hr tasks when an employee dies - wp&bc portland...beneficiary designations −request them, if...
TRANSCRIPT
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Tom Kramer Bullard Law
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!