Retiree & Active DROP Participants - Death Benefits and Importance of Keeping Beneficiary Designations Updated

Date: Jul 10, 2020


When was the last time you thought about your SDCERS beneficiary designations? Over a year ago? Five years? The day you retired or entered DROP? Maybe never? Beneficiary designations may seem like a chore you can put off or do once and forget about, but the truth is you should review your beneficiary designations at least once a year to make sure they reflect your current circumstances. For example, beneficiary designations probably aren’t the first thing on your mind when you get married or divorced, have a child, or lose a loved one, but these are all defining life events that may affect who you want to receive your pension benefits when you die. This article summarizes the death benefits provided to DROP participants and SDCERS retirees, but please review the Death Benefits Fact Sheet and Retirement Benefit Options Fact Sheet for more in-depth information.

Continuance Benefit – Both DROP participants and retirees were required to selected a Retirement Benefit Option when they submitted their DROP or retirement application. If you selected a Retirement Benefit Option that provided a continuance benefit, then upon your death, the person you designated as your continuance beneficiary will continue to receive a portion of your monthly pension benefit for the rest of their life; the amount they receive depends on the Retirement Benefit Option you selected. Unfortunately, if you retired or entered DROP after September 18, 2008 and selected the Maximum Benefit (Married) option, the 50% continuance benefit will be forfeited if you and your spouse are divorced when you die. Similarly, your continuance benefit is forfeited if your continuance beneficiary predeceases you. Please note that your continuance beneficiary is irrevocable – once you retire or enter DROP, you cannot change this beneficiary designation under any circumstances.
$2,000 Retiree Death Benefit and Other Unpaid Monies– All DROP participants and retirees will designate another beneficiary to receive the $2,000 retiree death benefit. This benefit will be paid in a lump sum and is meant to cover death-related expenses, such as funeral costs. Besides the $2,000, this benefit may also include any unpaid monies due to the deceased retiree, such as the Annual Supplemental Benefit, unpaid monthly pension benefit, Corbett benefit, etc. You may choose anyone to receive this benefit, including a trust or non-relative. You can also designate an alternate beneficiary, in case your primary beneficiary predeceases you, and/or multiple beneficiaries to receive equal or unequal shares. Unlike the continuance benefit, your beneficiary for this death benefit can be changed at any time.
DROP Death Benefit – The last death benefit is only for DROP participants and DROP retirees who are still receiving a DROP annuity when they die. These Members can designate a beneficiary to receive the funds remaining in their DROP account upon their death. As with the $2,000 Retiree Death Benefit, you can change this beneficiary designation at any time as well as designate both primary and alternate beneficiaries.
If you die while participating in DROP, your beneficiary designated to receive your DROP account balance will receive all of the funds in your DROP account, including interest. If you named only one beneficiary, they may elect to receive the DROP account either in a single lump sum payment or in equal monthly installments over their life expectancy. However, if you named multiple DROP beneficiaries, they will each receive their proportionate share of your DROP account in single lump sum payment.
If you are a DROP retiree receiving a monthly DROP annuity, you may name only one beneficiary to continue receiving your DROP annuity after you die – your DROP annuity cannot be distributed to multiple beneficiaries. If you name more than one beneficiary for your DROP annuity, your beneficiaries will divide the remaining balance in your DROP account equally and receive proportionate lump sum payments. However, if you’ve named a single beneficiary to receive your DROP annuity, they may choose to continue the monthly annuity payments until the funds in your DROP account are exhausted, or they may elect to receive the remaining funds in a lump sum.
As you can imagine, it may take a while to sort out who gets what if you die without updating your beneficiary designations. Luckily, designating a beneficiary is quick, easy, and you can do it from home by logging in to your SDCERS Member Portal account and clicking “Beneficiary Update” from the left menu. (If you don’t already have a Member Portal account, you can register here.)

Screenshot of SDCERS Member Portal, showing where the beneficiary information page is located.

You will be able to name beneficiaries to receive different types of death benefits depending on if you are active, in DROP, or retired. You can designate both a Primary and an Alternate beneficiary for your $2,000 Retiree Death Benefit and DROP Death Benefit. When you die, your Primary is first in line to collect the death benefit, while your Alternate receives the benefit only if the Primary is already deceased. For some death benefits, you can name multiple beneficiaries and designate a specific percentage of the benefit to each person. If you choose to do this, make sure your percentages add up to 100%. Lastly, you may also designate a trust to receive any death benefit that is not a continuance or an annuity.

Document Under Categories: Member Portal, News Articles, Pension