June 5, 2009
Perhaps it is a sign of age or maybe just a sign of the uneasy times we are living in, but the subject of death has come up in several of my conversations lately. Not that anything is wrong or anticipated, but the topic has been on the water cooler list. For instance, during a recent dinner with friends, the topic came up as a "what if" situation. I guess we want to be sure that we get our money's worth out of our retirement -- or at least someone does.
So now is as good a time as any to look at death benefits payable under the Civil Service Retirement System and the Federal Employees Retirement System. There are additional benefits payable upon your death if you have Federal Employees Group Life Insurance, unpaid compensation (last paycheck and unused annual leave, for instance) Social Security, workers' compensation and the balance in your Thrift Savings Plan. Some of these payments are governed by your valid designation of beneficiary or the standard federal order of precedence. Social Security provides widow, children and sometimes dependent parent benefits to surviving family members. Workers' compensation could be payable if the death is work-related.
I want to address three scenarios under CSRS and FERS: the death of a current employee, a former employee and a retiree.
1. Current Employee
If the employee has a minimum of 18 months of creditable service and is survived by an eligible current or former spouse with a valid court order awarding a survivor annuity, then a basic death benefit and/or a monthly survivor annuity could be payable. If the employee's death is work-related, the surviving spouse could be entitled to compensation from the Office of Workers' Compensation Programs instead of a CSRS or FERS surviving spouse benefit. The compensation benefits are more generous than the CSRS or FERS benefit and are tax-free. If the death is not work-related, then the surviving spouse benefits could be payable from CSRS or FERS. (An eligible spouse is defined as one who was married to a current employee or retiree at the time of his or her separation from federal civilian service and the spouse was married to the deceased for at least nine months, the death occurred before nine months of marriage, the death was accidental, the couple had a child.)
This benefit is payable to dependent children upon the death of an employee or retiree with no election required. Someone has to apply for this benefit on behalf of the eligible child or children. The benefits are adjusted annually for inflation.CSRS: A fixed rate per child is determined each year. The 2009 rates are:
FERS: A child's survivor benefit rate is calculated as follows: The total amount payable to all children under CSRS minus the total amount payable to all children by Social Security divided by the number of children.
No Eligible Spouse or Dependent Children
When an employee is not survived by anyone entitled to a monthly survivor annuity, then the employee's contributions to the retirement fund are refunded. The payment is made to the beneficiary designated on a valid designation of beneficiary form or according to the standard federal order of precedence if there is not a valid beneficiary designation on file.
2. Former Employee
As long as the former employee did not receive a refund of his or her retirement contributions, then the contributions are returned to the beneficiary designated on a valid designation of beneficiary form, or according the standard federal order of precedence if there is not a valid beneficiary designation on file. A survivor annuity is not payable if the former employee did not apply for a deferred annuity.
If a former employee with at least 10 years of creditable service (five years of which must be creditable civilian service) is survived by an eligible surviving spouse, the spouse could be eligible for a monthly survivor benefit. The benefit begins on the date the former employee would have been eligible for an unreduced annuity, unless the survivor chooses to have it begin at a lower rate on the day after the former employee's death.
No monthly benefits are payable to children of deceased former FERS employees if the death occurs after leaving federal employment and before retirement.
If a former employee dies and no survivor annuity is payable, the retirement contributions remaining to the deceased person's credit in the retirement fund, plus applicable interest, are payable. The payment is made to the beneficiary designated on a valid designation of beneficiary form, or according the standard federal order of precedence if there is not a valid beneficiary designation on file.
Employees elect the type of retirement they want under CSRS and FERS when they file their retirement application. The choices include:
Employees can elect to provide a maximum, a partial or no survivor benefit for a current spouse. The spouse must provide consent unless a full survivor benefit is elected. The maximum or partial election ensures continued health benefits for a spouse who is covered under a self and family health plan and is not eligible for Federal Employees Health Benefits under his or her own retirement.
The dependent children benefits described above also are payable if the retiree is survived by a dependent child or children. Employees will be asked to name their unmarried dependent children on the retirement application so the Office of Personnel Management is aware of their existence.
I've written about the election that employees make at retirement in previous columns. Here's a link to those columns:
If you die leaving no one who qualify for a survivor benefit, the contributions that are left in your retirement fund (if any) will be paid as a lump-sum payment according to your most recent valid beneficiary designation. Your retirement contributions are depleted when you have received retirement benefits equal to the amount of your contributions to the retirement fund.
Domestic Partner Benefits
There are no federal benefits extended to domestic partners at this time, other than the availability to elect an insurable interest survivor benefit upon retirement and naming the partner as the beneficiary for any lump-sum payments. For more on this subject, my colleague, Alyssa Rosenberg, has recently written on this topic in her May 2009 feature, "Foreign and Domestic".
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 Monday mornings at 10 a.m. ET on federalnewsradio.com or on WFED AM 1500 in the Washington metro area.
June 5, 2009