Supporting Your Survivors

Are you providing financial support for someone? That could be a spouse, dependent children, a disabled relative or an aging parent. As you consider your own retirement, you also should consider what might happen to these people if you die before they do.

Available Benefits

Here is a list of federal benefits for survivors:

• Benefits for children: Both the Civil Service Retirement System and the Federal Employees Retirement System include dependent child survivor annuities. According to the Office of Personnel Management pamphlet, Survivor Benefits for Children, in 2008, the children's survivor benefit is $444 per month. For children of FERS employees or annuitants, this benefit is offset by Social Security benefits.
• Spousal benefits: CSRS and FERS provide spousal survivor benefits. Here are two columns I've written about them: Spousal Benefits (March 10, 2006) and "Survivor:" Federal Edition (Jan. 12, 2007).
• Lump-sum payments: There are lump-sum payments available to your survivors from your Federal Employee's Group Life Insurance policy, your Thrift Savings Plan, CSRS and FERS benefits, and unpaid compensation (such as your final pay check and a payment for unused annual leave). These payments are governed by a standard order of precedence. If you are not sure whom you've designated as your beneficiary, it might be time to file a new set of designation forms. You should maintain the employee copy of these forms in a place that will be easy for your survivors to find in the event of your death. I wrote about beneficiary designations in this column: Who's Your Beneficiary? (May 12, 2006).
• Social Security benefits for families: These come in two forms: Survivor's Benefits and Children's Survivor's Benefits.

Benefits of Spousal Benefits

Should you choose survivor benefits for your spouse? I'll let readers weigh in on that question:

• "I looked into purchasing a life insurance policy instead of electing spousal survivor benefits recently and wanted to share what I found. I was advised by professional financial advisers that the government's survivor benefits are excellent, and that in my case I should take advantage of them. For the relatively low deduction to the retiree's annuity (less than 10 percent for the full survivor benefit) the survivor gets 55 percent of the full retirement benefit with annual cost of living adjustments for as long as they live. There is flexibility as well, as you can opt for less than the full survivor benefit with a smaller reduction to the retiree's annuity if that works for your situation. If the "survivor" dies first, the retiree's benefit is no longer reduced going forward. If you have concerns about providing for your survivor in the event you die first, this is hard to beat. I personally did not find term insurance to be as affordable or reliable when trying to insure a comparable financial benefit for my spouse."
• "I agree that choosing a spousal annuity is much like buying life insurance. Indeed, premiums paid for life insurance policies primarily serve to provide peace of mind to the insured, as the insured will reap no other direct benefit from the policy. Unless other solid income-producing assets are available, however, choosing a survivor annuity is preferable to purchasing life insurance because the annuity is backed by the full faith and credit of the U.S. government, and we are all living longer lives. Even if you purchase a 40-year term life policy, are you willing to take a chance that your spouse may be left with inadequate resources should you live longer than anticipated? As a GS-14 under CSRS, a 10 percent reduction of income to provide 55 percent of my retirement benefit to my spouse may be viewed as a hefty fee, but nonetheless a reasonable one. The bottom line for me is my decision is dependent on an honest answer to a simple question: What is my level of concern for the well-being of my spouse after I die?"

Common Questions

Here are some questions I've recently received about survivor's benefits:

If a federal employee dies at age 56 and his survivors are his wife plus two college-age children, does his wife get his benefits and do they start at time of his death?

If the children are under 22 and unmarried, they will be entitled to children's survivor benefits. The spouse is entitled to a spousal survivor annuity as well, and it would begin immediately (regardless of the age of either spouse). If there is a former spouse with a court-ordered survivor benefit, this could prevent the current spouse from receiving the full spousal benefit. In addition, if a FERS employee dies in federal service, he or she must have at least 10 years of service for a survivor annuity to be payable. If the FERS employee had at least 18 months of federal service, a basic death benefit is payable to the spouse. Here's some additional information from OPM's CSRS and FERS Handbook: Spouse Benefits: Death of an Employee and Children's Benefits.

I am a widower who is retiring. At a retirement seminar, I was told that if I were to marry again after retirement, I could extend my health insurance to my new wife. The woman I am dating has sufficient funds and does not need to worry about paying the retiree/employee share of the health premiums, but will have no health insurance once she leaves work until she turns 65 for Medicare.

A retiree can cover a new spouse with health insurance 30 days prior to the marriage (or 60 days after), when the spouse loses his or her employer coverage, or during an open enrollment period. Also, if a retiree marries -- or as they say in the regulations, "acquires a spouse" -- he or she can choose a reduced retirement to provide a survivor annuity for the new spouse so in the future, the spouse can continue health insurance or simply receive income. This choice can be made anytime within two years of the date of marriage.

Under CSRS, a partial survivor annuity is expressed as 55 percent of whatever base you and your spouse choose. It can be any amount from $1 up to your full retirement benefit. But if the amount you choose is not enough to cover the cost of the health insurance for your surviving spouse, he or she will have to pay the difference directly to OPM.

Under FERS, a partial survivor annuity is 25 percent of the basic benefit. The reduction to the basic benefit for a partial spousal election is 5 percent. The maximum spousal survivor annuity election under FERS is 50 percent of the FERS basic benefit to the surviving spouse. The reduction to the FERS basic benefit for the maximum election is 10 percent. To ensure health coverage for a surviving spouse of a FERS retiree, a partial or full spousal election must be made.

If your spouse is a federal employee or retiree, then the survivor election isn't necessary to continue enrollment in the Federal Employees Health Benefits Program. Coverage under a self and family enrollment would allow a surviving spouse to continue enrollment as self only through his or her own retirement benefit or salary. A survivor election might still be necessary to provide income replacement, even though it may not be needed to continue health insurance coverage.

In your March 10, 2006 column you stated, "Unlike in many private sector plans, the annuity of the retiree can be restored if his or her spouse dies first." I have asked other retirees about this and none of us have been able to find that in OPM retirement regulations.

The reference you are looking for is in Chapter 52 of the CSRS and FERS Handbook: "Any reduction in an annuity to provide a current spouse survivor annuity will terminate on the first day of the month after the current spouse dies."

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.