HR Tasks When an Employee Dies - WP&BC Portland...Beneficiary Designations −Request them, if there may be death benefits •Final wages and PTO (if not automatically payable to the

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Tom Kramer Bullard Law

tkramer@bullardlaw.com

Western Pension & Benefits Council Half-Day Health & Welfare Benefits Conference

November 9, 2016

HR Tasks When an Employee Dies

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Looking at Me

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Looking at You

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Agenda – Living Employees

− Beneficiary designations

− Benefit plan provisions

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Agenda – Deceased Employees

− Humanity

− Final paychecks

− Benefits following death

− Tax withholding and reporting

− Military service

− Disputes over death benefits

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From The West Wing

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Beneficiary Designations

− Request them, if there may be death benefits

• Final wages and PTO (if not automatically

payable to the surviving spouse (or partner?))

• Employer-provided life insurance

• Retirement plan benefits

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Beneficiary Designation Procedures

− Try to send periodic reminders to update

− Consider including status of beneficiary

designation on benefit statements

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Beneficiary Designation Reminders

− Explain importance and consequences

− Explain key terms (“primary,” “contingent”)

− Suggest legal advice before designating

minor or trust beneficiaries

− Reminder about possible multiple beneficiary

forms

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African Elephant

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Benefit Plan Provisions

− Consider writing benefit plans to anticipate

possible disputes

• Divorce cancels designation of former spouse as

beneficiary?

• Plan adopts “slayer” statute rule?

• Default beneficiaries other than decedent’s

estate?

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Not Dead; Just Sleeping

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Deceased – Humanity

− Condolences to family

− Notice to co-workers and others affected

− Consider memorial service, grief counseling

− Designate contact person for questions

− Forward voice-mail and e-mail

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That Was Serious

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Deceased – Compensation and Benefits?

− Prior paycheck not negotiated?

− Final paycheck due?

− Terminate disability benefits?

− Life insurance benefits due?

− Retirement plan benefits due?

− Recapture prepaid compensation or

benefits?

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Health Benefits after Death

− Offer continuation coverage to covered family

members, if any, and if continuation available

− Notify eligible family members of any unused

HRA or health FSA balance

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Retirement and Life Insurance Benefits

− Identify designated or default beneficiaries

− Offer payment as provided by plan

− Report to taxing authorities as required

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Final Wage Payments

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Final Paychecks – Whom to Pay (Oregon)

− Wages (defined broadly) up to $10,000 –

• Pay surviving spouse (or Oregon-registered,

same-sex domestic partner?), or if none

• Pay dependent children or their guardians or

conservators in equal shares

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Final Paychecks – Whom to Pay (Washington)

− Court-appointed executor, administrator or

PR

− Surviving spouse (or Washington-registered

domestic partner?), with community-property

agreement

− If neither applies, go to next slide

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Washington Final Paychecks

− Surviving spouse (domestic partner?) or, if

none, surviving children

• Up to $13,000 (currently, if State was employer)

• Up to $2,500 (for other employers)

− Beneficiary with small-estate affidavit

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Final Paychecks – General Principles

− In Washington, get “Claim for Indebtedness”

affidavit

− If statute doesn’t dictate –

• Seek direction from personal representative of

estate

• Ask co-workers; notify potential claimants

• Consider interpleader action

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Final Paychecks – Taxes

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Taxation of Payments in Year of Death

− No federal income tax withholding

− FICA tax and withholding is required

− FUTA tax applies (subject to $7k wage base)

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Tax Reporting of Payments in Year of Death

− Include post-death payments in boxes 3 and

5 (not box 1) of employee’s W-2 Form for

year of death

− Include gross post-death payments in box 3

of recipient’s Form 1099-MISC for year of

death

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What’s Next?

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Payments Made After Year of Death

− No federal income tax withholding

− No FICA tax or withholding

− No FUTA tax or withholding

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Tax Reporting of Payments after Year of Death

− No Form W-2 reporting for payments

− Include payments in box 3 of recipient’s Form

1099-MISC for year of payment

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Tax Issues Are Always Humorous

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Death During Military Service

− Retirement (Including §401(k)) Plans

− Must pay benefit to survivors if employee

dies during military service as if employee

rehired, then died

− May provide make-up matching or profit-

sharing contributions for service period

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Last Laughs

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Disputes Over Death Benefits

− Remember general principles

• Question claimants; review their claims

• Ask co-workers; notify potential claimants

• Consider interpleader action

− Plan payment of costs of resolution

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Thank You!