As one nears retirement, many decisions await from family to financial matters. A recent federal appellate decision, O’Shea v. UPS Retirement Plan (No. 15-1923), reveals the importance of careful estate planning alongside serious illnesses or retirement. In this case, an employee, diagnosed with cancer, died one week before his official retirement date but after his final day of work. Following a diagnosis in the previous year, the employee originally planned to retire at the end of the calendar year. The employee met with a human resources supervisor, who advised him to take his accrued time, which pushed back his official retirement date. This advice given was standard practice, and the HR supervisor had no knowledge that he was terminally ill.
Following the submission of his retirement application, the employee was told that his annuity start date would be March 1, 2010 after his official retirement on February 28, 2010. The employee chose the Single Life Annuity with 120-Month Guarantee and named his children as the beneficiaries. The Guarantee allowed him to receive payments of over $4,000 each month for 10 years. If he died during this term, his listed beneficiaries would receive the payments. Neither the HR supervisor nor the retirement benefits applications made it clear that he needed to live until the annuity start date on March 10, 2010 for the guarantee to be realized. The employee was unaware that he risked forfeiting his payments by delaying the retirement date.
While the retirement application did not explicitly lay out the requirements in the body of the application, it did note that the benefits plan designations are subject to the terms of the Plan. The Plan states that payments can be made to the beneficiaries if the participant dies before the first payment but after the annuity starting date. The only exception listed is for a spouse or domestic partner, who would be entitled to receive a pre-retirement survivor annuity. In addition to the annuity plan, the employee also participated in the Special Restructuring Program, which provided a year’s compensation in exchange for signing a release of claims and retiring. The employee accepted this with his attorney on February 12, 2010 for a single pre-tax payment of $98,800. The release included his employer and “all related companies,” which included the benefit programs, as well as any claims of which he might not know.