Survivor Annuity Benefits Paid to Children of Deceased Federal Employees and Annuitants- Part 2 of 2
Edward A. Zurndorfer–
The previous FEDZONE column discussed the monthly survivor annuity benefits paid to the children of a deceased federal employee or annuitant. The deceased employee or annuitant was covered by either the Civil Service Retirement System (CSRS) or by the Federal Employees Retirement System (FERS). As was mentioned in that column, since the Social Security Administration (SSA) also pays a survivor benefit to children of deceased individuals who were covered by Social Security (such as FERS-covered employees/annuitants) children of deceased FERS-covered employees and FERS annuitants will have their OPM child monthly survivor benefits offset by their Social Security monthly survivor benefit. This column discusses this offset and the effect on the OPM monthly child survivor benefit.
First, a discussion on the Social Security surviving child death benefit. A surviving child of a deceased parent (mother or father) is entitled to a child’s survivor Social Security benefit if the following conditions are met: (1) The parent was either “fully insured” or “currently insured” with respect to Social Security; (2) the child is the child of the deceased parent; (3) the child was a tax dependent of the deceased parent; (4) the child is under age 18 (under 19 and a full-time elementary or secondary school student) or over age 18 and under a disability which began before age 22; (5) the child is not married; and (6) an application for the child’s Social Security death benefit is filed.
A child includes a natural (legitimate) child, stepchild, legally adopted child, dependent grandchild or a step-grandchild.
A child who qualifies for this benefit will receive 75 percent of the deceased parent’s primary insurance amount (PIA) at the time of the parent’s death. The PIA is defined as the amount of a “fully insured” (with respect to Social Security) individual’s monthly Social Security retirement benefit at his or her full retirement age (FRA) in current (on the day of the parent’s death) dollars. The following example illustrates:
William died at age 45. He paid into Social Security during his entire working life. At the time of William’s death, his PIA (at his FRA of age 67) was $2,000. William leaves behind two children, ages 16 and 13. Each child is entitled to a Social Security monthly survivor benefit of .75 times $2,000, or $1,500 per month. These monthly Social Security survivor checks will continue until the children reach age 18, or 19 if still in high school.
Note a child’s monthly survivor benefit may have to be reduced if the overall Social Security family maximum applies (150 percent of the deceased parent’s PIA) and therefore all Social Security survivor benefits based on the deceased’s earnings record have to be reduced pro-rata.
Coordination of Social Security Children Death Benefit and OPM Children Death Benefit
Any monthly FERS survivor benefit payable to any child of the deceased FERS-covered employee or FERS annuitant is reduced (offset) by the total amount of any Social Security survivor benefit payable to all children based on the Social Security earnings record of the deceased employee/annuitant. In many cases, the FERS survivor benefit is reduced to $0. The following example illustrates:
Carol, age 45, was a FERS-covered employee with 22 years of federal service at the time of her death on May 1, 2019. Carol had one child, age 12, at the time of her death. Carol’s PIA at the time of her death was $1,800. Carol was married at the time of her death. Her child is entitled to receive the higher of: (1) The OPM child survivor benefit amount – the single orphan rate in effect during 2019 – $537 per month; and (2) the Social Security child death benefit payment – 75 percent of Carol’s PIA, or .75 times $1,800 equal to $1,350 per month. Carol’s child will, therefore, receive $1,350 per month.
There is no offset or reduction in any month for which the child is not entitled to any Social Security child death benefit. For example, if the Social Security death benefit ends because the child attained age 18, then the FERS survivor benefits are payable to the child until age 22, assuming that the child is a full-time student.
If the death of the employee results from injury or illness sustained in the performance of duty, compensation benefits may be payable. These payments are administered by the Department of Labor’s Office of Workers’ Compensation Programs (OWCP). OWCP payments are reduced by the amount of any Social Security survivor benefits attributable to the deceased employee’s Federal service while under FERS coverage.
Surviving Parent or Legal Guardian Responsibility to Obtain Children Survivor Benefits
A parent, legal guardian or other person with care and custody of the surviving child or children eligible for FERS children survivor benefits must: (1) Complete Standard Form (SF) 3104 and SF 3104B on behalf of the child or children; and (2) submit a copy of the SSA award or denial letter to OPM upon receiving it. Note that OPM requires evidence of the Social Security entitlement or non-entitlement before making any payments.
Finally, if OPM child monthly payments are payable, then because a surviving child is eligible for federal health benefits (the Federal Employees Health Benefits Program or FEHBP), FEHBP premiums will be withheld from the OPM monthly child survivor payment. In the situation in which any OPM child monthly payment is reduced below the amount necessary to pay the FEHBP premium because of a Social Security offset, then the child or children can continue FEHBP coverage by making direct payments to OPM. OPM will provide the payer with the procedures for making direct payments.
Edward A. Zurndorfer is a Certified Financial Planner, 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 the employees of Serving Those Who Serve 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.