The Spousal Survivor Anuity benefit for FERS workers. Eligibility, benefit amounts, and more-
Edward A. Zurndorfer-
For employees covered by the Federal Employee Retirement System (FERS) and who die while still in federal service, there are death benefits payable to certain individuals. This is the second of three columns discussing death benefits for FERS employees who die while still in federal service. This column discusses spousal survivor annuity and insurance benefits.
Eligibility for a Spousal Survivor Annuity Benefit
A monthly survivor annuity benefit is payable to the surviving spouse of a deceased employee if the employee: (1) Completed at least 10 years of creditable federal service at the time of the employee’s death; and (2) the employee died while FERS contributions were being deducted from his or her paycheck.
The minimum 10 years of creditable federal service includes: (1) Service while initially covered by CSRS and the employee later switched to FERS (including refunded CSRS service); (2) CSRS Offset service of which the employee received a refund of contributions before being covered by FERS; (3) FERS service for which retirement contributions remain to the employee’s credit; (4) “non-deduction” service – usually temporary service – in which FERS retirement contributions were not deducted from the employee’s paycheck and the service occurred prior to January 1, 1989, regardless of whether a deposit for such service had been made; and (5) military service for which the deceased performed prior to becoming a FERS employee but had not made a full deposit. The spousal survivor annuitant can make a deposit and if such a full deposit including interest charges is made, the survivor annuity will be calculated including all years of military service.
Payment or non-payment of a military deposit may affect the amount and/or payment of the FERS spousal survivor annuity. Consider the following examples:
Example 1. Carl, a FERS employee, died while in federal service. At the time of his death, Carl had 10 years of federal service and five years of prior military service before entering federal service. Carl had not made a deposit for his military service. His surviving spouse Wilma could make this deposit. If Wilma elects not to make the military deposit for Carl’s five years of military service, then the survivor annuity will be computed based on 10 years of service. If Wilma makes the deposit, then the survivor annuity will be computed based on 15 years of service.
Example 2. Francine, a FERS employee, died while in federal service. At the time of her death, Francine had six years of civilian service under FERS and five years of prior military service for which a deposit is owed but not paid. Francine was married to Henry. If Henry elects not to make a military deposit on behalf of Francine, then no survivor annuity is payable because Francine had less than 10 years of FERS service at the time of her death. If Henry makes a full military deposit on behalf of Francine, then Francine’s combined civilian and military service time of 11 years enables Henry to meet the 10-year FERS service requirement for payment of a FERS spousal survivor annuity.
Amount of a FERS Spousal Survivor Annuity Upon the Death of a FERS-covered Employee
In general, a spousal survivor annuity upon the death of a FERS-covered employee is computed as if the employee had retired optionally and received a Basic FERS annuity with no age reduction on the date of death. The surviving spouse receives 50 percent of the deceased employee’s Basic FERS annuity, computed based on the deceased employee’s type of service, age, length of service, unused sick leave, and high-three average salary on the date of death.
In the case of a deceased law enforcement officer (LEO), firefighter or air traffic controller, the spousal survivor annuity is 50 percent of the annuity computed under the special formula for law enforcement officers, firefighters, and air traffic controllers, if, at the time of death, the deceased employee was: (1) age 50 or older and had at least 20 years of law enforcement, firefighter or air traffic controller service; or (2) any age with at least 25 years of law enforcement, firefighter or air traffic controller service. If on the date of death, the employee did not meet the age and/or service requirements stated above, then the spousal survivor annuity is computed using the regular formula discussed in the previous paragraph. The following examples illustrate the spousal survivor annuity calculation:
Example 3. Robert, age 48, and a FERS-covered employee died in federal service with 22 years of service. At the time of his death, Robert had 1043 hours (6 months) of unused sick leave hours and a high-three average salary of $100,000. Robert was married at the time of his death. His spouse is entitled to a full survivor annuity computed as follows:
FERS annuity computation as of the day of Robert’s death: 22.5 years times 1% times $100,000 equals $22,500
Full spousal survivor annuity: .50 times $42,500 equals $11,250.
Example 4. Julie, age 52, and a FERS-covered law enforcement officer (LEO), died in federal service with 26 years of LEO service. At the time of her death, Julie had 2087 hours (one year) of unused sick leave and a high-three average salary of $150,000. Julie was married at the time of her death. Her spouse is entitled to a full survivor annuity computed as follows:
FERS LEO annuity computation as of the day of Julie’s death: (20 years times 1.7% plus 7 years times 1%) times $150,000 equals $61,500
FERS LEO full spousal survivor annuity: 0.50 times $61,500 equals $30,750.
Example 5. Julio, age 46 and a FERS-covered LEO, died in federal service with 15 years of LEO service at the time of his death. Julio had 1,043 hours of unused sick leave (6 months) and a high-three average salary of $100,000. Julio was married at the time of his death. His surviving spouse is entitled to a full survivor annuity, but because at the time of his death Julio had less than 25 years of LEO service, the FERS annuity, and survivor annuity will be computed using the regular FERS annuity computation rules and not the computation rules for special provision FERS employees like LEO’s.
FERS annuity computation as of the day of Julio’s death: (15.5 years times 1%) times $100,000 equals $15,500
FERS full spousal survivor annuity: 0.50 time s$15,500 equals $7,750.
FEHB Health Insurance Benefits for Surviving Spouse
If the deceased employee had FEHB self plus one (coverage for the deceased employee and surviving spouse) or self and family (coverage for the deceased employee, surviving spouse, and at least one child younger than 26), and a survivor annuity is payable to the surviving spouse, then the surviving spouse can continue FEHB health insurance coverage. The enrollment must be immediate and there can be no lapse in coverage. The federal government will pay on average 72 to 75 percent of the FEHB premiums throughout the surviving spouse’s life. The surviving spouse’s FEHB premiums – the other 25 to 28 percent – are deducted from the spousal survivor annuity. If the spousal survivor annuity is insufficient to pay the FEHB premiums, then the surviving spouse may make direct premium payments to OPM.
The surviving spouse who is eligible for the Basic Employee Death Benefit (BEDB) (discussed in a previous column) but who is not eligible for a survivor annuity because the deceased employee had less than 10 years of FERS service, may continue FEHB benefits by making direct premium payments to OPM.
If the deceased FERS employee had self only FEHB enrollment at the date of death, then the FEHB enrollment terminates at death with the surviving spouse having no rights to enroll in the FEHB program.
FEGLI Life Insurance Benefits
The order of precedence for payment of life insurance under the Federal Employees Group Life Insurance (FEGLI) program is: (1) Designated beneficiary, as shown on Form SF 2823; (2) widow or widower; (3) child or children in equal shares with the share of any deceased child distributed among the descendants of that child; (4) parents in equal shares or the entire amount to the surviving parent; (5) duly appointed administrator/executor of the estate; and (6) next of kin under the laws of domicile at the time of death.
The surviving spouse is encouraged to fill out and complete Form FE-6 (Claim for Death Benefits) (available for download here) upon the death of the FERS employee. The form FE-6 and all other life insurance forms should be sent to the Office of Federal Employees’ Group Life Insurance, together with a certified copy of the death certificate. If the claim is being made for accidental death, then the circumstances surrounding the death of the employee must also be documented.
The surviving spouse who receives a survivor annuity would also be eligible to have dental and vision insurance coverage offered through the Federal Employee Dental and Vision Insurance Program (FEDVIP) as well as long-term care insurance offered through the Federal Long Term Care Insurance Program (FLTCIP).
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street – Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.