By John Grobe for FedSmith
What Happens to Your Benefits if You Die While Still Working?
This is a question we do not want to ponder, as we all plan on living long after we retire. When it comes to Ben Franklin’s quote, “Plan like you’ll live forever; pray like you’ll die tomorrow”, we all tend to focus on the first part. However, it is helpful to know what will happen to our federal benefits, should we die while still employed.
Your health insurance will no longer do you any good, but it may be a great deal for your surviving spouse. If your spouse is enrolled with you on a self and family policy on the date of your death, he/she will be able to continue federal employee health benefits 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 are married at the time of your death, the survivor benefits your spouse will receive are dependent on your retirement system. If you are CSRS, your spouse will receive a full survivor annuity (55% of what your annuity would be). In the unlikely event you have less than 22 years of service, your spouse will receive a “guaranteed minimum” annuity.
If you are under FERS, your spouse will receive a lump-sum death benefit of ½ of your final salary (or high-3, if higher) and $30.792.97 (in 2012). If you have worked ten years or more, your spouse will be entitled to a full survivor annuity (50% of what your annuity would be).
Under both retirement systems, if your surviving spouse remarries before the age of 55, he/she forfeits the survivor annuity.
Your annual leave, credit hour and comp time balance are considered “unpaid compensation” and will be paid to your designated beneficiary.
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, they may combine your TSP account with their own.
© 2013 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.
