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March 28, 2024

Federal Employee Retirement and Benefits News

Tag: survivor annuity

survivor annuity

Deciding on Retirement Survivor Annuities by Michael Wood

Michael Wood has been a licensed professional for almost 20 years, and he has focused exclusively on those consumers who are close to or already retired.

Individuals that are still married during their retirement can give a full survivor annuity for their spouse. This is unless of course a court-ordered divorce settlement has barred them or an agreement is reached with the spouse to receive a lesser amount in writing.

Under CSRS, full survivor annuity is 55 percent of your base annuity, and 50 percent under FERS. A survivor annuity that is reduced under CSRS can be in terms of a percentage of any base you elect or in a specific dollar amount. Selecting a specific dollar amount can be as low as $1 every month. Under FERS, 25 percent is the only possible reduced annuity.

Once you opt for retirement, OPM can then determine the amount your annuity is reduced by to pay for the survivor benefit. The reduction is taken from the annuity amount you are entitled to during the moment you retire before deductions such as taxes, life, and health insurance.

To CSRS retirees, OPM applies a formula to determine the reduction to be made to your annuity. The reduction under CSRS should be 2.5 percent of the first $3,600 you elect, plus another 10 percent of the amount that is above $3,600. This reduction would be less complicated under FERS. For a 50 percent survivor benefit your annuity would be reduced by 10 percent and 5 percent for a 25 percent benefit.

A majority of retirees elect a full survivor annuity for their spouses, and it is a good reason to elect a small survivor annuity rather than not have one at all. To do so can preserve entitlement of your spouse to have coverage under the Federal Employees Health Benefits program. This is unless your spouse has an entitlement to the coverage in his or her own right as federal employee or retiree. Your surviving spouse would receive an annuity that can allow them to continue with that coverage after your death.

A CSRS survivor that has an annuity that is reduced substantially would be required to pay premiums directly to OPM if they have an elected reduction that is small to cover them. Survivors from FERS are typically less likely to have problems to pay for these premiums under the reduction of 25 percent.

Survivor annuity benefits are raised by cost-of-living-adjustments on an annual basis regardless of the survivor age.

Michael Wood

Contact Michael Wood
[email protected]

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Can I Be Totally Cut Out of My Spouse’s Annuity?

Federal Retirement Survivor Annuity Eligibility

My Spouse's AnnuityThis is a very sad story but true and eye opening.  I recently had a woman come to me in tears about having some difficulty receiving her deceased spouse’s survivor annuity.  She said that she had contacted OPM after her husband’s sudden death and was told that she was not entitled to her husband’s annuity as a survivor.  She said, can you please help me?  I looked at her and asked how long she had been married.  She replied, “Eleven years.”  I asked if the she had been married before and she said that it was the first marriage for both she and her husband.  I then asked why she believed OPM had told her that she wasn’t entitled to a survivor annuity.

I knew what had happened but one must be gentle when dealing with a heart that is broken because she had lost her husband and seemingly could not benefit from his labor as a federal employee.  I found out gradually that he was under CSRS.  I tried to comfort her and encouraged her to think about 5 of the happiest times she had with her husband.  She closed her eyes for a few minutes and then started to laugh out loud.  I asked her if she wanted to share.  She told me a story about when she first met her husband he always wore yellow socks and that she hated it.  After he reluctantly told her why he wore the yellow socks, she found him as many socks in different shades of yellow as she could.

He told her that whenever he was having a lousy day and the world seemed positioned against him, he would push away from his desk, cross his legs and look at those ridiculous yellow socks and he would have a belly-washer laugh.  I laughed with her at the very thought of a grown-man having on yellow socks.  I then eased her into a reality she had to face.  I said there are a number of reasons why you might not be eligible for a survivor annuity as the wife of your husband.  I said listen very carefully so that you can determine which category fits you.

You may not be eligible for a survivor annuity of a deceased federal employee if:

 

– there is a court order that required an ex-spouse to receive the total annuity, then there would be no annuity for you to receive..

– there is a court order granting the ex-spouse a partial annuity then you would be eligible for the remainder.

– a former spouse is no longer eligible to receive the survivor annuity because she passes away or before age 55  remarries, then you would be eligible to received the entire survivor annuity.

She looked at me bewildered and before she could go into another realm, I said, “Have you ever met your husband’s ex-spouse?”  She said, “I told you he had not been married before.”  I told her that she had a right to talk to OPM and they had an obligation to tell her as a surviving spouse why she was not entitled to a survivor annuity.

I guided her path to finding the answer to her question.  She called me back about a week later and said that she had found out that her husband had been married before and that there was a court order on file leaving the total annuity to his ex-spouse.  She said that her husband never mentioned his ex-wife and had denied ever being married before their marriage.  I said I was so sorry and wished I could have done more to help.  She said, “You did a lot to help me.  You told me that my husband had been married before when you asked if I had ever met his ex-wife. Thank you.”

The fear of telling the truth or the fear of something; or perhaps just not having the -conversation- that takes care of the business of the end of our lives can be very costly.

P. S.  Always Remember to Share What You Know.

Recommended Articles

Understanding The Thrift Savings Plan, By Todd Carmack

Social Security for FERS Employees by Todd Carmack

A Little-Know Opportunity Can Increase Your Retirement Income – By Mark Sprague

FEGLI…If What You Thought To Be True. by Marty Duggan

Is The Pension ‘Survivor Benefit’ Best For You? by Todd Carmack

Survivor BenefitBoth CSRS and FERS have an option when they retire to choose a Survivor Benefit option which allows their spouse continued partial pension payments in the event of your death.

For CSRS, the Survivor Benefit option would provide a 55% annuity payout.  For FERS, the Survivor Benefit has two options:  a 25% or 50% continued benefit option.  Both provide for lifetime income for the employee and a reduced payout for the surviving spouse.  However, there are several other options that exist that may provide for a much great lifetime income stream and those alternatives are certainly worth consideration.  

Here is an example for CSRS:

For CSRS the election of Survivor Benefits will reduce the retirement annuity payout by approximately 10% for life.

Alan, a CSRS employee, and his wife Jane decide to take the joint life option (electing the survivorship option) and while both are living, their monthly income is $4000 per month (which includes the 10% reduction of Alan’s Pension described above).  If Alan dies first, then Jane will receive 55% of the $4000, or $2200 a month for the rest of her life.  If Jane dies first, then Alan will still receive his full monthly income of $4000.

For FERS, the Survivor Benefit has two options:  a 25% or 50% continued benefit option.

Here is an example:

For FERS, the election of Survivor Benefits will reduce the retirement annuity payout by either 5% or 10% depending on the Survivor Benefit option selected.  Likewise, these choices are irrevocable, once chosen. 

Carol, a FERS employee, and her husband Mike decide to take this joint life payout (survivor benefit) and while they are both alive, the monthly pension is $4000.  If they choose the 25% option, and Carol passes away, Mike will receive $1000 monthly for her life.   If they choose the 50% option, Mike would receive $2000 monthly for life.

Is there an alternative?  For both FERS and CSRS employees often times a life insurance policy may be a reasonable option to consider.  For FERS, the 5% or 10% employee Pension reduction and for CSRS the 10% reduction should all be considered an expense used to purchase the surviving spouse’s lifetime income.  Therefore the logical question is to consider the amount that is being spent to ensure the future income and ask whether or not that money could be better spent somewhere else – in essence, Is There A Cheaper or Better Option?  

A case for life insurance;  Although this may not be for everyone and you should always discuss your individual circumstances with a knowledgeable financial professional before making any decisions, life insurance could provide a higher benefit for your spouse and give you more control over your pension.

Let’s consider the fact that your spouse could pre-decease you.  In that event, if you had chosen the Survivor benefit, you would have spent 5-10% of yoru potential retirement income and received nothing for it.  Not to mention, once your spouse has passed on, your pension reduction will continue – your elections are permanent, regardless of circumstances and how much longer you have in retirement.

What happens if you and your wife pass much earlier than expected.  Life expectancy is no guarantee.  Car accidents, slip and falls, and just poor health can all lead to pre-mature death.  If you and your spouse pass much earlier than expected your CSRS and FERS annuity stops – there is no cash value or payout to your children or loved-ones.  In this case, the government keeps whatever you haven’t taken and your heirs receive nothing.

Moreover, the cost for the Survivor Benefit Option is rather high when compared to many life private life insurance policies that could provide a guarantee of income either equal to or greater than the FERS or CSRS Survivor Benefit – not to mention numerous other reasons why the Survivor Benefit may not be the only option to consider.  You may be able to use the costs associated with your Survivor Benefit and purchase a life insurance policy that provides your spouse and or your heirs with a much greater benefit.

Life is about knowing the options and choosing what is best for your situation.

About the Author

Todd Carmack

Financial Advisor

Bedrock Investment Advisors, LLC

Arizona

Other Todd Carmack Articles

Understanding The Thrift Savings Plan, by Todd Carmack

Social Security for FERS Employees, by Todd Carmack

Understanding Your FEGLI Coverage.  by Todd Carmack

 

Disclosure: BWM Advisory, LLC reserves the right to edit blog entries and delete those that contain offensive or inappropriate language. Content will also be deleted that potentially violates securities laws and regulations. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. All investment strategies have the potential for profit or loss. Hyperlinks on this website are provided as a convenience. We cannot be held responsible for information, services or products found on websites linked to ours. BWM Advisory, LLC is registered as an investment adviser with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.

Federal Benefits and Children

Federal Benefits and Children

federal benefitsFirst we should discuss who qualifies as a dependent child.  Federal benefits guidelines under the Office of Personnel Management state that a child is considered dependent if:  the child was born of the marriage to the retiree; is a stepchild or a child that is recognized as such born out of wedlock who lived with the retiree in a parent-child relationship at the time of the retiree’s death; a recognized child born out of wedlock where child support exists as a result of a judicial determination; and an adopted child who lived with the deceased retiree and the retiree had filed a petition to adopt the child, and the surviving spouse adopted the child after the retiree passed away.  The child is deemed dependent where there is evidence that the deceased supported the child by making contributions on a regular and consistent basis sufficient to cause notable loss if no longer apparent.

Children who are dependent may receive a monthly benefit until they reach the age of 18, marry or pass away.  The monthly survivor annuity payments may continue beyond 18 if the child is a full-time college student attending an accredited college or university.  The federal benefits can continue under those conditions until the child reaches age 22.  Children that are disabled and are dependent may receive federal benefits if the disability occurred prior to age 18.

P. S.  Always Remember to Share What You Know.

Survivor Benefit

Monthly Survivor Benefit

survivor benefitIndividuals who were covered under the Federal Employees Retirement System (FERS) who pass away, their surviving spouse or former spouse may be entitled to a recurring monthly survivor benefit if certain qualifying conditions are met.  A surviving spouse may qualify for an annuity if the deceased employee completed 10 years of creditable service with 18 months of that time being in the civilian service.

Further the surviving spouse must also meet the 9 month minimum requirement of being married to the deceased to qualify for the monthly benefit.  If the federal employee’s death occurred prior to 9 months of marriage, the surviving spouse might still be eligible for the benefit if a child was born of the marriage or the employee’s death was accidental.

A former employee may qualify for the benefit if the same 9 month marriage provision is met and a valid court order is on file with the Office of Personnel Management.

Discuss your benefits with your human resources benefits specialist and always make sure you understand exactly how they apply to you and your family.

P. S.  Always Remember to Share What You Know.

Former Spouse and Death

Death and Formal Spouse

former spouseYou might say what does a former spouse have to do with the business of the deceased federal employee.  You might be surprised under certain circumstances, that the former spouse may have more to do with the business than you can imagine.

Actually the Basic Employee Death Benefit (BEDB) may be payable to the former spouse in its entirety or partially, if a valid court order is on file at the Office of Personnel Management awarding the benefit to the former spouse.  In addition, the former spouse had to have been married to the deceased federal employee or retiree for a minimum of nine months and did not re-enter into matrimony before reaching age 55.

Families who must contend with the pain of making funeral arrangements for a loved one are often so inundated with the loss and the confusion that the very minute details might be overlooked.  Anger, arguments and temporary family discord often are the ingredients that make-up the discourse of funerals.  Surprises come up about things you thought you knew and you didn’t.  Nobody can agree on anything because the pain of loss is masking the entire ordeal.  Since we all know that losing a loved one is an indescribable pain, it is a good idea to prepare for the inevitable.

P. S.  Always Remember to Share What You Know.

FERS and Deceased Employees

FERS And Deceased Employees

fersThe Federal Employees Retirement System (FERS) has special provisions for surviving spouses of deceased federal employees.  When an employees dies who has at least 18 months of creditable service within FERS, survivors might be entitled to an annuity based on the service of the deceased employee if:

-the deceased was married to the surviving spouse for a minimum of nine months;

-death was accidental; or

-the deceased employee’s marriage produced a child;

If  any of the above exists, the surviving spouse may be eligible for the Basic Employee Death Benefit (BEDB).  The Basic Employee Death Benefit is equivalent to 50 percent of the federal employee’s final salary or the average salary if it is higher, plus $15,000 which is increased by the Civil Service Retirement System COLA which began December 1, 1987.  It should be noted that the $15,000 increased to $30,792.98 for federal employees under FERS who died on or after December 1, 2011.

It is always a good idea to know what benefits are available to you in retirement and how those benefits work in retirement during your lifetime and in the event of your death.

P. S.  Always Remember to Share What You Know.

 

Related Articles

Survivor Annuity and Concerns

Survivors Guide

Survivors Benefits

Survivors Guide Overview

Is The Pension Survivor Benefit Best For You?

Applying For Benefits – When A Federal Employee Dies

Applying for Benefits

benefitsWhen a federal employee dies family members or representatives must apply for benefits.  Benefits are not automatically distributed. The forms differ depending on the retirement system your deceased family member was a part of.  Standard Form (SF) 2800 is used for those individuals who were covered under the Civil Service Retirement System (CSRS).  Standard Form (SF) 3104 or 3104B are applicable for those individuals covered under the Federal Employees Retirement System (FERS).

In addition to completing the applicable forms, a death certificate must be attached along with a certificate of marriage where appropriate.  The form should be mailed to:

Office of Personnel Management, Retirement Operations Center, P. O. Box 45, Boyers, PA  16017-0045.  When a widow or widower applies for benefits for themselves and/or on behalf of children it is only necessary to submit one application.

Be careful to put your information in a safe, secure place so that it can be available when needed.

P. S.  Always Remember to Share What You Know.

OPM: Reporting A Death – Federal Retirement Annuity

opm

To report the death of a federal annuitant, you may call the Office of Personnel Management (OPM) or go online.  If you don’t have all the information required to complete the online application, it is better to contact OPM via phone (202) 606-1800 so that they can direct you.

When completing the form on line there is some specific information of which you must supply.  You will be asked to submit a Claim Number assigned to the annuitant’s death.  Name of the Former Federal Employee, although this is not really required, since you will be entering the name of the deceased which is the same as the former federal employee.  You will also be asked to enter the Social Security number of the deceased federal employee adhering to the this format 222-22-2222 (numbers and dashes).  The birth date of the deceased federal employee is required with a 2 digit month, a 2 digit day and a 4 digit year of birth (MM-DD-YYYY).  It might sound mundane to address each of these issues, but when families experience such a tragedy as the loss of a loved one, the simplest things can turn into unmanageable tasks.

The date of the death is required and follows the same format as the deceased’s birth date, 2 digit month, 2 digit day and 4 digit year of death.  A question asking if there is a current surviving spouse is a part of the online application.  A telephone number with an area code and no dashes 7033333333 is mandatory and it is also helpful to know whether the AM or PM is a better time to make contact with you.

An email address is required. You will be asked if there are surviving children and if they are minors, students or disabled.  After you have completed all required information about the deceased, you will be asked to enter information about yourself.  Your name and telephone number with area code is required.  After you have reviewed the document for completeness and accuracy, then you are ready to click on the submit button to begin the process of taking care of the final business of your loved one’s life and staying connected to family during such a difficult time. Remember to stay in contact with the OPM.

P. S.  Always Remember to Share What You Know.

Related Articles

Survivor Annuity and Concerns

Survivors Guide

Survivors Benefits

Survivors Guide Overview

Is The Pension Survivor Benefit Best For You?

FERS and Deceased Employees

Basic Employee Death Benefit

DOMA: Survivor Annuities and the Defense of Marriage Act

DOMA and Survivor Annuities

domaWith changes in policies regarding Survivor Annutities following the Supreme Court’s finding that Section 3 under the Defense of Marriage Act (DOMA) was unconstitutional, many benefits and other provisions impacting federal and postal workers must now be revisited.  Measures have been extended to provide benefits to legally married same-sex spouses that had been previously denied.

Married couples have a number of benefits both under the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS).  The same benefits under each retirement system  are now available to legally married same-sex spouses.  While all benefits are important and understanding those benefits is equally important, emphasis should be placed on Survivor Annuities.

Much of this information will be new and undoubtedly somewhat confusing for same-sex couples because they have not had the headache nor the privilege of having to deal with this before.  Albeit, I would venture to say that it is a very welcome burden to bear. I have been teaching retirement classes for a while now and this subject is always a bit demanding initially. In a previous post, I stated that getting ready for retirement at any juncture of one’s career requires some work.

In order to have a complete understanding of Survivor Annuity under both CSRS and FERS requires not only ingesting all of the relevant information, but having a frank discuss with your family members as to what decision is best for your family.  Benefits specialists and other planners may be able to make suggestions to you based on certain data, but the best information will come from you and your family.  You have everything that is needed to make a good decision including the emotional profile of the why, the what, the when, the how and the what if.

Making such life-impacting decisions can sometimes be a real challenge.  It is also an opportunity to have a conversation about some rather critical issues we spend too much time trying to avoid.  Here is the rub, the Supreme Court has done some of the work, as a matter of fact, the stage has been set, now it is time to perform a duty for yourself and your family by safeguarding your future. Visit the Office of Personnel Management’s (OPM) website for information on Survivor Annuities.  We will also dedicate some future posts to Survivor Annuities under both retirement systems.

P. S.  Always Remember to Share What You Know.

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