If You Die Before You Retire, What Happens to Your Benefits? Response to Readers’ Questions
by John Grobe |
My recent column (What Happens to Your Federal Employee Benefits if You Die While Still Working?) raised some questions from readers. What follows are answers to many of the specific questions that were asked. All of the following answers refer to employees who die before they retire.
If an individual is not married, their retirement contributions are refunded to their designated beneficiary. If there is no designated beneficiary, it goes according to the standard order of precedence for federal benefits:
- Surviving spouse, if any;
- Children, if any;
- Parents, if still alive;
- Executor or administrator of the estate; if any
- Next of kin as determined by the laws of the state where the deceased federal employee resided at the time of their death.
The government’s "contributions" to your retirement are not refundable.
A spouse who is a retired federal employee and rolled his/her TSP into an IRA may keep their deceased spouses TSP funds in the Thrift Plan, but they cannot roll them into the IRA.
A former spouse is only entitled to a full survivor annuity if it is awarded in the court order and he/she has not re-married prior to the age of 55. On the other hand, if an employee lived until retirement and wished a former spouse to receive a survivor annuity, they could choose an insurable interest survivor annuity for them at the time of retirement.
If you are not married, but have a "life partner", that person would be entitled to any benefits for which they were named beneficiary. They would not be entitled to a survivor annuity. On the other hand, if an employee lived until retirement and wished a "life partner" to receive a survivor annuity, they might be able to choose an insurable interest survivor annuity for them at the time of retirement.
Once you die, your spouse can change from the self and family FEHB coverage to self-only.
If you die with a minor child your child would be entitled to FERS children’s survivor benefits. For this purpose, a child is defined as:
- Unmarried, and;
- Under age 18; or
- Under age 22 if a full-time student; or
- Disabled before 18 and incapable of self support
Children’s benefits are automatic and you do not have to elect them, even after retirement.
There is, however a $ for $ offset with any Social Security survivor benefits to which the child is entitled. This almost always wipes out the FERS children’s survivor benefit. The SS and OPM definition of child differ and it is possible for a child who loses eligibility under SS by virtue of turning 19, to receive a FERS survivor benefit until age 22 if they are a full-time student.
If you are a CSRS employee who has worked over 41 years and 11 months and are continuing to contribute to the CSRS system, those contributions will result in an extra annuity, or a lump some payment when you retire. If you die before retiring, they will be paid (including interest they have earned) according to the standard order of precedence for federal benefits.
If you switched from CSRS to FERS, any survivor benefits for a spouse would be governed by FERS rules.
If you are CSRS any unused sick leave it will be used in the computation of a survivor annuity.
A non-spousal beneficiary can establish an "inherited IRA" with the TSP. The TSP, however, strongly recommends discussing the details of such a transfer with a tax advisor in their 06/08 publication entitled "Death Benefits". If the non-spousal beneficiary were a federal employee, they would not be able to combine it with their own TSP.
If you have a divorce decree that specifies that your pension be divided with your former spouse after you retire, but is silent regarding a survivor annuity for the former spouse, the former spouse is entitled to nothing if you die before you retire.
If you marry late in your career, your new spouses rights will supersede those of any beneficiaries.
You must be married at least 9 months in order for your spouse to be entitled to a survivor annuity and, therefore, entitled to continue FEHB after your death. Exceptions to the 9-month rule are if your death is accidental or if there is a child born of the marriage.
© 2013 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.