Survivor Benift and Taxes

[Brett]

Quick Question. I plan on paying for the full survivor benifit when I retire. Is that amount deducted from your tax obligation, or not?

 

[alevin]

Not sure I understand the question, Brett. Are you referring to life insurance benefit?

 

[Texarkandy]

"Alevin" is speaking I believe about the portion that is deducted from your annuity to pay for your survivor benefit
(i.e. for a 50% Survivor Benefit, FERS retirees have their annuity reduced by 10%)

Now, I don't know this first hand - but Ed Zurndorfer (a pretty reliable source) answered this question on Federal Soup, and according to him those monies are not taxable. Here's a link to the Q&A: http://community.federalsoup.com/4/...=6984011031&m=435109067&r=946100267#946100267

Some folks argue that you could be better off forgoing the Survivor Benefit (& the deduction) & just buying a term life insurance policy instead. That's a very personal & case-by-case decision. Personally, we went with the max 50% Survivor Benefit.

 

[Lostdawg]

Brett,
I know the Military Survivor Benefit is deducted before taxes. I can't find anything that says FEGLI is Pre Tax. As that would be a major benefit, (means they would advertise it) I think not.

I did find this for your further research.

IRS Publication 721, Tax Guide to U.S. Civil Service Retirement Benefits, explains how the federal income tax rules apply to civil service retirement benefits received by federal employees or their survivors. This booklet is available on the Internet (www.irs.gov), or you may call 1-800-TAX-FORM to get the publication mailed to you free of charge.

And this...

Survivor Benefit Elections
Retiring employees covered under the Civil Service Retirement System (CSRS) may make one of three types of spousal benefit elections at the time of retirement:
• Self Only ( No survivor benefits)
• Partially reduced annuity
• Fully reduced annuity
Married employees retiring under CSRS will automatically receive a fully reduced annuity to provide a current spouse survivor annuity unless the spouse consents to an election not to receive the maximum survivor benefits. Retiring employees covered under the Federal Employees Retirement System (FERS) may make one of three types of spousal benefit elections at the time of retirement:
• Self Only (No survivor benefits)
• One half reduced annuity (25% survivor benefits)
• Fully reduced annuity
Under FERS, a married retiring employee will receive a reduced annuity to provide maximum (50%) survivor benefits to a current spouse unless the spouse agrees not to receive the full survivor benefits.
An election of a survivor annuity under both CSRS and FERS will result in a reduction in the retiree’s annuity with the exception of the Self Only election.

hope this helps in finding your answer,
Pete

 

[Texarkandy]

Brett,
I know the Military Survivor Benefit is deducted before taxes. I can't find anything that says FEGLI is Pre Tax. As that would be a major benefit, (means they would advertise it) I think not.
.................

FEGLI has nothing whatsoever to do with either the CSRS or FERS annuity survivor benefit.

FEGLI (beyond basic) is nothing more than expensive term life insurance -it is not a "survivor benefit".

 

[nnuut]

Quick Question. I plan on paying for the full survivor benifit when I retire. Is that amount deducted from your tax obligation, or not?

"If you are married, your annuity will be reduced automatically to provide the maximum survivor annuity for your spouse, unless you and your spouse jointly agree to provide a lesser amount or none at all. Your spouse's survivor annuity would be 55 percent of your basic annuity or any lesser amount you and your spouse agree to. Your annuity would be reduced by 2 1/2 percent of the first $3,600 in basic annuity and 10 percent of the remainder of your basic annuity.
Your annuity will be increased periodically by cost-of-living increases that occur after you retire. Your initial cost-of-living increase will be prorated based on how long you have been retired when that cost-of-living increase is granted."
Annuity is reduced before taxes to pay for survivors benefit!

 

[Brett]

Thanks for the input guys, I really appreciate it!