One of the more difficult choices that federal employees face as they move into retirement is whether to provide for a survivor benefit on their annuities. The choice has important financial ramifications, not only for the employee but also for family members. But there also are important benefit implications.
The financial side is relatively easy to quantify. Choosing to provide the standard survivor annuity as a CSRS retiree results in a reduction to the annuity of about 10 percent. In return, the survivor would receive an annuity equal to 55 percent of the unreduced annuity upon the annuitant’s death. Smaller survivor benefits, with associated smaller reductions in the primary annuity, also can be elected.
Under FERS, the retiree can choose two types of survivor annuity: a 50 percent benefit, which results in a 10 percent reduction of the primary annuity, or a 25 percent benefit, which results in a 5 percent reduction.
From a financial viewpoint, deciding whether to provide a survivor benefit can be a complicated matter that depends on, among other factors, total assets and any benefits the spouse earned on his or her own accord.
From a benefits viewpoint, the major factor in the decision always has been that in general, if a survivor benefit is not elected, the survivor—and possibly certain eligible children—would not be able to remain covered under the Federal Employees Health Benefits program upon the primary annuitant’s death. This factor alone has made the difference for many retirees in the election decision.