Death Benefits

ET-6101, Rev. 11/2005

The Department of Employee Trust Funds (ETF) administers three programs that provide survivor benefits: Wisconsin Retirement System, Group Life Insurance and Group Health Insurance. In the event of your death, your survivors should contact ETF immediately. They may be eligible for one or more of these benefits. ETF will send information about survivor benefits and how to apply for them to the beneficiary(ies).

WISCONSIN RETIREMENT SYSTEM (WRS) BENEFITS

The amount of WRS benefits payable to your beneficiaries depends on whether you die before retirement or after retirement.

Before Retirement

Your beneficiaries are entitled to a benefit whether your death occurs while an active employee or after you have terminated employment under the WRS, provided you did not close your account. The minimum current death benefit amount is shown on the annual Statement of Benefits sent to active and inactive members.

• If you die as an inactive member (including alternate payees who have not yet taken a monthly benefit), the benefit will always include the full amount of employee required and any voluntary additional contributions (whether paid by you or by your employer as a fringe benefit), plus accumulated interest.
• If your WRS employment began before 1966, the death benefit may also include employer contributions made to your account prior to the date you became covered under the formula retirement benefit provisions, plus accumulated interest.
• If you die as an active WRS employee after 1999* and before reaching minimum retirement age (age 55 for most; age 50 for protective occupation participants), your death benefit is twice the amount of your employee required contribution balance, plus any voluntary additional contributions in your account.
• If you die as an active WRS employee after 1999* and after reaching minimum retirement age (age 55 for most; age 50 for protective occupation participants) AND your beneficiary is a living person or a trust in which a living person has a beneficial interest, the higher of the following two death benefits is payable:
  • Twice the amount of your employee required contribution balance, plus any voluntary additional contributions in your account; or
  • A special death benefit based on both employee and employer contributions. The amount of the special death benefit is calculated as though you retired on the date of death and selected a joint and survivor annuity continued in full to your beneficiary(ies). The present value of that benefit is normally available as a lump sum or life annuity to your beneficiary(ies). Note that this special death benefit is NOT available if your beneficiary is an entity other than one or more living persons or a trust in which one or more living persons has a beneficiary interest.

  The special active death value, present value of a retirement annuity at the time of the participant’s death, does not increase if application for the benefit is delayed.

  • Death benefits changed as a result of 1999 Wisconsin Act 11. If you are a beneficiary of a participant who died or terminated employment prior to January 1, 2000, contact the Department of Employee Trust Funds for death benefit information.

After Retirement

If your death occurs after you begin your retirement annuity, death benefits are determined according to the annuity option you selected when you retired.

If you chose the For Annuitant’s Life Only option, your annuity will be paid to you for as long as you live and will end at your death. No payments will be made to any beneficiary. Other annuity options, such as life annuities with a guaranteed number of payments and joint and survivor options, provide varying levels of death benefit. Generally, joint and survivor options provide better death benefit protection to a surviving spouse than the other options.

GROUP LIFE INSURANCE BENEFITS

Current Employees

If you are covered under the Wisconsin Public Employers Group Life Insurance Program, the minimum death benefit payable for active employees (the “basic amount”) is your highest year of WRS earnings rounded to the next higher thousand. Depending on the additional options offered by your employer and selected by you, the total coverage amount may be as much as five times the basic amount. In case of accidental death, the total amount payable is doubled.

Former Employees, Including Retirees

To be eligible to continue group life insurance after termination, you must meet ONE of the following requirements:

1. Your employment began before January 1, 1990, or
2. You have been covered by the group life insurance plan in five calendar years, if your beginning employment date is after January 1, 1990 and ONE of the following applies:
   • You are receiving an immediate annuity or meet all of the requirements for receiving an immediate annuity except the filing of an application, or
   • The sum of the years of your creditable service in the WRS on January 1, 1990, plus your years of group life insurance coverage after 1989 equals 20 years, or
   • The sum of your years of service on payroll with the same employer on January 1, 1990, plus your years of group life insurance coverage after 1989 equals 20 years. The service must be with the same employer that employed you immediately before termination of employment.

Insurance Coverage and Premiums

If you are under age 65 and elect to continue coverage, your amount of insurance and premiums will be the same as prior to your termination or retirement. Premiums will automatically be deducted from your monthly retirement annuity if you file for an immediate annuity. If you do not take an immediate annuity, you must file a Continuation Application form (ET-2154) to continue coverage. You will pay premiums directly to the Minnesota Life Insurance Company.

When you reach age 65, all premiums cease and any supplemental and/or additional insurance coverage that you may have terminates. Your basic insurance coverage continues at a reduced amount for life. For State employees and some local government employees, the basic coverage amount will reduce to 75% of your basic amount at age 65, and further reduce to 50% of your basic amount at age 66 and thereafter. Some local government employers have elected to offer coverage that further reduces basic coverage to 25% of the basic amount at age 67 and thereafter. There is no accidental death and dismemberment benefit on post-retirement coverage.

Living Benefit

Under most circumstances this insurance is term life insurance only; there is no cash value while the insured person is still living. However, an insured person who is terminally ill or is permanently confined to a long-term care facility or has been admitted to a hospice program for the terminally ill may be eligible to receive part or all of the death benefit while still living. The benefit payable to your beneficiary(ies) after you die is adjusted by any amount(s) paid while you are living. Please contact the Department if you would like more detailed information about this provision.

GROUP HEALTH INSURANCE BENEFITS

State Employees

Your spouse and dependent children are eligible to continue group health insurance coverage if a family contract is in force at the time of your death. Your unused sick leave credits will be used to pay group health insurance premiums for eligible survivors.

ETF will send the application form to continue health insurance after receiving notification of your death. This form must be returned within 90 days of the date of death or within 30 days of receipt of this form.

Health insurance benefits cannot be continued to your survivors and unused sick leave credits are lost if you have single coverage at the time of your death.

Local Government Employees

Your spouse and dependent children are eligible to continue group health insurance coverage if a family contract is in force at the time of your death.

ETF will send the application form to continue health insurance after receiving notification of your death. This form must be returned within 90 days of the date of death or within 30 days of receipt of this form.
Health insurance benefits cannot be continued to your survivors if you have single coverage at the time of your death.

DESIGNATING A BENEFICIARY

You determine the beneficiary of your retirement account and life insurance (if applicable). Any death benefit payable is paid according to your most recent Beneficiary Designation Form on file with ETF, regardless of any subsequent changes in your personal situation. Exception: If you select a joint and survivor annuity when you retire, your named survivor can never be changed.

If you have not filed a Beneficiary Designation form, any death benefits are paid according to statutory standard sequence. This sequence is as follows:

1. Widow or widower
2. Children (natural or legally adopted). If at least one child survives you, the share of any deceased child will be payable to the surviving spouse of that child or to the surviving children of the child if there is no spouse.
3. Grandchild(ren)
4. Parent(s)
5. Brother(s) and sister(s)
6. Estate

Payment will be made to the person(s) in the lowest numbered group that contains one or more living persons. The beneficiaries in Group #2 will include all of your children regardless of whether the child’s birth is legitimate or illegitimate (as long as any relevant paternity is established), and whether the child’s date of birth is before or after your date of death.

Your will does not govern the payment of benefits from ETF. If your estate is your beneficiary, payment will be made to and distributed by your estate.

It is important to keep your beneficiary designation current. You should update your beneficiary designation periodically to reflect changes in your personal circumstances. If you wish to change your beneficiary designation, obtain a Beneficiary Designation form from ETF. Designation by letter is not acceptable. You may request a blank form by telephone, in writing or by e-mail. The Beneficiary Designation form is also available on ETF’s Internet site for you to download, print, complete and mail. When the Department receives your new beneficiary designation form, it will supersede your previous designation.

ALTERNATE PAYEES

If you have a WRS account as the alternate payee (former spouse) of a WRS participant whose account was divided per a Qualified Domestic Relations Order, you are entitled to name the beneficiaries who will receive any death benefits from your account upon your death. To designate your beneficiary(ies), you must complete a Beneficiary Designation form and file it with ETF. If you do not designate a beneficiary, or if your beneficiary(ies) are deceased at the time of your death, any death benefits payable are paid according to statutory standard sequence.

If you are receiving a monthly annuity as an alternate payee, whether there is a death benefit payable will depend on the annuity payment option. Contact ETF for more information about designating beneficiaries for your annuity.

If you are an alternate payee with more than one WRS account, you may name separate beneficiaries for each separate account by filing separate designations. Examples of multiple accounts include: having an alternate payee account plus your own account as a covered WRS employee; your alternate payee account plus one or more accounts as a beneficiary; more than one alternate payee account. Contact ETF for more information about designating separate beneficiaries for multiple accounts.

TAX INFORMATION

Death benefits that exceed the WRS contributions actually paid by you from post-tax dollars are taxable income to your beneficiaries. If your account includes both required and additional contributions, your beneficiary(ies) may take a lump sum from your additional contributions and leave the required contributions, but by doing so will lose eligibility for income averaging and capital gains treatment.

A spouse beneficiary is eligible to roll over lump sum WRS death benefit distributions into his or her own (non-WRS) retirement account. Such accounts include traditional IRAs, Sec. 403(b) tax deferred plans, Sec. 457 governmental deferred compensation plans and other eligible employer plans (except WRS). You should consult your tax advisor for information.

There are specific federal tax law requirements that regulate when a beneficiary of a WRS account must begin distribution. Beneficiaries who do not comply with federal tax law requirements may be subject to federal excise taxes or penalties. Information from the Internal Revenue Code about distribution requirements and tax penalties for beneficiaries can be found in Internal Revenue Service (IRS) Publication 575, Pension and Annuity Income.

Payments from the WRS (other than from tax-deferred additional accounts) are exempt from Wisconsin inheritance tax. The benefit is included in the federal estate tax. Contact your tax advisor or the IRS regarding federal estate tax information.

Your survivor benefits are controlled by the applicable statutes, rules and contracts. ETF has briefly summarized these provisions in this brochure. However, if there are any discrepancies between this brochure and the applicable statutes, rules or contract provisions, the statutes, rules or contract provisions will control.

The Department of Employee Trust Funds does not discriminate on the basis of disability in the provisions of programs, services, or employment. If you are speech, hearing, or visually impaired and need assistance, please call 1-877-533-5020 or (608) 266-3285 (local Madison) or TTY (608) 267-0676.