In part one of this post, we looked at survivor benefits that are available to your beneficiaries. This post will focus more on the amount of each benefit.
This benefit is the longest lasting of the survivor benefits and it is automatic for employees. It can be taken as either a full (50 percent of the retiree’s calculated annuity) or a partial (25 percent of the retirees’ annuity). This payment is made monthly and is increased with COLA’s annually. This benefit is required for the surviving spouse to be eligible to maintain health insurance coverage under FEHB. It is paid until the spouse dies or remarries (under the age of 55-unless the prior marriage lasted 30 years). A new spouse can be added for this benefit after retirement at an additional cost if the 9-month requirement is met.
Lump Sum Payment
If there is a lack of beneficiaries or an insufficient amount of time to earn an annuity, then that estate will receive a refund on all contributions made. A designated beneficiary will receive a prorated amount earned on either a final paycheck for that employee or a final annuity payment for a retiree.
Basic Employee Death Benefit
Beneficiaries will receive this if the current employee dies while employed. The basic benefit is $32, 326.58. In addition, they also receive 50 percent of that employee’s salary, or of the High-3 salary, whichever is greater. This payment may be taken as a lump sum, monthly installments over three years, or be transferred to an IRA.
This amount is reduced by the amount of Social Security paid. In most cases, the amount of the Social Security benefit will be higher and the employee benefit will not apply. The SS benefits end at the age of 18 so the employee benefit could be paid after that provided the child is in school.
This is potentially the highest lump sum death benefit available for beneficiaries. Depending upon the selected benefits, this could include an amount of the current salary (rounded up plus $2,000), $10,000 Option A, and a salary multiplied up to 5 for Option B. The Basic amount is increased for younger employees, and the payment is tax-free.
A surviving spouse beneficiary may choose to roll an inherited TSP balance into their own account if they are a federal employee. If they are not, they can still maintain the account by being a beneficiary participant on the TSP. In any other scenario, that person must transfer the TSP to an outside inherited account or take direct distributions. Once in this account, the beneficiaries can take the money out within five years or choose a stretch option. This option is available over their lifetime and only available to a surviving spouse. The subsequent beneficiary can’t choose this option; however, they can maintain that option.
Understanding these benefits is the first step. Additionally, if you are a federal worker who has been injured and can no longer perform your job duties, these benefit elections may apply to you too. If you are eligible or think you may be, for a medical disability retirement, please give us a call at 877-226-2723, or fill out this inquiry form. We can schedule you for a FREE consultation and discuss your specific situation further.