Should You Designate Beneficiaries For Your Federal Benefits?

By on November 5, 2012 in Pay & Benefits with 8 Comments

That’s a good question, and one that’s often answered too quickly by HR professionals and federal employees alike.  A little knowledge about how federal benefits are paid may help you make the best decision for your situation.

First, though, what “federal benefits” am I talking about?   For most employees, this includes your Federal Employees Group Life Insurance (FEGLI); Thrift Savings Plan (TSP) funds; employee contributions to FERS or CSRS, and “unpaid compensation” (unpaid salary, annual leave, etc.).  Some employees have other benefits available through their employment, but these are the basics.

Second, how are your benefits paid if you don’t designate beneficiaries?  This is where employees should start, in order to make the best decisions.  Let’s get familiar with that.

For most of the benefits listed above, a standard “Order of Precedence” applies to payment of the benefits in the event of an employee’s death.  (The exceptions are addressed below.)  The order of precedence states that all of those benefits will be paid —

  1. to the beneficiary(ies) you designated;
  2. if there is no valid designation of 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 the descendants of that child;
  4. if none of the above, to your parents in equal shares, or the entire amount to the surviving parent;
  5. if none of the above, to the court-appointed 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.

The only exception to the “order of precedence” shown above applies to the Federal Employees Group Life Insurance (FEGLI) program.  FEGLI benefits are paid first in accordance with a court order or to the assignee of the life insurance, if either exists.  If any life insurance funds remain after payment of those obligations, they are paid in accordance with the order of precedence.

So, should you designate beneficiaries for your federal benefits?  For the vast majority of employees, the answer is “No.”  Payment in the order starting with number 2 above is the preferred order for most people: first, the surviving spouse; then children; then parents; then executor of estate, etc.  If the order of precedence is acceptable, then no designation of beneficiary is needed!

Indeed, if you filed designations many years ago, you may need to update or cancel them.  It’s easy for designations to become outdated due to marriage, divorce, death of parents, birth of children, and other life events.  If designations aren’t current, then your benefits may not be paid the way you want them to be, which can lead to some very messy situations after your death. I’ve seen valid beneficiary forms that were more than 30 years old that named an employee’s parents, even though the employee had long since married and had children.

Many agencies inadvertently contribute to the problem of inaccurate beneficiary forms.  Many agencies routinely give beneficiary forms to their new employees as part of the new employee package.  This is usually done with no discussion or supporting information.  Being eager to please, many new employees complete the forms with no real thought or understanding of the long-term implications, and may not even remember completing them.

So it’s wise to know whether you’ve ever designated beneficiaries, and whether such designations are still appropriate.  You should have received your own copies of most of these designations when you submitted them, but if you can’t find any record, this may help:

  • The designations of beneficiary for FEGLI and unpaid compensation are filed in your Official Personnel Folder (OPF).  If you don’t have access to your electronic OPF, ask your servicing personnel office to check your OPF.
  • The designation of beneficiary for Thrift Savings Plan (TSP) funds is filed with the TSP.  Check your latest annual TSP statement for a listing of your designated beneficiaries (if any), or contact the TSP Service Office at 1-TSP-YOU-FRST (1-877-968-3778).
  • For employees under FERS:  the designation of beneficiary for your employee contributions to FERS is maintained in your OPF.
  • For employees under CSRS:  the designation of beneficiary for your employee contributions to CSRS is filed with the U.S Office of Personnel Management.  (If you don’t know if you’ve submitted such a designation, it may be easiest to fill out a new one or submit a cancellation simply so you know what is on file.)

Do you need to designate new beneficiaries or cancel current designations so that the order of precedence applies?  The forms you need are available online:

 

© 2016 Ehren Clovis. All rights reserved. This article may not be reproduced without express written consent from Ehren Clovis.

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About the Author

Ehren Clovis retired from federal service after a career as a Benefits Specialist. She dealt with the employees of several different federal agencies, and acquired broad knowledge and experience with federal benefits, including the special retirement provisions for federal Law Enforcement Officers (LEOs). She now presents retirement and benefits training for federal employees through private companies. Ms. Clovis also counsels individual clients about federal retirement and benefits via phone and email.

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  1. S. Johnson says:

    Designating a beneficiary/beneficiaries is an excellent decision.  However, isn’t it true that if those folks listed as beneficiaries are deceased, and the individual has a will, that the order for distribution would go according to the will.  If everyone in the will was deceased, then the order of precedence would proceed according to the laws of the state.   

  2. BPM says:

    I also disagree as unfortunately in the last year we had two employees pass with no beneficary forms on file and I had both the hospital and county corner’s office calling asking about next of kin information.  Order  of precedent requires research as grannybunny states. One of our employees before passing listed a sibling out of the country and our Retirement branch is still awaiting word on what to do with the former employees 42 years of CSRS annuity monies. Listing more than one beneficiary in writing is wise as No man knows the day or hour……. and it’s better than leaving to the State of —- BPM

  3. Fed4Fodder says:

    DISAGREE.  This article seems to be written for the average, middle class, married employee that worked in the 1950s.  In 2013, many federal employees are in “significant other” relationships or in marriages recognized by a few states and the District of Columbia but NOT by the U.S. government. In addition, a large number  employees are not part of the “traditional” family. In those cases, the best protection is designating a beneficiary.  A surprising large number of people today do not have wills.  They should,  but they don’t. I think you missed half of the federal workforce.

  4. befuddled beneficiary says:

    How can you find out if a payment was made from the remaining CSRS account of a deceased employee?   My cousin at one time told me he had named me as beneficiary on his CSRS account he died and his widow does not return phone calls or emails.  I don’t want to appear greedy but other than contacting the widow is there a way to determine if there was a payment?

    • LaborAttorney says:

      You should pay an attorney for about 60-90 minutes of work.   An attorney who does wills and trusts, or family law, can get to the bottom of this and will know better than you where to turn over rocks. 

  5. grannybunny says:

    I disagree that one should not designate beneficiaries if one agrees with the order of precedence.  Agencies don’t maintain family trees on their employees, and — in order to follow the order of precendence, in the absence of beneficiary designations — some type of factual determination would have to be made as to whether or not deceased employees left surviving spounses, and if not, who  and where are their surviving children and/or descendants of any predeceased children, etc., all of which takes additional time and creates unnecessary opportunities for human error, or worse.  Every state has orders of precedence for the estates of people who die without leaving a will, but no responsible person would ever suggest that someone not make a will if they agreed with that order.  Just as with wills/life insurance beneficiary designations, people need to review their designations periodically — or when there are changes in family composition — in order to keep them updated, but that’s no reason not to make the designations in the first place.  Disclosure:  I am a retired attorney and former member of the judiciary, and have seen a lot of horror stories resulting from people not making formal, legal, designations of their wishes on important issues.

    • Guest says:

       You make valid points, grannybunny, and I agree with most of them, especially that “people need to review their designations periodically ~ in order to keep them updated.”  From my experience dealing with death cases, though, I’ve seen that far too many people do NOT keep them updated — and the results are far more painful for the survivors than if the payments had gone in the order of precedence.  The main lesson here:  prepare designations of beneficiary if you want or need to — but if you prepare them, KEEP THEM UP TO DATE!  

  6. sandiegoret says:

    Good reminder and accurate.  Years ago I was lucky enough to work in a personnel (HR) unit that gave out this exact information and we followed up every time we had an office visit.  Of course, Ms. Clovis’s observation about giving the forms out to new employees was also true of our agency.  We, in employee relations, understood the benefits and how to explain them but the staffing people could never be convinced not to give out the forms to new employees or to invite us to explain them–and they never did so we still wound up with some of the situations she described (beloved widow but not so beloved first spouse gets it all…)

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