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Per the calculation info I provided, with a monthly benefit of $4000, had your father elected a full survivor's benefit which is 55% of the annuitant's benefit, this would have cost him a monthly reduction in his own benefit of 10%, and at this death your mother would have gotten $2200/month.
If you can find out what your father's monthly benefit reduction was for his survivor's annuity, that would give you the info you need to figure out your mother's accurate survivor's benefit.
We have copies of the Survivor Annuity election paperwork. On that paperwork it says:
>>> The annuity paid to you during your lifetime is reduced by 2-1/2% of any amount up to $3,600 used as a base for computing the survivor annuity, plus 10% of any amount over $3,600. ANY SURVIVOR ANNUITY IS 55% OF THE AMOUNT CHOSEN AS A BASE.<<<
The way this is written makes it sound like "any amount up to $3600" is what should be used as the base. I believe that is how my Dad understood that sentence, so when he contacted the Washington office and requested permission to change his election, he elected $3600 as being what he thought was the most he could elect (and also apparently someone had recommended that amount to him).
Going by this wording, we feel that Mom should be receiving somewhere between $1500 and $2000 a month as a Survivor Annuity, rather than the $640. Dad had saved ALL of his Annuity Statements, and I have gone back through them all and done calculations, including the annual COLAs, and I still can't figure out where the Office of Personnel Management (Fed) is coming up with $640 for her Survivor Annuity. None of these statements show any deduction for a Survivor Annuity ... I don't know if those deductions would normally be on such statements, but they are not on his.
I have talked by phone several times with people at the OPM, and the first thing they always say is that Dad DID NOT make an election for Survivor Annuity -- I point out that we know he initially didn't because of his misunderstanding of the wording on the election paperwork, but that he subsequently sent a letter explaining that and requesting to elect. THEN the person at the OPM agrees that he did elect, so they obviously have a copy of his letter in his file, and yet their computer system has him as not having made an election. This is a red flag to me.
Their second question/statement is that my parents were divorced. No, they were not divorced. Nor did my Dad have any previous marriage. I don't know where this question comes from when the OPM people bring it up.
We have tried several times to get OPM to clarify to us how they arrived at $640 in Survivor Annuity for Mom out of Dad's elected base of $3600. So far, they have not been able to provide that to us.
We feel we are getting the runaround. Can anyone here clarify the above for me, or if it appears to others that there is some big mistake on the part of OPM, what path can we pursue to fix it? (what kind of lawyer would we need, or whatever)
Thanks for your time reading this
Well, I've taken a month off from posting, so I guess this is as good a place as any to jump back in and try to provide you with a little clarification if I can.
From what you've written above, your father elected to provide a base survivor's annuity to your mother of $3,600. That was by no means the most he could have elected as a base; the most would have been electing a full survivor's annuity that would have used 100% of his annuity as a base. By only electing to use $3,600 of his annuity as a base, his annuity was reduced by only $90. Now, there are two things that may not be clear to you: 1) that $3,600 is an annual figure; and, 2) the survivor's annuity is 55% of that $3,600 base figure. So basically, your father chose to provide a survivor's annuity to your mother of $1,980/yr., or $165/month. (Just as a side note, some federal retirees elect the $3,600 as a base as a minimum, not a maximum, just so that their surviving spouse remains eligible for the Federal Employees Health Benefits Program(FEHBP) and receives a small annuity that is sufficient to pay the FEHBP premiums.)
The next step is to take that $165 that your father initially elected and multiply and compound it by the amount of the cost-of-living increases that he received each year over the past few decades. If you want, you can look them up and then do the arithmetic starting from $165. You'll probably come close to the $640 that your mother is currently receiving. (Assuming the $640 is a gross figure.)
If you have any other questions, I'll try to answer them for you if I can.
Per the calculation info I provided, with a monthly benefit of $4000, had your father elected a full survivor's benefit which is 55% of the annuitant's benefit, this would have cost him a monthly reduction in his own benefit of 10%, and at this death your mother would have gotten $2200/month.
That's close, but not quite how it's done; the 55% is based on an annuitant's unreduced annuity, not the "gross" amount that he receives each month before deductions. (The unreduced amount is not shown on annuity statements.) So if someone who had elected to use 100% of their annuity as a base survivor's annuity is shown to receive $4,000 as a gross monthly amount, their unreduced annuity is actually closer to $4,440. (This is just an approximation because the reduction is close to 10%.)
Fifty-five percent of the unreduced annuity ($4,440) would equate to a survivor's annuity of approximately $2,442/month, not the $2,200 that you wrote above. However, this is just an academic exercise because the annuitant in question did not elect to provide a full survivor's annuity.
So, "Annual" is the key to this. And, nowhere in that qualifying paragraph is annual mentioned - other than that is EXACTLY what the word "annuity" means - ANNUAL.
And, dad didn't understand any of this. Most people wouldn't.
It does not matter what the pension amount is.. What matters is the percentage amount of the pension.. So if he was getting $4000 when he died and the survivor amount was 16% that would equal the $640 your mom is being paid...
She is VERY lucky that OPM allowed a change to the decision your father made.....
BUT at the same time if she is getting an amount then his pension would have been a certain amount less than what he would have gotten to take care of this.....
Your Dad would have had to pick an amount percentage of hsi pension for your Mom to receive anything...
If you have any other questions, I'll try to answer them for you if I can.
Very much appreciate your information -- I was going to PM you this morning and then saw you had responded already! I do have some questions
The wording on the election form references "annuity paid to you during your lifetime". At the time of his death, Dad was receiving approximately $4000 a month -- $48,000 a year. Of course, he didn't receive that much every year of his retirement, but if I were to go back and add up the annual annuity received for every year of his retirement until his death, no doubt it would add up to several hundred thousand dollars. He retired in 1974 and passed in 2009. Although no deductions are shown on his statements for Survivor Annuity, on the revised election that he submitted, it was shown that per month the deduction at that time would be $176 a month for the Survivor Annuity. So that would have been in the range of $2000 deducted that year for the Survivor Annuity. That amount would only have gone up (re COLAs) every year of his 35 years of retirement.
Even if that deduction had not gone up, had stayed at the initial $176/month ... $2000/year, over those 35 years we are talking an amount of $70,000 presumably set aside for payment of Survivor Annuity. Clearly, due to annual COLAs, it should be even more than that.
My question: where is all that money? Mom is only getting $640/month (after the deduction for Federal Employees Blue Cross/Blue Shield insurance). [NOTE: at this point, 6 years after Dad's death, she is getting a bit more than $640/month, but I'll just stick with that as a figure to work with here.] She is now aged 95 and at the rate she is being paid the Survivor Annuity, there's no way she will get even the base amount of $70,000 that is the least that should have been held out for her Survivor Annuity.
So ... ???
Editing to add this comment: my understanding is that the Federal annuity system is the Fed employee equivalent of Social Security. If that is the case, then Mom might have been far better off had Dad not worked for the Fed, because assuming he found a dollar-equivalent paying job for his lifetime, she would have been able to draw his entire monthly Social Security amount after his death.
Do you have a copy of the second election where your father elected a survivor benefit? If not, request it and make sure your mother's signature is on it. She has to sign away her right to anything less than a full survivor annuity. Long shot but I would still check.
Your father should have received a statement annually (in January) showing his new pension amount for that year with the cost of living, reduction for any survivor benefit, tax withholding and insurance deductions. This is different from the 1099-R he would have received showing income received for tax purposes.
The calculation is not rocket science and anyone at OPM should be able to give it to you. But, if you cant get it out of them, I agree that the fastest way to get a response will be to go through your congress person.
. That amount would only have gone up (re COLAs) every year of his 35 years of retirement.
Even if that deduction had not gone up, had stayed at the initial $176/month ... $2000/year, over those 35 years we are talking an amount of $70,000 presumably set aside for payment of Survivor Annuity. Clearly, due to annual COLAs, it should be even more than that.
My question: where is all that money? Mom is only getting $640/month (after the deduction for Federal Employees Blue Cross/Blue Shield insurance). [NOTE: at this point, 6 years after Dad's death, she is getting a bit more than $640/month, but I'll just stick with that as a figure to work with here.] She is now aged 95 and at the rate she is being paid the Survivor Annuity, there's no way she will get even the base amount of $70,000 that is the least that should have been held out for her Survivor Annuity.
So ... ???
Editing to add this comment: my understanding is that the Federal annuity system is the Fed employee equivalent of Social Security. If that is the case, then Mom might have been far better off had Dad not worked for the Fed, because assuming he found a dollar-equivalent paying job for his lifetime, she would have been able to draw his entire monthly Social Security amount after his death.
It doesn't work that way. I.E. you aren't guaranteed to get anything back of the amounts that are deducted for survivor benefits.
Survivor annuities are a crap shoot. If your designated survivor dies before you the retiree do, you don't get back what was deducted. They just stop taking deductions.
Same if they only live long enough after you to collect some of the money that was deducted for benefits.
The retiree is different in that anything they paid into the system that has not been paid out at time of death is inherited by their designated beneficiary.
Mom is only getting $640/month (after the deduction for Federal Employees Blue Cross/Blue Shield insurance).
So, $640 is NOT the amount of her gross monthly benefit - but is, instead, the NET amount payable after deduction for health insurance.
So, what, exactly, is the gross amount monthly she is receiving BEFORE deduction for health insurance and taxes (if any)? Guessing, Mom's gross monthly pension benefit is in the area of $1,200, or thereabouts, instead of the $2,442 (per MMoB) should dad have selected a full survivor benefit - which he didn't.
The gross amount is the ONLY figure that matters. Cost of health insurance and tax withholdings are variables and have nothing to do with the calculation of the pension benefit entitlement.
Last edited by Ariadne22; 06-06-2015 at 01:15 PM..
Do you have a copy of the second election where your father elected a survivor benefit? If not, request it and make sure your mother's signature is on it. She has to sign away her right to anything less than a full survivor annuity. Long shot but I would still check.
This was not true for CSRS, only FERS. Under CSRS, spouses were only notified if the employee chose less than a full survivor's annuity.
Quote:
Originally Posted by Blondy
Your father should have received a statement annually (in January) showing his new pension amount for that year with the cost of living, reduction for any survivor benefit, tax withholding and insurance deductions. This is different from the 1099-R he would have received showing income received for tax purposes.
This also is incorrect. The reduction for survivor annuity is not shown on the annual statement. (As a side note, this is an amount that I have tracked manually since I first retired.)
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