Who’s Your Beneficiary?

By Tammy Flanagan

May 12, 2006

One important tasks in retirement planning is thinking about how you want to designate who will get lump-sum benefits related to your federal service. Beneficiary forms are among the most litigated pieces of paperwork in the federal government. Designations of beneficiaries must be in writing, signed by the designator, witnessed and filed with the Office of Personnel Management, the Thrift Savings Plan or your agency, depending on the type of benefits.

Think back over your federal career. Have any of the following occurred?

If you have experienced any of these events, it is possible that you may need to update your beneficiary designations. The following systems rely on such designations: Case Studies

Beneficiary designations are used to assign who will receive lump-sum payments. They do not affect survivor annuity benefits. Let's look at some examples of how designations of beneficiaries might play out in the real world: Example 1: Sara died, before her retirement, at 51 after 23 years of federal service. She was survived by her sister and brother, who each received 50 percent of the following benefits:

Consider this: What if Sara recently had married but neglected to update her beneficiaries?

Example 2: John died after being retired under FERS for four years. He was survived by his wife and two dependent children. John had elected maximum FERS survivor's benefits for his wife, providing her with a lifetime benefit equal to 50 percent of his FERS basic retirement benefit. The children also are entitled to separate children's benefits as long as they are dependent. And John's wife and children may be eligible for Social Security widow and children's benefits. John named his wife as 100 percent beneficiary of his FERS, FEGLI and TSP benefits. So in addition to a survivor annuity, she is entitled to:

Consider this: What if John was previously married and had never updated his FEGLI beneficiary paperwork to shift benefits to his current spouse? She would not have been entitled to the $350,000 in life insurance.

Order of Precedence

So what happens if you don't have beneficiary designations on file? According to Chris Meuchner, who works in OPM's FEGLI section, it occurs in half of cases involving distribution of lump-sum death benefits. For CSRS, FERS, TSP and unpaid compensation benefits, here is the order of precedence for payment if there is no valid designation on file when you die:

  1. To your widow or widower.
  2. If none, to your child or children in equal shares, with the share of any deceased child distributed among that child's descendants.
  3. If none, to your parents in equal shares or the entire amount to your surviving parent.
  4. If none, to the executor or administrator of your estate.
  5. If none, to your next of kin under the laws of the state where you lived at the time of your death.
Assignment of FEGLI

For FEGLI, you have the option of assigning your life insurance to someone else, giving them ownership and control of your coverage. The money then goes to the assignee or the assignee's beneficiary when you die.

Under such cases, the insurance still covers your life and you must continue to pay for it, but someone else controls the coverage. You may assign your life insurance to an individual, a corporation or an irrevocable trust, but your decision to make such an assignment cannot be changed. (Also, you cannot assign Option C coverage under FEGLI.)

If you have filed form RI 76-10 assigning ownership of your life insurance to someone else, the Office of Federal Employees Group Life Insurance will pay benefits to the beneficiary designated by your assignee, if there is one. If there isn't, the benefits will go to your assignee.

If you did not assign ownership and there is a valid court order on file, the office will pay benefits in accordance with that court order. If there is no valid court order on file, benefits will be paid according to the order of precedence in the chart above.


Designation of Beneficiary forms:

Federal Employees' Group Life Insurance: Designations to a Trust

Chapter 34, Designation of Beneficiary, CSRS and FERS Handbook

To Do

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.

By Tammy Flanagan

May 12, 2006