survivor benefit
Planning for your Federal Retirement by Todd Carmack
Preparing for your federal retirement starts the day you are hired! By this I mean you want to start taking advantage of one of the greatest benefits a FERS employee has as early as possible; the Thrift Savings Plan. In order to maximize the matching contributions, you want to contribute at least 5%. This may be difficult for newbies in the workforce, but free money is too hard to come by. For those who are high-income earners and can’t take advantage of a private Roth, you can contribute to the Roth TSP.
For those employees who have served in the military, take advantage of buying back your military time (service credits) to count towards your CSRS/FERS pension. This can enhance your retirement annuity by thousands of dollars a year.
If you intend on carrying your Federal Employee Health Benefits Program into retirement, make sure that you have been enrolled for at least 5 years. When it comes to ensuring your spouse or significant other can continue on the FEHB if you pass away, make sure to select either the 25% or 50% Survivor Benefit option. This will not only ensure part of your FERS annuity payment, but also continuation of their FEHB coverage.
Throughout your working career with the federal government, you want to make sure to be up to date on your beneficiaries for TSP and FEGLI. Life events such as children born, marriage or divorce or death can happen. Part of retirement planning is making sure your loved ones are provided for both during the working years and after.
Start considering the issue of Long Term Care coverage when you are young. You may want to consider utilizing either traditional long-term care policies, available through the government (John Hancock) or private policies (sometimes less expensive). Another option to consider is permanent life insurance with long-term care coverage or living benefits which can potentially allow for accelerated payments in the event of in-home health care or nursing home care expenses.
I would also suggest 5-10 years out, attend a retirement seminar – sometimes more than one. This may help you plan and provide some tips on the benefits and process.
Other Todd Carmack Articles
Social Security for FERS Employees by Todd Carmack
Understanding The Thrift Savings Plan, By Todd Carmack
Is The Pension ‘Survivor Benefit’ Best For You? 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.
Is The Pension ‘Survivor Benefit’ Best For You? by Todd Carmack
Both 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
First 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
Individuals 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
You 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
The 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.
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Applying For Benefits – When A Federal Employee Dies
Applying for Benefits
When 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
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.
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Receiving Your BEDB and Survivor Annuity Payment
Receiving your BEDB Payment
Many individuals who came of age when a lot of the automation we take for granted today was not in existence, have some reservations about BEDB direct deposit and taking care of their financial affairs online. The Department of Treasury through which federal benefits are paid requires all federal benefits be made by electronic means.
Believe it or not, there are still some individuals who do not have bank accounts; they simply choose to handle their business otherwise where they find the most comfort and security. The government recognizes this concern and for individuals who do not have bank accounts, payments can be made through a Direct Express Debit Card. The BEDB annuity payment is automatically deposited to the card on the date you would otherwise receive your annuity payment and is immediately available for your use.
There are some benefits you cannot receive by direct deposit or the express debit card and they are the Basic Employee Death Benefit and the survivor annuity payment if your permanent address where you would ordinarily receive payments is outside of the United States in countries where the automated programs are not available.
You must notify the Office of Personnel Management as to how you wish to receive your BEDB payments by completing Section 1 of SF 3104 – Application for Death Benefits. You can also send the Direct Deposit sign-up form (SF 1199A) to OPM’s Retirement Operations Branch – Boyers, Pennsylvania – P. O. Box 440 – 16017-0440. You and your bank must complete the form. You can also fax the information to OPM. Visit the OPM website for a current fax number.
Open communication is the path to a future you are prepared to meet.
P.S. Always Remember to Share What You Know.
The deceased may have had additional life insurance through FEGLI.
Postal employee families are encourages to visit LiteBlue for information
