How to Collect a Decedent's Employee Benefits
The estate’s executor is responsible for collecting any employee benefits, or death benefits for which the decedent may be eligible. These may include retirement accounts, continued COBRA health benefits for the decedent’s family, and/or reimbursement for unpaid salary or vacation time. Contact as many of the decedent’s former employers as possible to uncover all available benefits and retirement plans.
To collect these benefits, the estate’s executor must formally contact the employer, usually with a letter. Most likely, you’ll find beneficiary designations, detailing who receives these benefits, signed by the decedent and on file with the employer. If the decedent has named no beneficiary, a provision under the employer’s plan or insurance policy typically designates the surviving spouse or the executor of the estate as beneficiary.
The employer will need at least one certified copy of the death certificate. Note that not all employee benefits have a death benefit. Here are some of the benefits that may apply:
Death benefits: The decedent may have had term life insurance, accidental death insurance, or other death benefits through the employer. Typically, the employer takes care of the paperwork to process those claims.
COBRA benefits for surviving spouse and dependent children: The decedent may have had certain benefits through an employer, such as health, dental, and/or vision insurance that the surviving spouse or dependent children may be eligible to temporarily continue. Check with the employer to see what benefits qualify for continuation under COBRA.
Flexible Spending Accounts and Health Savings Accounts: Some employers provide their employees with a way to pay for out-of-pocket healthcare and/or dependent-care expenses using pretax dollars. Deductions from the employee’s salary fund these accounts, called Flexible Spending Accounts. If the account has a balance at the date of death, that balance can be used to pay for either healthcare or dependent-care expenses incurred prior to death.
Health Savings Accounts are savings/investment accounts for pretax dollars the decedent put aside to cover healthcare costs. These accounts let you save and invest the unspent money in them from year to year. They can transfer to a surviving spouse on death, who can make withdrawals at any time, free of income tax, for healthcare costs.
Retirement accounts: Check for any employer-sponsored retirement accounts. The 401(k) is the most common, but you may also find a Savings Incentive Match Plan for Employees (SIMPLE), a Simplified Employee Pension Plan (SEP), or other, less common plans.
Unpaid salary, bonuses, vacation time, and/or comp time: Ask the employer about unpaid salary, bonuses, vacation time, comp time, and sick time. Some of these may be owed and payable upon death. Ask if the employee or estate is entitled to anything else, like reimbursable expenses.
Finding and notifying former employers is difficult but can be rewarding. Employers often pay out retirement plans valued at less than $5,000 when employees leave, but they’re under no obligation to do the same with larger sums. Finding retirement plans in place with old employers that hold tens or even hundreds of thousands of dollars isn’t uncommon.
To locate former employers, look at W-2s on prior tax returns, ask family members, and even ask the most recent employer who may have the decedent’s resume. You may also find references to prior employers in the decedent’s papers.