Any federal employee covered under the Federal Employee Retirement System (FERS) is eligible to leave a survivor annuity that will be given to his or her spouse, upon their death. This survivor annuity determines how much your spouse can receive from your pension if you pass away in retirement before your spouse. If you are married when you complete your Federal Disability Retirement application, you will need to elect a survivor benefit option before submitting your application to Office of Personnel Management (OPM). However, deciding which benefit to elect can be tough as there are pros and cons to each.
Let’s explore your options together and learn how each can impact your federal retirement.
What Survivor Annuity Options Can I Elect Under Federal Disability Retirement?
Maximum survivor annuity for your current spouse
- If you elect this option, your Federal Disability Retirement gross annuity will be reduced, and your spouse will receive 50% your unreduced earned annuity.
Partial survivor annuity for your current Spouse
- If you choose this option, then your gross annuity will be partially reduced and upon your death, your spouse will receive 25% of your unreduced earned annuity. In order to be able to elect this option, you much have written notarized consent from your current spouse.
Reduced Federal Disability Retirement annuity with survivor annuity for your former spouse(s)
- This option is for those that have been divorced and are court ordered to leave a survivor annuity to your former spouse. In order to be eligible for this option you must submit copies of divorce decrees for all former spouses for whom you elect to provide a survivor annuity.However, your election to provide a survivor annuity to your former spouse stops upon the death of that former spouse or if they remarry before they reach age 55.
Federal Disability Retirement annuity payable only during your lifetime
- If you choose this option, then no survivor annuity will be paid to your spouse after your death. Also, your spouse will not be eligible for the Federal Employees Health Benefits (FEHB) program. However, you must have your spouse’s notarized written consent to be able to elect this option.
How is FERS survivor annuity calculated?
Maximum survivor annuity for your current spouse
If you elect this option, your Federal Disability Retirement gross annuity will be reduced by 10% and your spouse’s annuity upon your death will be 50% of your unreduced earned annuity.
- For example, if your High 3 Average is $76,000 then your unreduced annual benefit for year 1 would be $45,600 and then $30,400 for year 2 and each year after that.
- After year 1 your unreduced annual benefit would be $30,400 then the survivor annuity would be calculated as
- $30,400 x 50% = $15,200/year
Partial survivor annuity for your current Spouse
If you choose this option, then your gross annuity will be reduced by 5%. Upon your death your spouse will receive 25% of your unreduced earned annuity. To be able to elect this option, you must have written notarized consent from your current spouse.
- For example, if your unreduced annual benefit is $30,400 then the survivor annuity would be calculated as
- $30,400 x 25% = $7,600/year
Reduced Federal Disability Retirement annuity with survivor annuity for your former spouse(s)
The amount given in survivor annuity will be based on what the divorce decree states. A qualifying court order awarding a survivor annuity to a former spouse may prevent the payment of a current spouse survivor annuity. If such an election causes the total of all current and former survivor spouse annuities to exceed the maximum 50%, OPM will accept the election but will pay only the portion that does not exceed the maximum.
Federal Disability Retirement annuity payable only during your lifetime
If you elect this option, then your federal disability annuity will not be affected and will remain the same unless changes are made based on a divorce or new marriage.
What Happens if my current and/or former spouse passes first?
If you elect a survivor annuity for your current or former spouse and he or she dies, you should immediately notify OPM. Once OPM has confirmed that death, your own annuity will be restored to its full amount on the first day of the month after the current and/or former spouse dies. However, you will not receive any money that was already taken out throughout your retirement and put towards the survivor annuity prior to their death.
Factors to take into Consideration
When deciding which option is best for you, there are a lot of factors that you should take into consideration in order to make the best choice. Answer the following questions and combine them in order to help guide you.
Age difference between you and your spouse
Are you and your spouse relatively close in age? If not, who is younger?
Age is a big influencing factor when deciding on survivor annuity because you want to try and plan your finances. If your spouse dies before you then the money that you had taken out for a survivor annuity goes away and will not be given back to you.
Gender difference
Taking gender differences into consideration is important because females generally live longer than males on average by 6 to 8 years. There are also different health issues between genders that could arise in later years that effect overall health.
Your current health and entire health history
Do you currently have any serious medical conditions, or have you had a long history of health problems?
This is a crucial factor that could highly influence the outcome of a survivor annuity election. Analyzing your current health and entire health history can help you in your decision making.
Family health history
What is the average lifespan of your family members?
Are there any genetic medical conditions that could arise in the future?
Family health history can be a good indicator of your future health. For example, if you are male and the males in your family live on average of 70 years and all had heart problems, then that can help you predict your health.
Sources of Income
Are you the sole income earner in your household or do you and your spouse share the income earning?
Survivor annuity is there to help spouses once their husband/wife has passed while on Federal Disability Retirement. This is especially important for those survivors that are fully dependent on the federal workers income however, if the income earning is shared then electing a survivor annuity might not be beneficial.
Life insurance proceeds
Do you have a life insurance policy? If so, then who will receive the proceeds? Is the total amount more than they would receive in survivor annuity?
As stated earlier, Federal Disability Retirement recipients are not allowed to elect a survivor annuity for a dependent other than their spouse. There is also a max of 50% for a survivor annuity payment. Which is why it is important to look at any life insurance policies that you may have in comparison to your estimated survivor annuity
We know that the Federal Disability Retirement application process can be overwhelming and deciding on survivor annuity adds to the pressure. When making such important decisions, it is helpful to consult with a professional. It is also important to discuss all options and influencing factors with your spouse as you are not able to make changes to survivor annuity once it has been submitted other than in the case of a qualifying life event. Weighing all your options together with a professional will help you find the right balance between living with a reduced retirement income and providing for your spouse in the future.
If you are in the process of filing for federal disability retirement, call us today at (859) 226-2723 for a FREE consultation. We are here to help, and if you need assistance regarding financial benefit policies, we are happy to point you in the right direction!
