I recently had a confusing exchange with a retiree. He e-mailed me to ask if the premiums for a survivor annuity were increased by COLAs. I explained that electing a survivor annuity results in a one-time reduction in a retiree’s base annuity, and that COLAs would be applied only to the new base annuity he’d be receiving. It wasn’t long before I got another e-mail from him asking if the answer to his question was "yes" or "no."

It took me a while before I realized that his confusion proceeded from a false premise. He thought that the survivor annuity he had elected would have premiums due every year, the way they would be if he had taken out a life insurance policy on his wife. When I finally got through to him, he explained that the reason he was confused is that he couldn’t believe that electing a survivor annuity resulted in a one-time only permanent reduction in his monthly benefit. The sad news was this: He told me that if he had known, he and his wife would have elected a full survivor annuity instead of a partial one.

I bring this up because there may be others out there who are suffering from the same misunderstanding about how the election of a survivor annuity works. So let me explain.

If you are married when you retire, you are required by law to elect a full survivor annuity for your spouse. A full survivor annuity under CSRS is 55 percent of your base annuity; under FERS, it’s 50 percent. With the written and notarized consent of your spouse, it can be less than that or nothing at all. Under CSRS, the amount elected can be as small as $1 per year. Under FERS, the only partial benefit option is 25 percent.

The reduction in your own annuity for a CSRS survivor annuity would be 2.5 percent of the amount you elect up to $3,600 plus 10 percent of any amount over $3,600. Under FERS it would be 10 percent for a full survivor annuity election, 5 percent for a partial annuity election.

If you were to die before your spouse, he or she would be entitled to the amount you elected. It would be derived from your original base annuity before you made an election, increased by all cost-of-living adjustments that occurred between the time you retired and your death.

If your spouse died before you (or otherwise lost eligibility for the survivor benefit), you would need to notify OPM, which would restore your annuity to what it would have been had you not made a survivor election.