Federal Employee Survivor Benefits For Children With Special Needs
HomeTHE VOICEEmailThe Voice®Special Needs AllianceSandra L. Smith, CELAOast & TaylorMay 2021 – Vol. 15, Issue 6
Federal employees may be able to provide government survivor benefits for their children with special needs. Federal employees, non-elected, non-military people working in federal agencies, in executive branch departments, the military, and the U.S. Postal Service.
Two Different Retirement Systems
There are two different retirement systems covering federal employees, depending on the date they became employed. The current system is the Federal Employees Retirement System , for employees who started employment after 1983. The older system is the Civil Service Retirement System , for employees who started employment before 1984 . FERS and CSRS are both managed by an agency called the Office of Personnel Management .
Eligibility for a Childs Survivor Benefit
Federal employee survivor benefits are automatically provided under the law, and the employee does not have to elect the benefit at retirement. Additionally, there is no reduction in the retirees own retirement annuity in order to provide for the survivor benefit. This differs from the military Survivor Benefit Program, in which the military retirees monthly retirement benefit is decreased in order to provide a survivor benefit for a spouse and/or children.
Amount of Benefits
The amount of the survivor benefit also depends on whether the deceased parent was a FERS or CSRS employee.
How Much Can A Current Or Former Spouse Receive In Fers Survivor Benefits
As with many other aspects of federal benefits, the amount varies widely. The maximum payable survivor benefit amount is equal to 50% of the federal employees unreduced annual benefit.
The federal employees annual benefit will depend on the deceased employees time in government service, age, and pay level.
The federal employee has a large role in deciding how much their survivor benefits are, even to the point of deciding the spouse receives no survivor benefit.
They can also elect for the spouse to have a partially reduced annuity or a fully reduced annuity.
Payment Options Of The Bedb For The Surviving Spouse
Using Form SF 3104B, a surviving spouse must elect whether to receive the BEDB in: one payment, including a rollover option or in 36 monthly payments.
The reason why a surviving spouse may elect not to receive a lump sum payment is because of income tax reasons. The lump-sum payment is fully includable in the surviving spouses income and taxable, and a lump sum payment received in a particular year could result in dire tax consequences for the surviving spouse. By having the BEDB paid out over three years , the tax burden can be spread over that period and will likely result in less overall taxes paid.
To determine the amount of each monthly payment, the BEDB amount is multiplied by the factor appropriate for the employees date of death. The current factor used to determine the monthly installment is 0.0299522. Additional information on this can be found in the Federal Register.
Returning to the example, if Thomas elects to receive his BEDB in 36 monthly payments, then his monthly installment payment will be computed as:
Factor x .0299522
Monthly installment payment $2,585.53
The total amount paid in 36 installment payments will exceed the BEDB since the installment payments include interest. In this example, over 36 months Thomas will receive:
36 times $2,585.53, or $93,079
The $93,079 less $86,322, or $6,757, is the total interest paid over 36 months.
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Fers Lump Sum Death Benefit Payment Government Claims And Federal Income Taxes
A FERS lump sum death benefit payment is subject to any properly certified timely request for recovery of a valid debt due the United States.
The amount of lump sum death benefit payment under FERS is not subject to Federal income tax because the original contributions were previously taxed. However, any interest paid on these contributions is taxable in the year the refunded contributions are paid.
Death Benefits For Relatives Of Fers Employees Who Die In Service Part I
The Basic Employee Death Benefit everything a federal employee under FERS needs to know about what happens if they pass away while still working for the Government
For employees covered by the Federal Employees Retirement System and who die while still in federal service, there are death benefits payable to certain relatives and other designated beneficiaries. This is the first of three columns discussing death benefits for FERS employees who die while in federal service. This column discusses the Basic Employee Death Benefit .
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Spousal Survivor Benefits The Basic Employee Death Benefit
The basic employee death benefit is a lump sum death benefit payment made to the surviving spouse of a deceased employee covered by the Federal Employees Retirement System . This column discusses what the requirements are in order for a surviving spouse to receive the BEDB, the amount of the BEDB, payment options to the surviving spouse, and the Federal income tax consequences of the BEDB.
Employee Benefits: Pension Plan
Federal Employees Retirement System
Beginning in 2013, new employees to the federal government will be covered by the Federal Employees Retirement System-Revised Annuity Employees . These employees must pay 3.1% of their salary as FERS retirement contributions. This is a contributory three-tier plan providing retirement income from a Federal pension, Social Security and a Thrift Savings Plan .
NOTE: If you were employed by the Federal government in the past, you may be covered by the Civil Service Retirement System or the CSRS Offset system instead of FERS. The disability and survivor benefits shown above are different if you are covered under CSRS.
In addition to a future retirement benefit, FERS provides disability coverage and survivor benefits.
FERS Disability Coverage
You are eligible for disability retirement after completion of 18 months of creditable civilian service.
FERS Survivor Benefits
Survivor benefits may be payable to a qualified spouse, ex-spouse, and/or child. Certain survivor benefits are payable after completion of 18 months of creditable civilian service. Other benefits require completion of 10 years of creditable service.
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Payment Of The Basic Employee Death Benefit
The surviving spouse has three options with respect to how to receive the BEDB, namely:
- Lump-sum payment, fully federal and state taxable in the year received or
- Direct transfer to surviving spouses traditional IRA, or if the surviving spouse is a federal employee with a Thrift Savings Plan traditional account, direct transfer into the traditional TSP account or
- 36 monthly installment payments.
The surviving spouses election as to which option to use to receive the BEDB is made on FormSF 3104B . The election is done after the employing agency inserts the lump sum amount payable.
To determine the amount of each monthly installment payment, one needs to multiply the total amount of the BEDB by the factor appropriate for the date of death of the employee. The current factor for deaths occurring on or after Oct. 1, 2017, is 0.0299522. Additional information about this factor can be found here in the November 7, 2014, Federal Register.
The following is an example:
Basic Employee Death Benefit $90,000
Times Factor x 0.0299522
Monthly Installment Payment $2,695.70
The total amount paid in 36 installments is larger than a single lump-sum payment because the total of 36 payments includes interest.
Part II >
Federal Income Tax Consequences Of The Bedb
BEDB payments made to a spouse are fully taxable to the receiving surviving spouse, subject to both Federal and, if applicable, state income taxes. Since the BEDB is subject to ordinary and not preferential income tax rates, a lump sum payment could result in a surviving spouse being pushed into the highest marginal tax brackets.
Surviving spouses should, therefore, consider the alternatives to a lump sum payment including installment payments over 36 months or the rollover option to a traditional IRA. A disadvantage to a rollover to a traditional IRA is that the surviving spouse would have to be at least age 59.5 to avoid paying a 10 percent early withdrawal penalty when withdrawing from the rollover traditional IRA. On the other hand, BEDB installment payments are not subject to any early withdrawal penalty, no matter the age of the surviving spouse.
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Requirements For A Surviving Spouse To Receive The Bedb
In order for a surviving spouse to receive the BEDB, the surviving spouse must have been married to a FERS-covered employee who, at the time of his or her death while in Federal service, must have had at least 18 months of Federal service. In determining whether an employee completed 18 months of potentially creditable civilian service, the following service times are included:
- Prior service included in a CSRS component, including refunded CSRS service
- Prior CSRS Offset service for which the employee received a refund before being covered by FERS
- Prior FERS service for which FERS retirement contributions remain to the employees credit or
- Nondeduction service performed prior to Jan 1, 1989, regardless of whether a deposit for such service has been made.
For purposes of the 18-month requirement, creditable civilian service does not include:
- Refunded FERS service
- Nondeduction performed after Dec. 31, 1988 and
- Service performed on or after Jan. 1, 1989 under another retirement system for Federal employees. Such service is not creditable under FERS for any purpose. The exception is service that is creditable under the Foreign Service Pension System provided that the survivor: waives credit for the service under the FSPS and makes a deposit for the service.
How Long Do Fers Survivor Benefits Last
Surviving spouse annuities continue for the life of the spouse unless the spouse remarries before they reach age 55.
There is an exception to this rule, however, if the spouse and employee were married for over 30 years. In that case, the spouse of the deceased employee will receive annuity payments regardless of whether they remarry or not.
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Public Safety Officers Educational Assistance Program
This Department of Justice program provides educational assistance to children and spouses of law enforcement, fire and emergency public safety officers killed or disabled in the line of duty. Available only to those survivors who have received benefits under the Public Safety Officers Benefits program listed under one-time death benefits.
The benefits may be used solely to defray educational expenses, including tuition, room and board, books, supplies, and other education fees. Covers all eligible survivors of public safety officers killed or permanently disabled on or after January 1978.
For more information, contact:
What Is The Lump Sum Death Benefit And Who Is Eligible To Receive It
June 20, 2019Edward A. Zurndorfer, Certified Financial Planner
During their years of federal service, employees covered by the Civil Service Retirement System or by the Federal Employees Retirement System contribute a portion of their paychecks into either retirement system.
When a CSRS- or a FERS-covered employee retires, the retired employee receives these contributions as part of his or CSRS or FERS annuity check. The total amount of CSRS or FERS contributions made is paid back to the retired employee the annuitant over the annuitants life expectancy or, if the annuitant is giving a survivor annuity over the joint life expectancy of the annuitant and the annuitants designated survivor annuitant.
The question then becomes: What happens if a CSRS or FERS employee were to die before retiring? What happens to the employees CSRS or FERS contributions? What were to happen if a CSRS or FERS annuitant and a survivor annuitant were to die before all contributions had been returned? What happens to the remaining CSRS or FERS contributions? This column discusses the lump sum death benefit paid to survivors of deceased CSRS or FERS employees and annuitants.
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Fers Lump Sum Death Benefit Credit
During a FERS employees federal service, the employee contributes 0.8, 3.1 or 4.4 percent of the employees salary to the FERS Retirement and Disability Fund. The amount contributed each pay date depends on when the employee entered Federal service under FERS before 2013, during 2013 or after Dec. 31, 2013, respectively). The employee may have a deposit for temporary civilian service performed prior to Jan. 1, 1989. The employee may have made a deposit for prior military service. The employee may have a redeposit of previously refunded FERS contributions when the employee left Federal service and then returned to federal service.
The lump sum death benefit under FERS paid to survivors of deceased FERS employees or annuitants consists of the unrefunded amount of one or more of the following:
FERS contributions via payroll deduction withheld from the deceased employees pay throughout the employees years of full and part time permanent service
deposits from temporary time occurring before Jan. 1, 1989
deposits for prior military service and
redeposits of previously refunded FERS contributions.
U.S. Office of Personnel ManagementRetirement Operations CenterBoyars, PA 16017-0045
Applicants for the FERS lump sum death benefit payment must:
Complete the Application Form for Death Benefits and attach any other form and/or evidence as the application or circumstances require and
attach a copy of the death certificate of the deceased and send to:
Curious To Learn More About Fers Survivor Benefits
It is very difficult it is to lose a spouse. We understand that sorting out financial matters is probably the last thing you want to deal with when your spouse passes away.
On top of that, the world of federal retirement survivor benefits is often difficult to navigate on your own. If your deceased spouse was a federal employee, we can help ensure that you obtain the benefits that they intended you to have.
Here at the Federal Employment Law Firm of Aaron D. Wersing, PLLC, we are dedicated to assisting with all kinds of federal employment matters.
We care about all of our clients, and we are passionate about ensuring that they obtain the compensation they deserve.
We have many years of experience successfully helping our clientsas our client reviews show. Together, we can work with you to help maximize your FERS survivor benefits.
Many people wrongly believe that hiring an attorney will cost them a small fortune. However, we dont want money problems to prevent people from reaching out and consulting us.
Thats why all of our initial consultations are free. Dont lose out on obtaining the federal retirement benefits you rightfully deserve. Contact us today.
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Csrs Lump Sum Death Benefit Payment Government Claims And Federal Income Taxes
A CSRS lump sum death benefit payment is subject to any properly certified timely request for recovery of a valid debt due the United States.
The amount of lump sum death payment under CSRS is not subject to Federal income tax because the original contributions were previously taxed. However, any interest paid on these contributions is taxable in the year in which the refund is made.
Trans Fers Employees What Should They Do
Those employees who contributed to both CSRS and FERS in general, for at least five years to CSRS and then transferred to FERS and will be retiring under FERS will be receiving two annuities. One annuity is a CSRS annuity based on years working under CSRS and another annuity which is a FERS annuity based on years working under FERS. These employees are called Trans FERS employees. As a result of receiving both a CSRS annuity and a FERS annuity, a Trans FERS employee should fill out and submit to OPM both forms SF 2808 and SF 3102.
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Sdb Contribution Payment For Periods Of Leave Without Pay
SDB contributions for all periods of leave without pay are based on the rate of salary the employee would have received had he been on duty.
SDB contributions are always payable at the single rate regardless of the type of leave and will be paid as follows:
For periods of LWOP other than those listed in below and for which deductions were not paid in a lump sum within thirty days of the return to duty, the recovery will be extended over a period equal to twice the period of the absence.
In addition, in cases where the employee was on LWOP due to illness or disability which has been certified as such by the deputy head of the department, the payment period may be extended by the Minister if he is of the opinion that undue hardship may be caused to the participant.
Unpaid Salary And Leave Owed To Deceased Employee
When a Federal employee dies in service, his or her survivors will receive a lump sum payment covering the deceaseds final pay and unused annual leave. This lump sum is paid by the employing agency under the same order of precedence as the other payments described. Seasonal wildland firefighters are included in this definition.
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Unfunded Mandates Reform Act Of 1995
This rule will not result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any year and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.