When you began working for the government, you filled out a designation of beneficiary form. If you die, that form will settle the question about who is entitled to receive any benefits based on your employment.
If you don’t remember who you designated, you need to go to your personnel office, dig the form out of your official personnel file and make sure that whoever you designated back then is still who you want to receive those benefits in the event of your death.
While you can designate anyone to receive the proceeds of your Federal Employees’ Group Life Insurance or Thrift Savings Plan account, the rules are much stricter about who is eligible to receive a survivor annuity.
Only a lawfully wedded spouse or former spouse (when there is a court order) is entitled to a survivor annuity. As a rule, a nonspouse — companion, significant other, life partner, etc. — of a federal employee or retiree isn’t entitled to a survivor annuity. However, there is an exception: The Office of Personnel Management will recognize common-law marriages for survivor benefit purposes, but only if the state in which you live either recognizes it, or if that common-law marriage was contracted in a state which does recognize common-law marriage and you now live in a state that doesn’t.
There also is a little known provision of law that allows you to provide a survivor annuity to someone who has “an insurable interest” in you.
Individuals who are presumed to have an insurable interest in you are your current spouse (if blocked by a court order), a blood or adoptive relative closer than a first cousin, a former spouse, someone to whom you are engaged to be married, or someone with whom you would be considered to be in a common-law marriage in a place that recognizes such arrangements.
When there is no automatic presumption of insurable interest, you can establish one by submitting affidavits from one or more people who have personal knowledge of your relationship. The affidavits need to confirm that relationship, the extent to which the nonspouse is dependent on you, and the reasons he or she might reasonably expect to derive a financial benefit from your continued life. Other than that, at retirement you’ll need to prove that you are in good health. You can do that at your own expense by having a medical exam. The report of that exam, signed and dated by a licensed physician, must be attached to your retirement application.
The cost to you of an insurable interest annuity depends on two things: the difference between your age and that of the beneficiary and the amount of your annuity that can be used as a base. The latter will vary depending on whether there is anyone else who has an entitlement to a survivor benefit, such as a current or former spouse.
To compute the reduction in your own annuity, you need to determine how much of that annuity is available. If there are no other claimants, that would be your entire basic annuity before any deductions are taken. Multiply the figure you come up with by the following percentages:
- 10 percent if the survivor is the same age, older than, or less than 5 years younger.
- 15 percent if 5 but less than 10 years younger.
- 20 percent if 10 but less that 25 years younger.
- 25 percent if 15 but less than 20 years younger.
- 30 percent if 20 but less than 25 years younger.
- 35 percent if 25 but less than 30 years younger.
- 40 percent if 30 or more years younger.
The product will be the amount by which your own annuity will be reduced. Regardless of the size of that reduction, the survivor benefit will always be 50 percent of the available annuity base.
In addition to a survivor annuity, there are other kinds of financial benefits that may be available to a nonspouse. Among these are the proceeds of your Thrift Saving Plan account and your Federal Employees Group Life Insurance. Assuming that there are no other claimants with higher legal standing for these benefits, you can assure that they go to the person of your choice by completing the appropriate designations of beneficiary. You can get either get these from your servicing personnel office or you can download them at www.tsp.gov and www.opm.gov/forms.
Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your questions to email@example.com.