Retirement & Financial Planning Report

Although a non-spouse (companion, significant other, life partner, etc.) is not entitled to a survivor benefit, there is a little-known exception to this rule. The Office of Personnel Management (OPM) recognizes common-law marriages for survivor benefit purposes, but only if the state you live in recognizes them or your common-law marriage occurred in such a state even though you now live somewhere else.

On the other hand, if you can’t meet the common-law marriage requirement, there is another little-known provision of law that will let you provide a survivor annuity to anyone who has an insurable interest in you. So, what’s does “insurable interest mean”? It means that the person is financially dependent on you and might reasonably be expected to derive a financial benefit from your continued life. Obviously, that would include your current spouse. But it could also apply to a blood or adoptive relative closer than a first cousin (such as a child), a same-sex domestic partner who meets certain qualifications, a former spouse/qualifying partner, someone to whom you are engaged to be married or enter into a qualifying partnership, or someone with whom you would be considered to be in a common-law marriage in a place that recognizes such arrangements.

Further, if the person you want to provide a benefit for isn’t on the list above, you can establish an assumption of insurable interest by submitting affidavits from one or more people who have personal knowledge of your relationship. They’d need to confirm your relationship, the extent to which the non-spouse is dependent on you, and the reasons he or she might reasonably expect to derive a financial benefit if you stayed alive. Of course, you’d also need to prove that you’re in good health by having a medical exam, and then having the report signed and dated by a licensed physician.

An insurable interest annuity provides the survivor with 50 percent of the dollar amount you select as a base. How much that cost you depends on two things: the difference in ages between you the person you want to get the benefit and the amount of your annuity that’s available to be used as a base. That will vary depending on whether there is anyone else who is entitled to a survivor benefit, for example, a current or former spouse.

Here’s a table that can help you to figure out how much your base annuity would be reduced if you elect an insurable interest annuity:

10 percent if the survivor is the same age, older than, or less than 5 years younger

15 percent if 5 but less than 10 years younger

20 percent is 10 but less that 25 years younger

25 percent if 15 but less than 20 years younger

30 percent if 20 but less than 25 years younger

35 percent if 25 but less than 30 years younger

40 percent if 30 or more years younger

Of course, there are other kinds of benefits that may be provided for a non-spouse, for example, the proceeds of your Thrift Saving Plan account and your Federal Employees Group Life Insurance. And they can receive those benefits as long as someone else doesn’t have legal title to them. Just remember to fill out designation of beneficiary forms to make sure that the money goes where you want it to go.