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Advice on how to prepare for life after government.

Federal Couples

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Are you a federal employee who is married to another fed? If so, you've got some unique issues to deal with in planning for retirement. They mostly revolve around two fundamental questions:
  • Do we need to provide each other with survivor's benefits?
  • Should we be enrolled in self and family health benefits, or should we each carry self only (if we don't have dependent children)?
As with other issues regarding federal benefits, the answers to these questions depend on your individual situation.

The Civil Service Retirement Spouse Equity Act of 1984 contains several key provisions that affect federally employed couples. Under the act:

  • Former spouses of federal employees can receive survivor benefits in accordance with orders from state courts.
  • An employee must get the consent of his or her spouse to waive survivor benefits.
  • Certain former spouses of federal employees, former employees and annuitants may qualify to enroll in the Federal Employee Health Benefits Plan.
Let's take a look at some of the questions that arise as a result of these provisions. Survivor Benefits
If a federal couple retires, is it necessary to leave each other a survivor's benefit, since each will be entitled to their own retirement?
The answer to this question is based on financial need. The simple question to ask is this: "If I die and my retirement stops, will this cause a financial hardship for my spouse?" If your spouse is able to pay the bills and maintain the household without the benefit of your survivor's benefit, then it is not as important as it would be for a spouse who is financially dependent on the CSRS or FERS annuity. Age difference and health of each spouse may be considered, but since the actual date of death is unpredictable with any degree of certainty, financial planning should be done by looking at the worst-case scenario.

The survivor's annuity is payable for the life of the surviving spouse and is adjusted annually for inflation. These two features make it an extremely valuable benefit in the event the spouse outlives the retiree by a lot of years. If your spouse dies before you, you may elect to have your full annuity restored to the amount payable without the election of survivor's benefits.

If you are being encouraged to purchase life insurance instead of electing a survivor's annuity, consider the source of the encouragement. Be sure you are getting an unbiased opinion from someone who will not have a financial gain if you purchase the insurance policy.

If I die after retiring from CSRS (I am already at retirement age but still working), will my wife's surviving benefits be reduced? She receives Social Security benefits because she retired as a FERS employee. She is also receiving partial payments (for 4 hours each day) from workers' compensation.
If you elect a reduced CSRS retirement to provide your wife a survivor's annuity, this will not reduce her other entitlements. Electing a survivor's benefit is almost like buying insurance. You pay for the benefit by having your retirement reduced. She would be entitled to 55 percent of your CSRS retirement if you elect maximum survivor's benefits.

If a CSRS employee dies before retirement, survivor's benefits are payable to the surviving spouse in the same way that they are if elected at retirement. The benefit would be computed based on the amount of service and the high-three of the employee at the time of death. A CSRS spousal survivor annuity is payable as long as the employee had a minimum of 18 months of service. The surviving spouse must have been married to the employee for at least nine months at time of death, or have a child born of the marriage. If the death was accidental, the length of marriage requirement is deemed satisfied.

Under FERS, the situation is different. FERS is a three-tiered retirement system, and survivor benefits may be payable from all three of its tiers:

  • Half of the FERS basic benefit goes to the surviving spouse. This is paid regardless of any other benefits the spouse may be receiving.
  • An employee who retires under FERS also has had Social Security coverage. If the surviving spouse is also receiving Social Security benefits based on their own work, Social Security will check to see if they can get more money as a widow or widower. They will receive the higher benefit, not a combination of the two types of benefits.
  • The proceeds from the FERS employee's Thrift Savings Plan account will be paid in a lump sum to the designated beneficiary. If the beneficiary is a spouse, he or she may transfer the balance to their own TSP account or to an Individual Retirement Arrangement to avoid paying taxes on the full amount in one year.
  • Under FERS, the basic employee death benefit is payable if the employee had completed at least 18 months of creditable civilian service and died while subject to FERS deductions. As under CSRS, the surviving spouse must have been married to the employee for at least nine months at time of death or have a child born of the marriage. And if the death was accidental, the length of marriage requirement is deemed satisfied.

    If the deceased employee had at least 18 months of creditable civilian service, the basic employee death benefit amount is a lump sum payment (currently $26,584.62) plus a lump sum equal to the higher of half of the final salary at the time of death or half of the employee's highest three years of average salary.

    If the deceased employee had 10 or more years of creditable service, the basic employee death benefit amount is payable plus a survivor annuity equal to 50 percent of the employee's basic FERS annuity at time of death.

    Both my wife and I (we've been married 31 years) have 100 percent CSRS coverage, with no current or previous claims to any part of the pensions by anyone else. We both will have pensions at $50,000-plus a year. I will retire at age 59 and have 40 quarters in Social Security. My wife will work two years longer, until she is 55, then will retire with 35 years of federal service. Now if I go to the 'final TDY in the sky', my wife will have full survivor benefits under my election at retirement. Does she collect 100 percent of her benefit from my pension if she is collecting her own CSRS pension? Since I am qualified for Social Security, will my wife be able to collect a Social Security widow's benefit if I die first?
    You are required to provide 55 percent of your CSRS retirement to your spouse (unless she waives this benefit) and she is required to make the same election for you when she retires. She will be entitled to her own retirement (at age 55) and may also receive a survivor's benefit from you if you die before her. As for Social Security retirement benefits, yours will be computed under the provisions of the Windfall Elimination Provision. If you die before your wife, she will be affected by the Government Pension Offset because she will be receiving her own CSRS retirement benefit. She will have the widow's benefit from your Social Security reduced by two-thirds of her CSRS benefit.

    Health Insurance

    Should a federal couple carry family coverage or two self-only plans?
    If there are dependent children involved, the answer's easy-one spouse has to have family coverage. Employees and retirees can change to family coverage during any open season. Retirees also have open seasons in the same way as employees. When there is a qualifying life event (such as marriage, birth or adoption of a child or a family member losing health coverage through their employer), a change from self only to self and family coverage can be made outside of an open season, within 60 days of the qualifying event.

    Sometimes it's less expensive for married federal employees or retirees without dependent children to carry two individual self only plans. When considering such an approach, remember to take into account out-of-pocket expenses such as deductibles, co-payments and catastrophic limits as well as the premiums.

    Keep in mind that employees do not have to pay income tax on premiums for health benefits, but retirees do. Because of this, if one spouse retires before the other, consider having the spouse who remains employed carry self and family coverage.

    If you have recently switched to self only coverage prior to retirement and your personnel records do not show that you will have five years of coverage when you retire, be sure to let your personnel office know that you were under your spouse's self and family plan. To continue FEHBP coverage into retirement, you must have been continuously covered by an FEHBP enrollment. This includes time you are covered as a family member under another person's enrollment.

    If your spouse is eligible for his or her own CSRS or FERS annuity, it is not necessary to leave a survivor's benefit for your spouse to carry health benefits. If you die while in a self and family plan, your CSRS or FERS spouse may continue coverage through their own federal salary or retirement benefit. They must enroll within 31 days of the date of your death.

    To Do

    • As you plan your retirement, consider the financial need for spousal survivor benefits. Discuss the cost and value of this benefit with your spouse. If you decide to provide partial or no survivor benefit, you will be required to obtain the notarized consent of your spouse.
    • If you are a couple who both receive federal salary or retirement benefits and you don't have dependent children, consider the benefits of maintaining separate self only FEHBP plans rather than one self and family enrollment.
    Resources Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on NITPInc.com.

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