Survivor Benefits: Plan for the Future

Transcription

1 Survivor Benefits: Plan for the Future A NARFE Federal Benefits Institute Webinar Presented by Tammy Flanagan 1

2 Different Decisions at Different Stages of Your Career: Employee Pre-retirement Post-retirement Thrift Savings Plan Insurance CSRS or FERS retirement Social Security 2

3 Employee Decisions Beneficiary Designations Life Insurance Health Insurance Change order of precedence Life events Increase / Decrease Re-evaluate Trading premiums for Long-Term Care Insurance Coverage for family members Life event changes Coverage for children 3

4 CSRS Designation of Beneficiary: Pre- and Post-Retirement FERS FEGLI TSP SF-2808 Retirement Contributions Last Retirement Check Maintained by OPM SF-3102 Retirement Contributions Last Retirement Check eopf: Employees OPM: Retirees SF-2823 Assignment of Basic FEGLI eopf: Employees OPM: Retirees TSP-3 Maintained by TSP for employees and retirees 4

5 Designation of Beneficiary: Pre-Retirement Only Unpaid Compensation SF-1152 Last Paycheck Unused Annual Leave Travel allowance, any money owed by agency 5

6 Standard Order of Precedence if no valid Designation of Beneficiary 1st 2 nd 3 rd 4th 5th Spouse Child or children in equal shares Decedents of deceased children Parents equally Surviving parent Executer or Administrator of Estate Next of Kin State law where resided time of death 6

7 Test Your Knowledge A designation of beneficiary form must be notarized: A. True B. False 7

8 Test Your Knowledge A designation of beneficiary form must be notarized: A. True B. False 8

9 5/11/17: Estate Planning Webinar 9

10 Death of Employee: CSRS or FERS Spouse Former spouse: CSRS 55% of your earned annuity (22+ years of service) FERS Basic Death Benefit (18 months + service) $32, % of annual pay rate 10 years + service: 50% of earned FERS annuity According to court order 10

11 Death of Employee: CSRS or FERS Unmarried, dependent children CSRS $512 / month (maximum $1,537) or $614 / month per child (no living parent; maximum $1,844) FERS Same as CSRS but offset by anything children receive from SSA Designated Beneficiary: Return of retirement contributions if no survivor annuity payable 11

12 How much life insurance do you need? Final Expenses Raising Children Income Replacement 12

13 Insurance needs change over time: Reduce life insurance Long Term Care Needs Burial 13

14 FEGLI Basic Option A Option B Option C Salary Plus $2,000 $10,000 Multiples of Salary Spouse: $5,000 Living Benefit Accidental Death Increases with salary Implemented in 1968 Accidental Death Up to 5 times Increases with salary Children: $2,500 Up to 5 times 14

15 Test Your Knowledge All of the following are benefits of FEGLI except: A. No underwriting for life event B. Provides coverage in retirement C. Maintains cash value D. Pays regardless of cause (one exception) 15

16 Test Your Knowledge All of the following are benefits of FEGLI except: A. No underwriting for life event B. Provides coverage in retirement C. Maintains cash value D. Pays regardless of cause (one exception) 16

17 Health Insurance Not Enrolled Or Self Only May elect to include spouse before or after retirement, but Surviving spouse cannot enroll in FEHB Self Plus One or Family Coverage continues, if Survivor benefit payable Spouse does not remarry before 55* *unless marriage lasted 30 years or more 17

18 Test Your Knowledge Which of the following family members are not eligible for FEHB: A. Common law spouse B. Parents C. Child incapable of self support over age 26 D. Step children 18

19 Test Your Knowledge Which of the following family members are not eligible for FEHB: A. Common law spouse B. Parents C. Child incapable of self support over age 26 D. Step children 19

20 Pre-Retirement Decisions CSRS or FERS Choose what kind of annuity you want Your life only Reduced to provide for someone else Life Insurance Health Insurance Increase / Decrease Evaluate cost to maintain in retirement Survivor benefit requirement for surviving spouse/children Must be covered on date of death 20

21 CSRS SF 2801 Application for Immediate Retirement 21

22 FERS SF 3107 Application for Immediate Retirement 22

23 Common Misconceptions: If your spouse has their own retirement, then it is not necessary to leave them a survivor annuity. 23

24 CSRS or FERS: Retirement Election Married: Spouse Maximum Benefit 50% of unreduced FERS 55% unreduced CSRS Partial Benefit 25% unreduced FERS 55% of $ CSRS Insurable Interest (if there is a court order) None 24

25 No Spousal Survivor Election Mary $40,000 John $40,000 Total Income: $80,000 25

26 No Spousal Survivor Election: Mary predeceases John Mary Deceased John $46,000 Total Income: $46,000 26

27 No Spousal Survivor Election: John predeceases Mary Mary $49,000 CSRS: $34,000 SSA / GPO $13,000 $22,666 = $0 John Deceased FERS: $18,000 Social Security: $13,000 Total Income: $49,000 TSP: $15,000 TSP: $9,000 27

28 Full Spousal Survivor Election: Mary $36,870 John $38,200 Total Income: $75,070 28

29 Full Spousal Survivor Election: John predeceases Mary Mary $58,000 John Deceased Total Income: $58,000 29

30 Full Spousal Survivor Election: Mary predeceases John Mary Deceased John $64,270 Total Income: $64,270 30

31 Summary Full Survivor Election No Survivor Election John and Mary Both Living $75,070 $80,000 John predeceases Mary $58,000 (Mary) $49,000 (Mary) Difference in income -$17,070 -$31,000 Mary predeceases John $64,270 (John) $46,000 (John) Difference in income -$10,800 -$34,000 31

32 Survivor Election VS Life Insurance SB reduces taxable income Lifetime income Inflation protection Spouse equity Replaces 55% / 50% Life Insurance is Paid with after-tax $ Must manage proceeds May be canceled 32

33 CSRS or FERS: Retirement Election Former Spouse Survivor Benefits Court Order None Voluntary Election Election #5 on retirement application 33

34 CSRS or FERS: Retirement Election Single Elections None Insurable Interest 34

35 Insurable Interest Age of Person Named in Relation to You Reduction in Your CSRS or FERS Annuity Older, same age or less than 5 years younger 10% 5 but less than 10 years younger 15% 10 but less than 15 years younger 20% 15 but less than 20 years younger 25% 20 but less than 25 years younger 30% 25 but less than 30 years younger 35% 30 or more years younger 40% The survivor s rate will be 55% of your reduced CSRS or FERS Annuity 35

36 FEGLI Basic Coverage Option A Option B Option C 36

37 FEGLI Option B Example $240,000 Option B Coverage Age Per $1,000 Total $0.433 $ $0.953 $ $1.170 $ $2.080 $ $3.900 $ and over $5.720 $1,

38 38

39 FEHB: Surviving Spouse Continue Self Only Coverage Eligible for survivor annuity Pay employee share of premium Remarriage before 55 Permissible Changes Open season Move out of service area 39

40 Test Your Knowledge Which is not a qualifying life event to make a change to health benefits? A. Divorce B. Becoming age 65 C. Marriage or remarriage D. Retirement 40

41 Test Your Knowledge Which is not a qualifying life event to make a change to health benefits? A. Divorce B. Becoming age 65 C. Marriage or remarriage D. Retirement 41

42 Post-Retirement Decisions CSRS or FERS TSP Social Security Spouse predeceases annuitant Annuitant dies and survivor annuity payable Post retirement marriage Beneficiary Participant Account Widow s benefits GPO 42

43 Test Your Knowledge: If you marry after retirement, it is required that you provide a survivor annuity for your spouse. A. True B. False 43

44 Test Your Knowledge: If you marry after retirement, it is required that you provide a survivor annuity for your spouse. A. True B. False 44

45 Reporting a Death Application for Death Benefits SF 2800 CSRS SF 3104 FERS Death certificate Marriage certificate, if applicable Send to: Office of Personnel Management Retirement Operations Center ATTENTION: Survivor Processing Section Post Office Box 45 Boyers, Pennsylvania

46 Social Security: Dual Entitlement Pat Paul $1,400 / month $2,000 / month 46

47 Social Security: Dual Entitlement Paul or Pat $2,000 / month 47

48 Social Security Survivor Benefits Widow Age 60 Caring Children Delay earned benefit Divorced 10 years marriage Remarry 60+ Children High School Disabled Step children /grandchildren 48

49 Spouse: Beneficiary Participant Account Spouse beneficiary, may Transfer to IRA or own TSP Interfund transfer Withdrawal options Remain in TSP Upon death of surviving spouse, beneficiary may not transfer to inherited IRA 49

50 Test Your Knowledge Spouse s notarized consent is required for the following TSP elections, except: A. FERS monthly payment option B. FERS required minimum distribution (RMD) monthly payments C. FERS joint annuity with 50% survivor option D. FERS one-time partial withdrawal 50

51 Test Your Knowledge Spouse s notarized consent is required for the following TSP elections, except: A. FERS monthly payment option B. FERS required minimum distribution (RMD) monthly payments C. FERS joint annuity with 50% survivor option D. FERS one-time partial withdrawal 51

52 Beneficiary Strongly recommend consulting a tax or financial advisor 52

53 Test Your Knowledge The TSP will first honor the following document upon your death: A. Will B. Prenuptial agreement C. Beneficiary designation D. Property settlement E. Court Order F. Trust document 53

54 Test Your Knowledge The TSP will first honor the following document upon your death: A. Will B. Prenuptial agreement C. Beneficiary designation D. Property settlement E. Court Order F. Trust document 54

55 CSRS or FERS Information Please RI (CSRS Survivors) RI (FERS Survivors) Social Security What You Need to Know When you Get Survivors Benefits TSP Book 31 Death Benefits 55

56 Or Online Office of Personnel Management Social Security Administration Thrift Savings Plan 56

57 NARFE is here to help: Departments Federal Benefits Special Topics Death of Retiree or applying for survivor benefits Also contact: NARFE Service Officers 57