Understanding Survivor and Death Benefits - Public School ...

Reversionary PensionsA reversionary pension offers a member the optionof providing a lifetime pension for any designatedindividual. A reversionary pension is fundedthrough a reduction in the amount of the member’sretirement pension and is paid upon the member’sdeath. This option must be established prior to themember’s retirement date by submitting CTPF Form706, Designation of Reversionary Beneficiary.Qualifying Conditionsn A reversionary designation must be filedwith CTPF prior to the effective date of themember’s retirement.n If the member dies within 730 days fromthe date the designation is filed at CTPF, noreversionary pension will be paid.n The reversionary pension remains a fixedamount throughout the recipient’s lifetime.n The reversionary pension cannot be less than$40 per month or more than the reducedpension payable to the member as a result ofthis reversionary option.There are additional conditions regarding thisreversionary option. For further information, pleasecontact CTPF Member Services.5

Survivor PensELIGIBILITYSINGLESURVIVORSpouse or childMEMBERS IN ACTIVE SERVIn The active member must have had at leastyears of active CTPF service for survivors tqualify for a pension. A member with inacor deferred status, must have earned 10 yeaof CTPF service for survivors to qualify forpension.n A couple must have been married or unitea civil union for at least one year immediatprior to the member’s date of death.n A surviving spouse must be at least 50 yearunless an eligible minor child or children asurvive. The survivor pension is paid evenspouse remarries or becomes a party to a cunion.n Eligible children (born to or legally adoptethe member) must not be married or unitecivil union and under age 18.n Pension is based on 30% of average salary (maximum) or 50% of the retirement pensiearned by the member, whichever is greaten Eligible minor child’s pension is paid to thechild’s surviving parent or guardian until thchild marries, becomes a party to a civil unturns 18.n Spouse’s pension is payable when spouse rage 50, for life.MULTIPLESURVIVORSSpouse and/oreligible minorchildrenn Pension based on 60% of total average salaryof death ($600 maximum) or 50% of the retirpension earned by the member, whichever isgreater. Pension is divided equally among all esurvivors.n Pension is paid until a child marries, becomparty to a civil union, or turns 18; at that tithe benefit is recalculated and split among tremaining survivors.n Spouse’s pension is payable immediately wmember’s eligible child(ren) are under agein the spouse’s custody or at age 50, for life6n Pensions increase 3% each January 1 on orfollowing the one year anniversary of theeligibility date.

ion SummaryCE1½otiversad inelys oldlsoif theivilRETIRED MEMBERSn A couple must have been married or united ina civil union for at least one year immediatelyprior to the member’s date of death.n A surviving spouse must be at least 50 years oldunless an eligible minor child or children alsosurvive. The survivor pension is paid even if thespouse remarries or becomes a party to a civilunion.n Eligible children (born to or legally adopted bythe member) must not be married or united in acivil union and under age 18.d byd in a$400onr.eion, oreachesat timeementligiblen Pension is based on 50% of member’sretirement pension.n Eligible minor child’s pension is paid to thechild’s surviving parent or guardian until thechild marries, becomes a party to a civil union, orturns 18.n Spouse’s pension is payable when spouse reachesage 50, for life.n Pensions are based on 50% of member’sretirement pension, divided equally among alleligible survivors.es amehehile18 and.n Pension is paid until the child marries, becomesa party to a civil union, or turns 18; at that timethe benefit is recalculated and split among theremaining survivors.n Spouse’s pension is payable immediately whilemember’s eligible child(ren) are under age 18 andin the spouse’s custody or at age 50, for life.n Pensions increase 3% each January 1,on or after the eligibility date.7

Death BenefitsLump-Sum Death BenefitDesignated beneficiaries of active and retiredmembers qualify for a lump-sum death benefit.n Beneficiaries of active members receive a benefitbased on the member’s monthly salary andservice credit, with a $10,000 maximum.n Beneficiaries of retirees receive between $5,000and $10,000 depending on the number of yearsthe member was retired.Refund of ContributionsFollowing a member’s death, CTPF calculates thepension benefits due to survivors. If a member’scontributions exceed the amount required to fundsurvivor pensions, the beneficiaries may receivea refund, minus the amount required to fund asurvivor’s pension. The refund amount can only bedetermined upon a member’s death.Payment of Death BenefitsDeath benefits are paid to individuals listed on amember’s Designation of Beneficiary form. Deathbenefits and refunds are paid:n to the primary beneficiaries listed on the mostrecently completed Designation of Beneficiaryform on file with CTPFn to the alternate beneficiaries listed if noprimary beneficiary survivesn to the member’s estate if no beneficiariessurvive or if a Designation of Beneficiaryform has not been filed with CTPF8

Designating a BeneficiaryDesignating a beneficiary ensures that the lump-sumdeath benefit and any refund of contributions arepaid according to a member’s wishes.Any person, trust, church, charity, or organizationcan be named as a beneficiary. If more than oneindividual or organization is named, all shareequally in the benefit unless specific percentages aredesignated.Benefits payable to a minor child are paid in careof the minor’s guardian. Members may establish acustodian other than the minor’s guardian under theIllinois Uniform Transfers to Minors Act.A creditor may not be named as a beneficiary as ameans of providing security for a debt.It is important to update the Designation ofBeneficiary form as life events occur, includingmarriage, civil union, death, birth, or divorce.A member may change the designation at any timeby submitting a new form to CTPF. The designationform must be on file at CTPF prior to themember’s death.The information contained on the Designation ofBeneficiary form is confidential and will not bedisclosed to anyone. Members who cannot locate acopy of the current designation and/or cannot recallthe named beneficiary, should contact CTPF torequest a new designation form.The only person who may sign and submit anew Designation of Beneficiary form is the CTPFmember. No representative, including a powerof attorney, guardian, conservator, trustee, orrepresentative payee, can sign this form or submita new form.9

Health InsuranceA surviving spouse and/or dependent childrenwho receive a survivor pension may qualify forCTPF health insurance coverage and for the healthinsurance premium rebate if CTPF was the deceasedmember’s final retirement system.Survivor PensionCalculationsExample 1: Death in Active ServiceJane, a career teacher and a single parent of16-year-old twin boys, died at age 55. She had 30years of service credit and a final averagesalary of $55,000.Jane’s earned pension:2.2% x 30 years x $55,000 = $36,300 annuallyTotal survivor pensions:50% x $36,300 = $18,150 annuallyJane’s sons will each receive an annual survivorpension of $9,075 (half of $18,150) through their18th birthday. Their pensions will increase 3% inJanuary following the one-year anniversary of theirfirst benefit payment. Their pensions will be paid tothe boys’ guardian, Jane’s mother.Jane designated her sister, Martha, as her primarybeneficiary. Martha will receive the lump-sum deathbenefit. Since Jane’s contributions during her lifetimeexceeded the amount required to fund the twins’pensions, Martha will receive a refund of Jane’scontributions, minus the amount required to fund thesurvivors’ pensions.10

Example 2: Death After RetirementJohn, 74, died after 12 years of retirement. At thetime of his death he received an annual pension of$45,000. John’s wife Margaret, 72, qualifies for asurvivor pension of 50% of John’s pension.Margaret’s survivor pension:50% x $45,000 = $22,500Margaret will receive the survivor pension for life.Her pension increases 3% annually beginning theJanuary following her first payment.John designated his daughter, Claire, as his primarybeneficiary. Claire receives the $5,000 lump-sumdeath benefit.Since all of John’s contributions were used to fundhis pension during his 12 years of retirement, there isno refund of contributions.Example 3: Reversionary PensionRobert is 65 years old and ready to retire with 40 yearsof service. His wife preceded him in death and he liveswith his 30-year-old son who has special needs. WhenRobert dies, his son will not qualify for a survivorpension because he is not a minor child.In order to ensure his son’s financial future, prior toretirement, Robert elects to provide a reversionarypension for his son. When Robert dies, thereversionary pension will be paid to his son or hisson’s guardian each month.11

Contact InformationMember ServicesChicago Teachers’ Pension Fund203 North LaSalle Street, suite 2600Chicago, Illinois 60601-1231312.641.4464 phone312.641.7185 faxwww.ctpf.orgmemberservices@ctpf.orgBoard of TrusteesJay C. Rehak, presidentLois W. Ashford, vice presidentTina Padilla, financial secretaryJames F. Ward, recording secretaryJeffery BlackwellJeanne Marie FreedWalter E. PilditchMary Sharon ReillyRodrigo A. SierraRaymond WohlJerry TravlosAndrea L. ZoppKevin B. Huber, executive directorPChicago Teachers’ Pension Fund12Visit us at www.ctpf.orgRevised on web August 2012