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USG Corporation Pension Planning: What Happens to Your Benefits After You Pass Away

'USG Corporation employees should regularly review their pension type, payout elections, and beneficiary designations to help align retirement income with long-term family goals and avoid unintended consequences for heirs.' – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement.

'USG Corporation employees who understand the differences between DB and DC plans, along with the impact of survivor benefits, are better positioned to make informed decisions that can support both their retirement needs and their legacy goals.' – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article we will discuss:

The differences between Defined Benefit (DB) and Defined Contribution (DC) pension plans.
How survivor benefits and payout options work for spouses and other beneficiaries.
What happens to pension and retirement account funds if no beneficiary is named or upon the retiree’s death.

When planning for retirement, many people focus on growing income while they are living. Yet, understanding what happens to your Fortune 500 pension after your death is equally important. The type of plan you have, the payment method you choose, and whether you have named a beneficiary will determine if—and to whom—your benefits can be passed on.

Social Security survivor benefits operate under different rules and are separate from pensions. This discussion focuses on workplace and private pensions, which often include survivorship clauses that, if structured properly, can provide continued financial support to loved ones.

The Two Main Types of Workplace Pensions

Defined Benefit (DB) Plan

A DB plan promises a specific monthly payment at retirement, calculated based on factors like years of service and salary history. Fortune 500 is responsible for making sure the plan is funded and bears the investment risk. These are sometimes called “final salary” or “traditional pensions.”

Defined Contribution (DC) Plan

In a DC plan, you, Fortune 500, or both contribute to your account. The final retirement amount depends on contributions and investment performance. You manage the investment risk, and income is determined by your withdrawal plan and account balance. Examples include 401k, 403b, and 457 plans.

Passing on Defined Contribution Benefits

In most cases, DC plans are straightforward to pass on. If you die before using the full balance, your named beneficiary inherits the remaining amount. Under the SECURE Act, most non‑spouse beneficiaries must withdraw the full balance within ten years, while spouses often have rollover flexibility. If you have no beneficiary listed, the balance may go to your estate, potentially increasing taxes and delaying access.

Defined Benefit Payment Choices for Married Retirees

Federal law generally requires a Qualified Joint and Survivor Annuity (QJSA) as the default payout form for married DB plan participants unless the spouse consents to another choice. This makes sure your spouse continues to receive income after your passing.

Common DB payout options include:

Joint and Survivor Annuity: You receive lifetime payments; your spouse continues to receive a percentage (generally 50%, 75%, or 100%) for life after your death.
Life with Period‑Certain Annuity: You get lifetime payments, and your spouse or beneficiary receives payments for the remainder of a guaranteed term if you pass first.
Guaranteed Minimum Payment: Provides a fixed number of total payments; any remaining payments go to your spouse if you pass away early.
Joint and Contingent Survivor Annuity: Allows a beneficiary other than your spouse (with spousal consent) or a custom continuation percentage.

If You’re Single and Considering a Lump Sum

For single retirees without dependents, a lump sum payout may be preferable to an annuity, as many single‑life annuities stop payments at death.

Benefits of lump sum payouts:

Investment control is in your hands.
Ability to name heirs for remaining funds.
Potential to roll over to an IRA for tax deferral.
Risks of lump sum payouts:
Mismanagement could deplete funds too soon.
Investment returns are not assured.

When No Beneficiary Is Named

If a DB single‑life annuity is chosen, payments stop upon death. With a term‑certain annuity, any remaining guaranteed payments may go to your estate. In a DC plan, the balance may default to your estate, possibly leading to probate delays and less favorable tax treatment.

If Death Occurs While Receiving Benefits

For DB plans, your chosen payment option and beneficiary designation determine what happens. Single‑life annuities end immediately; joint‑life annuities continue to pay the surviving spouse. Period‑certain options pay beneficiaries for the rest of the guaranteed term. For their part, DC plans transfer the remaining balance to the beneficiary, with non‑spouse heirs generally required to withdraw within ten years.

Key Takeaways for Fortune 500 Employees

Regardless of whether you have a DB or DC plan, planning ahead is essential:

- Keep beneficiary information current.
- Understand how payout options affect survivor benefits.
- Be aware of tax rules for inherited pensions and retirement accounts.
- Seek professional guidance before making irreversible decisions.

By making informed choices, you can make sure your Fortune 500 pension serves both your retirement needs and the legacy you want to leave for loved ones.

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Sources:

1. Employee Benefits Security Administration. What You Should Know About Your Retirement Plan . U.S. Department of Labor, n.d. pp. 6, 9–10, 21–22, 32.

2. Internal Revenue Service. Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs) . IRS, 19 Mar. 2025, pp. 7–12, 9–10.

3. Social Security Administration. Survivors Benefits . Social Security Administration, Apr. 2025, pp. 5–6, 8–9, 10.

How does the retirement plan structure at USG Corporation impact both final average earnings participants and cash balance participants, especially regarding their eligibility and benefits accrued over time? In what ways does the differentiation between these two categories influence the retirement outcomes for employees of USG Corporation?

Retirement Plan Structure: USG Corporation's retirement plan differentiates between Final Average Earnings Participants and Cash Balance Participants. Final Average Earnings participants, who joined before January 1, 2011, accrue benefits based on their final average earnings and years of service, which can result in higher benefits for longer-serving employees. Cash Balance participants, who joined after January 1, 2011, have their benefits calculated based on a cash balance account, which grows with contributions and interest credits. These differences affect retirement outcomes, as Final Average Earnings participants may see higher pension payments if they have longer service or higher wages, while Cash Balance participants have more predictable but potentially lower benefits based on their account balance(USG Corporation_Retirem…).

USG Corporation's Retirement Plan allows for different age-specific rules regarding early retirement. How do the "Rule of 90" and "Rule of 82" affect the financial planning of employees considering an early retirement option, and what should they consider regarding their long-term financial security?

Rule of 90 and Rule of 82: The "Rule of 90" allows employees to retire early without a reduction in benefits if their age plus years of service total 90, provided they retire at or after age 62. The "Rule of 82" permits early retirement with reduced benefits for those whose age and years of service total 82. Employees planning early retirement must consider these rules as they directly affect the amount of benefits they receive, making it important to assess how long-term financial security will be impacted, especially if they retire before age 62(USG Corporation_Retirem…).

Could you elaborate on the process through which employees at USG Corporation can change their beneficiaries within the retirement plan? What steps need to be taken, and what are the implications of these changes on the benefits received upon the participant's death?

Changing Beneficiaries: To change beneficiaries, USG Corporation employees must contact Your Benefits Resources™, where they can designate a primary and contingent beneficiary. If married, the spouse must provide notarized consent to name a different primary beneficiary. The process involves completing a form, and any changes affect who receives benefits upon the participant's death. Failing to update the beneficiary could result in benefits being paid to unintended individuals(USG Corporation_Retirem…).

As part of the retirement process at USG Corporation, how are pensionable earnings calculated? What factors are included in this determination, and how might they vary among different employees based on their roles within the organization?

Pensionable Earnings Calculation: Pensionable earnings at USG Corporation include regular pay, shift differentials, and bonuses but exclude items like nonqualified deferred compensation, severance, and stock awards. These earnings are used to calculate benefits based on formulas that take into account an employee’s service years and earnings over the 36 highest consecutive months of the last 15 years of participation(USG Corporation_Retirem…).

How does the automatic enrollment in the USG Corporation Retirement Plan work, and what options do employees have if they initially chose not to participate? What implications might this have for their retirement savings strategy?

Automatic Enrollment and Opting In: Employees at USG Corporation are automatically enrolled in the retirement plan unless they choose to opt out. If employees decide not to participate initially, they can enroll later by contacting Your Benefits Resources™. Failure to participate from the start could result in lower retirement savings due to fewer years of contributions(USG Corporation_Retirem…).

In the context of USG Corporation, what are the potential tax consequences for employees withdrawing their retirement benefits, especially regarding the mandatory withholdings? How might employees effectively manage these tax liabilities when planning for retirement?

Tax Consequences of Withdrawals: Employees withdrawing their retirement benefits from USG Corporation will face mandatory federal income tax withholdings, typically 20% for lump sum distributions, unless the distribution is rolled over into an IRA. Employees must plan for these taxes when withdrawing to avoid unexpected liabilities and ensure they maximize their after-tax retirement income(USG Corporation_Retirem…).

How do employees at USG Corporation access the necessary documents related to their retirement benefits, and what is the process for obtaining copies of these documents if needed? What are the responsibilities of the Plan Administrator in this process?

Accessing Retirement Documents: Employees can access documents related to their retirement benefits through Your Benefits Resources™ online or via phone. If additional copies are needed, employees can request them from the Plan Administrator for a small fee. The Plan Administrator oversees ensuring these documents are provided to participants as required by ERISA(USG Corporation_Retirem…).

What unique provisions exist for USG Corporation employees who experience a break in service? How do these provisions impact their accumulated benefit service and overall benefits upon reemployment?

Break in Service Provisions: USG Corporation allows employees who experience a break in service to retain their accumulated benefits if they are reemployed within one year. If reemployed after one year, their previous service may not count toward future benefits unless they were vested prior to termination. This can affect the total benefits an employee accrues if they leave and later return(USG Corporation_Retirem…).

What options do employees of USG Corporation have for managing their benefits if they return to work after retirement? How does this affect their pension benefits and the overall strategy for maximizing retirement income?

Returning to Work After Retirement: Employees returning to work after retirement at USG Corporation will have their pension payments suspended and recalculated based on additional years of service. This recalculation takes into account prior payments, meaning employees should consider the impact of returning to work on their long-term pension strategy(USG Corporation_Retirem…)(USG Corporation_Retirem…).

How can employees of USG Corporation contact their Benefits Resourcesâ„¢ for more information on their retirement plan options? Are there specific channels preferred for different types of inquiries, and what resources are available to assist them?

Contacting Benefits Resources™: Employees can contact Your Benefits Resources™ via the web or a toll-free number to inquire about retirement plan options. Different inquiries, such as changes to beneficiaries or requesting benefit estimates, can be handled through these channels. Resources such as detailed benefit estimates are available to help employees plan for retirement(USG Corporation_Retirem…).