This is the fourth of a series of discussing how certain life events can affect a federal retiree’s benefits.
This column presents why retiring employees are advised to review their designation of beneficiary forms. Also presented is information on third-party payees.
SEE ALSO:
Beneficiary Designations
There are two types of beneficiary designations that apply to federal retirees:
‧ Designation for Life Insurance benefits under the Federal Employees Group Life Insurance (FEGLI) program.
To designate a beneficiary or to update one’s designation of beneficiary for the FEGLI program, A FEGLI program enrollee/insured should go here.
‧ Designation for any lump sum retirement benefit payable upon a retiree’s death.
A retiring CSRS or FERS employee can choose any individual to receive any lump sum death benefit payable upon the retiree’s death by completing a Designation of Beneficiary form. Lump sum death payments include:
(1) Any amount by which a retiree’s contributions to either the CSRS or FERS Retirement and Disability fund (plus any interest due) that exceed the total amount that OPM paid the retiree and all other survivors (unexpended balance); or
(2) Any CSRS annuity or FERS annuity that OPM owes the deceased retiree.
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Note:
(1) Since any contributions (via payroll deduction) plus
(a) deposits for military service and temporary service including interest and
(b) redeposits including interest a deceased retiree made to their respective retirement system (CSRS or FERS) were made with after-taxed salary dollars, the refund of the excess retirement contributions are not taxable to the designated beneficiary(s); and
(2) The following are the designation of beneficiary forms that should be completed:
CSRS/CSRS Offset: Standard Form 2808
FERS: Standard Form 3102
If a retired federal employee (CSRS or FERS) upon their death does not have on file a Designation of Beneficiary (Form SF 2808 or SF 3102) for the lump sum benefit payable, then OPM will pay the first individuals listed below who is alive on the date the payment becomes due:
‧ The retiree’s widow or widower.
‧ The retiree’s child or children – descendants of a deceased child may qualify.
‧ The retiree’s parents in equal shares, or all to the surviving parent.
‧ The administrator or executor of the retiree’s estate; or
‧ If none of the above, the retiree’s next of kin as determined under the laws of the state in which the retiree lived.
It is also important that federal retirees keep their designation of beneficiary up to date. Unless a federal retiree changes or cancels their designation of beneficiary, the individual named – such as a former spouse – will receive the lump sum death benefit.
Retirees also need to provide OPM their designated beneficiaries’ current addresses. Failure to do so may mean that the retiree’s designated beneficiary cannot be located and therefore benefits will not be paid to that individual. The preferred way to update beneficiaries’ current addresses is to file a new Designation of Beneficiary when a beneficiary’s address changes. A new address cannot be added directly to the existing Designation of Beneficiary form itself. This is because any cross out, erasures or alterations on an existing Designation of Beneficiary form will make the designation form invalid.
Third-Party Payees
If a retiree is unable to handle their finances, a court may appoint a guardian, or the person responsible for the retiree’s financial assistance may apply to become their “representative payee.”
In the situation in which a federal retiree becomes mentally or physically unable to handle their own money, a family member or someone who is able to help should contact OPM as soon as possible. When the family member or a friend contacts OPM, OPM will give them complete instructions as to what to do in order to take care of the federal retiree’s retirement benefits. This includes managing the CSRS or FERS monthly annuity and health benefits. The family member or friend will be asked for identifying information such as the federal retiree’s OPM retirement claim number, full name and Social Security number, as well as the name and address of the person responsible for the federal retiree’s financial concerns.
Power of Attorney
OPM does not recognize Power of Attorney filings. An individual who is responsible for the care or custody of a federal retiree who is either mentally or physically impaired, and handles the retiree’s finances, should contact OPM as soon as possible. OPM will give the individual complete instructions on what to do in order for the individual to formally take care of the federal retiree’s retirement benefits.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER®, Chartered Life Underwriter, Chartered Financial Consultant, Registered Health Underwriter and Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, located at 833 Bromley Street Suite A, Silver Spring, MD 20902-3019
