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:

1. meet the 18 month minimum service requirement for a death benefit; or

2. 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:

1. completed at least 10 years of total creditable service, and

2. 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:

1. Widow or widower

2. Children, with the share of any deceased children distributed among the

   descendents of that child

3. Parents in equal shares or the entire amount to the surviving parent

4. Executor of the deceased's Will or the administrator of the estate

5. 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:

1. partial deposits for civilian service performed before 1989;

2. partial deposits for post-1956 military service and

3. annuity accrued and unpaid.

Surviving Spousal Retirement Annuity Supplement

To be eligible for the surviving spousal retirement annuity supplement, the

surviving spouse must:

1. be entitled to a current spousal survivor FERS annuity;

2. under age 60;

3. 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