What Is the Lump Sum Death Benefit and Who Is Eligible to Receive It?

During their years of federal service, employees covered by the Civil Service Retirement System (CSRS) or by the Federal Employees Retirement System (FERS) contribute a portion of their paychecks into either retirement system.

When a CSRS- or a FERS-covered employee retires, the retired employee receives these contributions as part of his or CSRS or FERS annuity check. The total amount of CSRS or FERS contributions made is paid back to the retired employee – the annuitant – over the annuitant’s life expectancy or, if the annuitant is giving a survivor annuity (most probably to a surviving spouse) over the joint life expectancy of the annuitant and the annuitant’s designated survivor annuitant.

The question then becomes: What happens if a CSRS or FERS employee were to die before retiring? What happens to the employee’s CSRS or FERS contributions? What were to happen if a CSRS or FERS annuitant and a survivor annuitant were to die before all contributions had been returned? What happens to the remaining CSRS or FERS contributions? This column discusses the lump sum death benefit paid to survivors of deceased CSRS or FERS employees and annuitants.

CSRS Lump Sum Death Benefit Credit

During an employee’s CSRS (or CSRS Offset) federal service, the employee contributes 7 percent (CSRS) or 0.8 percent (CSRS-Offset) of his or her salary to the CSRS Retirement and Disability Fund. An employee may have made a deposit for temporary time or military service. An employee may have left federal service and requested a refund of his or her previously made CSRS contributions. The departed employee subsequently returned to federal service and redeposited these previously withdrawn contributions.

The lump sum death benefit credit under CSRS paid to survivor(s) of a deceased CSRS or CSRS Offset employee or annuitant consists of the unrefunded amount the following:

(1) CSRS contributions that were withheld from the deceased employee’s salary through all the years the employee was a full time or part time permanent employee;

(2) redeposits of refunds previously paid;

(3) deposits for temporary time;

(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 (or transfer to a position not covered by CSRS) on any amount over one year of service. Note that voluntary contributions to the CSRS Retirement and Disability Fund made through the Voluntary Contribution Program (VCP) are not part of the lump death benefit credit.

If an employee dies in service or when an annuitant dies in retirement and there is no CSRS survivor annuity payable, then any portion of the total CSRS contributions made that has not been paid to the annuitant and survivor annuitant as part of a CSRS monthly or monthly survivor annuity is payable in the following precedence:

(1) Designated beneficiary as shown on Form SF 2808 (Designation of Beneficiary, CSRS);

(2) widow(er);

(3) child or children;

(4) parents;

(5) Executor or Administrator of the Estate; and

(6) next of kin.

Since OPM’s Retirement Office does not know where a deceased employee’s or deceased annuitant’s relative lives, CSRS and CSRS Offset employees and annuitants if they have not done so already are encouraged to fill out SF 2808, which – in addition designates beneficiaries- lists the addresses of these designated beneficiaries (this is necessary because OPM mails the checks to the designated beneficiaries). Employees and annuitants should send the completed SF 2808 to:

U.S. Office of Personnel Management
Retirement Operations Center
P.O. Box 45
Boyars, PA 16017-0045

Upon the death of the CSRS/CSRS Offset annuitant and if applicable survivor annuitant, designated beneficiaries for the CSRS lump sum death benefit must:

(1) Complete the Application for Death Benefits (SF 2800) and attach any other forms and/or evidence as the application or circumstance require; and

(2) attach a certified copy of the deceased’s death certificate and send to:

Office of Personnel Management
Retirement Operations Center
Attention: Survivor Processing Section
P.O. Box 45
Boyers, PA 16017-0045

CSRS Lump Sum Death Benefit Payment – Government Claims and Federal Income Taxes

A CSRS lump sum death benefit payment is subject to any properly certified timely request for recovery of a valid debt due the United States.

The amount of lump sum death payment under CSRS is not subject to Federal income tax because the original contributions were previously taxed. However, any interest paid on these contributions is taxable in the year in which the refund is made.

FERS Lump Sum Death Benefit Credit

During a FERS employee’s federal service, the employee contributes 0.8, 3.1 or 4.4 percent of the employee’s salary to the FERS Retirement and Disability Fund. The amount contributed each pay date depends on when the employee entered Federal service under FERS – before 2013, during 2013 or after Dec. 31, 2013, respectively). The employee may have a deposit for temporary civilian service performed prior to Jan. 1, 1989. The employee may have made a deposit for prior military service. The employee may have a redeposit of previously refunded FERS contributions when the employee left Federal service and then returned to federal service.

The lump sum death benefit under FERS paid to survivors of deceased FERS employees or annuitants consists of the unrefunded amount of one or more of the following:

(1) FERS contributions via payroll deduction withheld from the deceased employee’s pay throughout the employee’s years of full and part time permanent service;

(2) deposits from temporary time occurring before Jan. 1, 1989;

(3) deposits for prior military service; and

(4) redeposits of previously refunded FERS contributions.

If a FERS employee dies in service or when a FERS annuitant dies in retirement and no FERS survivor annuity is payable, then any portion of the lump sum death benefit credit under FERS that has not been paid to the annuitant or a survivor annuitant as part of the FERS monthly annuity or monthly survivor annuity is payable in the following order of precedence: (1) Designated beneficiary as shown on Form SF 3102 (Designation of Beneficiary, FERS); (2) widow(er); (3) child or children; (4) parents; (5) Executor or Administrator of the Estate; and (6) next of kin. Since OPM’s Retirement Office does not know where a deceased FERS employee’s /annuitant’s relatives live, all FERS employees, no matter what stage they are in at this point of Federal service, should complete and submit Form SF 3102 which lists the names and addresses of designated beneficiaries (this is necessary because OPM mails the checks to the designated beneficiaries). The completed SF 3102 should be sent to:

U.S. Office of Personnel Management
Retirement Operations Center
P.O. Box 45
Boyars, PA 16017-0045

Applicants for the FERS lump sum death benefit payment must:

(1) Complete the Application Form for Death Benefits (SF 3104); and attach any other form and/or evidence as the application or circumstances require; and

(2) attach a copy of the death certificate of the deceased and send to:

Office of Personnel Management
Retirement Operations Center
Attention: Survivor Processing Section
P.O. Box 45
Boyers, PA 16017-0045

FERS – Lump Sum Basic Employee Death Benefit

The Basic Employee Death Benefit (BEDB) is a lump sum payment made to the surviving spouse or former spouse of a deceased married FERS employee who dies in service with at least 18 months of federal service. The BEDB is not a survivor annuity. Therefore, a surviving spouse can also be paid the lump death benefit payment if that person is entitled to the lump sum death benefit payment under order of precedence.

FERS Lump Sum Death Benefit Payment – Government Claims and Federal Income Taxes

A FERS lump sum death benefit payment is subject to any properly certified timely request for recovery of a valid debt due the United States.

The amount of lump sum death benefit payment under FERS is not subject to Federal income tax because the original contributions were previously taxed. However, any interest paid on these contributions is taxable in the year the refunded contributions are paid.

“Trans” FERS Employees – What Should They Do?

Those employees who contributed to both CSRS and FERS – in general, for at least five years to CSRS and then transferred to FERS (most probably during one of the two FERS “open seasons” that OPM conducted in 1987/1988 and in 1998) and will be retiring under FERS – will be receiving two annuities. One annuity is a CSRS annuity based on years working under CSRS and another annuity which is a FERS annuity based on years working under FERS. These employees are called “Trans” FERS employees. As a result of receiving both a CSRS annuity and a FERS annuity, a “Trans” FERS employee should fill out and submit to OPM both forms SF 2808 and SF 3102.