How Are Pensions Paid to Beneficiaries?

Posted Jul 4, 2024


Financial security in retirement is a paramount concern for many Americans.

Financial security in your golden years typically comes from a mix of Social Security, individual funds from savings and investments, and oftentimes, defined benefit pension income. Pensions are an important leg of this stool because, unlike your personal savings or investments, they can never run out or lose their value – payouts are guaranteed for as long as you live.

But what happens to your pension when you die? Although pension benefits vary, many plans allow members to select a beneficiary to continue receiving their benefit payments if the member dies.

Let’s take a closer look at how it works.

Pension Beneficiaries Explained

Pension plans usually allow only the member and a select beneficiary, such as your spouse, to receive your pension payments. Determining how your pension will be handled when you die depends on the type of plan you have, your age, and if you have already entered retirement and are receiving payments. 

The Employee Retirement Income Security Act of 1974 protects the surviving spouse of a deceased pension plan participant, although levels of protection vary. Beneficiaries should look at the pension plan’s summary and description to learn what type of plan the member had, as well as what type of survivor benefits they may be able to access.

If the plan stipulates survivor benefits, beneficiaries should contact the pension plan administrator or the former employer of their deceased spouse to initiate a benefits claim. You’ll probably have to provide the administrator with a death certificate as proof that the member has passed.

Once the survivor benefit process has begun, you can expect to learn whether death benefit payments will be dispersed as monthly annuity installments or in a lump sum. Some plans may also offer the ability to roll those funds over into another type of retirement account.¹ You’ll have to report either type of proceeds on your annual tax return.

If the member had already started drawing benefit payments from the pension, then the amount of death benefit payments to beneficiaries is offset by the amount drawn by the deceased member. If the member has not yet retired and has not begun receiving pension payments, the beneficiary may be offered a lump sum payment instead. Lump-sum payments are calculated using a multiple of the deceased member’s salary and his or her years of employment.

The Bottom Line

Pension providers often require members to designate a beneficiary when they set up their pension plans. Qualified beneficiaries include surviving spouses, children, and minors, who may receive survivor benefits depending on the rules of the plan. Factors such as the member’s age and retirement status affect potential benefit payments to beneficiaries.

To learn more, contact the pension administrator or provider to find out what beneficiary payments you might be entitled to.


1.  Retirement Topics: Death,,

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.

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