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Surviving spouse's benefits
in private pension plans
When an active worker or retired employee dies, what benefits does the spouse receive from employer contributions to a private pension plan? While the Bureau of Labor Statistics has no data on actual annuity payments and the number of beneficiaries receiving them, a representative sample of medium and large companies shows that, as required by law, the plans offer a surviving spouse a lifetime annuity. However, both eligibility requirements for this benefit and the size of monthly payments depend on when death occurs. If death is before retirement, the spouse usually is eligible for an annuity if the employee had sufficient age and service to qualify for early retirement benefits; the size of the annuity depends on the pension the worker would have received if he or she had opted for early retirement.1 (See chart 1.) If the employee had retired, the typical plan would provide for a spouse's annuity equal to about two-fifths of the worker's accrued benefits.
A few pension plans offer "death benefits," as well as annuities. While annuities provide a lifetime income, death benefits are paid either in a lump sum or for a specified number of months. The most common lump-sum payment is $1,000; monthly death benefits most often are paid for 5 years. However, if death occurs after retirement, the number of monthly payments to the spouse is reduced by the number of pension payments already received by the retiree.
This article is based on data from the Bureau's 1981 survey of employee benefits in large and medium firms.2 A sample of 1,505 establishments across most private industries yielded data on the detailed provisions in 914 pension 21.5 million employees in 43,325 establishments. Eighty-four percent of the employees were covered by private pension plans— 79 percent were under plans fully paid for by their employer, and 5 percent paid of the cost.
This excerpt is from an article published in the April 1984 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 The Employer Retirement Income Security Act of 1974 (ERISA) requires that if an employee made contributions to a pension plan, the plan must provide for returning the participant's accumulated contributions, with interest, if death occurs before retirement.
2 The survey is conducted in a sample designed to represent all private sector establishments in the United States, excluding Alaska and Hawaii, employing at least 50, 100, or 250 workers, depending on the industry. Industry coverage includes mining; construction; manufacturing; transportation, communications, electric, gas, and sanitary services; wholesale and retail trade; finance, insurance, and real estate; and selected services. For additional details on the survey, see Employee Benefits in Medium and Large Firms, 1981, Bulletin 2140 (Bureau of Labor Statistics, 1982). See also Robert Frumkiun and William Wiatrowski, "Bureau of Labor Statistics takes a new look at employee benefits," Monthly Labor Review, August 1982, pp. 41-45.
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