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Death Benefit Delays – Don’t Let This Happen to You (Part 2)

Posted By Dennis Damp On In ANNUITIES / ELIGIBILITY,BENEFITS / INSURANCE,ESTATE PLANNING,FINANCE / TIP,RETIREMENT CONCERNS,SOCIAL SECURITY / MEDICARE,SURVIVOR INFORMATION | Comments Disabled
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The first part of this article [3] discussed the delays survivors can expect before receiving their first annuity check, electing a survivor’s annuity, survivor’s annuity cost, reporting a death, and submitting the application for death benefit forms.

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Part 2 explains the weak link in the system, ways to reduce the delays as much as possible, and how to report a death to Social Security and the Thrift Savings Plan (TSP.)  I suggest printing this two-part series and place the copies in your estate or retirement binder for your heirs to use when needed.

The Weak Link

OPM’s response exposed the weak link in the process and those who aren’t prepared financially will suffer the consequences. They stated in their reply, “The application for death benefits form after receipt by OPM is currently taking 3 months to process under the CSRS system and about 5 months under the FERS system.”  After the claim is processed a spouse would receive any backpay owed since the passing.

You have to add the delay in reporting the death while family and friends are grieving, the 4 to 6 weeks to receive the forms package, the time to complete the forms and send them back, and the 3 to 5 months for OPM to process them and send out the survivor’s first annuity check with backpay!

The first check you would probably receive is for the FEGLI life insurance payout and that could be as long as the initial 4 to 6 weeks for OPM to send the forms, then add the time to mail it back, and for them to process the forms, you are looking at 8 to 10 weeks for that check to arrive.

Set Up a Survivor’s Savings Account

If you have minimal savings and assets to rely on, set up a savings account to cover your survivor’s expenses for at last 4 to 6 months. Use our Budget Worksheet [5] to enter your current expenses and determine what they will need to pay the bills and cover basic necessities while they wait. Those just getting by will have a difficult time making ends meet while waiting for their first survivor’s annuity check to arrive.




Ways to Reduce the Wait

To avoid the 4 to 6-week wait for these forms to arrive from OPM, I asked Mike, one of their customer service representatives, if survivors could report the death online and complete and send in these forms shortly after a death to expedite the process. OPM replied, “It would be best to send back the paperwork in the blue and pink colored envelopes that we send with the packet. This allows for the process to be sped up in the mailroom.”

What I did years ago was to add these forms to my estate planning binder. I have a SF-2800 and the FE-6 forms partially completed (the forms are pdf fill-in forms) with sticky arrows on sections where my wife and son will need to add the date of my death, attach a certified copy of my death certificate, etc. (If you are a FERS employee/annuitant you will need Form SF-3104, not the SF-2800, which is for CSRS.)  

I also included a copy of our marriage license and identified where signatures are needed and the return address. Even if survivors must wait for receipt of the forms package from OPM, these forms will at least be completed and ready to be sent in. Plus, it will help survivors during a very emotional and stressful time for all.

Reporting a Death to Social Security

In most cases, the funeral home will report the person’s death to Social Security. The surviving family member should give the funeral home the deceased’s Social Security number if you want them to make the report. You can also report the death to Social Security by calling 1-800-772-1213 or visit your local Social Security office. Unfortunately, a death can’t be reported online.

The death should be reported as soon as possible, because benefits end in the month of the death. Social Security pays a $255 one-time lump sum death payment to the surviving spouse and a surviving spouse may be able to apply for a survivor’s benefit. Download Social Security’s brochure titled “How Social Security Can Help You When a Family Member Dies.” [6]

Reporting a Death to the TSP   

Call the TSP at 1-877-968-3778 to report a death. Account investments are not converted to the G-Fund upon an annuitant’s death as previously required. You will be instructed to send a certified copy of the death certificate to their TSP Death Benefit Unit and to set up a new survivor’s online account. The deceased spouse’s assets would transfer to this new account. This can take up to a month or more.

The spouse is able to set up a new account and move the funds around as necessary, set up an annuity, or transfer the account to an IRA if desired. The surviving spouse can keep the TSP account active until their death. However, the survivor’s beneficiaries can’t set up an inherited TSP account like you are able to do in the private sector. All funds are distributed to designated beneficiaries in a lump sum taxable the year of the death.

This is one reason why it is recommended by many financial planners to eventually transfer a survivor’s TSP to an IRA. This way heirs can convert their inheritance to an inherited IRA and withdraw the funds over a specific period of years to avoid a large tax hit the first year.

Summary

I suggest printing this article and part 1 and place them in your estate file or binder.  There are so many things to think about when planning your estate; it can be overwhelming at times. Review my 11-part Estate Planning Guide [7] to help you take care of many essential tasks while still able to do so.

Helpful Retirement Planning Tools

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Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change.

The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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