We talk a lot about survivor benefits in retirement, Federal Employee Group Life Insurance (FEGLI), and life insurance for federal employees, but what are the exact benefits a widow or widower would receive?

The benefits a FERS employee’s beneficiary is eligible (through government employment) to receive are:

• FEGLI proceeds
• FERS survivor annuity
• Basic Employee Death Benefit (BEDB)
• FERS lump sum benefit
• Thrift Savings Plan (TSP)
• Social Security benefits

FEGLI Proceeds

The first option is Federal Employee Group Life Insurance (FEGLI). FEGLI is optional coverage available to all federal employees when they are first hired. The government also has an open season approximately once every decade for optional enrollment into FEGLI. Coverage options include:

• Basic – your salary rounded up to the next $1,000 plus $2,000
• Option A – a flat amount of $10,000
• Option B – multiples of your salary up to 5 times
• Option C – up to 5 multiples on your spouse ($5,000 per multiple) and eligible kids ($2,500 per multiple)

It is important to keep your FEGLI beneficiary form (SF 2823) up to date.

FERS Survivor Annuity

The FERS survivor annuity is commonly referred to as a benefit for spouses when a federal retiree passes; however, a surviving spouse could qualify for the survivor annuity if a FERS employee dies while employed. To qualify for this benefit, the following requirements must be met:

• married for at least nine months, or
• employee’s death was accidental, or
• there is a child born of the marriage, and
• the employee had 10 or more years of FERS service.

If these requirements are met, then a survivor annuity is eligible to be paid out to the survivor. Just like a full FERS retiree’s survivor annuity is calculated on the retiree’s retirement date, the survivor annuity is calculated as of the date of death. A spouse who remarries prior to age 55 would lose the survivor annuity unless the marriage was 30 years or longer.

A surviving spouse who is eligible for a survivor annuity would also be eligible to continue Federal Employee Health Benefits (FEHB).

A child can receive monthly survivor benefits if the child is a dependent; under 18 or under age 22 if they are a full-time student; unmarried; or disabled provided the disability occurred prior to age 18. The amount of monthly benefit payable to children depends on if the child’s parent who was married to the federal employee is still alive and the number of children in the household. The amount children receive is often reduced to zero due to a reduction from Social Security benefits that are received.

Basic Employee Death Benefit (BEDB)

The BEDB is a lump sum benefit for FERS employees who have 18 months or more of FERS service. The lump sum equals the higher of half of the employee’s salary or half of their high 3 plus an additional $37,055.54 that is typically adjusted annually. The lump sum is paid out following the order of precedence as long as the spouse was married to the federal employee for at least 9 months preceding death.

FERS Lump Sum Benefit

The FERS lump sum benefit is only paid out if the FERS employee wasn’t eligible for a survivor annuity. In other words, if the FERS employee fell short of 10 years of service, the money the employee paid in to the FERS retirement system plus some interest would be paid out to the beneficiary.

Thrift Savings Plan (TSP)

Every full-time FERS employee has a TSP that is fully vested at the death of the federal employee. Beneficiaries have multiple options upon the employee’s death.

• A spouse can keep the funds in a Beneficiary Participant Account (BPA).
• The funds can be transferred to an inherited IRA.
• The funds can be withdrawn.

This video covers more about BPAs and inheriting TSPs and IRAs. The good news about a TSP is that it is your account and you aren’t restricted on whom you can name as a beneficiary. There is a myriad of rules your beneficiary may have to navigate on whether it’s best to leave the funds in TSP, transfer to an IRA, transfer to an inherited IRA, or withdraw the funds.

Social Security

Social Security benefits aren’t directly tied to FERS employment, but FERS employees are part of the Social Security system their survivors are eligible to receive these benefits. I’m not going to go into too many details here since this topic is enough for a separate article, but spousal requirements for benefits are:

• age 60 or older, or 50–59 and disabled, and
• married for at least 9 months, and
• didn’t remarry prior to age 60.

Children can also receive benefits if they are:

• age 17 and younger, or
• age 18–19 and a full-time student (K-12), or
• if they developed a disability prior to age 21.

There are limits to how much each person can receive in Social Security survivor benefits, as well as a household maximum.

There are many potential benefits that a survivor of a federal employee could receive. It’s important to understand the benefits when doing survivor planning. It is also important for the federal employee to fill out beneficiary forms correctly. Here are the beneficiary forms that I am aware of:

• SF 1152— unpaid compensation
• SF 3102—FERS contributions for those who don’t qualify for the survivor annuity
• SF 2823—FEGLI
• TSP-3—TSP beneficiary form

If you find yourself confused by all of the acronyms and what benefits you do and don’t have, don’t worry; schedule an introductory call because helping people plan is exactly what I do.

Brad Bobb, CFP® is owner of Bobb Financial Inc. and an expert in financial planning for federal employees.