative annuity, you receive a reduced monthly benefit, plus a lump-sum payment equal to all your unrefunded contributions to the retirement fund. The reduction in your monthly benefit depends on your age at the time you retire even though by definition anyone eligible for this form of annuity is considered to have a life expectancy of less than two years.
This once was a generally available option at retirement but now is restricted to those with certain medical condition. These conditions change from time to time.
The latest list is:
metastatic and/or inoperable neoplasms; aortic stenosis (moderate-severe); class IV cardiac disease with congestive heart failure; respiratory failure; cor pulmonale with respiratory failure; emphysema with respiratory failure; ventricular tachycardia; severe cardiomyopathy; aplastic anemia; uncontrolled hypertension with hypertensive encephalopathy; cardiac aneurysm; agranulocytosis; hepatic failure; severe hypoxic brain damage; severe portal hypertension with esophageal varices; AIDS (active—not AIDS related complex or only seropositivity); life-threatening infections (encephalitis, meningitis, rabies, etc.); scleroderma with severe esophageal involvement; amyotrophic lateral sclerosis (rapidly progressive); hemiplegia with life threatening complications; quadriplegia with life threatening complications; or ventricular flutter.
Decisions on other conditions are made on a case by case basis.