Everything is on the table when bankruptcy of an entity is involved - and that involves payments going to zero, as happened with an Alabama town that didn't have money to pay retirees. Even when bankruptcy is only threatened, it galvanizes unions to accept major cuts to retiree benefits to avoid even deeper cuts under a bankruptcy plan, as has occurred in some Rhode Island cities.
So, legally, is it possible? Yes. Is it likely? Probably not yet. California public unions are, collectively, pretty strong and have enjoyed a headlock on the legislature, and thus garnered great gains in benefits and retirement pensions and health care coverage - despite years of budget deficits, and especially during the tech, housing, and student loans bubbles.
As for a lump sum payment or a steady trickle, you'll need to check with a CPA or other qualified financial advisor versed in situations such as yours, specific to California and the U.C. retirement system, and your tax situation.
You are welcome to go searching the forums on 401(k) plans, IRAs, and cashing out of retirement plans (scroll past the advertisements) for more information.
Every few days or weeks, a newcomer shows up and creates a forum topic along these lines after not finding anything. It seems they are worried about their future prospects under the existing political and economic system, and their retirement money is the first thing on their mind.
Poet
Note: Here are a sampling of other 401(k) and IRA and retirement cashout forum topics, found using the Google Custom Search box on this site (see upper right corner of most web pages here).
401(k)
http://www.peakprosperity.com/forum/401k/55664
Anyone Taking The 10% Penalty And Cashing Out 401k or IRA?
http://www.peakprosperity.com/forum/anyone-taking-10-penalty-and-cashing-out-401k-or-ira/14434
Should I Cash Out Early On My State Retirement?
http://www.peakprosperity.com/forum/should-i-cash-out-early-my-state-retirement/50137
Cashing Out Your Retirement Early And Buy PM's?
http://www.peakprosperity.com/forum/cashing-out-your-retirement-early-and-buy-pms/51538
Is it time to cash in IRA and pay 50% tax and 10% Penalty?
http://www.peakprosperity.com/forum/it-time-cash-ira-and-pay-50-tax-and-10-penalty/13659
Need advice on precious metals IRA vs. physical gold vs. GLD/SLV
http://www.peakprosperity.com/forum/need-advice-precious-metals-ira-vs-physical-gold-vs-gldslv/10029
I will be retiring from a public employer in California within two years. Their defined-benefit pension plan is currently 80% funded (that's what we've been told) and, thankfully, not part of the State of California's PERS pension plan. I firmly believe our economy will have a major melt-down within this decade so I am uneasy about leaving my retirement funds with an organization that is already so financially strapped. I will have one opportunity to either cash out (roll-over those funds into a personal IRA) or receive a 'promise' of monthly income for the rest of my life.
I must factor in that my father and mother are both in their mid-90's and very healthy, so my life expectancy could be another 30-40 years. I will be 60 years old when I retire and plan to work elsewhere for another 5-10 years. If I took the monthly payments they would amount to about $3,330 per month for a total of $1.2 million over the 30 years from age 60 to age 90 (even more if, like my parents, I live beyond 90). The lump sum cash payment would be $504,000, which is about 42% of the amount paid out monthly over 30 years. I would need to earn about 7% growth on this lump sum to equal the monthly payments provided by the pension.
I do not know the legalities that pertain to pensions such as this (e.g. Could promised payments be reduced in future years?) and would appreciate any advice or resource suggestions from fellow realists.
Thank you very much.