March 10, 2006If you are married, have you begun to evaluate the kinds of benefits under CSRS and FERS that your spouse will be eligible for if he or she lives longer than you? Providing an annuity for a surviving spouse is generally a win-win situation, and the federal government has very generous benefits in this area. The catch is that these benefits come at the price of a reduction in your retirement annuity of either 10 percent (in FERS) or a little less than that (in CSRS). Also, you need to think about what happens if your spouse dies first, and to remember that health benefits for surviving spouses are connected to the choice of survivor benefits. Also, keep in mind that under the law, you need your spouse's notarized consent not to sign up for spousal benefits when you retire. Example
Let's look at how the surviving spouse benefit works in real life. The table at the bottom of this page shows FERS and CSRS examples of employees who elect to receive full spousal survivor benefits.
In looking at the table, keep in mind that cost of living adjustments for survivor benefits are applied before and after the death of the retiree. FERS and CSRS annuities are adjusted for COLAs after the reduction for the survivor annuity.
FERS survivor annuities are increased by COLAs even if the survivor annuitant is not yet 62. If the retiree had received no COLA increases because he or she was under 62, there is no increase in the survivor benefit until after the survivor begins receiving the benefit. Under CSRS, while the retiree is alive, the potential survivor benefit receives the same COLA increases the retiree receives. Points to Consider
When evaluating whether to choose the maximum survivor benefits for your spouse, be sure to consider the following:
If a surviving spouse will not need the income of a full annuity, the employee may elect a partial annuity (with the notarized consent of the spouse).
Under FERS, the partial benefit is equal to 25 percent of the FERS retirement. The reduction in gross retirement benefits is 5 percent rather than 10 percent.
Under CSRS, the retiree can elect for the spouse to receive 55 percent of any "base amount" up to the full retirement. For example, the election could be 55 percent of $10,000 or 55 percent of $3,600 or 55 percent of $1, for that matter. The amount of the base is the foundation for the reduction to the retirement. So, if the base is $3,600, then the retirement is reduced by 2.5 percent of $3,600, or $90 per year. The size of the base is adjusted annually to account for COLAs.
Providing a partial survivor annuity also will allow the surviving spouse to continue coverage in the Federal Employee Health Benefits Program as long as the retiree dies with family coverage. If the survivor annuity is not enough to cover the cost of premiums, the survivor annuitant may pay the difference directly to the Office of Personnel Management.
Surviving Spouse Benefits Under CSRS and FERS
|Reduction to provide maximum survivor annuity: 2.5% of first $3,600, 10% of remainder of CSRS annuity||$3,730||$311|
|Reduced retirement benefits||$36,270||$3,022|
|Spousal survivor benefit: 55% of $40,000||$22,000||$1,833|
|Retirement benefits (does not include Social Security or Thrift Savings Plan)||$20,000||$1,666|
|Reduction to provide maximum survivor annuity: 10% of FERS annuity||$2,000||$167|
|Reduced retirement benefits||$18,000||$1,500|
|Spousal survivor benefit: 50% of $20,000||$10,000||$833|
March 10, 2006