The Inevitable
You might not want to think about what will happen after you die, but for your survivors’ sake, you should.
I know it's the middle of summer, when most of us are focused on vacations and picnics. But I recently received some sad news about a family member, and it forced me to think about preparing for this kind of news when it comes into our lives.
Specific benefits are paid upon the death of a federal employee or retiree. Here are some things to be aware of to smooth the process of disbursement of these benefits to your survivors.
Retirement Benefits
If you are survived by a spouse, former spouse with court-ordered access to benefits, or dependent children, they might be eligible for a survivor annuity. It's important to get accurate calculations of the benefits payable on a recurring basis from the Office of Personnel Management. For employees who die before retirement, OPM will assist the family in understanding the value of any benefits payable and the procedure to obtain them.
Even for those who don't leave behind eligible survivors, lump-sum disbursement of unpaid retirement contributions, as well as their final retirement check, can be paid if valid beneficiary designations have been made. Here are links to the beneficiary forms if you need to update yours:
It would be a good idea to make your loved ones aware of information from OPM on reporting the death of a federal employee or retiree. The National Active and Retired Federal Employees Association is another valuable source of information.
Thrift Savings Plan
The balance in your TSP account is payable upon your death to your beneficiaries. Here are some links to important death information related to the TSP:
- Beneficiary Designation
- Information Related to Deceased Participant
- Important Tax Information About TSP Death Benefit Payments (This document soon will be updated to reflect the new spousal accounts made possible under a recent change in the law.)
- Change in Address for Separated Participant
Life Insurance
Benefits from the Federal Employees Group Life Insurance program can be worth tens of thousands of dollars -- in some cases, hundreds of thousands. Beneficiaries receiving $5,000 or more automatically will receive the funds in a money market account. FEGLI proceeds begin earning interest immediately upon establishment of the account. Beneficiaries can write checks for $250 or more, up to the full amount in the account, as soon as they receive the checkbook for the account. Here's a link to more information.
Retirees generally stop paying for their basic life insurance when they turn 65, unless they pay additional premiums. But the value of the basic coverage remains at 25 percent of coverage at retirement. This money can be used to cover the costs of burial or final expenses. Life insurance proceeds are not subject to income taxes.
Make sure the amount of FEGLI coverage you maintain is adequate and update your beneficiary form as necessary. If you are medically insurable and the type of work and hobbies you have allow you to shop around for life insurance, you might find that there are cheaper ways to protect your family using term life insurance that is readily available in the private insurance market.
Other Benefits
Keep these benefits in mind, too:
- Unpaid Compensation: For an employee who dies in service, this can include the last pay check and payment for unused annual leave. There is a separate beneficiary form to designate the individual to receive this payment.
- Worker's Compensation: If an employee dies as a result of a work-related injury or illness, compensation might be payable to his or her family. Here's a link to more information.
- Social Security Administration: Employees in FERS are covered by Social Security. Benefits are payable upon the death of a FERS employee or retiree if they are survived by eligible family members. Here's more information.
Helpful Hints
Finally, here are some general tips:
- Maintain your own personnel folder and store it with your other important papers. This can come in handy to document your federal career in the event your official records are not readily available. Include the phone number of your human resources office in case your survivors have questions. (Here's AARP's suggestion on how to organize your important papers.)
- Update your beneficiary forms after you've experienced a life event such as a death, birth of a child, divorce or marriage.
- Once a year, review your records to be sure nothing has changed since the previous year. Have you switched agencies? Signed up for a new benefit? This might be something to do shortly after each birthday, to celebrate and appreciate another year of life.
I'm sorry if I made you think unpleasant thoughts this week. But if your summer is a little slow, this might be a good time to do some important preparation for the future.
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.
For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on federalnewsradio.com or on WFED AM 1500 in the Washington metro area.