Thinking the Unthinkable

What will happen to your survivors when you're gone?

According to an Office of Personnel Management report, in one recent year more than 66,000 claims were filed under the Federal Employees Group Life Insurance program upon the death of government retirees. More than 7,200 were filed for active federal employees. At the end of 2006, more than 30,000 people were added to OPM's survivor annuity rolls, on top of the approximately 620,000 people who already were receiving monthly benefits.

You probably don't want to dwell on statistics like these. But have you ever wondered what your family members would do if they lost a loved one- namely, you?

I spoke to two federal employees recently who were responsible for assisting family members of other employees who had recently died.

It comforts me to know that in every instance I've seen in the 30 years I've been in and around government, the death of a federal employee is treated like the death of a family member. More often than not, an agency benefits specialist will pay a house call to the surviving family members to help them apply for the benefits they are entitled to receive. Here's a summary of the benefits that might be payable upon the death of a federal employee:

Retirement Benefits

If there are no survivors eligible for monthly survivor annuity benefits (a surviving spouse, eligible former spouse or dependent children), then the contributions you've made to either the Civil Service Retirement System or the Federal Employees Retirement System will be returned in a lump sum to whomever you have designated as a beneficiary. If you don't have a valid beneficiary form on file, then the money will be paid according to the federal standard order of precedence:

-- To your widow or widower.

-- If none, to your child or children equally, and descendants of deceased children by representation.

-- If none, to your parents equally or surviving parent.

-- If none, to the appointed executor or administrator of your estate.

-- If none, to your next of kin who is entitled to your estate under the laws of the state in which you lived at the time of your death.

Spousal Survivor Benefits

Under CSRS, if an employee has 22 years of service or more, the surviving spouse (or qualified former spouse with court-ordered benefits) is entitled to 55 percent of the retirement benefit the employee would have received if they had retired on the date of death. If the employee had more than 18 months, but less than 22 years, of service, then the benefit is computed based on the disability benefit computation.

Under FERS, if an employee has 18 months or more of service, the surviving spouse (or eligible former spouse with court-ordered benefits) would be entitled to the Basic Employee Death Benefit. The value of this benefit in 2010 is $29,722.95, plus 50 percent of the employee's final annual salary rate (or his or her high-three average salary, if higher). This can be paid as a lump-sum payment, or in 36 monthly payments.

If a FERS employee has 10 years or more of service, the surviving spouse (or eligible former spouse) would receive a monthly survivor benefit equal to 50 percent of the FERS retirement benefit that the employee would have received if he or she had retired on the date of death. This is in addition to the Basic Employee Death Benefit.

An annuity to the surviving spouse of an employee generally begins on the day after the employee's death. A survivor annuity to a widow or widower ends on the last day of the month preceding the month in which he or she dies or remarries before age 55 (or 60 if remarriage occurred before Nov. 8, 1984). For remarriages occurring after Jan. 1, 1995, if the widow or widower remarries before turning 55, and was married for at least 30 years to the person on whose service the survivor annuity is based, the survivor annuity will not be terminated.

Children's Survivor Benefits

Unmarried, dependent children are entitled to a separate monthly benefit of about $500 per month per child (the amount varies based on the number of eligible children and whether or not there is another surviving parent). This benefit is reduced by the combined benefit of all the children's benefits payable from Social Security. Under FERS, in many cases that reduces the benefit to zero.

Social Security Survivor Benefits

These can be paid to:

-- A widow or widower. They can get full benefits at full retirement age (65 to 67, depending on your year of birth), or reduced benefits as early as 60.

-- A disabled widow or widower, as early as 50.

-- A widow or widower at any age if he or she is taking care of the deceased's child who is under age 16 or disabled, and receiving Social Security benefits.

-- Unmarried children under 18, or up to 19 if they are attending high school full time.

-- Under certain circumstances, benefits can be paid to stepchildren, grandchildren or adopted children.

-- Children at any age who were disabled before age 22 and remain disabled.

-- Dependent parents 62 or older.

Even if you're divorced, you still might qualify for survivor benefits.

Other Benefits

The balance in your TSP account is paid to your beneficiary or according to the federal standard order of precedence outlined above. You need to designate a beneficiary only if you want payment to be made in a way other than the standard order.

OPM has all the information pertaining to Federal Employees Group Life Insurance in one place on its Web site. You can find forms, calculators to determine the amount of insurance you currently have, and information on rates and eligibility rules.

Your beneficiaries also are due any unpaid compensation, including your last paycheck, unused annual leave and anything else your agency might owe you that hasn't been paid. There is a separate beneficiary designation form for these benefits. It's important to keep such forms up to date.

Tammy Flanagan is senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars, and the Retirement Planning columnist for GovernmentExecutive.com.

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