FRS Contribution Refund After Death: Non-Vested and Vested Member Rules

Not every FRS death results in an ongoing monthly pension for the family. If the deceased member wasn't vested — or if the beneficiary doesn't qualify as a joint annuitant — the payout may be limited to a refund of the member's personal employee contributions. Understanding the difference before you file saves time and prevents surprises.

The 3% Contribution and Who Pays It

Since July 1, 2011, FRS Pension Plan members contribute 3% of their gross salary to the retirement system through mandatory payroll deductions. These are the member's personal contributions — money that came out of their paycheck, not the employer's contribution.

Members hired before July 1, 2011 (Tier I) did not make personal contributions for most of their career. If a Tier I member died without any post-2011 payroll deductions, there may be no personal contributions to refund. In that case, the beneficiary of a non-vested member receives nothing from the pension system.

Investment Plan members also make the 3% payroll contribution, but their account works differently — the full account balance (employee contributions plus employer contributions plus investment earnings) is distributed to beneficiaries upon death, regardless of vesting status (though employer contributions require at least 1 year of service).

What Non-Vested Members' Beneficiaries Receive

A Pension Plan member who dies before reaching the vesting threshold (generally 6 years for Tier I and 8 years for Tier II) generally leaves their beneficiary with a lump-sum refund of accumulated personal employee contributions, not a monthly pension. If the member died while actively employed within one year of vesting, a spouse or other qualifying joint annuitant may use accumulated unused annual, sick, and compensatory leave, or purchase up to one year of eligible in-state or out-of-state service credit, to meet the vesting requirement.

The refund amount is the total of the member's 3% payroll deductions over their career. For a member earning $45,000 per year who worked for 4 years, that's roughly $5,400 ($45,000 × 3% × 4 years). No interest accrues on these contributions.

The surviving spouse is automatically the Pension Plan beneficiary unless the member designated someone else after the most recent marriage. Otherwise, the named beneficiary receives the refund. If no beneficiary is on file, the statutory default order applies: surviving spouse first, then children, then parents, then the estate.

The one exception: in-line-of-duty death. If the member died in the line of duty, survivor benefits are available from the first day of FRS employment regardless of vesting. The ILOD benefit bypasses vesting entirely.

What Vested Members' Beneficiaries Can Choose

When a vested active Pension Plan member dies (non-line-of-duty), the designated beneficiary's options depend on whether they qualify as a joint annuitant — the surviving spouse, a child under 25, a disabled child, or a financially dependent parent or guardianship ward.

A joint annuitant can choose between:

1. A refund of personal employee contributions (same lump sum as the non-vested scenario)
2. An immediate lifetime monthly benefit calculated under Option 3 — as if the member retired the month after death and selected the joint-survivor option

If the member died before reaching normal retirement age, the immediate Option 3 benefit is subject to early retirement actuarial reductions. The joint annuitant can instead elect a deferred Option 3 benefit that begins when the member would have reached normal retirement age, avoiding the early retirement penalty. The deferred benefit will be larger per month, but payments don't start until that future date.

If the designated beneficiary is not a joint annuitant — an adult child over 25, a sibling, a friend, a trust, or an estate — they can only receive the contribution refund. No monthly benefit is available, regardless of how many years the member worked.

How to Claim the Contribution Refund

File Form FST-11g (Application of Beneficiary for Benefit Payment) with the Division of Retirement. You'll need:

• A certified copy of the death certificate
• The beneficiary's Social Security number and date of birth
• The Division's Refund Payout Selection Form (REF-PAYT), when requested
• Banking information for direct deposit

The refund is processed as a lump-sum payment after the Division verifies the claim. The FRS tax notice says after-tax employee contributions are not taxable and are paid using the IRS Simplified Method; only DROP and pre-tax refund amounts are eligible for rollover. A designated beneficiary other than a spouse may directly roll an eligible amount only to an inherited IRA, not to their own IRA or an employer plan. Ask the Division to identify the taxable and rollover-eligible amounts before choosing a payout.

Before You Accept the Refund

If you qualify as a joint annuitant, do not sign the contribution refund form without first asking the Division to calculate your Option 3 benefit amount. The monthly benefit, even with early retirement reductions, may be worth far more over a lifetime than the one-time refund. Once you accept the refund, you permanently forfeit the right to a monthly pension.

Call the Division of Retirement at 844-377-1888 and ask: "What is my calculated monthly Option 3 benefit, both immediate and deferred?" Compare both figures against the lump-sum refund amount before making your election.

The FRS Survivor Benefits Guide includes a benefit comparison worksheet that walks through the math for each option and the forms required for whichever election you choose.

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