When You Go
Addressing the touchy subject of who gets your benefits after you die.
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.)
CSRS: An eligible surviving spouse is entitled to 55 percent of the earned CSRS retirement benefit as of the date of death or 55 percent of the guaranteed minimum disability benefit if greater.
For example, if Georgia, who is covered by CSRS, were to die at age 53 and she had 35 years of service, her surviving spouse would receive 55 percent of 66.25 percent of her high-three average salary (the computation of a CSRS benefit based on 35 years of service). There would be no penalty if her death was before age 55 -- unlike the reduction for retiring before age 55.
This is a lifetime benefit and payable immediately to the surviving spouse. The benefit also includes an annual cost-of-living adjustment to help maintain its value over the years. It ends upon the death of the surviving spouse or upon the surviving spouse's remarriage prior to age 55, with the exception of those who were married for 30 years or more. For those who were married for 30 years or more, or for surviving spouses who remarry after age 55, the benefit is not affected by the remarriage. This is an entitlement to the current spouse or to a former spouse who was awarded this benefit in a divorce agreement. This is not a benefit that is chosen by the employee.
FERS: An eligible surviving spouse is entitled to the FERS Basic Death Benefit as long as the employee had a minimum of 18 months of civilian service. This benefit equals 50 percent of the employee's final salary (high-three average salary, if higher), plus $15,000 (increased by Civil Service Retirement System cost-of-living adjustments beginning Dec. 1, 1987). The $15,000 has increased to $29,722.95 for deaths on or after Dec. 1, 2008. This benefit could be paid as a lump sum to the surviving spouse or in 36 equal monthly payments.
If the employee had completed at least 10 years of creditable service, the spouse also would receive (in addition to the Basic Death Benefit) a monthly survivor benefit that equals 50 percent of the earned FERS Basic Retirement Benefit as of the date of death.
For example, if Andy, who is covered by FERS, died at age 53 with 20 years of service, his surviving spouse would receive 50 percent of 20 percent of his high-three average salary (the FERS basic computation provides either 1 percent or 1.1 percent of the high-three for every year of creditable federal service, such as 20 years times 1 percent equals 20percent of the high-three average salary). He also would be entitled to the basic death benefit in addition to the survivor annuity benefit.
The same rules regarding remarriage and the duration of this benefit apply to FERS as they do to CSRS. If the surviving spouse is not eligible for Social Security benefits as a widow or a parent of a dependent child, then there also could be a supplemental benefit until the surviving spouse qualifies for Social Security.
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:
- $470 per month per child with a maximum of $1,409 (if the child, or children, has a living parent who was married to the employee or retiree)
- $564 per month per child with a maximum of $1,691 (if the child, or children, has no living parent who was married to the employee or retiree)
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:
- Reduced annuity with full survivor benefits to my spouse
- Reduced annuity with partial survivor benefits to my spouse
- An annuity payable only during the retiree's lifetime (no reduction and no survivor annuity elected)
- Reduced annuity with survivor annuity for a person named who has an insurable interest in the retiree
- Reduced annuity with survivor benefit for former spouse(s) or a combination of current and former spouse(s).
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:
- "Spousal Provision" March 13, 2009
- "Survivor Benefits Q&A" April 25, 2008
- "Supporting Your Survivors" April 18, 2008
- "Survivor: Federal Edition" Jan. 12, 2007
- "Federal Couples" July 7, 2006
- "Who's Your Beneficiary?" May 12, 2006
- "Spousal Benefits" March 10, 2006
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.
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