NC TSERS 401(k) and 457 Death Benefit Rollover: What Beneficiaries Need to Know

North Carolina state employees often participate in the NC 401(k) Plan and the NC 457 Plan alongside their TSERS defined benefit pension. These supplemental retirement accounts are entirely separate from the pension — separate beneficiary designations, a separate plan administrator (Empower, formerly Prudential), and separate rules for what happens after death.

What Happens to the 401(k) and 457 When a Member Dies

The account balance transfers to the designated beneficiary. Unlike the TSERS pension, which involves complex option elections and monthly annuity calculations, the supplemental plans are straightforward: the beneficiary inherits the account balance.

The beneficiary designation on file with Empower controls who receives the funds. This is not the same as the TSERS Form 2C beneficiary or the life insurance beneficiary. Updating one does not update the others.

If no beneficiary is designated, the plan's default distribution rules apply — typically to the surviving spouse first, then to the estate.

Rollover Options for Surviving Spouses

A surviving spouse has the broadest options. They can:

• Roll the funds into their own IRA (Traditional or Roth, matching the original account type); a rollover can defer tax on pre-tax amounts and lets the spouse treat the funds as their own retirement savings
• Roll into an Inherited IRA and take distributions based on their own life expectancy
• Take a lump-sum distribution, reporting any taxable amount as income in the year received; tax treatment depends on whether the funds are pre-tax, after-tax, or Roth
• Leave the funds in the plan (if the plan permits), taking distributions on their own schedule

For pre-tax funds, a spousal rollover into a Traditional IRA can defer income tax until distributions. The best choice depends on the account type and the spouse's circumstances.

Rollover Options for Non-Spouse Beneficiaries

Non-spouse beneficiaries — adult children, siblings, or other individuals — cannot roll inherited 401(k) or 457 funds into their own retirement account. Their options are:

• Inherited IRA: Transfer the funds to a beneficiary IRA. Under the SECURE Act, most non-spouse beneficiaries must empty the account within 10 years of the original owner's death.
• Lump-sum distribution: Take the full balance immediately and pay income tax on it in that year.
• Five-year rule: Some plans allow distribution over five years instead of requiring a single lump sum.

The 10-year rule applies to deaths occurring after January 1, 2020. Beneficiaries who are disabled, chronically ill, minor children (until age of majority), or not more than 10 years younger than the deceased have different distribution timelines.

How This Differs from the TSERS Pension Death Benefit

The TSERS pension and the supplemental retirement plans are parallel but independent:

Filing the Claim

Contact Empower directly — not RSD — to initiate the supplemental retirement death benefit claim. You will need:

• The deceased member's Social Security number
• A certified death certificate
• The beneficiary's identification and tax information

Empower's NC plans customer service line handles both the 401(k) and 457 accounts. The claim process is separate from anything you file with the Retirement Systems Division for the TSERS pension.

Do not assume the employer's HR department will notify Empower. Report the death to both the retirement system and the supplemental plan administrator independently.

Do Not Forget This Step

Many families focus entirely on the TSERS pension claim and overlook the 401(k) and 457 accounts until months later. If the deceased was an active employee, the employer's HR department can confirm whether supplemental plan accounts exist and provide Empower's contact information. If the deceased was a retiree, check prior account statements or contact Empower directly.

Our NC TSERS Survivor Benefits Guide covers the full spectrum of TSERS pension benefits after death — the companion to this supplemental retirement claim process — so nothing falls through the cracks.

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