Retirement Policy

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Elaine Lumsden

Is electing a survivor benefit for your current spouse required?  For anyone who is married at the time of retirement, electing a full survivor benefit for their current spouse is required unless the spouse is willing to sign and notarize the appropriate form accepting either a partial or no survivor benefit.

What is the cost and entitlement of this survivor benefit?  For CSRS, a full survivor benefit is 55% of the retiree’s annuity after any reduction for age or deposit service but before the cost of the survivor benefit election is applied.

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CSRS Example:  Andy is retiring at age 55 with 30 years of service and has no service for which a deposit is owed.  His unreduced annuity is $60,000/year or $5,000/month.

·      Full survivor benefit entitlement would be 55% x $60,000 = $33,000/year or $2,750/month.  The cost would reduce his annuity by $5,730/year or $477.50/month.

·      Partial CSRS survivor benefit, the survivor would receive 55% of the annual base amount chosen.  Andy and his wife elect a partial benefit base of $30,000.  She would receive 55% x $30,000 = $16,500/year or $1,375/month.  Cost for this partial survivor benefit would be $2,730 per year or $227.50 per month.

*NOTE CSRS formula is $90 for the first $3,600 of benefit elected and 10% of any amount over $3,600

FERS Example:  Sandy is retiring at her MRA with 30 years of service.  Her unreduced annuity is $30,000/year or $2,500 per month.

·      Full survivor benefit entitlement would be 50% x $30,000 = $15,000/year or $1,250/month.  The cost would reduce her annuity by 10% or $3,000/year or $250/month.

·      Partial FERS survivor benefit, the survivor would receive one quarter of the retiree’s annuity or 25% x $30,000 = $7,500/year or $625/month.  The cost would reduce her annuity by 5% or $1,500/year or $125/month.

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What if you have a court-ordered survivor annuity to a former spouse?  Retiring employees do not elect a survivor annuity benefit for the court-ordered former spouse because that is accomplished by the court order.   Former spouse benefits have precedence over current spouse elections meaning if the former spouse is entitled to the full survivor benefit, you would still make an election for the current spouse.  Although the current spouse would not receive any monies as it would be paid to the former spouse first, should the former spouse predecease the current spouse, then the election made at retirement for the current spouse would then go into effect.

What if I had my current spouse sign a pre-nuptial agreement, am I still required to leave them a full survivor benefit?  YES, pre-nuptial agreements are documents signed before the marriage therefore the current spouse will still be required to sign and notarize the appropriate forms accepting anything other than a full survivor benefit.

Other considerations when electing a survivor benefit:

A)  In order for a non-federal spouse to continue FEHB should the retiree die first, a survivor benefit election must be in place.  It does not have to be a full survivor benefit election just as long as an election is made.  For example:  If the retiree had a former spouse who was court ordered to receive the full survivor benefit, making the election for the current spouse will still permit the current spouse to continue FEHB upon the retiree’s death even with no monetary benefit payable to the current spouse.

B)  The survivor benefit election is calculated prior to taxes being assessed.  This means you will be taxed on a smaller amount.

C)  And probably most importantly, because the cost of the survivor benefit does not go up.  In the CSRS example above, where the cost of the survivor benefit is $477.50/month, that cost remains $477.50 for the life of the retiree.  Even though the retiree’s and the survivor benefit amounts increase by any Cost of Living Increases, the cost remains as calculated at retirement.  Should the retiree’s spouse die before the retiree, the Office of Personnel Management will recalculate the retiree’s annuity, the month following the date of the spouse’s death, as if no election was made, giving back not only the cost of the survivor benefit, but increasing the entitlement by the COLAs on the additional amount, making a current spouse survivor benefit election a great option.

Federal Retirement Mistakes to Avoid

The Value of a Survivor Annuity

Designating Beneficiaries for Survivor, TSP Benefits

Considerations for Carrying FEHB into Retirement

The Pros and (Mostly) Cons of Taking a Refund of Your Retirement Contributions

Last-Minute Retirement Checklist

Watch Begins for Federal Pay Raise Order

FERS Retirement Guide 2022

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