RETIREMENT HANDBOOK & GUIDELINES FOR SURVIVORS

Transcription

1 RETIREMENT HANDBOOK & GUIDELINES FOR SURVIVORS A publication of the Society of Former Special Agents of the FBI Special gratitude and acknowledgement is extended to Larry Schneider ( ) for his invaluable assistance in updating this handbook. (January 2015)

2 INTRODUCTION This handbook is intended to help Society members with questions about Civil Service Retirement System (CSRS) and Federal Employee Retirement System (FERS) annuities, Social Security, Medicare, Federal Employee Group Life Insurance (FEGLI), Federal Employees Health Benefits Program (FEHB), SAMBA and SATI insurance plans, the Thrift Savings Plan (TSP) and veterans benefits. Included are guidelines for survivors in case of a death in the family: applying for any survivor's annuity, Social Security, Medicare and veterans benefits, settling insurance claims, and assisting in securing legal, tax and financial advice to help settle the estate of the decedent. The emotional trauma at the time of death of a family member is difficult enough without the survivors struggling unaided with the many financial intricacies. This document describes the benefits that are available to survivors, indicates what information and documents are needed, provides a means to record personal information, and sets forth what action must be taken when a death occurs. Each member is encouraged to sit down with his or her family to review this booklet and fill out the applicable information in the appendices. At the time of the death of a Society member or spouse many things will require the attention of the survivors or someone acting on their behalf. Included in the appendices is a general checklist that can be used by survivors immediately following a death. Please note that street addresses, phone numbers, addresses, Web site addresses and the qualifications for certain benefits included in this handbook were correct at the time of this publication. Please verify information. Changes and corrections will be made to the handbook when applicable. 2

3 CONTENTS Section Title Page Number Submitting Obituaries to the Grapevine 4 Important Web Sites 4 Office of Personnel Management 5 Federal Employees Health Benefits Program 11 Federal Employees Group Life Insurance Program 12 Special Agents Mutual Benefit Association SAMBA 14 Federal Employee Liability Insurance FEPLI 15 Thrift Savings Plan 16 Social Security Administration 20 Medicare 26 Veterans Benefits 29 Private Insurance 32 Estate, Inheritance Taxes 33 Organizing Finances after Your Spouse has Died 34 Appendices Personal Information Form 37 Important Documents Form 39 General Checklist on the Death of Spouse 40 the Grapevine Obituary Form 41 Notification to OPM Death 43 Notification to OPM Marital Status Change 44 Sample Insurance Notification 45 Notification to Department of Veterans Affairs 46 Notification to Decedent s Employer 47 3

4 THE GRAPEVINE Submitting an Obituary Upon the death of a Society member or spouse, please notify the Society National Office at Follow up with the submission of an obituary for publication in the Grapevine. Obituary forms are available on-line at and a sample is printed in the appendices. Send the completed form, along with a good quality digital or original photograph and any newspaper clippings or other obituary information to: editor@socxfbi.org OR Editor, the Grapevine 3717 Fettler Park Drive Dumfries, VA Submitted photos cannot be returned unless accompanied by a stamped, self-addressed envelope. Promptness and coordination are important to ensure timely submissions and to avoid duplicate submissions. INFORMATION Important Web sites Society National Office Office of Personnel Management Social Security Administration Federal Employees Group Life Insurance Federal Employees Health Benefits program Thrift Savings Plan SAMBA Federal Employee Professional Liability Insurance FEPLI Department of Veterans Affairs Medicare

5 OFFICE OF PERSONNEL MANAGEMENT The Office of Personnel Management (OPM) is the government agency that oversees all personnel matters regarding federal employees and retirees. Any correspondence to OPM about retirement annuities, death benefits, Federal Employee Group Life Insurance (FEGLI), or Federal Employees Health Benefits Program (FEHB) should be directed to: Office of Personnel Management Retirement Operations Center P.O. Box 45 Boyers, PA (general inquiries) (FEGLI questions) (FEHB questions) Phone: (7:30 a.m. to 7:45 p.m. Eastern time, Monday through Friday). In the Washington, DC, area, call The headquarters office is located at 1900 E Street, NW, Washington, DC, In any OPM contact, the CSRS or FERS account number (retirement claim number) and the retiree's PIN (Personal Identification Number) must be furnished. If a PIN is not available, use the last four digits of the retiree's Social Security number. CSRS RETIREMENT Most federal employees will be in one of two retirement systems. The Civil Service Retirement System (CSRS) originally covered employees first employed prior to This section provides information for former employees covered under CSRS. The CSRS is a defined benefit, contributory retirement system. Employees share in the expense of the annuities to which they become entitled. CSRS covered employees contribute 7, 7-1/2 or 8 percent of pay to CSRS and, while they generally pay no Social Security retirement, survivor and disability (OASDI) tax, they must pay the Medicare tax (currently 1.45 percent of pay). The employing agency matches the employee's CSRS contributions. CSRS employees may increase their earned annuity by contributing up to 10 percent of the basic pay for their creditable service to a voluntary contribution account. Employees may also contribute a portion of pay to the Thrift Savings Plan (TSP). There is no government contribution, but the employee contributions are tax-deferred. For more information about TSP, go to 5

6 Deceased CSRS Retirees Monthly Survivor Benefits Surviving Spouse If a CSRS retiree dies, recurring monthly payments may be made to the surviving spouse if the retiree elected a reduced annuity to provide the benefit. To qualify for the benefit, the surviving spouse must have been married to the retiree for at least nine months If the death occurred before nine months, a survivor annuity may still be payable if the employee s death was accidental or a child was born of the marriage. Former Spouse Recurring monthly benefits may be made to the former spouse of a deceased retiree if the retiree elected a reduced annuity to provide the benefit or the benefit is payable under a court order. A former spouse must have been married to the retiree for at least nine months. For additional information about court-ordered benefits, refer to the pamphlet, Court Ordered Benefits for Former Spouses, at Children Unmarried children who are dependent upon the retiree may receive recurring monthly benefits until they reach age 18, marry or die. Monthly survivor annuity payments for a child can continue after age 18 if the child is a full-time student attending a recognized school. Benefits can continue until age 22. Unmarried disabled dependent children may receive recurring monthly benefits if the disability occurred before age 18. The child is a dependent if he/she: was born of the marriage to the retiree; is an adopted child who meets all of the these conditions: (1) the child lived with the deceased retiree, (2) the deceased filed a petition to adopt the child, and (3) the child was adopted by the surviving spouse after the retiree died. is a stepchild or recognized child born out of wedlock who was living with the retiree in a parent-child relationship when the retiree died; or is a recognized child born out of wedlock for whom a judicial determination of support has been obtained. The child is a dependent if there is proof that the deceased made regular and substantial contributions to the child s support. Lump Sum Benefit If no survivor annuity is payable upon the retiree s death, a lump sum may be payable equal to the annuity due the deceased, but not paid before death. If no survivor annuity is payable, the balance of any retirement contributions remaining to the deceased person s credit in the Civil Service Retirement and Disability Fund, plus applicable interest, may also be payable. FERS RETIREMENT The Federal Employees Retirement System (FERS) is the newest retirement system generally covering employees employed after 1987 and those who voluntarily switched from CSRS. This section provides information for employees covered under FERS. FERS became effective on Jan. 1, Since that time, new federal civilian employees who have retirement coverage are covered by FERS. 6

7 FERS is a retirement plan that provides benefits from three different sources: a retirement annuity, Social Security and the Thrift Savings Plan (TSP). Two of the three parts of FERS (Social Security and the TSP) can go with a federal employee to another job if federal employment is terminated before retirement. The annuity and Social Security parts of FERS require the employee to pay his or her share each pay period. The government agency withholds the cost of the annuity and Social Security from pay as payroll deductions. The agency pays its part, too. After retirement, the retiree receives annuity payments each month for life. The TSP part of FERS is an account that the government agency automatically sets up for the employee. Each pay period the agency deposits into the employee s account an amount equal to 1 percent of the basic pay earned for the pay period. The employee can also make his or her own contributions to the TSP account and the agency will also make a matching contribution. These contributions are tax-deferred. The Federal Retirement Thrift Investment Board administers the TSP. Deceased FERS Retirees Monthly Survivor Benefits Surviving Spouse If a FERS retiree dies, recurring monthly payments may be made to the surviving spouse if the retiree elected a reduced annuity to provide the benefit. To qualify for the benefit the surviving spouse must have been married to the retiree for at least nine months. If the death occurred before nine months, a survivor annuity may still be payable if the employee s death was accidental or there was a child born of the marriage. Former Spouse Recurring monthly benefits may be made to the former spouse of a deceased retiree if the retiree elected a reduced annuity to provide the benefit or the benefit is payable under a court order. A former spouse must have been married to the retiree for at least nine months. For additional information about court-ordered benefits, refer to the pamphlet Court Ordered Benefits for Former Spouses at Children Unmarried children who are dependent upon the retiree may receive recurring monthly benefits until they reach age 18, marry or die. Monthly survivor annuity payments for a child can continue after age 18, if the child is a full-time student attending a recognized school. Benefits can continue until age 22. Unmarried disabled dependent children may receive recurring monthly benefits, if the disability occurred before age 18. The child is a dependent if he/she: was born of the marriage to the retiree; is an adopted child who meets all of the these conditions: (1) the child lived with the deceased retiree, (2) the deceased filed a petition to adopt the child, and (3) the child was adopted by the surviving spouse after the retiree died. is a stepchild or recognized child born out of wedlock who was living with the retiree in a parent-child relationship when the retiree died; or is a recognized child born out of wedlock for whom a judicial determination of support has been obtained. The child is a dependent if there is proof that the deceased made regular and substantial contributions to the child s support. 7

8 The combined benefit of all the children is reduced by the total amount of a child s insurance benefits that are payable (or would, upon proper application, be payable) under Title II of the Social Security Act for the same month to all children of the deceased (including those of a former marriage who may not be living with the current spouse) based on the total earnings of the deceased. In many cases, the FERS children s benefit is reduced to $0. Lump Sum Benefit If no survivor annuity is payable upon the retiree s death, a lump sum may be payable equal to the annuity due the deceased, but not paid before death. If no survivor annuity is payable, the balance of any retirement contributions remaining to the deceased person s credit in the Civil Service Retirement and Disability Fund, plus applicable interest, may also be payable. ALTERNATIVE FORM OF ANNUITY Some retirees can choose to receive an alternative form of annuity if they have a critical medical condition. Under this option, the retiree receives a reduced monthly benefit, plus a lump sum payment equal to all un-refunded contributions to the retirement fund. The amount of reduction in the monthly benefit depends on age at the time of retirement and the amount of retirement contributions. The election of an alternative form of annuity will not affect the potential survivor annuity payable to spouse or children. However, the spouse's consent is necessary to make this election. The alternative form of annuity cannot be chosen if retiring under disability rules or if there is a former spouse who is entitled to court-ordered benefits based on the retiree s services. The alternative form of annuity cannot be elected unless the retiree has a life-threatening medical condition. DEATH OF AN ANNUITANT SURVIVOR BENEFITS If the deceased annuitant has elected a survivorship annuity, the eligible survivor(s) can collect benefits from OPM with little or no difficulty, provided they follow the simple procedures listed under Notifying OPM. (Please note that at the time of a retirement either a full or partial survivor benefit can be elected.) What is a Full Survivor Benefit? If you retire under the CSRS, the maximum survivor benefit payable is 55 percent of your unreduced annual benefit. If you retire under the FERS, the maximum survivor benefit payable is 50 percent of your unreduced annual benefit. What is a Partial Survivor Benefit? Under the CSRS, you can elect any portion of your annuity as a basis for the survivor benefit payable in the event of your death. Under the FERS, the partial benefit is 25 percent of your unreduced annual basic annuity. However, if you elect to provide a survivor annuity that is less than the maximum amount, your spouse's consent is required. 8

9 How is the Reduction Calculated? Under the CSRS, your annuity is reduced by 2.5 percent of the first $3,600 of the amount you choose as a basis for the survivor annuity, plus 10 percent of any amount over $3,600. Under the FERS, your annuity is reduced by 10 percent for a full survivor annuity or 5 percent for a partial survivor annuity. NOTIFYING OPM 1. Notify OPM immediately after the death of the annuitant, either by phone, fax or e- mail. Follow up by letter. Required information includes the name of the decedent exactly as it appears on OPM's rolls, the decedent's CSRS or FERS account number, Social Security number and PIN. (See appendices for a sample letter.) Request application forms for any survivor benefits due and for any benefits due under the FEGLI. OPM will furnish to the individual(s) entitled to benefits all necessary application forms for any unpaid compensation, survivor annuity, and any benefits that might be due under FEGLI. 2. Return all un-cashed government checks payable to the decedent (whether received prior to or after annuitant's death) to OPM at: Office of Personnel Management Retirement Operations Center P.O. Box 45 Boyers, PA DO NOT ATTEMPT TO CASH OR DEPOSIT THESE CHECKS. Government checks made payable to a deceased annuitant cannot be legally cashed by anyone. Explain that the check is being returned because of the death of the annuitant, furnishing the exact date of death. Write "Payee Deceased" and the signature of returnee, in ink, across the face of the check. OPM will not authorize any survivor benefit payments until advised by the Treasury Department that there are no outstanding checks payable to the decedent. If authorization has been given for direct deposit of annuity checks to a financial institution, promptly notify the institution of the exact date of the annuitant's death. Any such deposit covering payment for all or part of a period occurring after the death of the payee must be returned in full by the bank to the U.S. Treasury Department and appropriate adjustment made in the payee's bank account. DO NOT attempt to make an individual return payment to OPM or the Treasury Department. Any accrued annuity unpaid to the annuitant during his lifetime will be included in benefits paid to his or her eligible survivor(s). 3. When received, complete the application for survivor benefits as well as the one for FEGLI and return in the envelopes provided. A certified copy of the death certificate must accompany each application. If other evidence is required to support any claim for benefits, OPM will request it. This could include a copy of marriage certificate, birth certificate, divorce decree, or other documents establishing identity or relationship. Upon receipt of applications, OPM will authorize payment of benefits. These benefits may include automatic health insurance coverage if the survivor has been covered by the annuitant's enrollment in one of the government's FEHB programs and if the survivor is eligible for a survivor annuity beginning immediately after the death of the annuitant. 9

10 Death of Spouse Restoration of Total Annuity If, at the time of retirement, a retiree elected survivor benefits, a percentage of the retiree's annuity has been withheld each month to offset the cost of annuity to be paid to the surviving spouse upon the death of the retiree. Such retirees who have lost a spouse are eligible to have that reduction for survivor benefits restored to full annuity. To restore full annuity, OPM must be advised of the death of the spouse. (See appendices for sample notification letter.) Remarriage Restoration of Survivor Benefits In the event of remarriage, OPM should be notified if the retiree desires to restore survivor benefits for the new spouse. (See appendices for sample notification letter.) This notice must be within two years of the remarriage and will not be effective until at least nine months after the date of the remarriage. The retiree's annuity will be reduced for lifetime, or until the death of the second spouse, by a percentage calculated as follows: The amount of the gross retirement benefits received from the date of death of the first spouse until the effective date of survivorship coverage for the new spouse will be subtracted from the amount that would have been received had not benefits been restored to full annuity. Interest on the amount thus obtained will be added and the total sum prorated based on the age of the annuitant. According to OPM, in most cases this will be less than 5 percent of the retiree's annuity. This amount, plus the amount (approximately 10 percent) of the annuity is reduced by the regular formula for electing survivor benefits, will be deducted from the monthly annuity. However, the maximum reduction is 25 percent. 10

11 FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM FEHB Most people who retire from the federal government can continue their participation in one of the plans available under the FEHB. When an annuitant dies while enrolled in a Self and Family plan, the survivor annuitant (and any other family member eligible for continued coverage) will automatically have continued coverage under the plan unless OPM is advised, in writing, to discontinue this coverage. After the annuitant's death, eligible family members will continue to be covered if: 1) The annuitant was enrolled for Self and Family, and 2) A family member receives a survivor annuity. The coverage ends if the survivor annuity terminates. The survivor(s) share of the cost of the plan is the same amount as the annuitant was paying and will be deducted from the survivor annuity payment. If there is only one survivor annuitant and no other family member is eligible for continued coverage, OPM will change the enrollment to Self Only coverage. If the annuitant dies and none of his or her family members receives a monthly survivor benefit, the family enrollment ends. More information about coverage for survivor annuitants is at If, for any reason, a surviving spouse does not wish to continue coverage under FEHB, OPM must be advised in writing. Once canceled, however, coverage can never be reinstated except under the following conditions: OPM regulations permit annuitants and former spouses to cancel their enrollment in FEHB for the purpose of enrolling in a Medicare-sponsored prepaid health plan under sections 1833 or 1876 of the Social Security Act. If they should subsequently be un-enrolled from the prepaid health plan, they can re-enroll in a FEHB plan. If the un-enrollment in the prepaid health plan is involuntary, re-enrollment in FEHB can be made any time beginning 31 days before and ending 31 days after the un-enrollment in the prepaid health plan. Re-enrollment in FEHB after voluntary un-enrollment may only be made during the next open season. Should a spouse who had terminated FEHB coverage remarry a person covered by FEHB, the spouse could be covered as dependent under this plan. Coverage would not be continued should this second husband or wife die, unless a survivorship annuity had been provided following the second marriage. If a spouse is receiving a survivor's annuity as a widow or widower of a deceased employee or annuitant and such annuity terminates because of remarriage, enrollment and coverage under FEHB will automatically end. 11

12 FEDERAL EMPLOYEES GROUP LIFE INSURANCE PROGRAM FEGLI Most federal employees carry life insurance coverage into retirement under the FEGLI. If you are eligible and choose to continue your insurance as an annuitant or compensationer, you must complete a Continuation of Life Insurance Coverage form (SF 2818). On this form, you elect if you want to continue your basic life insurance into retirement as a compensationer and elect the amount of basic insurance you want after age 65 (or retirement, if later). The choices are 75 percent reduction, 50 percent reduction, or no reduction. For annuitants, OPM pays the government contribution and the retirement system makes withholdings from your annuity. Cost for Annuitants for Each $1,000 of Basic Insurance Amount in Effect at the Time of Retirement 75% Reduction 50% Reduction No Reduction Until the month after your 65 th birthday $ monthly $ monthly $ monthly Starting the month after your 65 th birthday Free $0.60 monthly* $1.83 monthly* * This amount will be withheld from your annuity for life (unless you cancel or subsequently elect 75 percent reduction). If you have optional insurance and are eligible to continue it, you must choose how you would like to continue it in retirement (if you choose to keep option A, it automatically reduces when you reach age 65 (or retire, if later). There is no reduction election for option A. For options B and C, you can choose whether to have all or some of the multiples reduce or not reduce. You pay 100 percent of the cost of optional insurance. The premiums for the three optional insurance coverages are based on your age and the number of option B and/or option C multiples (up to five) you elect. They may increase as you get older. Refer to the OPM Handbook or Web site for more information on the pricing of the three optional insurances. Can My Family Continue Coverage if I Die? Upon your death, your family members covered under option C are eligible to convert their coverage to an individual policy. The conversion policies do not include "family" policies similar to the FEGLI Program's option C. The individual policy is issued to the eligible family member. In the case of a minor child, the parent can apply on the child's behalf for an individual policy. OPM will send your family member(s) a Notice of Conversion Privilege (SF 2819) to your last address on file. OPM doesn't have to try to locate family members who might not have lived with you at the time of your death. 12

13 How Do I Report a Death? If you are filing an option-c claim, contact OPM s Retirement Operations Center at Is My Designation of Beneficiary Current? Most annuitants don't realize that they have several designations to keep current. If you don't have a designation on file, then the funds will be distributed according to the order of precedence. An out-of-date designation may cause the money to go to someone whom you no longer wish to receive it. Each life insurance policy should have a primary and secondary (or contingent) beneficiary designation. If you are married, typically your spouse will be the primary beneficiary although that is not a requirement. If you are married then typically children and grandchildren will be the secondary beneficiaries. For the secondary designation, it should typically read lawful living children in equal shares. If a child predeceases you and you would like that child's share to go to his or her children (your grandchildren) then the designation should read "lawful living children per stirpes. When, Where Should I Send My Completed Designation of Beneficiary Form? You may want to consider completing a new designation form whenever you have a significant change in your life, such as a marriage, divorce or death. Be sure it remains accurate and reflects your intentions. You should also file a new designation whenever a beneficiary's address changes. Failure to do so may mean that the FEGLI office cannot locate your beneficiary and therefore cannot pay him or her the death benefits. If you are a retired employee, you must file the form with the OPM. ORDER OF PRECEDENCE When you die, FEGLI will pay life insurance benefits in a particular order, set by law, if you did not assign ownership and there is no valid court order on file, OFEGLI will pay benefits in this order: 1) To the beneficiary(ies) you designated; 2) If there is no such beneficiary, to your widow or widower; 3) If none of the above, to your child or children, with the share of any deceased child distributed among descendants of that child (a court will usually have to appoint a guardian to receive payment for a minor child); 4) If none of the above, to your parents in equal shares or the entire amount to your surviving parent; 5) If none of the above, to the executor or administrator of your estate; 6) If none of the above, to your other next of kin as determined under the laws of the state where you lived. This order of precedence cannot be changed by a will or any court action, but the insured can change beneficiaries at any time and should do so if it is desired that the benefits go in a direction other than in the order of precedence specified. When advised of the death of the insured, OPM will forward the necessary forms to apply for the insurance. 13

14 SPECIAL AGENTS MUTUAL BENEFIT ASSOCIATION SAMBA SAMBA Term Life Insurance coverage is portable, which means that, once you are approved for coverage, the SAMBA Term Life Insurance Plan is yours even if you change jobs or leave federal employment. SAMBA Term Life Insurance Plan coverage is available in amounts up to $600,000. In the event of death of the retiree or a dependent, SAMBA should be notified immediately. Make notification to: SAMBA Old Georgetown Road Rockville, MD Telephone: or Fax: samba@samba-insurance.com If the deceased retiree or deceased dependent was insured under a SAMBA life insurance plan, SAMBA will send an application for any benefits due the designated beneficiary. SAMBA will also notify the surviving retiree or dependents of their eligibility to continue participation. 14

15 FEDERAL EMPLOYEE PROFESSIONAL LIABILITY INSURANCE FEPLI Wright USA (formerly Wright and Company) offers many insurance plans that continue to be available to retired employees such as: Federal Employee Professional Liability Insurance (FEPLI) Former Federal Employee Professional Liability Insurance (FFEPLI) Life Insurance Dental Insurance Disability Income Insurance Personal Umbrella Liability Insurance In the event of death of a retiree or dependent covered by any Wright USA insurance policy, make notification to: Wright USA 706 Philadelphia Blvd, Suite 1 Wilmington, DE Telephone: Fax: Wright USA will mail an application for any benefit due the designated beneficiary. Wright USA will also notify the surviving retiree or dependent of eligibility to continue participation in the above plans. 15

16 THRIFT SAVINGS PLAN The Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees. Congress established the TSP in the Federal Employees Retirement System Act of The Federal Retirement Thrift Investment Board, an independent government agency, administers the TSP. The purpose of TSP is to provide additional retirement income for CSRS and FERS employees. It offers federal civilian employees the same type of savings and tax benefits that many private corporations offer their employees under 401(k) plans. Contributions to the plan are voluntary and the rules differ for FERS and CSRS employees. Generally, withdrawals are not permitted from TSP until you have separated from federal service. For a FERS retiree the TSP is an integral part of the retirement package, along with the FERS basic annuity and Social Security. For a CSRS retiree, the TSP is a supplement to the CSRS annuity. TSP WITHDRAWALS AFTER LEAVING FEDERAL SERVICE You have two options for withdrawing your TSP account after you leave federal service. You may take a partial withdrawal or a full withdrawal. Partial Withdrawals A partial withdrawal allows you to make a one-time-only withdrawal and leave the rest of your money in the TSP until a later date. Use Form TSP 77 - Request for Partial Withdrawal. You can make a partial withdrawal under the following circumstances: You have not made a prior partial withdrawal or have one that is currently pending, and You did not make an age-based in-service withdrawal while you were still employed by the federal government or the uniformed services, and You request $1,000 or more from your account. Full Withdrawal When you are ready to withdraw all of the money from your TSP account, you can do it all at once, over a period of time, or you can purchase an annuity that will make payments to you for life. For maximum flexibility, you can choose any combination of these full withdrawal options. Single Payment Choose the single payment option if you want to withdraw your entire account at one time. It is sometimes referred to as a "lump sum" payment. This is the choice you would make to rollover the TSP to an IRA. 16

17 Series of Monthly Payments Choose monthly payments if you want to withdraw your entire account in a series of payments spread over time. The TSP offers two choices of monthly payment: Specific Dollar Amount You may request a specific dollar amount that you will receive each month until your entire TSP account has been paid out to you. The amount you request must be $25 or more. Life Expectancy You may request to have the TSP calculate your monthly payment for you using the Internal Revenue Service's Life Expectancy Tables. Your first payment amount will be based on your age and your account balance at the time of the first payment. The TSP will recalculate your monthly payment every year. Life Annuity A life annuity is a monthly benefit paid to you for life. You can withdraw all or part of your TSP account as a life annuity as long as the portion of your account balance used to purchase it is $3,500 or more. If you make this choice, the TSP will purchase an annuity for you from its provider. For information on the annuity options available to you, go to the TSP Web site, Make sure you don't confuse the TSP annuity that you can purchase as a full withdrawal option with the annuity that is part of your retirement package. The TSP annuity is not the basic annuity that you will receive when you retire as either a FERS or CSRS employee, or the retired pay that you receive as a member of the uniformed services. Combination of Options You can withdraw your entire account balance using a combination of any of the available full withdrawal options (single payment, monthly payments or life annuity). If you choose a life annuity as an option, the portion of your account balance used to purchase it must be at least $3,500. ROLLING TSP TO IRA Every retiree should give very serious consideration to rolling his or her TSP account to an individual retirement account (IRA) upon leaving federal service and certainly before reaching age 70½ when the IRS requires mandatory withdrawals. You can rollover the TSP to an IRA using form TSP-70, which can be downloaded directly from the tsp.gov site. By using this form for a direct rollover you avoid any tax consequences or any withholding for taxes. WHAT ARE REQUIRED MIMINUM DISTRIBUTIONS (RMDs)? Required minimum distributions, often referred to as RMDs or minimum required distributions, are amounts that the federal government requires you to withdraw annually from traditional IRAs and employer-sponsored retirement plans, such as the TSP, after you reach age 70½ (or, in some cases, after you retire). You can always withdraw more than the minimum amount from your IRA or plan in any year, but if you withdraw less than the required minimum, 17

18 you will be subject to a federal penalty, which is 50 percent of the amount not withdrawn that was required to be withdrawn. The RMD rules are calculated to spread out the distribution of your entire interest in an IRA or plan account over your lifetime. The purpose of the RMD rules is to ensure that people don't accumulate retirement accounts, defer taxation, and leave these retirement funds as an inheritance. Instead, required minimum distributions generally have the effect of producing taxable income during your lifetime. Your first required distribution from an IRA or retirement plan is for the year you reach age 70½. However, you have some flexibility as to when you actually have to take this first-year distribution. You can take it during the year you reach age 70½, or you can delay it until April 1 of the following year. Since this first distribution generally must be taken no later than April 1 following the year you reach age 70½, this April 1 date is known as your required beginning date. Required distributions for subsequent years must be taken no later than Dec. 31 of each calendar year until you die or your balance is reduced to zero. This means that if you opt to delay your first distribution until April 1 of the following year, you will be required to take two distributions during that year your first year's required distribution and your second year s required distribution. Calculation of RMDs RMDs are calculated by dividing your traditional IRA or retirement plan account balance by a life expectancy factor specified in IRS tables. Your account balance is usually calculated as of Dec. 31 of the year preceding the calendar year for which the distribution is required to be made. For most taxpayers, calculating RMDs is straightforward. For each calendar year, simply divide your account balance as of Dec. 31 of the prior year by your distribution period, determined under the Uniform Lifetime Table using your attained age in that calendar year. This life expectancy table is based on the assumption that you have designated a beneficiary who is exactly 10 years younger than you are. Every IRA owner's and plan participant's calculation is based on the same assumption. There is one exception to the procedure described above the younger spouse rule. If your sole designated beneficiary is your spouse, and he or she is more than 10 years younger than you, the calculation of your RMDs may be based on the longer joint and survivor life expectancy of you and your spouse. (The life expectancy factors can also be found in IRS publication 590.) Consequently, if your spouse is your designated beneficiary and is more than 10 years younger than you, you can take your RMDs over a longer payout period than under the Uniform Lifetime Table. If your beneficiary is not your spouse, or a spouse who is not more than 10 years younger than you, then you must use the shorter payout period specified in the Uniform Lifetime Table. If you have multiple IRAs, an RMD is calculated separately for each IRA. However, you can withdraw the required amount from any one or more IRAs. Inherited IRAs are not included with your own for this purpose. If you participate in more than one employer retirement plan, your RMD is calculated separately for each plan and must be paid from that plan. Why should I consider rolling the TSP to an IRA? 1) Control: You will have complete flexibility in the timing and amounts for withdrawing money except that the above rules for RMD must be observed after reaching age 70 ½. The TSP has much more restrictive withdrawal policies. 2) Diversification: An IRA offers unlimited investment options, such as individual stocks, bonds, mutual funds, commodities, real estate, precious metals and different types of annuities. The ability to diversify your investments can help to better manage risk and reduce volatility in all types of markets and economic conditions. 18

19 3) Wealth Transfer: If you want to leave an inheritance for heirs that cannot be done if the TSP is converted to an annuity. It can be done using the stretch IRA concept with an IRA. While this may also be available with the TSP, it s unlikely that the TSP personnel are aware of or familiar with it. HOW THE TSP DISTRIBUTES DEATH BENEFITS In the event of your death, the funds in your beneficiary participant account cannot remain in the TSP. Your account will have to be distributed to your beneficiary(ies) indicated on Form TSP-3 - Designation of Beneficiary, or, if no form is on file with the TSP, according to this order of precedence: To your widow or widower; If none, to your child or children equally, and to descendants of deceased children by representation; If none, to your parents equally or the surviving parent; If none, to the appointed executor or administrator of your estate; If none, to your next of kin who is entitled to your estate under the laws of the state in which you resided at the time of your death. For this order of precedence, a child includes a natural child or an adopted child, but does not include a stepchild who has not been adopted. A parent does not include a stepparent, unless your stepparent has adopted you. By representation means that if your child predeceases you, his or her share will be divided equally among his or her children. A will or any other document is not valid for the disposition of your beneficiary participant account. It is not a substitute for a Designation of Beneficiary form. A retiree or beneficiary receiving an annuity from TSP may obtain detailed information about this plan by visiting the TSP Web site, If not already available, a Personal Identification Number (PIN), needed to access a retiree's personal account, may be requested at this site or by calling If a retiree was receiving an annuity from the Thrift Savings Plan at the time of death, contact the Federal Retirement Thrift Investment Board at Provide the Board the name of the deceased, the TSP account number and the date of death. If the retiree had elected a survivorship benefit, such benefits will then be paid to the designated beneficiary. Upon the death of a spouse receiving spousal benefits from the Thrift Savings Plan, do not cash any such annuity checks. If such checks are received subsequent to a retiree s death, contact the Board at the above number to obtain instructions on how and where to return them. The spouse has no right to will the annuity to anyone else; his or her death will be the end of the benefit. 19

20 SOCIAL SECURITY ADMINISTRATION Social Security is a program administered by the Social Security Administration (SSA) of the U.S. Department of Health and Human Services. It is designed to augment family income at the time of retirement. It is normally payable only to a person and/or spouse who, through their employment, had deductions made from their wages for a certain number of years. For most people now applying for benefits, 40 quarters (not necessarily consecutive) of such employment are required. Full retirement age (also called "normal retirement age") was 65 for many years. However, beginning with people born in 1938 or later, that age gradually increases until it reaches 67 for people born after No matter what your full retirement age is, you may start receiving benefits as early as age 62 or as late as age 70. IF YOU RETIRE EARLY You can retire at any time between age 62 and full retirement age. However, if you start benefits early, your benefits are reduced a fraction of a percent for each month before your full retirement age. This chart lists age 62 reduction amounts and includes examples based on an estimated monthly benefit of $1,000 at full retirement age. Note: If your birthday is on Jan. 1, SSA figures your benefit as if your birthday was in the previous year. 20

21 Year of Birth or earlier Full (normal) Retirement Age and 2 months and 4 months and 6 months and 8 months and 10 months Full Retirement and Age 62 Benefit By Year Of Birth Months between age 62 and full retirement age A $1000 retirement benefit would be reduced to The retirement benefit is reduced by 3. At Age A $500 spouse's benefit would be reduced to The spouse's benefit is reduced by $800 20% $375 25% 38 $ % $ % 40 $ % $ % 42 $ % $ % 44 $ % $ % 46 $ % $ % $750 25% $350 30% and 2 months and 4 months and 6 months and 8 months and 10 months 1960 and later 50 $ % $ % 52 $ % $ % 54 $ % $ % 56 $ % $ % 58 $ % $ % $700 30% $325 35% 1. If you were born on Jan. 1, you should refer to the previous year. 2. If you were born on the 1st of the month, the benefit is figured as if your birthday was in the previous month. You must be at least 62 for the entire month to receive benefits. 3. Percentages are approximate due to rounding. 4. The maximum benefit for the spouse is 50 percent of the benefit the worker would receive at full retirement age. The percent reduction for the spouse should be applied after the automatic 50% reduction. Percentages are approximate due to rounding. Delayed Retirement Credits 21

22 Social Security benefits are increased by a certain percentage (depending on date of birth) if you delay your retirement beyond full retirement age. The benefit increase no longer applies when you reach age 70, even if you continue to delay taking benefits. Increase for Delayed Retirement Year of Birth* Yearly Rate of Increase Monthly Rate of Increase % 11/24 of 1% % 1/2 of 1% % 13/24 of 1% % 7/12 of 1% % 5/8 of 1% 1943 or later 8.0% 2/3 of 1% *Note: If you were born on Jan. 1, refer to the rate of increase for the previous year. If you've already reached full retirement age, you can choose to start receiving benefits before the month you apply. However, SSA cannot pay retroactive benefits for any month before you reached full retirement age or more than six months in the past. WINDFALL ELIMINATION PROVISION If you worked for an employer who did not withhold Social Security taxes from your salary, such as a government agency or an employer in another country, the pension you get based on that work may reduce your Social Security benefits. The Windfall Elimination Provision affects how the amount of your retirement or disability benefit is calculated if you receive a pension from work where Social Security taxes were not taken out of your pay. A modified formula is used to calculate your benefit amount, resulting in a lower Social Security benefit than you would otherwise receive. The Windfall Elimination Provision primarily affects you if you earned a pension in any job where you did not pay Social Security taxes and you also worked in other jobs long enough to qualify for a Social Security retirement or disability benefit. For example, this provision affects Social Security benefits when any part of a person s federal service after 1956 is covered under the CSRS. However, federal service where Social Security taxes are withheld (FERS) will not reduce your Social Security benefit amounts. The Windfall Elimination Provision may apply if: You reached 62 after 1985; or You became disabled after 1985; and You first became eligible for a monthly pension based on work where you did not pay Social Security taxes after 1985, even if you are still working. How Does it Work? Social Security benefits are based on the worker s average monthly earnings adjusted for inflation. Your average earnings are separated into three amounts and the amounts are multiplied 22

23 using three factors. For example, for a worker who turns 62 in 2013, the first $791 of average monthly earnings is multiplied by 90 percent; the next $3,977 by 32 percent; and the remainder by 15 percent. The sum of the three amounts equals the total monthly payment amount. The 90 percent factor is reduced in the modified formula and phased in for workers who reached age 62 or became disabled between 1986 and For those who reach 62 or became disabled in 1990 or later, the 90 percent factor is reduced to 40 percent. There are exceptions to this rule. For example, the 90 percent factor is not reduced if you have 30 or more years of substantial earnings in a job where you paid Social Security taxes. If you have 21 to 29 years of substantial earnings, the 90 percent factor is reduced to between 45 and 85 percent. To see the maximum amount your benefit could be reduced, visit GOVERNMENT PENSION OFFSET (GPO) A Law That Affects Spouses, Widows or Widowers If you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse s or widow s or widower s benefits may be reduced. How Much Will My Social Security Benefits Be Reduced? Your Social Security benefits will be reduced by two-thirds of your government pension. In other words, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits. For example, if you are eligible for a $500 spouse s, widow s or widower s benefit from Social Security, you will receive $100 per month from Social Security ($500 $400 = $100). If you take your government pension annuity in a lump sum, Social Security still will calculate the reduction as if you chose to get monthly benefit payments from your government work. Why Will My Social Security Benefits Be Reduced? Benefits paid to wives, husbands, widows and widowers are dependent s benefits. These benefits were established in the 1930s to compensate spouses who stayed home to raise a family and who were financially dependent on the working spouse. But as it has become more common for both spouses in a married couple to work, each earned his or her own Social Security retirement benefit. The law has always required that a person s benefit as a spouse, widow or widower be offset dollar for dollar by the amount of his or her own retirement benefit. In other words, if a woman worked and earned her own $800 monthly Social Security retirement benefit, but she also was due a $500 wife s benefit on her husband s Social Security record, SSA could not pay that wife s benefit because her own Social Security benefit offset it. But, before enactment of the Government Pension Offset provision, if that same woman was a government employee who did not pay into Social Security, and who earned an $800 government pension, there was no offset, and SSA was required to pay her a full wife s benefit in addition to her government pension. If this government employee s work had instead been subject to Social Security taxes, any Social Security benefit payable as a spouse, widow or widower would have been reduced by the person s own Social Security retirement benefit. In enacting the Government Pension Offset provision, Congress intended to ensure that when determining the amount of spousal benefit, 23

24 government employees who do not pay Social Security taxes would be treated in a similar manner to those who work in the private sector and do pay Social Security taxes. APPLYING FOR SOCIAL SECURITY BENEFITS Social Security offers an online retirement application that you can complete in as little as 15 minutes from your home or office at a time convenient for you. In most cases, once your application is submitted electronically, you re done. There are no forms to sign and usually no documentation is required. Social Security will process your application and contact you if any further information is needed. You Can File Online for Retirement Benefits if You: are at least 61 years and 9 months old; live in the United States, Puerto Rico, the U.S. Virgin Islands, Guam, the Northern Mariana Islands or American Samoa; are not currently receiving benefits on your own Social Security record; have not already applied for retirement benefits; and want your benefits to start no more than four months in the future. Important: If you are within four months of age 65, your retirement application will include Medicare benefits. If you do not want to start receiving retirement benefits yet, you can use this application just to sign up for Medicare. NOTIFYING SSA OF A DEATH Social Security should be notified as soon as possible when a person dies. In most cases, the funeral director will report the person's death to Social Security. You will need to furnish the funeral director with the deceased's Social Security number so he or she can make the report. Some of the deceased's family members may be able to receive Social Security benefits if the deceased person worked long enough under Social Security to qualify for benefits. Contact Social Security as soon as you can to make sure the family receives all of the benefits to which it may be entitled. Please read the following information carefully to learn what benefits may be available. A one-time payment of $255 can be paid to the surviving spouse if he or she was living with the deceased; or, if living apart, was receiving certain Social Security benefits on the deceased's record. If there is no surviving spouse, the payment is made to a child who is eligible for benefits on the deceased's record in the month of death. Certain family members may be eligible to receive monthly benefits, including: A widow or widower age 60 or older (age 50 or older if disabled); A widow or widower at any age who is caring for the deceased's child under age 16 or disabled; An unmarried child of the deceased who is: younger than age 18 (or up to age 19 if he or she is a full-time student in an elementary or secondary school); or age 18 or older with a disability that began before age 22; A stepchild, grandchild, step-grandchild or adopted child under certain circumstances; 24