Should You Designate Beneficiaries For Your Federal Benefits?

The author offers some guidelines for considering whether or not you should designate beneficiaries for your federal benefits.

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:

About the Author

Ehren Clovis retired from federal service after a career as a Benefits Specialist. She dealt with the employees of many federal agencies, and acquired broad knowledge and experience with federal benefits, including the special retirement provisions for federal Law Enforcement Officers (LEOs). Now she presents retirement and benefits training for federal employees through Federal Career Experts, Inc., and counsels individual clients through her home business, Federal Benefits On Call.