Spouses leaving federal service together

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My spouse will reach her MRA of 56 years and 4 months with 22 years of service when I will be 52 years old with 34 years of service. As our TSP and other investments are solid, we wish to leave together. If I resign / defer when she retires, how are FEHB (currently under me), SRS, S/L, FERS annuities, TSP, etc. affected? How would the situation differ if a VERA is offered? Thank you!

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Posted by (Questions: 1, Answers: 1)
Asked on March 24, 2018 2:55 am
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Let’s take these one at a time. Since you will retire under the deferred option, you will not be eligible to continue FEHB nor will you get credit for your sick leave when your retirement commences at your MRA and there is no FERS Retiree Annuity Supplement payable on deferred annuities. Basically, you are eligible for money in the future based on work in the past. Everything is calculated as of the date you left federal service, meaning your retirement will be based on 34 years of service and your high-3 average salary as of the date your resigned.
For your wife, if she retires at her MRA with 22 years of service she can collect an immediate annuity, however, it will be reduced 5% for every full year or 5/12 of 1% for every full month she is under the age of 62. This is an age penalty for life. OR she can elect to postpone this retirement it until age 60, at which time she can collect with no age penalty. However, there would be no income for just under 4 years. You would need to change your FEHB coverage to her name prior to both of you leaving federal service. If you change the FEHB to her name, she will have met the 5-year rule even though she was previously covered under your policy. The reason she would have to change it to her name is because as stated in the previous paragraph, you will not be eligible to continue FEHB into retirement because you are leaving prior to your MRA and will be retiring under the deferred option. Your wife’s pension would include her unused sick leave as technically she is retiring under an immediate annuity, even if she elects to postpone it. However, no FERS Retiree Annuity Supplement is payable with the MRA+10 retirement option.
Now everything changes if a VERA is offered as both of you could retire on an immediate unreduced retirement. You would not need to change the FEHB into her name, both would collect the FERS Retiree Annuity Supplement, but yours would not commence until you reached your MRA, and both receive credit for their unused sick leave in the computation of the annuity.
With respect to TSP, any regular employee retiring in the year they are age 55 or older is eligible to draw against their TSP in any payout option without the age penalty. Your wife will be eligible to collect against her TSP right away but you will be limited to your options unless you wait until age 59 ½ to collect against yours. This applies in no matter whether it is an immediate, deferred, postponed, or VERA retirement.

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Answered on March 24, 2018 3:05 pm

Thank you for posting such a thorough response! FERS Postponed Retirement is an interesting option we had not considered; we will run the numbers to see if that would work (there would be no FEHB coverage, either, during those 3 years and 8 months).

( at March 24, 2018 4:12 pm)
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Private answer

Correct, although you can elect TCC, Temporary Conversion of Coverage. It is only good for 18 months and you pay the employee and employer portion plus a surcharge! Expensive but at least coverage for some of the time.

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Answered on March 24, 2018 4:17 pm
We sincerely appreciate your insight and remain on track for this plan but need to confirm that she would be eligible for my monthly annuity at my MRA if I die after resigning and before retiring. Is that an accurate interpretation of OPM's "Death of a Former Federal Employee Under FERS" guidance? https://www.opm.gov/retirement-services/fers-information/survivors/ Death of a Former Federal Employee Under FERS Monthly Survivor Annuity Surviving Spouse If a former employee who dies with at least 10 years of creditable service (5 years of which must be creditable civilian service) is survived by a spouse who was married to the deceased at the time of his/her separation from Federal civilian service AND who: was married to the deceased for at least nine months, or the former employee’s death was accidental, or there was a child born of the marriage to the former employee; the spouse may be eligible for a monthly survivor benefit. The benefit begins on the date the deceased former employee would have been eligible for an unreduced annuity, unless the survivor chooses to have it begin at a lower rate on the day after the employee’s death. The former employee would have been eligible for an unreduced annuity with a minimum of 10 years of creditable service and less than 20 years of service at age 62, with 20 or more years of service at age 60, or with 30 years of service at his/her Minimum Retirement Age (MRA)
( at June 25, 2021 8:16 pm)
1
Private answer

Correct, if you should die before reaching your MRA, she would be eligible to draw against your FERS benefit when you would have reached your MRA since you are leaving with more than 30 years of service.

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Answered on June 26, 2021 2:15 pm
Thank you! That is a relief after reading this interpretation at https://stwserve.com/want-to-leave-federal-service-deferred-retirement-might-be-an-option/: "No survivor annuity is payable to a departed employee’s spouse, former spouse, or children, if the departed employee dies before applying for, his or her deferred FERS annuity via Form RI 92-19. The only benefit payable in that case would be a lump sum payment of the deceased employee’s FERS retirement contributions without interest paid to the person(s) listed on Form SF 3102 (Designation of Beneficiary – FERS) which was hopefully previously properly filled out and submitted to OPM’s Retirement Office in Boyars, PA."
( at June 26, 2021 2:29 pm)
Chapter 72 of the CSRS FERS Handbook states: Upon the death of a former employee under FERS who did not meet the requirements for entitlement to retirement benefits before death, including having filed an application, either the former employee's lump-sum credit or an annuity may be payable to the appropriate survivor. The previous statement applies to CSRS.
( at June 26, 2021 2:36 pm)