Spousal Survivor Benefits Upon the Death of a FERS Annuitant

 

This is the second of two columns discussing the spousal benefits for the surviving spouse of a deceased federal retiree. The first column discussed the spousal survivor benefits paid to a surviving spouse of a deceased CSRS and CSRS Offset annuitant.

This column discusses the spousal survivor benefits paid to a surviving spouse of a deceased Federal Employee Retirement System (FERS) annuitant.

Definition of a FERS Annuitant

The definition of a FERS annuitant for the purpose of determining an individual’s status at the time of death means that the deceased annuitant had as FERS employee separated from federal service, in which the separated employee was covered by and contributed to the FERS Retirement and Disability Fund, and had met all of the requirements to retire immediately and to start receiving a FERS annuity. This includes having filed or being “deemed” to have filed a retirement application prior to his or her death.

A FERS-covered employee who was entitled to an immediate “MRA+10” or “MRA+20” FERS retirement when he or she separated but who postponed the commencing date of that annuity (“postponed” retirement) is considered a FERS annuitant for the purpose of this column.

A former FERS-covered employees who was entitled to an immediate retirement under the “MRA+10” or “MRA+20” retirement option, but who died before he or she filed an application to start receiving the FERS annuity (via OPM Form RI 92-19) is “deemed” to have filed the application and therefore meets the definition of a FERS annuitant.

If the individual had a Federal Employees Health Benefits (FEHB) program family enrollment (“self plus one” or “self and family” enrollment) at separation from federal service, a spouse who is eligible for a FERS survivor annuity may retain FEHB program health insurance coverage when the FERS survivor annuity begins.

FERS Survivor Annuity to a Surviving Spouse

The full FERS survivor annuity to a surviving spouse is equal to 50 percent of the deceased FERS annuitant’s annuity before it is reduced by the cost of the full survivor annuity benefit. The cost to give a full FERS spousal survivor annuity equals 10 percent of the annuitant’s starting FERS gross annuity.

The following example illustrates:

Example 1. William, age 56, retires from federal service with a FERS annuity based on 35 years of federal service. He elects to give his wife Serena a full FERS spousal survivor annuity of 50 percent. A summary of William’s FERS annuity – gross annuity and net annuity (after subtracting the cost of giving a full survivor annuity) and the initial survivor annuity benefit to Serena – is presented here:

$45,000 William’s starting FERS gross annuity
Less: 10 percent: ($4,500) Cost to give full FERS survivor annuity
$40,500 Net annuity to William (taxable)

If William dies before William’s FERS annuity gets any cost-of-living adjustment (COLA), then the amount of Serena’s starting survivor annuity would be equal to:

50 percent of $45,000, or $22,500 (taxable)

The FERS spousal survivor annuity will be 25 percent of the employee’s (annuitant’s) unreduced annuity if the annuitant had elected to provide a “less than maximum” survivor annuity. Note that the survivor spouse had to have formally agreed to that “less than maximum” election. The following example illustrates:

Example 2. Sharon, age 56, retires from federal service with 32 years of federal service. Her starting FER annuity is $50,000. She elected to give her husband Ken a less than maximum survivor annuity of 25 percent. Ken gave his consent for a less than maximum FERS survivor annuity. After the 5 percent cost to give a less than maximum survivor annuity is subtracted from her starting FER annuity, the initial survivor annuity benefit for Ken is:

$50,000 Sharon’s starting FERS gross annuity
Less: 5 percent: ($2,500) Cost to give a less than maximum FERS survivor annuity
$47,500 Net annuity to Sharon (taxable)

If Sharon were to die before receiving a FERS COLA, then Ken would receive a less than maximum FERS starting survivor annuity of:

25 percent of $50,000, or $12,500 (taxable)

Effect of Cost-of-Living Adjustment (COLA)

FERS annuitants who retire before age 62 do not receive any cost-of-living adjustments (COLAs) to their annuities until the January following the year they become age 62. COLAs increase the survivor annuity by the same percentage as the annuitant’s full FERS gross annuity. Upon the death of the FERS annuitant, the initial annuity paid to the surviving spouse will include all of the previous COLAs that had been applied to the annuitant’s full gross annuity. The survivor annuity will also be increased by all future FERS COLAs.

The following examples illustrate:

Example 3. Same facts as in Example 1 except that William dies at age 75 after receiving 12 years of COLAs. His initial FERS gross annuity of $45,000 has increased to $55,000. Serena is living when William dies. A summary of William’s gross annuity, the cost to give a full survivor annuity to Serena, and the survivor annuity benefit to Serena is:

$55,00 William’s FERS gross annuity
Less: ($4,500) Cost of giving a maximum spousal survivor annuity
$50,500 Net annuity to William (taxable)

When William dies, Serena will receive a maximum FERS spousal survivor annuity of:

50 percent of $55,000, or $27,500 (taxable)

Example 4. Same facts as in Example 2 except that Sharon dies 25 years later at age 81, after receiving 18 years of COLAs. Her initial FERS annuity of $50,000 has increased to $65,000. Ken is living when Sharon dies. A summary of Sharon’s gross annuity, the cost to give a less than maximum FERS survivor annuity to Ken, and the survivor annuity to Ken is:

$65,000 Sharon’s FERS gross annuity
Less: ($2,500) Cost of giving a less than maximum spousal survivor annuity
$62,500 Net annuity to Sharon (taxable)

When Sharon dies, Ken will receive a less than maximum survivor annuity of:

25 percent of $65,000 or $16,250

Lump-Sum Credit Payment

The lump-sum credit payment consists of the unrefunded amount of one or more of the following:

1. Retirement (FERS) deductions withheld from a FERS employee’s salary every pay period
2. Redeposits of refunds of retirement deductions previously paid
3. Deposits for non-deduction (temporary) service prior to Jan. 1, 1989
4. Deposits for post-1956 military service, or
5. In the case of an employee or former employee who dies with less than five years of creditable service, interest to the date of separation on any amount of FERS contributions covering over one year of service.

If there is no FERS survivor annuity payable upon the FERS annuitant’s death, any remaining portion of the lump-sum credit that has not been paid to the annuitant as part of the FERS annuity is payable to the person(s) entitled under the order of precedence.

If there is a FERS spousal survivor annuity payable on the death of the FERS annuitant, then the person(s) entitled under the order of precedence may be paid a lump-sum of the following, if not paid to the annuitant before his or her death:

1. Partial deposits for civilian service performed before Jan. 1, 1989, and
2. Partial deposits for post-1956 military service.

If there is a FERS spousal survivor annuity payable, the following may not be paid in a lump-sum credit payment:

1. Partial or completed deposits for non-deduction (temporary) service, unless the service covered by the deposit is not creditable, and/or
2. Completed deposits for post-1956 military service, unless the service covered by the deposit is not creditable under FERS.

A lump-sum credit payment is subject to any properly certified, timely request for recovery of a valid debt due the United States.

Spousal Special Retirement Supplement Annuity

In order to be eligible for the FERS spousal Special Retirement Supplement (SRS) annuity, the surviving spouse must be:

• Entitled to a current spousal FERS survivor annuity

• Under age 60

• Entitled to Social Security survivor (widow/widower) benefits, based on the deceased annuitant’s employment under Social Security at age 60, and

• Not presently eligible for Social Security mother, father or disability benefits based on the deceased annuitant’s account.

Note the following:

(1) In cases where the surviving spouse is entitled for a Social Security mother or father (“parent”) benefit because he or she is caring for an eligible child (a child younger than age 16), failure to apply for the Social Security “parent” benefit will not allow payment of the spousal SRS annuity; and

(2) The surviving spouse’s earned Social Security benefit is not considered in determining if he or she is eligible for the spousal SRS annuity.

The deceased annuitant must have had a minimum five years of creditable civilian service and at least one full calendar year of creditable FERS service in order for the spousal SRS annuity to be payable.

Amount Payable

The spousal SRS annuity requires determination of the amount of an “assumed” CSRS survivor annuity and a hypothetical Social Security calculation. The spousal SRS annuity 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 surviving spouse would be entitled under CSRS based on the service of the deceased annuitant. It is determined:

• As of the date after the date of the annuitant’s death,

• As if the surviving spouse had made application for the benefit, and

• As if the service of the deceased annuitant were creditable under CSRS.

The computation of the estimated Social Security spousal survivor benefit is the same as the computation of the special retirement supplement with three exceptions:

• When computing a spousal SRS annuity, earnings used include basic pay in the year of retirement and basic pay as a reemployed annuitant, if any, after retirement.

• Number of benefit computation years. The number of years used is the year following the year of death or use the year in which the FERS annuitant reached age 62 (if earlier) minus the year the FERS annuitant reached age 22, or 1951, whichever is later. This gives the number of elapsed years minus 5.

• Computation of the Primary Insurance Amount (PIA). The “bend points” used in the PIA formula are the “bend points” that apply in the year in which the FERS annuitant dies. The FERS spousal SRS annuity is reduced as if the surviving spouse were age 60 when the benefit begins. The reduction factor for a survivor spousal annuity SRS is 0.715.

Other Information About the Spousal SRS Annuity

1. The spousal SRS annuity is not subject to the Social Security earnings test

2. The spousal SRS annuity (like the FERS spousal survivor annuity) is increased by FERS COLAs, and

3. The spousal SRS annuity terminates at the beginning of the month in which the spouse attains age 60.

Application Process

Upon the death of a FERS annuitant, the surviving spouse should notify OPM’s retirement office as soon as possible. To do so, the surviving spouse should go online to the OPM Retirement Information and Services reporting page found here. The following is what the FERS spousal survivor annuitant will see upon linking to that OPM site:

Once on the reporting page, the surviving spouse will need to provide information about the deceased annuitant as well as information about the surviving spouse, and surviving children if the children are eligible for children survivor benefits. Once the completed report is submitted online to OPM by the surviving spouse, OPM will send a confirmation email that they received the surviving spouse’s report of the annuitant’s death. OPM’s retirement office usually responds within three to five business days.

A surviving spouse has 30 years after the FERS annuitant’s death in which to file an application for spousal FERS death benefits.