Departing FERS Employees Who Choose to Receive a Deferred Annuity Can Give a Survivor Benefit

A recent FEDZONE column discussed “vesting” retirement requirements for FERS employees. With thousands of federal employees losing their federal jobs in recent months, the question among many of these departing employees is: What happens to my FERS retirement? In particular, their FERS annuity. In general, when a FERS employee retires from federal service after meeting the minimum age and service requirements, the retiring employee will receive in one to two months after his or her retirement date the first of FERS monthly annuity checks that will continue throughout the retired employee’s lifetime.

But federal employees who leave federal service (as a result of a reduction-in-force, job elimination or firing) before meeting the minimum age and service requirement are not eligible for an immediate FERS annuity. Instead, they are eligible for deferred retirement in which they will collect their monthly FERS annuity at a later date. To be eligible for a deferred retirement, the departing employee must have at least five years of creditable service and not request a lump-sum refund of their contributions that were made to the FERS Retirement and Disability Fund via payroll deduction.

Deferred retirement means that the departed employee will receive his or her FERS annuity at a later date. That date depends on how many years of creditable FERS service the employee had at the time of departing federal service. The following table summarizes when the deferred annuity starts:

Within a few months of becoming eligible to start receiving his or her deferred annuity, the departing employee needs to download OPM Form RI 92-19 (Application for Deferred or Postponed Retirement), fill it out, and then submit the application to the Office of Personnel Management (OPM), Retirement Office.

What happens if the departed employee were to die before reaching the age at which he or she becomes for his or her deferred annuity? In that case, if the deceased former spouse was married while working in federal service, then the surviving spouse can apply for a FERS spousal survivor annuity.

How Does a Widow/Widower Qualify as a Surviving Spouse for a Deferred FERS Annuity?

A widow/widower is considered a surviving spouse if he or she meets one of the following requirements: (1) The surviving spouse and the former employee were married for at least nine months before the death of the former employee; (2) A child was born of the marriage. For this purpose, a child includes (a) a child born posthumously to the deceased former employee and spouse; (b) a child born to the deceased former employee and spouse before they were married; (c) a child of a prior marriage between the deceased former employee and spouse; or (3) The death of the former employee was accidental.

Eligibility Requirements

If the following requirements are met, then the surviving spouse is entitled to a survivor annuity upon the death of the former employee: (1) The surviving spouse meets the definition of a surviving spouse; (2) The surviving spouse was married to the former employee on the date of the former employee’s separation from federal service; and (3) The former employee had at least five years of civilian service covered by deductions or deposits and a total of at least 10 years of “creditable” service. The 10-year service requirement includes: (a) Active-duty military service and civilian service for which deductions or deposits are in the former employee’s retirement account; and (b) Temporary service for which a surviving spouse makes a deposit. Note that the surviving spouse of a deceased former employee may not make a deposit for military service.

Computation of Survivor Annuity of a Former Employee

The survivor annuity is equal to 50 percent of the deceased former employee’s FERS “basic” annuity. If the survivor annuitant elects to begin receiving the annuity on the date the deceased employee would have met the age and service requirements for an unreduced annuity. The amount of the survivor annuity is reduced if the survivor elects to receive the annuity beginning the day after the former employee’s death.

Unreduced FERS Annuity Computation Formula

The following steps are performed to compute the deceased former employee’s annual basic annuity and then reduced to give a full survivor annuity.

Step 1. Compute the deceased former employee’s annual basic annuity (unreduced for survivor benefits) as if the former employee had become entitled to receive an unreduced deferred annuity.
Step 2. Multiply the former employee’s basic annuity by 50 percent to obtain the unreduced annual survivor benefit.
Step 3. Divide the unreduced annual survivor benefit by 12 and round to the next lower dollar to obtain the unreduced monthly survivor benefit payable to the survivor when the former employee would have reached the age for deferred retirement benefits.

Reduced FERS Survivor Annuity Computation Formula

If the survivor annuitant elects to have the survivor annuity begin on the day after the former employee’s death, then the survivor annuity is actuarially reduced as follows:

Step 1. Computed the deceased former employee’s annual basic annuity (unreduced for survivor benefits) as if the former employee had become entitled to receive an unreduced deferred annuity.
Step 2. Multiply the former employee’s basic annuity by 50 percent to obtain the unreduced annual survivor benefit.
Step 3. Multiply the appropriate Present Value Conversion Factor by the unreduced annual survivor benefit.
Step 4. Divide the reduced annual survivor benefit and round to the next lower dollar amount to obtain the monthly survivor annuity benefit.

Note that cost-of-living adjustments are made only if the survivor annuity is paid. Therefore, although a survivor annuity commencing at the earlier date is at a lower rate, it increases with COLAs. That means that there are no COLAs applied to either the deferred annuity or the deferred survivor annuity until it actually begins.