 IPERS Member Handbook
IF YOU DIE BEFORE RETIREMENT
This section of the handbook addresses what happens to your IPERS benefits if you die before you retire.
A. Applicable to All Members
If you die before living into your first month of entitlement to benefits, your beneficiary will be entitled to receive a death benefit as listed below:
- If you are vested. If you designated only one individual as your beneficiary, your beneficiary may choose between a lump-sum payment or a lifetime monthly benefit (provided the monthly benefit is $50 or more). Otherwise, benefits will be paid as a lump-sum payment. The lump-sum payment will be one of the following, whichever is greater:
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1) |
A lump-sum payment equal to the actuarial present value of your accrued benefit as of your date of death. |
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OR |
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2) |
A lump-sum payment using the following formula: Your accumulated contributions plus the product of your highest year of covered salary and your total years of service (may exceed 30 years) divided by the applicable denominator. The applicable denominator is 30 years for regular members; 22 years for Special Service members. |
Federal law permits a member’s spouse to roll over the pretax portion of a lump-sum death benefit to a traditional IRA or an eligible retirement plan, which includes plans qualified under Section 401(a) of the Internal Revenue Code. If acceptable to the recipient plan, after-tax amounts are also eligible for rollover transfers. Rolling the taxable portion to another retirement plan or an IRA allows the funds to continue to grow on a tax-deferred basis until the spouse is ready to retire. Effective for distributions made on or after January 1, 2007, nonspouse beneficiaries have the same rollover rights as spouses, except their rollovers can only be made to IRAs.
The federal Internal Revenue Code requires that lump-sum death benefits for an IRC Section 401(a) plan cannot exceed 100 times the expected monthly payout the member would have received under Option 2 if the member had been at normal retirement age at the time of death. Death benefits may be reduced to comply with this requirement.
- If you are not vested. Regardless of the number or type of beneficiary(ies) designated, death benefits will be paid as a lump-sum payment as explained above. If you are an inactive nonvested member, the lump-sum preretirement death benefits for your beneficiary(ies) will be calculated using a formula that includes how much you contributed to IPERS, years of service, highest year’s salary, and other factors. Your beneficiaries cannot receive a benefit based on the present value of your accrued benefits at death, or a monthly benefit.
The following table displays a couple of examples showing death benefits for a member who died prior to retirement. (In both instances, the member was vested.)
| Example 1 |
Preretirement Death Benefit
(Member With 15.25 Years of Service)
After working for an IPERS-covered employer for 15.25 years, Bill dies at age 42. At the time of his death, his highest 3-year average salary is $45,635. Bill’s lump-sum preretirement death benefit would be $46,744. |
| Example 2 |
Preretirement Death Benefit
(Member With 21 Years of Service)
After working for an IPERS-covered employer for 21 years, Jane dies at age 59. At the time of her death, her highest 3-year average salary is $42,000. Jane’s lump-sum preretirement death benefit would be $147,000. |
B. Line-of-Duty Death Benefits
 If a Special Service member’s death is the direct result of a personal injury incurred in the line of duty, a line-of-duty death benefit of up to $100,000 may be payable. The line-of-duty benefit will be paid as a lump sum and is in addition to any other death benefits that are payable (not to exceed the Internal Revenue Code maximum).
Volunteer emergency workers covered under IPERS may receive this coverage under a state-sponsored benefit program other than IPERS.
C. Maximum Death Benefits
The Internal Revenue Code requires that lump-sum death benefits for an IRC Section 401(a) plan cannot exceed 100 times the expected monthly payout the member would have received under Option 2 if the member had been at normal retirement age at the time of death. (Line-of-duty death benefits may be reduced to comply with this requirement.) | 
