by George Ray
“What if I get married after I retire, can I still get a survivor benefit for my new spouse?” This question comes up frequently in benefits training sessions that I conduct. Or, sometimes it’s a variation of that question. Rather than ‘can I give my spouse a benefit?’, it’s ‘do I have to give a survivor benefit to my new spouse?'. The short answer is that you can elect to provide a survivor benefit, but you’re not required to provide one. After answering the question, the real value that I provide is in asking a better question -- should you?
Back in 1974, the Employee Retirement Income Security Act (known commonly as ERISA) began requiring companies that offered pension benefits to their employees to also provide benefits to the employee’s surviving spouse. However, at that time, the worker/retiree who would eventually receive the pension had the right to decline to provide a survivor benefit without even notifying his or her spouse of that decision. This typically got the worker a larger pension benefit, but often left the surviving spouse confused and without any income after the retiree’s death.
That is until President Reagan signed the Retirement Equity Act (REA) on August 23, 1984. This act amended ERISA to require the spouse of the worker to be notified of the opportunity to receive a survivor benefit. The law required companies to change their retirement plans to make the survivor benefit option the ‘default’ option, and required the spouse to waive their right to a survivor benefit in writing if the employee was requesting that the benefit not be provided or was requesting it to be reduced. It also said that the notification had to be clear and understandable, and witnessed (to reduce the possibility of it being coerced.)
This is why before you retire, you’ll have a decision to make about your pension. Will you provide your spouse with the ‘default’ survivor annuity (a 50% survivor benefit for those covered under the FERS pension system, 55% of your pension for those covered under CSRS) or will your spouse consent to receive a partial survivor benefit, or no benefit at all?
But, if you aren’t married at the time that you retire, then the question is moot. There is no spouse required to be notified, no survivor benefit required to be paid, and no cost which needs to be deducted from your retirement check.
But back to the original question -- if you do get married after retirement, are you required to provide your newly-acquired spouse a survivor benefit from the pension that you’re already receiving? The law says no, you’re not required to do that. But, what if you want to? Is it possible. The answer is yes, and here’s what OPM says you’ll need to do.
To be eligible to provide the benefit to your new spouse, you must contact OPM to request it within two years of the date of your marriage. Your election must be in writing and is submitted on the Standard Form SF-3107 (or the SF-2801 for CSRS). For your spouse to receive the benefit, he or she must have been married to you for at least nine months before your death, or be the parent of your child born to the marriage if less than nine months, or your death must be accidental. You can provide a full survivor benefit, or a partial annuity. Either way, you new spouse will sign the Spousal Consent Form (SF 3107-1 for FERS or SF 2801-1 for CSRS).
Because you’ve already been receiving your retirement benefit, there will be two reductions to your retirement check, rather than one. The first will be the standard deduction, and will depend upon whether you choose the full survivor annuity or the partial annuity. For a FERS retiree, from this point forward, the 50% annuity will cost 10% of your monthly retirement check, or a 25% partial annuity will cost 5% from your check. (For CSRS, the calculation is a bit more complicated.)
The second reduction is a permanent reduction that’s computed actuarially and is used to pay the survivor benefit deposit. You will essentially have to make up the cost for the survivor benefit that you haven’t been paying up to this point. The deposit equals the difference between the new annuity rate (calculated using both the life expectancies of you and your new spouse) and the annuity paid to you for each month since you retired (calculated only on your life expectancy), plus 6 percent interest.
OPM uses a Present Value Factor table to do this. Benefits Administration Letter 14-113 issued on October 1, 2014 updated the factors to those used today. To provide the survivor benefit, the second reduction is determined by dividing the amount of the survivor benefit deposit by a factor from the Present Value Table that’s based on your age on the date your annuity is reduced. By the way, if your new spouse should predecease you, it’s important to note that although the first reduction will stop, the actuarial reduction will not be eliminated from your pension. You’ll continue to pay the second reduction even after the death of your post-retirement spouse.
Now that we know it’s possible to provide a survivor benefit to your new spouse after you’ve already made your survivor benefit elections at retirement, the important question is ‘should you provide this benefit?’. There are several factors to consider including your ages, and the present health of both you and your spouse. How long you’ve already been receiving your pension will also be an important factor as it will impact the actuarial reduction. The longer you’ve already been receiving your pension, the larger the second reduction. You may also want to consider whether it may be less expensive to pass other assets to your new spouse to help him or her after you’re gone. And, is it even necessary? What assets and income streams does your new spouse already have which will continue after your death? You'll want to start by asking OPM to provide you with a calculation of your revised pension benefit amount and the cost. From there, you can begin to determine if it makes sense.
Love can bloom after retirement, and finding someone new to spend the rest of your life with can make your life so much better. Adjusting to putting the cap on the toothpaste tube again, and putting the seat down may be a sacrifice you’re willing to make, but you may want to think twice about changing your pension benefit.