Can I Change My Spousal Survivor Benefit In Retirement?

Short Answer: No

Long Answer: Yes, under certain circumstances

As a short recap, what is the Spousal Survivor Benefit? It’s Section D on the first page of the most important document of your career, the SF-3107. This is the benefit that your spouse will receive if you kick the bucket before them in retirement.

Remember that the survivor benefit is comprised of 2 parts. Most people know it’s a monthly check to your survivor for the rest of their life. A lot of people don’t know that the second part is continued FEHB eligibility. That’s worth repeating. If you don’t elect a survivor benefit, your survivor will NOT be able to continue with FEHB benefits after your death unless they qualify on their own as a federal employee.

Your choices at retirement?

1. 0% Reduction. No reduction in your annuity check each month in retirement. However, when you die, your benefits die with you. Surviving spouse gets no annuity check and no continued FEHB eligibility.

2. 5% Reduction. 5% is deduction from your annuity every month. When you croak, your spouse gets 25% of your annuity for the remainder of their life. And they also get continued FEHB coverage. (This is sometimes referred to as the partial survivor benefit, or very confusingly, a 50% survivor benefit.)

3. 10% Reduction. 10% comes out of your check. Your survivor get 50% of you annuity each month. And they also get the same FEHB coverage. No extra FEHB coverage for electing the 10% reduction. The only difference between 5% and 10% is the amount of money the spouse receives. (This is sometimes referred to as the full survivor benefit, or very confusingly, a 100% survivor benefit.)

Ok, so which one to pick? This is a hard decision for a lot of people. The survivor benefit is frankly a bit costly. So it’s not like it’s a fantastic deal, in my opinion. You’re paying 20% of the benefit. (5% gets them 25% or 10% gets them 50%. Both are 1/5th, or 20% of the award). But it is paid by pre-tax dollars so it doesn’t feel quite as costly. The real benefit in my opinion is the lifetime health insurance coverage. Most people I talk to consider 0% not an option then. Not so much for the money but for the continued health insurance.

Throughout the decision-making discussion, the question often arises—Can I change it later on if I don’t like what I chose? Always a good question in the financial realm! Always good to know if something can be undone before you get trapped into it.

So let’s look at the rules regarding changing the survivor benefit election in retirement.

Where do we find the rules? Not on the TSP Facebook page (why you guys continue to ask questions on there blows my mind. Roughly 40% of the info I see is wrong). Not on Fedsmith. Not from some strange “expert” on the internet. Not from some financial planner that gave you a FERS retirement seminar. And not from me either, for that matter!

The rules are located in the OPM CSRS and FERS Handbook, Chapter 52 “Survivor Benefit Election”.

The Handbook contains CSRS rules and FERS rules. Generally each chapter has CSRS rules first, then FERS rules later. But often (as is the case here), instead of rewriting the FERS rules, the Handbook will simply state that for some FERS rules, they are exactly the same as the CSRS rules.

So here we go…

REASON #1 Just Cause You Want To

On Page 29, we find that statement. “The following sections and parts of subchapter 52A are applicable to FERS employees…..Section 52A4.1-1: Changes of Election Before Final Adjudication…..Section 52A4.1-2: Changes of Election After Final Adjudication”

From this statement, we learn that we need to look under the CSRS rules Section 52A4 to determine what the FERS rules are, as the FERS rules simply copy, or adopt, the CSRS rules. Let’s do that.

BEFORE ADJUDICATION

Section 52A4.1-1: Changes of Election Before Final Adjudication, page 15

Remember the process of your retirement. You will submit a retirement application with a survivor election on it. You will then retire. At some point you will start getting interim payments from OPM. After OPM adjudicates your case, you will begin getting your real, unreduced, actual retirement check.

Here’s the deadline: Within 30 days after receiving that first, real, adjudicated, unreduced monthly annuity check, the retiree can make an election in writing to OPM reducing or increasing the survivor benefit election. In other words, you can change it up or down, up to 30 days after you receive your first real retirement check.

Example:

Jack retires on 12/31/22. He is married to Diane and elected a 50% survivor benefit. Jack begins receiving interim payments from OPM in March of 2023. He receives his first adjudicated regular monthly payment on June 1, 2023. Jack has 30 days from June 1, 2023 to change this election. In this case, since he already elected the max, the only possible change would be a reduction. Diane would have to sign off on the reduction. Had Jack elected only a 25% survivor benefit, he could have increased it to 50%, or reduced it to 0%.

AFTER ADJUDICATION

Section 52A4.1-2 Changes of Election After Final Adjudication page 16-17

Now we have another deadline. Let’s assume the 30 day deadline we just looked at has already passed. Now what? Do we have any options?

From the point of adjudication, the retiree now has 18 months to change the survivor election for his current spouse. However there is a twist now. The retiree cannot REDUCE the survivor benefit; they can only INCREASE it. So, if you elected zero or partial, you could move it up to partial, or full, respectively. You cannot go down in the benefit.

Example:

Same example, but this time, Jack elected 5% reduction to give Diane 25% survivor benefit. A year goes by. Jack’s worn down by Diane’s complaining about how she got shorted on the survivor benefit. Jack acquiesces and increases the survivor benefit to the max 10% reduction/50% benefit.

Is this free? Nope. Jack has to make an additional deposit. Remember he wasn’t paying the max since retirement. So he can’t just all of a sudden be getting the full benefit. He has to make some back pay to get caught up. Page 29 shows the FERS formula.

“The amount of a deposit is 24.5% of annual annuity for a change from no survivor to maximum survivor benefit, and 12.25 percent of annual annuity for change from no survivor to partial or partial to full survivor.”

Bottom line? There are some grace periods to make changes in the beginning stages of retirement but I would not plan on doing this. I would encourage you and your spouse to have the decision made and solidified when you fill out your SF 3107.

Dan Jamison’s FERSGUIDE has a great walk-through example of exactly how one pays the deposit and how expensive it can be. (You do buy the FERSGUIDE, don’t you???)

REASON #2 Death

This one is pretty simple. If your survivor passes away before you, OPM will stop taking out the survivor benefit cost if you provide them with a death certificate. This makes sense. If there is no survivor, why would you have to pay for the survivor benefit?

Since we don’t want to just go off common sense and supposition, where’s the law that specifically states this? 5 USC 8419 (b) (1) (A).

REASON #3 Marriage in Retirement

Let’s assume Jack wasn’t married at the time of retirement. But after a chance visit to the Tastee Freeze, he meets, falls in love, and subsequently marries Diane. Can he elect a survivor benefit for her? After all, he submitted his retirement paperwork a long time ago.

Yes. There are some caveats, however. If you think you can outsmart the government, think again. You can’t find out you have terminal cancer at age 90, marry a 20-year-old, elect the maximum survivor benefit and shuffle off this mortal coil, content in the fact you’ve figured out how to stick the government for 50% of your annuity for the next 70 years of her life, even though you haven’t paid any cost of the survivor benefit.

The government has rules to prevent that sort of thing. Here they are:

1. Jack has to make the election within 2 years of getting married

2. The election is not valid or in place until 9 months after the date of marriage

3. (This is the big one) Jack has to pay back to the date of retirement the cost of whatever annuity he elects. So 25% or 50%. That can be pricey.

Where are these rules? In the same book, Chapter 52. 52A5.1-1 Survivor Election for a Spouse Acquired After Retirement page 18 is the applicable CSRS rule that also applies to FERS.

The difference is the amount of deposit. It is different under FERS and is found on page 29 under Section 52B1.1-1 C. Applicable CSRS Provisions.

Ok, what about divorces, court-ordered survivor benefits to former spouses, voluntary elections to former spouses, and remarriage of former spouses? There is a dizzying array of combinations here. I won’t go through them. You can research your particular flavor of craziness in the handbook. I know of situations where an individual was married 4 times, awards were made to some former spouses, but not others, and the current spouse is only eligible for a tiny survivor benefit because the former spouses took up most of it. But then what happens if a former spouse who was awarded a survivor benefit remarries before age 55? Or dies? What if a retiree wants to elect his survivor benefit to go to a former spouse and has to get his current spouse to sign off on it? (Man, I’d love to listen to that conversation!) What if the former spouse was awarded a survivor benefit which negated the ability of the current spouse to get one?

It’s all in the book. Research it.

Also, do your best to stay married.