Note: A new version of this article with more current information is available at https://www.fedsmith.com/2016/03/17/what-happens-to-your-benefits-if-you-die-after-you-retire-2/
This is a follow-up article to several recent articles on the topic of federal employee benefits. The earlier articles are: Leaving Government Before Retirement? What Happens To Your Benefits?, and If You Die Before You Retire, What Happens to Your Benefits? A Response to Readers’ Questions.
This article considers the question: What happens to your benefits if you die after you retire?
Your spouse will be able to keep your health insurance if two conditions are met. First, you must have elected a survivor annuity. Second, your spouse must be enrolled with you on a self and family policy on the date of your death. If these conditions are met, you spouse will be able to continue your health insurance and Uncle will continue to pay his share.
Your life insurance will be paid to your designated beneficiary. If the amount of your insurance is $5,000 or greater, your beneficiary will not receive a check. Rather, they will receive a money market account and a checkbook for the account.
Speaking of beneficiary forms, do you know who your beneficiaries are? If you have any doubt, you may wish to check your Official Personnel Folder (OPF). The last thing you want is having your ex-spouse walking off with all you have saved over your career.
If you elected survivor benefits for your spouse at the time of retirement (or at the time of marriage, if after retirement) your spouse will begin collecting a survivor benefit after your death.
Under CSRS, survivor benefits can be as much as 55% of your annuity. You may elect lesser amounts, but spousal consent is required at the time.
Under FERS, survivor benefits can be either 50% or 25% of you annuity. Spousal consent is required for the 24% survivor benefit.
COLAs are paid on survivor benefits for CSRS and FERS. If your spouse remarries before the age of 55 they forfeit their survivor benefit.
If you did not elect a survivor benefit, your designated beneficiary is entitled to a refund of any of your contributions that have not been paid to you. OPM views you as recouping your contributions dollar-for-dollar beginning at retirement, so if you die more than a few years after retirement, there will be nothing to recoup.
Your TSP will go to your designated beneficiary. Your beneficiary may either take the money all at once (paying all the deferred taxes at once) or spread it out over his/her lifetime (paying all the deferred taxes a little bit at a time). If your spouse is a federal employee/retiree, they may combine your TSP account with their own.