What Happens to Your Pension When You Die: Beneficiaries and Taxes

When you die, your pension doesn’t disappear, but who gets it and how much depends on three things: the kind of plan you have, the payout option you selected, and whether you’re married. That is the short version of what happens to your pension when you die. A traditional monthly pension pays a survivor only if you chose an option that provides for one. A 401(k) or similar account passes its full balance to whoever you named as beneficiary. And if you’re married and work in the private sector, federal law gives your spouse automatic rights that override almost anything else on file.

Traditional Pensions: The Payout Option You Chose Controls Everything

A defined benefit pension pays a monthly amount for life based on your service and salary. What continues after your death is set by the payment form you elected at retirement.

A joint and survivor annuity pays you monthly for life, then continues paying a portion — typically 50%, 75%, or 100% — to your beneficiary for the rest of their life. A higher survivor percentage means a smaller check while you’re alive, because the plan is covering two lifetimes.¹
A period certain annuity guarantees payments for a fixed window, often 10 or 20 years. If you die inside that window, your beneficiary receives the remaining payments; once the window closes, payments stop.
A single life annuity pays the largest monthly amount but covers only your lifetime. When you die, payments stop and nothing passes to anyone.

The single life option is often the biggest check while you’re alive and nothing for your family after. If you’re married, federal law bars you from choosing it without your spouse’s witnessed written consent.

401(k) and 403(b) Accounts: The Whole Balance Passes to Your Beneficiary

Defined contribution plans hold a cash balance rather than promising a monthly amount. When you die, the entire account passes to your named beneficiary. They can take a lump sum, which delivers the money immediately but drops the full taxable amount into a single year of their income, or they can roll it into an inherited IRA and spread withdrawals over time.

The SECURE Act 10-Year Rule

For account owners who died in 2020 or later, most non-spouse beneficiaries must withdraw the full balance by the end of the 10th year after the owner’s death.² This replaced the older “stretch IRA” approach that allowed distributions over a beneficiary’s own lifetime.

Some beneficiaries are exempt and can still stretch distributions over their life expectancy. These “eligible designated beneficiaries” are a surviving spouse, a minor child of the account owner, someone disabled or chronically ill, and anyone no more than 10 years younger than the deceased.² For a minor child, the 10-year clock starts when they reach the age of majority.

Missing a required distribution triggers a 25% excise tax on the amount that should have come out. The penalty drops to 10% if the missed distribution is corrected within two years.³

Automatic Spousal Protections Under Federal Law

Under ERISA, most private-sector pension plans must provide two automatic forms of survivor coverage for a participant’s spouse.⁴

The qualified joint and survivor annuity, or QJSA, is the default for a retiree who dies after payments start. The surviving spouse receives a continuing annuity worth at least 50% (and up to 100%) of the amount paid during your joint lifetimes. Plans must also offer a qualified optional survivor annuity at 75% if their default is lower.⁴

The qualified preretirement survivor annuity, or QPSA, covers the case where you die before benefits start. Your surviving spouse still receives a portion of your vested pension so that your death before retirement doesn’t erase the family’s future income.⁴

These protections override anyone else on your beneficiary form. A spouse’s right can only be waived in writing, and the waiver has to be witnessed in person by a plan representative or notary — a signature alone doesn’t count.⁵ Without that witnessed consent, the plan is legally required to pay the spouse.

One condition: these protections apply only to vested benefits. If you die before meeting your plan’s vesting requirements, your survivors may receive nothing from that plan. Your summary plan description spells out how much of your benefit is vested.

How Divorce Changes the Picture

Divorce does not automatically cut off a former spouse’s claim to your pension. A Qualified Domestic Relations Order (QDRO) issued in the divorce can divide the pension and, importantly, can name your former spouse as the surviving spouse for death benefits.⁶

If a QDRO does that, your current spouse cannot be treated as the surviving spouse for the covered portion of the pension. A prior QDRO can override the ERISA protections that would otherwise go to your current spouse automatically.⁶ If you’ve been divorced and remarried, ask the plan whether a QDRO is on file and what it covers.

What Happens If No Beneficiary Is Named

If nothing valid is on file, the plan’s default hierarchy takes over. Most plans work down a set order that begins with a surviving spouse, then children, then parents, and finally your estate.

When the money defaults to your estate, it goes through probate, which can delay payment by months, expose the funds to the estate’s creditors, and burn through legal costs before your family sees anything. A current beneficiary designation avoids all of it.

Taxes Your Beneficiary Will Owe

Inherited pension money is not tax-free. The IRS treats it as income in respect of a decedent, so the beneficiary owes ordinary income tax on the taxable portion of whatever they receive, whether it comes as a lump sum or ongoing payments.⁷ Many beneficiaries assume they’re inheriting money the way they’d inherit a house, and the tax bill catches them off guard.

Withholding depends on the form of payment.⁸ Lump-sum distributions eligible for rollover have a mandatory 20% federal withholding, which a beneficiary can avoid by having the plan transfer the funds directly into an inherited IRA rather than sending a check.⁹ Other nonperiodic distributions default to 10% withholding, and ongoing annuity payments are withheld as if they were wages.

Government and Military Pensions Follow Their Own Rules

ERISA’s spousal protections don’t reach federal, state, or local government pensions. Those systems have their own survivor rules.

Under the Federal Employees Retirement System (FERS), a married employee who retires is automatically set to provide the maximum survivor annuity unless the spouse consents in writing to less. The maximum survivor annuity is 50% of the retiree’s unreduced benefit; a partial election provides 25%.¹⁰ If a federal employee dies while still working, the surviving spouse receives 50% of the annuity the employee would have earned had they retired on the date of death.¹¹

The military’s Survivor Benefit Plan (SBP) can pay up to 55% of a service member’s retired pay to an eligible beneficiary after death. Active-duty members who die from a service-connected cause receive automatic no-cost coverage, and retiring members can elect SBP with premiums deducted from their retired pay.¹²

State and municipal systems each set their own rules. Get the plan’s handbook or call its administrator.

If the Pension Plan Itself Fails

If your employer’s defined benefit plan collapses, the Pension Benefit Guaranty Corporation (PBGC) takes over as trustee and continues paying benefits up to statutory limits, including survivor annuities.¹³ Payments already in progress don’t stop when PBGC steps in.

PBGC’s guarantee is capped, with the cap tied to your age when benefits begin. In 2026, the maximum monthly guarantee under a joint-and-50%-survivor annuity at age 65 is $7,010.79.¹⁴ If your benefit was higher than the cap, PBGC pays only the guaranteed amount.

PBGC covers private-sector defined benefit plans only. It does not cover 401(k)s, government pensions, or church plans.

How a Survivor Actually Claims the Benefit

To file a death benefit claim, the beneficiary generally needs a certified death certificate (usually more than one, since other institutions will want them too), the deceased’s full legal name and Social Security number, the plan’s most recent Summary Plan Description, and the plan’s claim form. Contact the employer’s HR department or the third-party plan administrator to start. Many plans now accept documents through a secure online portal; if you submit by mail, use certified mail with a return receipt so you can prove when the plan received your paperwork.

If the deceased worked for a private employer that has since closed or merged, the pension may still exist. PBGC maintains a searchable database of unclaimed benefits from terminated private-sector plans, searchable by last name and the last four digits of the person’s Social Security number.¹⁵ For government pensions, contact the relevant retirement system directly.

If Your Claim Is Denied

Every ERISA-covered plan has to give you written notice if it denies your claim, including the specific reasons and how to have the decision reviewed.¹⁶ You have a right to a full and fair review and can submit additional evidence and written arguments. Read the denial letter for the appeal deadline; missing it can cost you the right to sue. Keep copies of everything. If the plan upholds the denial, you can file suit in federal court under ERISA, but you generally have to exhaust the plan’s internal appeal first.

1
Pension Benefit Guaranty Corporation. Benefit Options – Section: Joint-and-Survivor Annuities
2
Internal Revenue Service. Retirement Topics – Beneficiary
3
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
4
Office of the Law Revision Counsel. 29 U.S. Code 1055 – Requirement of Joint and Survivor Annuity and Preretirement Survivor Annuity
5
U.S. Department of Labor. FAQs About Retirement Plans and ERISA
6
U.S. Department of Labor. QDROs: The Division of Retirement Benefits Through Qualified Domestic Relations Orders
7
Internal Revenue Service. Publication 575, Pension and Annuity Income
8
Office of the Law Revision Counsel. 26 U.S. Code 3405 – Special Rules for Pensions, Annuities, and Certain Other Deferred Income
9
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
10
U.S. Office of Personnel Management. Survivor Benefits
11
U.S. Office of Personnel Management. How Is the Amount of My Benefits as a Surviving Spouse Determined
12
Defense Finance and Accounting Service. Survivor Benefit Plan
13
Pension Benefit Guaranty Corporation. Understanding Your Pension and PBGC Coverage
14
Pension Benefit Guaranty Corporation. Maximum Monthly Guarantee Tables
15
Pension Benefit Guaranty Corporation. Find Unclaimed Retirement Benefits
16
Office of the Law Revision Counsel. 29 U.S. Code 1133 – Claims Procedure