Priority Alert – Retirement Security Plan: Updates to the Standard Death Benefit

NRECA has updated the Retirement Security (RS) Plan’s standard death benefit, which applies to participants who have reached normal retirement age, are still employed, but die before making their retirement elections and starting to receive benefit distributions from the RS Plan. The change is now in place and the effective date is retroactive to January 1, 2018.

The standard death benefit for beneficiaries of participants who die after reaching their normal retirement age while actively employed* will increase to a benefit that is equivalent to the single cash payment the participant would have received if they had separated from service on the date of death. Beneficiaries of participants who die prior to attaining their normal retirement age will continue to receive 50% of the participant’s RS Plan benefit based on an annuity value.** The change ensures that beneficiaries of RS Plan participants will receive 100% of the participant’s single cash payment benefit if the participant dies after reaching their normal retirement age while actively employed.

This change will happen automatically for all co-ops that offer the RS Plan and provide the standard death benefit. There will be no increase in fees for this change. However, a summary of material modifications is required to communicate the change to plan participants. The SMM describing the change will be sent to benefits administrators on July 2, 2018. The SMM timing and process is described further in the accompanying article. Please note that the SMM needs to be distributed to participants by July 30, 2018. Co-ops offering the optional death benefit to their employees will not experience any changes but will receive the SMM because of another revision relating to final average equivalent salary in base salary plans which will take effect on July 1, 2018.

Information on this change will be forthcoming on the NRECA Employee Benefits website in the BA Guide as well as a new summary page for participants outlining the RS Plan and its associated benefits.

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*Co-ops offering an age 62/30-year plan: The 50% standard death benefit would apply until the participant attains the earlier of age 62 or 30 years of service. Thereafter, the standard death benefit would increase to a benefit that is equivalent to the single cash payment the participant would have received if the participant had separated from service on the date of death.  

**Standard death benefits for beneficiaries of participants who die before reaching their normal retirement age will remain unchanged. Spouse beneficiaries for participants who die prior to reaching normal retirement age receive a death benefit calculated based on 50% of the 50% joint and spouse annuity. Non-spouse beneficiaries receive a death benefit calculated based on the 10-year certain and life annuity.