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Elaine Lumsden
Is the choice of a survivor benefit for your current spouse mandatory? For anyone married at the time of retirement, the choice of a full survivor benefit for their current spouse is required, unless the spouse is willing to sign and legalize the appropriate form accepting a partial or no survivor benefit. .
What are the cost and entitlement for this survivor benefit? For the CSRS, a full survivor benefit is 55% of the retiree’s pension after any reduction for age or deposit service, but before the cost of choosing survivor benefit is applied.
CSRS example: Andy retires at 55 with 30 years of service and has no service for which a deposit is due. His unreduced pension is $ 60,000 / year or $ 5,000 / month.
· Entitlement to the full survivor benefit would be 55% x $ 60,000 = $ 33,000 / year or $ 2,750 / month. The cost would reduce her annuity by $ 5,730 / year or $ 477.50 / month.
· Partial survivor benefit from CSRS, the survivor would receive 55% of the chosen annual base amount. Andy and his wife choose a partial benefit base of $ 30,000. She would receive 55% x $ 30,000 = $ 16,500 / year or $ 1,375 / month. The cost of this partial survivor benefit would be $ 2,730 per year or $ 227.50 per month.
*REMARK: The CSRS formula is $ 90 for the first $ 3,600 of selected benefits and 10% of any amount over $ 3,600
Example FERS: Sandy is retiring from her MRA with 30 years of service. His unreduced pension is $ 30,000 / year or $ 2,500 per month.
· Entitlement to the full survivor benefit would be 50% x $ 30,000 = $ 15,000 / year or $ 1,250 / month. The cost would reduce his annuity by 10% or $ 3,000 / year or $ 250 / month.
· FERS partial survivor benefit, survivor would receive one-quarter of retiree’s pension or 25% x $ 30,000 = $ 7,500 / year or $ 625 / month. The cost would reduce his annuity by 5% or $ 1,500 / year or $ 125 / month.
What if you have a court-ordered survivor pension for a former spouse? Employees who retire do not choose a survivor annuity for the ex-spouse ordered by the court because it is accomplished by the court order. Former spouse benefits take precedence over current spouse elections, which means that if the former spouse is entitled to full survivor benefits, you would still make an election for the current spouse. Even if the current spouse would not receive any money, because it would be paid first to the former spouse, if the former spouse died before the current spouse, the election made at retirement for the current spouse would then take effect.
What if my current spouse signs a prenuptial agreement, am I still required to leave him or her a full survivor benefit? YES, prenuptial agreements are documents signed before marriage. Therefore, the current spouse will still need to sign and legalize the appropriate forms accepting something other than a full survivor benefit.
Other considerations when choosing a survivor benefit:
A) For a non-federal spouse to continue FEHB if the retiree dies first, a survivor benefit election must be in place. It does not have to be a full election of survivor benefits as long as an election is made. For example: if the retiree had a former spouse who received a court order to receive full survivor benefits, the choice of current spouse will still allow the current spouse to continue with FEHB upon the retiree’s death, even without any monetary benefit payable to the current spouse.
B) The choice of survivor benefit is calculated before taxes are assessed. This means that you will be taxed on a lower amount.
C) And probably the most important, because the cost of the survivor benefit is not increasing. 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 retiree and survivor benefit amounts increase with any increase in the cost of living, the cost remains that calculated at retirement. If the retiree’s spouse dies before the retiree, the Personnel Management Office will recalculate the retiree’s pension, the month following the date of the spouse’s death, as if no choice had been made, not only restoring the cost of the pension. survivor benefit, but increasing COLA entitlement to the additional amount, making a current choice of surviving spouse’s benefit an excellent option.
Federal retirement mistakes to avoid
The value of a survivor’s pension
Designation of beneficiaries for survivor benefits, TSP
Considerations for the transfer of FEHB to retirement
The advantages and (mainly) the disadvantages of reimbursing your pension contributions
Last minute retirement checklist
Monitoring begins for federal wage increase ordinance
FERS Retirement Guide 2022
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