Survivor benefits refer to the benefit that can be paid to the selected beneficiary following the death of the employee. This type of benefit is most frequently available in the context of a pension plan. A survivor benefit is a marital asset that should be addressed in the context of a divorce. Additionally, the survivor benefit is a separate asset than the pension itself such that a spouse could receive a portion of the actual pension as well as the survivor beneficiary designation. The employee may need to choose whether they want to establish a survivor benefit at the time of retirement. The election of a survivor benefit can result in the reduction of the benefit the employee will receive during their lifetime.
Even if an employee does not elect a survivor benefit, in certain cases it can still be established through court order. A Qualified Domestic Relations Order may be necessary to establish the award of a survivor benefit. Whether or not the award of a survivor benefit is appropriate likely depends on if there is an offset for the interest in the pension or a deferred distribution. With an offset, the employee keeps their entire pension and the other party is awarded other assets such that the parties still achieve an equitable distribution. With a deferred distribution, where the spouse of the employee will be receiving an actual portion of the pension but not until the employee retires, the survivor benefit can act as an insurance policy to ensure the spouse will receive some benefit from the pension even if the employee dies prior to retirement. The best course of action is to obtain and review all plan documents on the retirement/pension and any prior elections of the employee as a first step in determining how to reach an equitable distribution and what options are at your disposal.