Federal Employees News Digest

Informed Investor: Understanding the federal government’s survivor benefits - Part III

This third in a series of columns discussing survivor benefits for families of deceased federal employees examines benefits for surviving spouses of deceased employees covered by the Federal Employees Retirement System (FERS). FERS-covered employees are those employees first hired into federal service as full-time or part-time permanent employees any time after Dec. 31, 1983.

There are two types of survivor benefits that can be paid to surviving spouses of FERS-covered employees who die while in federal service. Whether one or both of these benefits can be paid depends on the amount of federal service the deceased employee had at the time of his or her death. A spouse includes a same-sex or an opposite-sex spouse.

Basic Employee Death Benefit (BEDB). For the BEDB to be paid to a surviving spouse, a deceased employee must have: (1) completed at least 18 months of potentially creditable service; and (2) died while contributing to FERS via payroll deduction.

The minimum 18 months of potentially creditable civilian service includes all of the following: (1) for a “trans” FERS employee, prior CSRS service; (2) CSRS or CSRS Offset service for which the employee received a refund before becoming covered by FERS; (3) FERS service for which retirement contributions remain in the employee’s credit; and (4) nondeduction (temporary) service prior to Jan. 1, 1989, regardless of whether a deposit for such service has been made.

The BEDB under FERS is equal to: (1) $15,000, increased by all CSRS COLAs beginning Dec. 1, 1987, plus (2) 50 percent of the deceased employee’s final salary, as shown on the deceased employee’s current SF 50 (Notice of Personnel Action), or high-three average salary, if larger.

As of Jan. 1, 2016, the $15,000 has increased to $32,326.58, a result of the annual CSRS COLAs since Dec. 1, 1987. The high-three average for BEDB purposes is computed the same way as it is for FERS annuity purposes.

The surviving spouse has two options with respect to how to receive the BEDB, namely: (1) one payment or (2) 36 monthly payments. The survivor’s election of one payment or 36 monthly installments is made on Form SF 3104B after the employing agency inserts the BEDB payable.  To determine the amount of each monthly installment payment of the BEDB, one needs to multiply the BEDB amount by the appropriate factor (available from OPM). For deaths occurring after Sept. 30, 2015, the factor is 0.0299522. The following example illustrates:

BEDB of $120,000 times .0299522 (factor) equals monthly installment payment of $3,594.26.

The total paid in 36 installment payments is 36 times $3,594.26 or $129,393.36, $9,393.36 more than the BEDB. This is because the $9,393.36 represents interest.

The BEDB is fully taxable. But if the surviving spouse elects to have the BEDB directly transferred to a traditional IRA, then the BEDB is not taxable until it is withdrawn from the traditional IRA.

A surviving spouse may at any time elect to stop receiving the BEDB in installment payments and receive a lump-sum payment of the remaining balance. If the surviving spouse elects installment payments but dies before the completion of these payments, then any remaining balance is paid in a lump sum to the spouse’s next of kin.

FERS Spousal Survivor Annuity. In addition to the BEDB, a monthly survivor annuity is payable to the surviving spouse of a deceased employee if the employee: (1) completed at least 10 years of total creditable service; and (2) died while contributing to FERS via payroll deduction. Creditable service is determined as it is for the BEDB (see above).

A spousal FERS survivor annuity is computed as if the deceased employee had retired optionally with no age reduction penalty on the day of death. The surviving spouse receives 50 percent of the decreased employee’s FERS annuity, based on the deceased employee’s length of service and high-three average salary. In the case of a deceased Trans FERS employee—a FERS employee who transferred to FERS from CSRS with at least five years of CSRS service—the surviving spouse receives 50 percent of the combined computed CSRS and FERS annuity components.

Responsibilities of a Surviving Spouse of a Deceased FERS Employee. A surviving spouse must: (1) complete the forms: (a) Form SF 3104 (Application for Death Benefits) and (b) Form SF 3104B (Documentation and Elections in Support of Application for Death Benefits When Deceased Was An Employee at the Time of Death); (2) attach a certified copy of the employee’s death certificate; and (3) attach a certified copy of the employee’s and spouse’s marriage certificate. If the deceased employee’s employing agency has not forwarded the employee’s records to OPM, then completed Forms SF 3104 and SF 3104B together with the other documents are sent to the employing agency’s personnel office. If the employing agency has forwarded the employee’s records to OPM, then Forms SF 3104 and SF 3104B and other documents are mailed to:  Office of Personnel Management, Retirement Operations Center, P.O. Box 45, Boyars, PA 16017-0045.


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Edward A. Zurndorfer Certified Financial Planner
Mike Causey Columnist
Tom Fox VP for Leadership and Innovation, Partnership for Public Service
Mathew B. Tully Legal Analyst

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