The recent Supreme Court decision opens up a world of choices.
For many years, I’ve been getting questions from federal employees in same-sex relationships about their ability to list their partners as spouses for survivor benefits and as family members for insurance benefits. I’ve always felt uneasy when I had to let them know this wasn’t possible, even though an opposite sex couple living in a common-law relationship could extend such benefits if they lived in one of the 16 states that recognize common-law spouses.
Thirteen states and the District of Columbia currently have laws that allow same-sex marriages. Now, in the wake of last week’s Supreme Court decision in United States v. Windsor, same-sex couples in these states who are legally married and in which at least one partner is a federal employee have access to family insurance coverage and can provide spousal survivor benefits. (See the Office of Personnel Management’s memo on the decision here.)
These new benefits will require same-sex married couples to understand a myriad of rules and regulations that up until now have not applied to them. Let’s look at some of them.
Benefits for Surviving Spouses
I’ve written about this issue several times over the years. Here are some of the columns:
- Goin’ to the Chapel (June 1, 2012)
- Safety Net (July 22, 2011)
- Summer Assignment (July 15, 2011)
- For Richer or Poorer, Final Words (March 18, 2011)
- For Richer or Poorer, Part Two (March 11, 2011)
- For Richer, For Poorer (March 4, 2011)
- Thinking the Unthinkable (June 11, 2010)
- The Inevitable (Aug. 14, 2009)
- When You Go (June 5, 2009)
- 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)
OPM has announced that Civil Service Retirement System and Federal Employees Retirement System retirees have a two-year window of opportunity to elect spousal survivor annuity benefits from the date of last week’s Supreme Court decision. If you choose to provide a spousal survivor benefit after you have retired, you must pay into the retirement system an amount equal to the amount your annuity would have been reduced during your retirement plus 6 percent annual interest.
Then, instead of a lump-sum payment, OPM will compute an actuarial (life expectancy) reduction to your retirement benefit. The reduction is determined by dividing the amount of the deposit by an actuarial factor for your age on the date your annuity is reduced to provide the survivor benefit. The actuarial reduction will not be eliminated from your annuity if your marriage ends.
If you had previously chosen to provide an insurable interest survivor annuity, you may now elect to provide your spouse a spousal survivor annuity if you are legally married. The spousal survivor annuity is more valuable than the insurable interest survivor annuity because the amount paid to the surviving spouse is based on the unreduced value of your CSRS or FERS benefit. The insurable interest annuity is based on the reduced annuity. Also, the spousal survivor annuity reduction is not computed on the age difference between the annuitant and the spouse.
Here’s a rundown on Federal Employees Group Life Insurance choices: Life Insurance Options (Feb. 3, 2012).
Here’s what OPM has to say about enrolling family members in the Federal Employees Health Benefits Program (on a website that will need to be updated to reflect the Supreme Court’s decision):
Family members eligible for coverage under your Self and Family enrollment are your spouse (including a valid common law marriage) and children under age 26, including legally adopted children, recognized natural (born out of wedlock) children and stepchildren. A child is eligible for coverage under your Self and Family enrollment, if a state-issued birth certificate lists you as a parent of that child.
OPM also has published answers to a series of frequently asked questions about FEHBP enrollment:
No, you do not have to be enrolled in a family plan for the five years before you retire to meet the five-year requirement. As a retiree, you can enroll in a family plan during the Open Season or when an event occurs that permits a change to the family plan.
If you are the surviving spouse and you receive a survivor annuity, you can continue the deceased's Self and Family enrollment for all eligible family members. The enrollment will be changed to your name and premiums withheld from your survivor annuity. If you are the only person eligible for coverage, the enrollment will be changed to Self Only. After the change, the carrier will send you a new identification card.
You are no longer an eligible family member when your divorce or annulment becomes final. You get a 31-day extension of your health benefits plans coverage after that date. You may convert to an individual contract offered by your health benefits plan, if you don't qualify for or don't want FEHB coverage through Spouse Equity or TCC.
As long as your spouse has a Self and Family enrollment and you are still married to your spouse, you will be covered under the enrollment. Your eligibility for coverage under your spouse's Self and Family enrollment will cease after a divorce or annulment. You may, however, be eligible for FEHB coverage under either the Spouse Equity provisions or the Temporary Continuation of Coverage provisions of the law. You would be enrolled in your own right and would pay both the Government and employee shares of the premium yourself.
The Social Security Administration has not yet provided updates on its website regarding the Supreme Court ruling overturning the Defense of Marriage Act. Social Security has provided survivor benefits to a retiree’s spouse and children since 1939. When employees are entitled to both their own Social Security as well as spousal Social Security benefits, they generally will receive the higher of the two benefits.
Here are some of my past columns that address spousal and widows benefits under Social Security:
- Getting the Most from Social Security (Oct. 19, 2012)
- Social Security and Spouses (Feb. 17, 2012)
- Social Security Trade-Offs (Aug. 5, 2011)
- Social Security 301 (Oct. 2, 2009)
- Social Security 201 (Sept. 25, 2009)
- Social Security 101 (Sept. 18, 2009)
- Offsetting Penalty (June 9, 2006)
Thrift Savings Plan
The Thrift Savings Plan is in the process of reviewing the Supreme Court’s decision and has said it will comply with the ruling. But at this time, the TSP hasn’t released any specific information. Presumably, spousal accounts and spousal rights will be made available to same-sex legally married couples, but the details haven’t been published yet.
Taxes and Divorce
My colleague Bob Leins, CPA, says there are differences in tax issues when a married couple files a joint return versus two single people filing their own returns. If both spouses are earning similar salaries, paying taxes might be less painful for the two single people. On the other hand, when one spouse is earning a significantly higher salary than the other, there may be tax benefits in filing a joint return. For more information see “10 Ways Getting Married Affects Your Taxes” by Lyndsey Buchholz of the Tax institute.