YOUR LAGERS BENEFICIARIES: WHO GETS WHAT?
If you remember your first day on the job, you might remember being asked to complete a LAGERS enrollment form. On that piece of paper, you designated beneficiaries for your LAGERS benefit. Do you remember who you put down? Do you know what that person might get? Or even more importantly, did you know that the person you designated might not be eligible for anything? Who gets what when it comes to your LAGERS benefit can be confusing especially since the person you designate as your beneficiary may not always be the first payable on your account in the event of your death.
When it comes to benefits that are payable if you die while you are still working, here are a couple important things to remember. If you are a vested member, and you pass away while still working for a LAGERS employer, a monthly Survivor benefit is going to be the first benefit payable on your account.
Common Misconception: Whomever I list as a LAGERS beneficiary is who will receive a survivor benefit if I die before I retire.
Regardless of who you list as your beneficiary, state law determines who gets first dibs on this benefit. LAGERS looks first to pay survivor benefits to a spouse of at least two years (the two year requirement is waived if the death was accidental or caused by your job). Your eligible spouse would receive lifetime monthly payments as if you had retired and elected Option A (this is the highest monthly payment available for a spouse). If you don’t have an eligible spouse, LAGERS then looks to pay any dependent children. These monthly payments will continue equally to each of your dependents until each is no longer considered dependent.
If you don’t have a spouse or dependent children, here’s where that beneficiary designation you made becomes important. When no monthly survivor benefit is payable, LAGERS will then refund your accumulated member contributions, if any, to whomever you designated on your beneficiary form. They receive a one-time payout of this amount, and no further benefit is then payable.
Common Misconception: Since state law decides my beneficiaries, it’s really not important to keep my beneficiaries up to date.
You may be thinking that since you have a spouse who will be eligible for a survivor benefit or perhaps since you work for a non-contributory employer and won’t have anything to refund in the event of your death, that it is not necessary for you to keep your beneficiaries up to date. In fact, it is always a best practice to keep your beneficiaries current. Here’s why; an employer has the option to switch between contributory and non-contributory which means that even if you are not contributing anything out of your own paycheck now, you may have either paid in some time in the past, or could potentially in the future. Keeping those records current helps ensure that your money goes to who you want it to go to. Remember, that you may designate any individual, legal entity (such as a charity), trust, or your estate as a beneficiary, and may designate more than one primary and/or contingent beneficiary to share equally in your accumulated contributions, but contingent beneficiaries will only receive payment should all your primary beneficiaries predecease them.
Common Misconception: My beneficiary is always guaranteed to get something.
If you pass away prior to retirement and you do not have a spouse, dependent children, and have no member contributions, there will not be anything payable to your beneficiaries from LAGERS. Keep in mind that LAGERS is designed to provide predictable income for those who were financially dependent upon you, but isn’t intended to be life insurance. Many employers provide supplemental life insurance or provide the option to purchase supplemental life insurance as part of your overall benefits package, so be sure to check with your employer on what is available for you.
Common Misconception: Payments will automatically begin to my beneficiary if I die.
When a member dies, it is the beneficiary’s responsibility to notify LAGERS and apply for the appropriate benefit. This is why it is important that whomever you list as a beneficiary and your spouse are aware of these benefits. I always encourage members to place a copy of their annual member statement or a LAGERS brochure with all of their other important documents such as life insurance policies, wills, etc. That way, you can rest assured that your loved ones don’t forget to apply for your hard earned LAGERS benefit.
Don’t forget that you can view and update your LAGERS beneficiary designation 24/7 on your myLAGERS account, or you can complete a change of beneficiary form, available on our website if you wish to update your designations by paper. These beneficiaries should be kept up to date until you retire, at which time, you will select a payout option and make new beneficiary designations for your retirement!