One of the most common questions LAGERS benefit specialists receive involves the distribution of benefits after you pass away. Whether your spouse (or another beneficiary) continues to receive benefit payments after your death depends on the payout option you select at retirement and your corresponding beneficiary.
Payout Options
Who receives your benefit after your death largely depends on the payout option you select at retirement. LAGERS offers four primary ways you can choose to receive your monthly benefit. Once you begin receiving payments, neither you nor your beneficiary can change the way the payment is distributed.
Each option provides a different type of protection for your loved ones.
Life Option: If you select the Life Option at retirement, you are receiving 100% of your monthly benefit for the rest of your life. A spouse or beneficiary will not receive any payments after your death, unless there is a remaining employee contribution account balance (any funds from your paycheck that your employer required you to contribute toward funding your benefit). If so, that balance will be refunded to your designated beneficiary or estate as a lump sum. You can change this beneficiary at any time in retirement.
Option A: If you select Option A, you are receiving 85% of the Life benefit for your lifetime. After you pass away, your spouse or other eligible dependent will receive 75% of your benefit payment for the rest of their life. To select this option, you must have been married to your spouse for two years before retirement or have an eligible dependent over the age of 40 who relied on you for more than half of their financial support for at least two years before retirement. Once payments begin, this beneficiary cannot be changed.
If your designated beneficiary passes away before you do, you may “pop up” your benefit to the full 100% amount for the rest of your life upon written notification to LAGERS.
Option B: If you select Option B, you are receiving 90% of the Life benefit for your lifetime. After you pass away, your spouse or other eligible dependent will receive 50% of your benefit for the rest of their life. To select this option, you must have been married for at least two years prior to retirement or have an eligible dependent over the age of 40 who relied on you for more than half of their financial support for at least two years before retirement. Once payments begin, this beneficiary cannot be changed.
If your designated beneficiary passes away before you do, your benefit may “pop up” to the full 100% amount for the rest of your life upon written notification to LAGERS.
Option C: If you select Option C, you are receiving 95% of the Life benefit for your lifetime. Your beneficiary will only receive a monthly payment if you pass away within 10 years of your retirement date, and the beneficiary’s monthly payment will stop once LAGERS makes 120 payments to you and your beneficiary combined. You can change this beneficiary at any time in retirement.
Regardless of your choice, your monthly benefit is guaranteed for life.
Beneficiaries
It is important that you talk to your beneficiaries about the payout option you elect at retirement so they understand what they may be entitled to upon your death. Just because someone is listed as a beneficiary on your account does not necessarily mean there will be a benefit payable. Communicating your payout option can help ensure your loved ones know what to expect and alleviate any confusion down the road.
Can I change my beneficiary after retirement? It depends. For Options A and B, your beneficiary cannot be changed once your benefit payments have begun. For Option C and the Life Option, you may update your beneficiary designation at any time during retirement.
What if I get divorced? If you select Option A or B and get divorced from the spouse you named as your beneficiary, they will still receive a monthly payment after your death, as the beneficiary for these options cannot be changed after retirement.
Will my beneficiary automatically receive payments after my death? No. In the event you pass away, your beneficiary will need to notify LAGERS so we can stop your benefit. They will also need to provide LAGERS with a certified death certificate if continuing benefits are payable.
