A jovial term used in reference to a friend or co-worker whom is having or has had a retirement party at work. The party must have refreshments/snacks for the term to apply.
This term comes from the behavior seen when a bug dies on a sidewalk or other observable location. Other bugs will notice the dead bug and stop by to tear a chunk off to eat. Similarly, a co-worker is retiring (dying in a sense) and the other co-workers stop by to grab a snack/drink ( much like tearing off a chunk to eat). Thus the retiree is the 'dead bug'.
Origin of this term is from an IBM site in Rochester, MN.
Hey, we got a dead bug in the break room!
Great, I could go for a doughnut.