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If You’re Confused About Survivor Benefits, You’re Not Alone

A guide to annuity options.

I recently received the following email from a reader that made me realize there may be some confusion regarding the various survivor benefits payable from federal employee retirement benefits:

I would appreciate your advice on the following question: If I take out a joint annuity with 50 percent survivors benefit and if my dear wife of 41 years dies, then I, the primary beneficiary, lose half of my annuity? I have read a lot of your articles over the years and I don't think I have ever heard that mentioned when it came to factors to consider when purchasing an annuity. If I have read this wrong, which I truly hope so, please let me know.

Like retirement benefits, survivor benefits based on the career of a federal employee come in various shapes and sizes. A survivor annuity refers to a recurring payment that is generally paid for the life of the survivor on monthly basis. Various benefits are payable upon the death of a federal employee and there are “elections” that must be made to provide for survivors at the time of retirement. (I covered the topic of death benefits that are payable upon the death of a federal employee in a 2009 column.)

The reader’s question refers to survivor annuity elections made at retirement. To understand the confusion, it helps to distinguish between how these elections apply to retirement benefits under the Civil Service Retirement System and the Federal Employees Retirement System, Thrift Savings Plan account balances, and Social Security benefits.

CSRS or FERS Retirement Benefits

If you’re married on your day of retirement, the maximum spousal survivor annuity is the default election under both CSRS and FERS. If you’d like to choose a partial survivor annuity or no such annuity, he or she will need to provide their notarized consent to that election. The Office of Personnel Management offers pamphlets for CSRS and FERS annuitants that include information to help you understand the cost and value of the survivor election.

If you die before your spouse after retirement, he or she will receive either 50 percent (FERS) or 55 percent (CSRS) of your unreduced retirement benefit for the rest of their life. This benefit is increased by cost of living adjustments before and after your death. If your spouse precedes you in death, then you can choose to have your CSRS or FERS benefit restored to the unreduced amount.

A partial survivor benefit election will provide a smaller surviving spouse annuity benefit and a smaller reduction to your retirement benefit. A partial or full survivor benefit election at retirement will also provide continuation of federal health benefits for a surviving spouse who is covered under your Federal Employee Health Benefits Program plan.

TSP Annuity Option

There are a variety of options for withdrawal of your TSP account funds after you separate from federal service. These include the option to purchase a single life or joint life annuity with some or all of your TSP balance. The amount of the monthly payment while you and your joint annuitant are alive and the amount of the payment to the survivor depend on whether you choose a 100 percent or a 50 percent annuity.

Under the 100 percent option, the amount of the monthly annuity payment to the survivor is the same as the annuity payment made while you and your joint annuitant are alive. Under the 50 percent option, the amount of the monthly payment to the survivor—whether that’s you or your joint annuitant—is cut to half of the monthly annuity payment made while both you and your joint annuitant are alive.

You may elect a withdrawal from the TSP to begin at any age, whether you were eligible for CSRS or FERS retirement at the time of your separation or you resigned from federal service without immediate retirement eligibility. To learn more about the various TSP withdrawal options, see the life events section of the TSP website.

Social Security Widow or Widower’s Benefit

Your spouse may be eligible for Social Security benefits upon your death if the benefit is greater than the benefit your spouse has earned for themselves or if your spouse hasn’t yet filed for their own retirement benefit. A widow or widower’s benefit may be payable before you file for benefits based on your own work record so that you can delay your own earned benefit to take advantage of delayed retirement credits and to avoid the reduction for early retirement before your full retirement age. Widow or widower’s benefits are payable as early as age 60 or at any age if you’re caring for young children or if your spouse meets certain conditions due to a disability.

Like Social Security retirement, these benefits are subject to an earnings test if you’re under the full retirement age and still working. The amount payable to a surviving spouse may be 100 percent of the worker’s benefit amount, but it will depend on the age of the surviving spouse at the time they claim this benefit.

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