Spouse was a federal employee and recently passed – what to know about FERS, FEHB, and more.
The surviving spouse of a federal employee, who dies while in service, is generally entitled to several benefits. Working through this maze during a time of grief can be overwhelming for a spouse, though. This article will outline the key benefits to be aware of. Note that the following applies only to spouses of employees who are current employees when they pass (not retired). There will be a follow-up article to cover the benefits for spouses of retired federal employees.
1. FERS Spousal Survivor Annuity-
If an employee dies in service with at least 10 years of federal service, the spouse is entitled to a survivor annuity which is equal to 50% of the annuity the employee would have been entitled at the time of his or her death. This annuity will be eligible for cost-of-living adjustments. The annuity is computed based on the years of service the deceased employee had, the type of service, and high-three average salary on the date of death. Any unused sick leave may also be used in the computation.
2. FEHB Health Insurance-
If the surviving spouse was covered under the deceased’s health insurance, and there is a spousal survivor annuity payable that the spouse may continue under the health insurance. The premium will be paid from the survivor annuity. If an employee had not worked 10 years to allow for the spousal survivor annuity but had completed 18 months of service making the spouse eligible for the Basic Employee Death Benefit (BEDB) then the spouse is also eligible to keep FEHB. They will pay OPM directly for the premiums in this scenario. If the spouse was not on the deceased employee’s FEHB at the time of death, they are not eligible to enroll in health benefits at all.
3. Basic Employee Death Benefit (BEDB)-
Generally, a surviving spouse is eligible for this benefit if the federal employee had at least 18 months of creditable service at the time of death and was married for at least 9 months at the time of death. The amount of the BEDB is calculated by an OPM formula which is increased annually plus 50% of the employee’s final SF-50 salary, or high-three average salary if higher. For 2022, the base amount is about $37,000 plus the amount based on the employee’s salary. There are several options that the surviving spouse has regarding receiving this benefit. The options have important tax implications. Consulting with a financial or tax advisor before making this decision is recommended.
4. Other benefits such as TSP, FEGLI Life Insurance, and Unused leave and Final pay-
These benefits will typically be distributed to a named beneficiary which may or may not be the surviving spouse. If the spouse is named, they will contact TSP and FEGLI directly to claim any benefits due. The deceased employee’s agency will distribute any unused leave and final pay period benefits due. This should be coordinated with the agency's HR department.
At Serving Those Who Serve, we are proud to offer a webinar series for all federal employees. Our survivor benefits webinar covers all the federal benefits as well as the social security benefits due to surviving spouses and other potential beneficiaries. Our webinars include a live question and answer session and are offered at no cost. Here is the link to view and register for all our webinars.
**Written by Jennifer Meyer, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Jennifer Meyer and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. 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. **