What Happens to a Deceased Person's Pension and Group Benefits in Ontario?

When a family member who worked for an employer dies, several different kinds of money may be involved: a pension, group life insurance, final pay, vacation pay and government benefits. Each follows its own rules, and each has its own paperwork. A spouse or child can feel overwhelmed trying to work out who to call first.

This article separates these categories and explains who is generally entitled to what in Ontario, and what to ask the employer for. Plan terms vary, so the plan documents and a lawyer or financial adviser can confirm what applies to your situation.

The different pots of money

It helps to treat each source separately, because the person entitled may be different. Some money goes to the estate and is handled by the executor, and some passes directly to a named person. Registered pension plans, RRSPs, RRIFs and TFSAs with a beneficiary designation generally pass outside the estate.

The executor settles unpaid debts and overpayments, including taxes owed to the CRA, before distributing the remaining assets to beneficiaries under the will. If there is no will or named executor, Canada.ca points to CRA guidance and provincial rules.

Employer pension and the surviving spouse

Under Ontario's Pension Benefits Act, as described in FSRA material, a pension starting on or after January 1, 1988 to a member with a spouse who is not living separate and apart must be paid in joint and survivor form unless both the member and spouse waive before the first instalment. The survivor pension cannot be less than 60 per cent of the pension in pay.

That rule is mainly about a pension that has already begun. If the person died before retiring, what is payable and to whom depends on the plan's terms and the facts. The administrator can tell you what the plan pays and to whom, and a lawyer can check that against the Act.

Ask the administrator whether a waiver was signed. If you are a spouse and you do not remember signing one, that is worth raising. Whether a spouse qualifies, for example if the couple were separated, depends on the facts.

Group life and other workplace benefits

Many employers provide group life insurance, and some also offer accidental death coverage or health benefits for survivors. The rules for these come mostly from the plan booklet and the policy. If a person is named as beneficiary, that person claims directly. If the estate is named, or no beneficiary is named and the insurer treats the estate as the beneficiary, the benefit becomes part of the estate, is distributed under the will, and creditors may claim it.

A revocable beneficiary can be changed at any time without telling them, while an irrevocable beneficiary must give written permission before changes are made. This can explain why the person on the employer's file differs from who the family expected.

FSRA directs beneficiaries to contact the insurer or agent to make a life insurance claim, and points to the OmbudService for Life and Health Insurance (OLHI) to help locate a deceased person's policy. The employer's HR department is usually the best first contact for a group plan, since it knows which insurer holds the coverage.

Final pay, vacation pay and termination pay

When employment ends, the employer must pay wages owing by the later of seven days after employment ends or the day that would have been the next pay day. Vacation pay that has accrued must also be paid, in accordance with that timing, for any reason employment ends. Vacation pay is 4% of wages for under five years of employment and 6% for five years or more.

An employer cannot withhold wages or make deductions unless a statute or court order authorizes it or the employee gave written authorization. Confirm the details with the employer or a lawyer.

Termination and severance are treated differently. The Ministry of Labour's guidance is that the death of an employee frustrates the employment contract, so the estate has no entitlement to termination pay where employment ended because of the death. But the employer cannot rely on that exemption for severance pay if the employee died after receiving a notice of termination. If the person had been laid off or given notice shortly before death, ask a lawyer to review the timing.

Government benefits, and what to do next

Service Canada asks to be told of the date of death of a CPP or OAS beneficiary as soon as possible. Benefits are payable for the month in which the death occurs, and the estate is entitled to the OAS and CPP payments for that month. Payments issued after the month of death must be returned. If they have already been spent or withdrawn, they must be repaid. CPP survivor benefits and the Allowance for the Survivor are among the benefits that must be cancelled on a death.

Use this list when you contact the employer.

• Ask HR, in writing, for a summary of all benefits: pension, group life, accidental death, health coverage for survivors and any employee savings plans.
• Ask for the plan booklet and the name of the pension administrator and group insurer.
• Ask for the beneficiary designations on file and the date of any change.
• Ask when final wages and accrued vacation pay will be paid, and whether the employer needs the executor's documents first.
• Ask whether any notice of termination had been given before the death.
• Ask whether a spousal waiver of the survivor pension was signed.
• Tell Service Canada the date of death and stop any payments after the month of death.
• Keep copies of everything, and speak to a lawyer if the employer refuses or delays, or if the family disagrees about who is entitled.

Frequently asked questions