Survivor Benefits: Plan for the Future A NARFE Federal Benefits Institute Webinar Presented by Tammy Flanagan 1
Different Decisions at Different Stages of Your Career: Employee Pre-retirement Post-retirement Thrift Savings Plan Insurance CSRS or FERS retirement Social Security 2
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
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
Designation of Beneficiary: Pre-Retirement Only Unpaid Compensation SF-1152 Last Paycheck Unused Annual Leave Travel allowance, any money owed by agency 5
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
Test Your Knowledge A designation of beneficiary form must be notarized: A. True B. False 7
Test Your Knowledge A designation of beneficiary form must be notarized: A. True B. False 8
5/11/17: Estate Planning Webinar 9
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) $32,326.58 + 50% of annual pay rate 10 years + service: 50% of earned FERS annuity According to court order 10
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
How much life insurance do you need? Final Expenses Raising Children Income Replacement 12
Insurance needs change over time: Reduce life insurance Long Term Care Needs Burial 13
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
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
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
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
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
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
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
CSRS SF 2801 Application for Immediate Retirement 21
FERS SF 3107 Application for Immediate Retirement 22
Common Misconceptions: If your spouse has their own retirement, then it is not necessary to leave them a survivor annuity. 23
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
No Spousal Survivor Election Mary $40,000 John $40,000 Total Income: $80,000 25
No Spousal Survivor Election: Mary predeceases John Mary Deceased John $46,000 Total Income: $46,000 26
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
Full Spousal Survivor Election: Mary $36,870 John $38,200 Total Income: $75,070 28
Full Spousal Survivor Election: John predeceases Mary Mary $58,000 John Deceased Total Income: $58,000 29
Full Spousal Survivor Election: Mary predeceases John Mary Deceased John $64,270 Total Income: $64,270 30
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
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
CSRS or FERS: Retirement Election Former Spouse Survivor Benefits Court Order None Voluntary Election Election #5 on retirement application 33
CSRS or FERS: Retirement Election Single Elections None Insurable Interest 34
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
FEGLI Basic Coverage Option A Option B Option C 36
FEGLI Option B Example $240,000 Option B Coverage Age Per $1,000 Total 55 59 $0.433 $103.92 60 64 $0.953 $228.72 65 69 $1.170 $280.80 70 74 $2.080 $499.20 75 79 $3.900 $936.00 80 and over $5.720 $1,372.80 37
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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
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
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
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
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
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
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 16017-0045 45
Social Security: Dual Entitlement Pat Paul $1,400 / month $2,000 / month 46
Social Security: Dual Entitlement Paul or Pat $2,000 / month 47
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
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
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
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
Beneficiary Strongly recommend consulting a tax or financial advisor 52
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
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
CSRS or FERS Information Please RI 25-26 (CSRS Survivors) RI 90-12 (FERS Survivors) Social Security What You Need to Know When you Get Survivors Benefits TSP Book 31 Death Benefits 55
Or Online Office of Personnel Management www.opm.gov Social Security Administration www.ssa.gov Thrift Savings Plan www.tsp.gov 56
NARFE is here to help: www.narfe.org Departments Federal Benefits Special Topics Death of Retiree or applying for survivor benefits Also contact: NARFE Service Officers 57