Pension benefits for survivors

Key takeaways about survivors pension benefits

• Pensions can be either defined-contribution, like a 401(k), or defined-benefit. When people talk about pensions they usually mean the latter.

• Defined-benefit plans pay out weekly after retirement, and may be available to survivors after the worker passes away.

• Some survivors pension benefits continue to pay the whole amount, while some pay a percentage. They can be lump-sum payments or continue weekly.

• If the worker dies before retirement, many pension plans have a totally different set of rules, which may be unique to your situation.

If your loved one had a pension plan, you may be entitled to receive some benefits now that they have passed away. This may be an important source of funds for you and your loved one’s family during this difficult time, so make sure to get the relevant information if you know or suspect your loved one had a pension.

How do pensions work?

Technically, a pension plan is any type of retirement plan in which an employer puts money into a pool of funds set aside for the future. That pool of funds is invested on the employee’s behalf, and whatever is earned on the investments becomes income paid to the worker after they retire. If they choose, sometimes workers can also make extra contributions to the pension. 

There are two main types of pension plans: defined-contribution plans and defined-benefit plans. In defined contribution plans, the employer agrees to pay a certain amount into an investment account on the employee’s behalf, but cannot guarantee how much they will receive at the time of their retirement. Common employer-sponsored retirement accounts like a 401(k) fall into this category. 

Usually, however, when people talk about pension plans, they are specifically referring to a defined-benefit plan, which guarantees a specific income to the employee after their retirement and up to their death. This is the “defined benefit,” a certain amount that the employer promises to pay their retired employees. Once you stop working, the company continues to pay you that amount every week until your death; that’s your pension. 

U.S. employers have been providing employed defined-benefit pension plans since the late 1870s. Nowadays around 80% of public employees and 15% of private employees are covered by this type of traditional pension plan. 

Pensions after the worker passes away 

Some pension plans end at the primary recipient’s death, but many allow you to name a beneficiary, usually a spouse or your minor children, to continue receiving some benefits. A plan may pay out to a beneficiary in one lump sum, or it may pay out over a pre-set period of time; some even continue throughout the surviving beneficiary’s lifetime. No matter how it is distributed, this money may need to be reported as income on any future tax returns; consult with a financial advisor or tax professional if you are unsure.

For government employees in particular, survivor benefits are often generous, up to the full amount the person was receiving. Many companies, however, only offer partial benefits to dependents. A common structure allows a surviving spouse to continue to receive 50% of the original pension amount after the retired worker passes away. The reasoning behind this is that if the full pension benefits were enough to support two people, half as much should be sufficient to support just the spouse.

If your loved one died before their retirement date, different rules may apply. No matter when the employee passed away and who is designated as the beneficiary, the employer may factor in things like life expectancy for both the retiree and the survivor when deciding what amount they will provide, so each scenario can be unique. Depending on the company, their policies regarding payment types and amounts will depend on the terms of the plan. In all cases, you will need to contact the company directly and consult your loved one’s pension paperwork to determine how much money you are owed. 

Locating your loved one’s pension benefits

Pension benefit plans vary from company to company and job to job—and sometimes even from employee to employee, if the company’s pension plan offers various options. If there are any documents available from the time your loved one started their job, this can be a valuable source of information to know which choices they made and exactly what you might be entitled to. For instance, most pension plans require that the retiree name their spouse as the primary beneficiary. If they want to name someone else, the spouse has to sign an official document stating it’s OK for the money to go to another person. 

If you suspect that you may be entitled to pension benefits but aren’t entirely sure, the best course of action is to contact the company directly. They should have complete records in their database or archive. If at all possible, you should also try to locate copies of any and all documents you may have pertaining to your loved one’s employment. If you have access to paystubs or even start paperwork, you can consult them on your own to help determine which plan elections were made.  

How to access pension benefits

The first step in obtaining your survivor benefits is, again, to contact your loved one’s employer. If it’s a big organization like a U.S. government department or the military, you can either call or find resources on its website to get you started. There are often professional liaisons or human resources representatives who can help you through this process. The VA, for instance, suggests working with an attorney, a claims agent, or a Veterans Service Officer to assist with your benefits claim. You may find it helpful to seek out this type of professional support, since every family’s situation is unique and everyone’s plan is specific to them. 

You will typically be asked to provide a copy of the death certificate. Once it is received, the company or organization will notify you about how much money you are entitled to and how it will be paid out, and if the payments can be rolled into another retirement plan.   

Although there is no amount of money that can make up for the pain and loss we feel when someone dies, pension plans can serve as an incredible source of financial relief for you and your loved one’s family.

Even if you have no idea about your loved one’s pension status, reach out to their employer to see what they can do to help. A designated company representative should be able to point you in the right direction so you can obtain whatever money you are entitled to.

You may be eligible for free bereavement support. Empathy can help with everything from funeral planning to estate administration, with step-by-step guidance and real-time expert support. Many people get free premium access to Empathy as a benefit with their life insurance claim. We partner with New York Life, Guardian Life Insurance Company, Bestow, Lemonade, and other leading carriers. When you make your life insurance claim, talk to your representative about whether Empathy is a benefit they offer.