5 U.S.C. § 8434 — Annuities: methods of payment; election; purchase

(a) Methods of payment.
(1) The Board^* must set the methods for paying annuities under this subchapter.
(2) Those methods must include at least: (A) a monthly annuity paid only during the annuitant's own life; (B) a monthly annuity paid for the joint lives of the annuitant^* and their spouse, with an appropriate monthly amount continuing to whichever of them survives the other, for the survivor's life; (C) a version of method (A) that automatically adjusts the payment amount, as long as it never drops below the previous year's amount; (D) a version of method (B) with the same kind of automatic adjustment; and (E) a method paying a monthly annuity for the joint lives of the annuitant and someone else the annuitant designates, either a former spouse^*, or someone with an "insurable interest" in the annuitant, with the amount continuing to whichever survives, for that survivor's life.

(b) Choosing a method. Subject to section 8435(b), under Executive Director^* regulations, an employee^*, Member^*, former employee, or former Member who elects to receive an annuity under section 8433 must choose one of the methods from subsection (a) before the annuity contract is actually purchased for them.

(c) Eliminated methods. Even if the Board eliminates a payment method, someone can still elect that eliminated method if the elimination took effect less than 5 years before their annuity is set to start.

(d) Buying the annuity contract.
(1) No earlier than 90 days before an annuity is to start (or a shorter period the Executive Director^* sets by regulation), the Executive Director must use the person's account^* balance to buy an annuity contract from an entity that regularly sells annuities.
(2) The Executive Director must, by contract with each seller, make sure the annuity follows the rules of this subchapter and subchapter VII.
(3) The purchased annuity contract must include terms the Executive Director requires to protect the annuitant.
(4) The Executive Director must require each seller to post a bond or otherwise prove financial responsibility, to protect the annuitant.

(e) No state tax on the purchase.
(1) No state, the District of Columbia, or Puerto Rico, or any local government^* within them, may tax, charge a fee on, or otherwise collect money based on, any amount paid to buy an annuity contract under this section.
(2) That protection doesn't stop a state from taxing the income or profit a company earns from selling the annuity contract, as long as that tax applies broadly to that company's business in general, not specifically to this transaction.