Guide to FERS Spousal Survivor Benefits Upon the Death of an Employee or an Annuitant
Edward A. Zurndorfer, CFP
Spousal Survivor Benefits - Death of an Employee and the Basic Employee Death Benefit
The basic employee death benefit (BEDB) is a benefit payable to the spouse of
a deceased employee who met the following eligibility requirements at the time
of his or her death: (1) completed at least 18 months of creditable
civilian service; and (2) died while subject to FERS deductions. In determining
whether an employee completed 18 months of potentially creditable civilian
service, the following types of service are included.
- Service included in a CSRS component to an employee's retirement, including
refunded CSRS service;
- CSRS-Offset service for which the employee received a refund before becoming
covered by FERS;
- FERS service for which FERS retirement contributions remain to the
employee's credit; and
- Temporary (non-deduction) service performed prior to Jan. 1, 1989,
regardless of whether a deposit for such service has been made.
For purposes of the 18-month requirement for creditable civilian, the
following types of service are not included:
- Refunded FERS service;
- Temporary (non-deduction) service performed on or after Jan. 1, 1989;
- Service performed on or after Jan. 1, 1989 under another retirement system
for federal employees. The exception is service that is creditable under the
Foreign Service Pension System (FSPS) provided that the surviving spouse waives
credit for the service under the FSPS and makes a FERS deposit for the FSPS
service.
The BEDB is $15,000 increased by the annual CSRS COLAs beginning Dec. 1, 1987
plus 50 percent of the employee's final salary, or high-three salary if higher.
If a FERS-covered employee were to die during 2009, a spouse would be eligible
for the BEDB of $29,722.95, plus the higher of the deceased employee's final
salary or high-three average salary.
An employee's full-time final salary is the employee's basic pay as of the
date of death, as shown on the deceased employee's SF50. For part-time
employees, the deceased employee's final salary is prorated according to the
tour of duty that was in effect immediately before death.
The
high-three salary for BEDB purposes is computed the same as for FERS annuity
computation purposes. If the employee has less than three years of service, the
salary is simply averaged for the total period of service.
If the deceased employee has service prior to Jan. 1, 1989 for which no
retirement deductions were taken, and a required deposit must be made in order
to:
- meet the 18 month minimum service requirement for a death benefit; or
- comply with the 10 years of service necessary for a monthly survivor
benefit, then OPM will withhold that deposit from the BEDB payment.
The surviving spouse must elect whether to receive the BEDB in one payment or
in 36 monthly payments. The total paid in 36 monthly installments is slightly
greater than a single lump sum payment because it includes interest.
A surviving spouse who is receiving monthly BEDB payments may at any time
elect to stop receiving the monthly payment and to receive a lump sum payment of
the unexpended balance. If the surviving spouse elects monthly payments but dies
before the completion of these payments, any unexpended balance is paid in a
lump sum to the surviving spouse's next of kin.
Spouses and former spouses have the opportunity to directly rollover the BEDB
lump-sum payment into a traditional IRA. In doing so, the surviving spouse or
former spouse will avoid the mandatory 20 percent federal income tax
withholding. The rollover election can be submitted with the application for
benefits to expedite the IRA rollover election process.
Spousal Survivor Annuity Upon the Death of an Employee
In addition to the BEDB, a monthly survivor FERS annuity is payable to a
spouse if the employee:
- completed at least 10 years of total creditable service, and
- died while subject to FERS deduction. In determining whether the employee
completed 10 years of total service, the deceased employee's active duty
military service time should be included. However, military service time is
subject to certain deposit requirements.
A spousal survivor annuity is computed as if the employee retired optionally
with no age reduction on the date of death. The surviving spouse is eligible to
receive 50 percent of the employee's FERS annuity based on the deceased
employee's type of service, age, length of service and high-three average salary
at the date of death. The spouse received 50 percent of the combined CSRS and
FERS annuity benefit in the case of a deceased "Trans" FERS-covered employee who
was eligible to receive a CSRS annuity component.
To receive their benefits, surviving spouses need to file form SF 3104
(downloadable from www.opm.gov) together with a
death certificate. Both form SF 3104 and the death certificate should be filed
with the deceased employee's Personnel or Human Resources Office (not with the
Office of Personnel Management).
Spousal Survivor Benefits Upon the Death of an Annuitant
A FERS annuitant is defined as an individual who has separated from federal
service and who has met all of the requirements to receive a FERS annuity. This
includes individuals who have filed or have been "deemed" to file an application
for the FERS annuity prior to death.
The spousal survivor of the individual who meets the above definition of a
FERS annuitant is not eligible for the FERS BEDB. Former employees who were
entitled to an immediate "MRA +10" annuity at separation but who have postponed
the commencing date of that annuity are considered to be a FERS annuitant.
Former employees who were entitled to an immediate MRA + 10 annuity at
separation but who die before they file an application are "deemed" to have
filed the application and therefore meet the definition of a FERS annuitant.
A full FERS spousal survivor annuity is equal to 50 percent of the
annuitant's annuity before it is reduced by the cost (10
percent) of the survivor annuity benefit - the unreduced annuity - as
illustrated in the following example.
At the time of his death Carlos, a FERS annuitant, was receiving a FERS
annuity of $45,000. His gross annuity was $50,000. In order to give his wife
Leonora a full spousal survivor annuity benefit, his annuity was reduced by 10
percent of $50,000, or $5,000, resulting in a net annuity of $45,000. Starting
the month after Carlos died, Leonora is eligible for a full spousal survivor
annuity benefit of 50 percent of $50,000, or $25,000.
A less than full FERS spousal survivor annuity is equal to 25 percent of the
annuitant's annuity before it is reduced by the cost (five percent) of the
survivor benefit, as illustrated in the following example:
The same facts as above except Leonora will receive - as a result of her
written and notarized consent- less than a full survivor annuity benefit. In
this case, Carlos was receiving $47,500 per year; his gross annuity of $50,000
was reduced by five percent ($2,500) in order for Leonora to have less than full
survivor annuity benefit. Leonora is eligible for a survivor annuity benefit,
starting the month after Carlos's death, of 25 percent of $50,000, or
$12,500.
A surviving spouse may receive a FERS survivor annuity in an amount other
than 50 or 25 percent of the annuitant's unreduced annuity only if a former
spouse is receiving the remaining portion of the survivor annuity based on a
court order.
Cost-of-living adjustments (COLAs) given to FERS annuitants older than age 62
increase the survivor annuity by the same percentage. Upon the death of the
annuitant, the initial annuity paid to the survivor will include all the
previous COLAs that had been granted the annuitant. The survivor annuity will
also be increased by all future COLAs.
Once the cost of the FERS spousal survivor annuity benefit is calculated,
that cost never changes, even with annual cost-of-living adjustments (COLAs)
increases. FERS spousal survivor annuity benefits will receive a COLA starting
in the January following the year in which the annuitant died. The annuitant
could have been younger than age 62; surviving spouses receiving a surviving
spousal annuity always get their first COLA the January following the year of
death.
If a FERS survivor annuity benefit is not paid, any contributions to the FERS
Retirement and Disability Fund that the deceased employee or annuitant did not
receive back as part of the monthly FERS annuity will be paid in a lump sum to
the most recent valid beneficiary, designated on form SF 3102. If a valid
beneficiary has not been designated, the lump sum payment will be made using the
following order of precedence:
- Widow or widower
- Children, with the share of any deceased children distributed among the
descendents of that child
- Parents in equal shares or the entire amount to the surviving parent
- Executor of the deceased's Will or the administrator of the estate
- Next of kin as determined by OPM, to be entitled under the laws of the
domicile of the deceased on the date of death
If there is a survivor annuity payable on the death of an annuitant, the
person(s) entitled under the order of precedence may be paid a lump sum payment
of the following, if not paid to the annuitant before death:
- partial deposits for civilian service performed before 1989;
- partial deposits for post-1956 military service and
- annuity accrued and unpaid.
Surviving Spousal Retirement Annuity Supplement
To be eligible for the surviving spousal retirement annuity supplement, the
surviving spouse must:
- be entitled to a current spousal survivor FERS annuity;
- under age 60;
- be entitled to Social Security survivor benefits (based on the deceased
annuitant's employment under Social Security at age 60); and (4) not presently
be eligible for Social Security benefits from a mother or father, or disability
benefits based on the deceased's account.
If the surviving spouse is eligible for benefits from a mother's or father's
Social Security due to an eligible child in their care and fails to apply for
that Social Security benefit, they will not be eligible for the surviving
spousal retirement annuity supplement. The surviving spouse's earned Social
Security benefit is not considered in determining the surviving spousal
retirement annuity supplement.
The deceased FERS annuitant must have had at least five years of creditable
civilian service and one full calendar year of creditable civilian service under
FERS. An annuitant who served from Jan.1 to Dec. 30 or 31 is considered to have
performed a "calendar year" of service. Military service cannot be counted in
determining the annuitant full calendar year of FERS.
The surviving spousal retirement annuity supplement requires determination of
the amount of an "assumed" CSRS survivor annuity and a hypothetical Social
Security calculation. In particular, the surviving spousal annuity supplement is
equal to the lesser of the amount by which the "assumed" CSRS survivor annuity
exceeds the FERS survivor annuity or the amount of the hypothetical Social
Security spousal survivor benefit.
The assumed CSRS survivor annuity is the amount of annuity to which the
survivor would be entitled to under CSRS based on the service of the deceased
annuitant. It is determined as of the day after the date of the annuitant's
death, or as if the survivor had applied for the benefits and if the service of
the deceased annuitant was creditable under CSRS. The following example helps
illustrate:
Charles, age 58, was a FERS annuitant who died unexpectedly on March 1,
2009. His FERS annuity at the time of his death was $36,000. Charles' wife
Sheila who is age 56 is entitled to a FERS survivor annuity of $20,000. Had
Charles been a CSRS annuitant his CSRS annuity would have been $67,770 and his
CSRS survivor annuity benefit would have been $41,250. Sheila's hypothetical
Social Security spousal survivor benefit is $12,000. Her spousal annuity
supplement is equal to the lesser of:
- the amount by which the "assumed" CSRS survivor annuity of $41,250
exceeds the FERS survivor annuity benefit of $20,000 or $21,250; or
- the amount of the hypothetical Social Security spousal survivor benefit
of $12,000.
This means that Sheila is entitled to a spousal retirement annuity
supplement equal to $12,000, in addition to the FERS survivor annuity benefit of
$20,000.
Unlike the FERS retirement annuitant supplement payable to the FERS annuitant
until he or she becomes age 62, the spousal retirement annuity supplement
is not subject to the Social Security "earnings" test. It is also increased each
year by FERS COLAs until it stops when the spousal survivor annuitant becomes
age 60.
To apply for both a survivor FERS annuity and the survivor spousal retirement
annuitant supplement, a surviving spouse must:
- Complete the application for death benefits, SF 3104 and SF 3104A, which can
be downloaded from OPM's Web site, www.opm.gov,
and attach any forms and/or evidence as the application or circumstances
requires.
- Attach a certified copy of the employee's death certificate
- Attach a certified copy of the employee's and spouse's marriage
license
The completed application and accompanied documents should be sent to:
Office of Personnel Management
P.O. Box 45
Boyars, PA
16017-0045
About the Author
Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in
Silver Spring, Maryland. He is also a registered representative with
Multi-Financial Securities Corporation (Branch A9X), member FINRA/SIPC, also
located in Silver Spring, Maryland
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Overview - CSRS
