Pension Payments Continuing to Deceased Retiree

[Guest cjk]

Retiree is receiving a monthly benefit in the amount of $2,183.78. The form of the benefit is a 100% QJSA. Retiree dies in October 2003, HOWEVER, the death is not reported to the employer/plan until July 2003. In effect, 21 payments were made to the deceased participant and not the spouse. Obviosly we have tax liability issues, overpayment issues, spousal benefit, issues, etc. This situation of continuing payments to a deceased retiree can occur with any form of life annuity, regardless of whether there is a beneficiary or survivor. The survivor benefit only complicates the issue. In the past I usually handled these kinds of situations on an "independent" event basis I would consider the "facts and circumstances" of each particular situation. I was wondering how other people handle such situations. Does anyone know of any guidance that has been issued, what would be considered "best practices," etc.? I want to turn over all stones, and truly value the opinions and experiences of others.

[Blinky the 3-eyed Fish]

Retiree dies in October 2003, HOWEVER, the death is not reported to the employer/plan until July 2003.

This obviously is a plan for psychics, since they reported his death in advance. Just kidding, I know you meant October 2001.

Though I am confused as to what the problem is here. With a J& 100%S annuity, the payment to the spouse would be the same as when the participant were alive. Did the spouse not pick up as income the checks made out to the husband? Please enlighted me.

Now say it was a J& 50%S annuity and the spouse were overpaid, then, depending on if the document addressed it, suspending payments for a period of time or adjusting future payment amounts would seem like viable solutions.

[AndyH]

No, it sounds more like a plan for reincarnated Zombies. Did the deceased cash checks for 2 years after he died?

Sorry, cjk, couldn't resist having a little fun with it.

Ws it direct deposit to some account that was maintained for 2 years?? And if so, was the account a joint account between the deceased and the spouse, and if so, what is the problem, other than maybe the 1099 reporting?

[david rigby]

Might be sensible to avoid making a mountain out of a molehill. Perhaps the Plan Administrator should write a letter to spouse, identify the issue, and state that all future checks will be in the name and SSN of the spouse. Since it appears the plan is not out any total $, don't make it too complicated.

Make sure plan's attorney reviews the situation before any correspondence to spouse.

[Guest cjk]

Thank you for your input and for the rightly deserved teasing. I wss hoping to have a pithy comeback but I don't. I quickly went from being "embarrassed" to laughing at myself and the situation. This sort of annuitant situation, although usually with not so long a period between death and reporting the death, occurs frequently. Our firm usually handles each situation on a facts and circumstances basis but I was wondering if there was a simplier "best practices" being used by other practioners. (PS. Thinner fingers and spellcheck would also be a help to me)

[david rigby]

Upon further reflection, make sure you are not dealing with a situation where the spouse is really the second spouse. If the spouse (defined at the time benefits begin) dies, most plans will not permit a subsequent spouse to assume the survivor role under a J&S form of payment.

[Guest eafredel]

In terms of best practices, the answer often turns on the nature of the employer, the community, and who the trustee of the plan is. Smaller companies often rely on "the grapevine" to inform them of retiree deaths If retirees and employees tend to be concentrated in a single community, the HR Department can check the obituaries in the local newspaper. Employers that provide retiree life insurance benefits simply cross check death claims filed on the life insurance with the list of retirees in the pension plan. Some of my clients require an annual written certification from each retiree verifying their address and Social Security number. Companies with more sophisticated HR or Benefits Departments or with institutional trustees check the list of retirees against the Social Security database.