Last week I wrote about the annuities available to the surviving spouses of federal employees. This week I’ll explain the benefits to the surviving spouses of federal retirees.

Unless barred by a court-ordered divorce settlement, if you are married when you retire, you are required by law to provide a full survivor annuity for your spouse unless you and your spouse agree to a lesser amount – or none at all – in writing.

A full survivor annuity under CSRS is 55 percent of your base annuity. Under FERS, it’s 50 percent. A reduced survivor annuity under CSRS may be a percentage of whatever base you elect or it can be a specific dollar amount. If you elect a specific dollar amount, it can be as little as $1 per month. Under FERS the only reduced annuity possible is 25 percent.

When you retire, OPM determines the amount your own annuity would have to be reduced to pay for the survivor benefit. The reduction is made from the amount of annuity you are entitled to on the day you retire, before any deductions are taken out for taxes, life or health insurance, etc.

If you are a CSRS retiree, OPM uses a formula to determine the reduction in your own annuity. Under CSRS it is 2.5 percent of the first $3,600 you elect plus 10 percent of any amount above $3,600. Under FERS, the reduction is less complicated. Your annuity is reduced by 10 percent of the amount of survivor annuity you elect.

While most retirees elect a full survivor annuity for their spouses, there may be a good reason for electing a smaller survivor annuity rather than none at all. Doing so preserves your spouse’s entitlement to be covered under the Federal Employees Health Benefits (FEHB) program. Unless your spouse is already entitled to that coverage in his or her own right as a federal employee or retiree, your survivor spouse has to be receiving an annuity to continue that coverage after your death. A CSRS survivor with a substantially reduced annuity will have to pay the premiums directly to OPM if the reduction elected is too small to cover them. A FERS survivor is less likely to have any difficulty paying for those premiums under the 25 percent reduction.

All survivor annuity benefits are increased annually by cost-of-living-adjustments (COLAs) regardless of the age of the survivor.

Note: If your surviving spouse remarries before age 55, the survivor annuity ends. However, it may be restored if that marriage is ended through annulment, divorce or the death of the new marriage partner.

Next week I’ll go over the pluses, minuses, and costs of continuing your life insurance coverage in retirement.