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What Are Death Benefits and Who's Entitled to Them?

As a small business owner, you're probably more focused on your product than on employee pensions, but if an employee dies, knowing how your company and the state deal with death benefits could come in handy.

So here's a primer on what death benefits are, who's eligible to receive them, and how they could impact your business.

Insurance Death Benefits

As the name implies, death benefits are insurance payments to a spouse, children, or other dependents when an employee dies. If the death is due to a work-related injury or illness, the death benefits could come from workers' compensation insurance. For instance, California's workers' comp death benefits include burial expenses and are based on the number of total and partial dependents of the employee.

Death benefits could also come from the company. Some companies, perhaps Google most famously, provide death benefits to families if a person dies while actively employed by the company. The tech giant:

  • Pays 50 percent of the deceased's salary to the surviving spouse or domestic partner for 10 years after the death.
  • Pays $1,000 per month to any children until they reach 19 years old (or 23 if they're a full-time student).
  • Vests the deceased's stocks immediately.

Pension Death Benefits

An employee's spouse or dependents may also be eligible to receive death benefits from a pension plan. Pension death benefits normally kick in if a retired employee passes away, but how the pensions are structured and the regulations for participation and payout are important to understand during the employee's lifetime.

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for pension plans in order to ensure funds placed in retirement plans during an employee's working days will be there upon retirement. Among other things, ERISA determines whether spouses have a right to pension benefits.

If you're concerned about your company's death benefits, don't work your employees to death and talk to an experienced employment law attorney near you.

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