If you are married when you retire, you are required by law to elect a full survivor annuity for your spouse. Image: Monster Ztudio/Shutterstock.com
By: Reg JonesAs Yogi Berra once said, “This is déjà vu all over again.” Recently I got an email from an employee asking me if the “premiums” for a survivor annuity were increased by COLAs.
I told him no, and explained that electing a survivor annuity would result in a one-time permanent reduction in his own annuity to pay for that benefit. There are no “premiums” unless you consider the impact of that reduction to your annuity as you receive it to be a kind of a premium (don’t; you’ll just confuse yourself).
His confusion was the result of a common misunderstanding about how things work. He thought that the survivor annuity he elected would have premiums due every year, the way they would be if he had taken out a life insurance policy on his wife. He said the reason he thought so was that he couldn’t believe that electing a survivor annuity would only result in a one-time adjustment.
I’m bringing this up now because there may be others out there who also misunderstand how the election of a survivor annuity works. So, let me fill you in.
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 FERS is 50 percent of your base annuity. With the written consent of your spouse, it can be reduced to 25 percent or none. Under CSRS the default amount is 55 percent. However, with the written consent of your spouse, the amount elected can be as small as $1 per year or none at all.
The one-time reduction in your own annuity under FERS is 10 percent for a full survivor election or 5 percent for a partial election. Under CSRS the reduction would be 2.5 percent of the amount you elect up to $3,600, plus 10 percent of any amount over $3,600.
If you were to die before your spouse does, he or she would be entitled to a survivor benefit in the amount you elected. It would be based on your original annuity before you made an election, increased by all cost-of-living adjustments (COLAs) that occurred between the time you retired and your death.
If your spouse dies before you do (or lost eligibility for a survivor benefit), you would have to notify OPM. It would restore your annuity to what it would have been had you not made a survivor election—but only moving forward, not retroactively.
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