At the time of retirement, if annuitants are married, they must give their spouses the maximum survivor benefits unless their spouses agree to a lower amount. A retiree can choose to give a survivor annuity to a spouse on their retirement application. This choice lowers the retiree’s monthly annuity so that it can cover the cost of the survivor annuity amount chosen.
An employee is anyone who was still on the agency’s employment rolls at the time of death even if they had applied for disability retirement and their pay had already stopped.
The total benefit for all the children is lessened by the amount of child insurance benefits that are due to all of the deceased’s children for the same month under Title II of the Social Security Act. These benefits are based on the total amount of money the deceased made. In many cases, FERS children’s benefits are reduced to $0.
If an employee dies and there is no possible survivor annuity payable based on their death, the retirement contributions remaining to the deceased person’s credit in the Civil Service Retirement and Disability Fund, plus any applicable interest, are payable. If a lump-sum benefit is payable, it is paid to the first person eligible under the following order of precedence:
A former employee is anyone who was no longer on an agency’s employment rolls at the time of death and had not yet qualified for retirement benefits. Under the Civil Service Retirement System (CSRS), the deceased employee’s retirement deductions are payable. Please see “Lump-Sum Benefits” below. There is not a monthly survivor annuity payable to a surviving spouse upon the death of a former employee covered under CSRS.
A retiree is anyone who had been separated from an agency’s employment rolls and has met all the requirements for retirement (including having filed an application for retirement benefits). An individual who was eligible for an immediate retirement when the individual separated from Federal service but postponed applying for benefits to avoid an age reduction, is deemed to have applied for retirement beginning the first of the month after death. Benefits due, in this instance, are those based on the death of a retiree.
Please be advised that you may receive a reclamation notice for payments received after death. The reclamation notice will provide you with instructions on how to proceed if necessary.
May be payable if a retiree dies who, at retirement, elected to provide a monthly survivor annuity for:
The combined benefit of all the children is reduced by the total amount of child’s insurance benefits that are payable under Title II of the Social Security Act for the same month to all children of the deceased based on the total earnings of the deceased. In many cases, FERS children’s benefits is reduced to $0.
If a retiree dies, a lump-sum benefit equal to the annuity due the deceased but not paid before death may be payable.
If no survivor annuity is payable based on the retiree’s death, the balance of any retirement deductions remaining to the deceased retiree’s credit in the Fund, plus any applicable interest, is payable. o If a lump-sum benefit is payable, it is paid to the first person eligible under the following order of precedence:
A surviving spouse can continue Federal health benefits coverage if there is a monthly survivor benefit or a Basic Employee Death Benefit payable to the surviving spouse and the Federal employee or retiree was enrolled in a self and family or self plus one health benefits plan on the date of death.
A former spouse of a deceased Federal employee/retiree can receive Federal health benefits coverage under certain conditions. Generally, you may apply for health benefits coverage under the Federal Employees Health Benefits (FEHB) Program if:
A child of a deceased employee/retiree can receive Federal health benefits coverage if the following conditions are met:
Have you ever wondered what happens to a person’s pension after they die? This question comes up a lot during hard times, and knowing the answer ahead of time can help grieving families deal with their problems more easily. Let’s go over what happens when a pensioner dies and what their family members need to do next.
The Immediate Steps After a Pensioner’s Death
When a loved one who receives pension benefits passes away. Right away, a number of important steps need to be taken.
- Notify the pension administrator – Contact the deceased’s employer or pension plan administrator to report the death
- Provide documentation – Most plans will require a death certificate
- Determine beneficiary status – Find out who was designated as the beneficiary on the pension plan
- Understand the type of pension plan – Different plans have different rules for survivors
“When a loved one dies, the last thing most families want to think about is financial paperwork,” says Michael Ruger, CFP® at Greenbush Financial Group. However, it is important to know how Social Security and pensions handle payments after death in order to avoid problems and sometimes even having to pay money back. “.
Types of Pension Plans and How They Handle Death Benefits
Not all pension plans work the same way after someone dies. Here’s how the two main types handle death benefits:
Defined-Benefit Plans
These traditional pension plans provide a predetermined retirement income based on factors like salary and years of service. When the pensioner dies, beneficiary options typically include:
- Lump-sum payout: The beneficiary receives the remaining balance in a single payment
- Joint-life annuity: The surviving spouse receives reduced payments (often 50% or 75% of the original amount) for their lifetime
- Period certain annuity: Payments continue for a specific period regardless of the beneficiary’s lifespan
Defined-Contribution Plans
These plans (like 401(k)s) allow employees to contribute a portion of their salary, sometimes with employer matching. When the account holder dies, beneficiaries may receive:
- Lump-sum payout: The entire account balance at once
- Gradual drawdown: Periodic payments over a specified timeframe
- Annuity purchase: Using the funds to buy an annuity for regular income
Who Gets the Pension After Death?
The big question is usually “who actually receives the pension benefits?” The answer depends on several factors:
Spousal Rights and Protections
The Employee Retirement Income Security Act (ERISA) provides specific protections for surviving spouses. According to the IRS ERISA “protects surviving spouses of deceased participants who had earned a vested pension benefit before their death.”
Unless the spouse has formally given up this right (usually through a notarized document), the pension benefits will usually go to the spouse. To make a claim, the surviving spouse should get in touch with the plan administrator.
What If There’s No Spouse?
If the pensioner wasn’t married or if the spouse waived their rights, the designated beneficiary receives the benefits. This might be:
- Children
- Other family members
- A trust
- An estate
As noted on TheMoneyKnowHow.com, “The beneficiary is the person who will receive your pension when you die. Much like naming a beneficiary on a life insurance policy, you can name one or more individuals to receive the benefits of your pension.”
Common Questions About Pension Benefits After Death
Do Pensions Always Continue After Death?
Not necessarily. Some pensions end completely when the pensioner dies, while others provide survivor benefits. It depends entirely on the type of plan and the options selected when the pensioner retired.
For example, if someone chose a “single life” option, payments stop at death. But if they chose a “joint and survivor” option, payments continue (usually at a reduced rate) to the surviving spouse.
Can Adult Children Collect a Parent’s Pension?
Generally, adult children cannot inherit retirement benefits when a parent dies, unless they were specifically named as beneficiaries. However, they may be eligible for certain Social Security benefits if they are disabled.
What Happens to Unclaimed Pension Payments?
If payments continue after death and aren’t returned, they’re considered overpayments. The bank or financial institution may be required to return these funds automatically once they’re notified of the death.
According to Greenbush Financial, “If Social Security or a pension plan issues payments after the recipient’s death, those payments are considered overpayments and must be returned.”
Social Security and Death: A Related Consideration
While not technically a pension, Social Security works similarly and is worth addressing:
Notification Process
Social Security doesn’t automatically know when someone dies. Notification typically happens through:
- Funeral homes: Most funeral directors report deaths to Social Security if provided with the Social Security number
- Vital records offices: State offices that issue death certificates send reports
- Family members: Survivors can call Social Security directly at 1-800-772-1213
Final Payment Rules
The Social Security Administration has specific rules about payments in the month of death:
- If someone dies in June, the July payment (received in July for June’s benefit) must be returned
- A surviving spouse may be eligible for a one-time death benefit of $255
- A surviving spouse may qualify for survivor benefits based on the deceased’s earnings record
Steps for Beneficiaries to Take
If you’re a beneficiary of someone who has passed away and was receiving a pension, here’s what you should do:
- Gather documentation – Locate the pension plan documents and death certificate
- Contact plan administrators – Call the pension provider as soon as possible
- Ask about options – Understand your choices for receiving benefits
- Consider tax implications – Consult a tax professional about potential tax consequences
- Watch for overpayments – Return any payments received after the death date
- Update your own planning – Revisit your financial plan based on new circumstances
Planning Ahead: Protecting Your Loved Ones
If you’re currently receiving a pension or will be in the future, consider these steps to protect your loved ones:
- Review beneficiary designations regularly, especially after major life events like marriage, divorce, or births
- Understand your pension options before retirement, particularly survivor benefit choices
- Document your pension information and keep it with other important papers
- Discuss your choices with your spouse or other potential beneficiaries
- Consider additional life insurance if your pension has limited survivor benefits
The Bottom Line
When a pensioner dies, what happens to their pension depends largely on the type of pension and the choices made during the retirement process. The most important steps for families are to notify the pension administrator promptly, understand the available options, and return any overpayments.
I always recommend my clients keep a “financial roadmap” document with all their pension details and instructions for family members. This simple step can save grieving loved ones significant stress during an already difficult time.
By understanding these processes in advance and planning accordingly, you can help ensure financial security for your loved ones even after you’re gone.
Remember, pension rules can be complex and vary significantly between plans. If you have specific questions about a particular pension, it’s best to contact the plan administrator directly or consult with a financial advisor who specializes in retirement planning.
Information for survivors and loved ones
Please accept our condolences on the loss of your loved one. The information provided below will help guide you through the process of reporting the death of a federal employee or retiree and applying for any potential death benefits that may be payable.
Time Limits for Changing a Survivor Annuity Election Made at Retirement
- You have to write to the company and ask to change a spouse survivor annuity choice you made when you retired no later than 18 months after the start date of your annuity. You can change your mind about not giving your spouse a survivor annuity when you retire. You can increase your choice of a survivor annuity that is less than the maximum amount for your spouse. You can’t lower the survivor annuity you chose when you retired, though.
- When you retire and get married, you have to be married for 9 months before your spouse can get survivor benefits, or they have to have children from the marriage. You have two years from the date of your marriage to choose to give your spouse survivor benefits. If you choose to give the survivor benefit, getting married after retirement will lower your annuity by two amounts. One will be the reduction to provide the survivor benefit. Another is that your annuity will be permanently lowered by an amount equal to the cost of a deposit. We will send you a bill with these costs when you contact OPM.