Publication 721 - Tax Guide To U.s. Civil Service Retirement Benefits - 2002 Page 17
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28The tax treatment of the special death benefit depends
Part IV
on the option you choose and whether a FERS survivor
annuity is also paid.
Rules for Survivors
If you choose the single payment option, use the
following rules.
of Federal Employees
•
If a FERS survivor annuity is not paid, at least part of
the special death benefit is tax free. The tax-free part
This part of the publication is for survivors of federal em-
is an amount equal to the employee’s FERS contri-
ployees. It explains how to treat amounts you receive
butions.
because of the employee’s death. If you are the survivor of
•
a federal retiree, see Part V.
If a FERS survivor annuity is paid, all of the special
death benefit is taxable. You cannot allocate any of
Employee earnings. Salary or wages earned by a federal
the employee’s FERS contributions to the special
employee but paid to the employee’s survivor or benefi-
death benefit.
ciary after the employee’s death are income in respect of
the decedent. This income is taxable to the survivor or
If you choose the 3-year annuity option, at least part of
beneficiary. This treatment also applies to payments for
each monthly payment is tax free. Use the following rules.
accrued annual leave.
•
If a FERS survivor annuity is not paid, the tax-free
part of each monthly payment is an amount equal to
Dependents of public safety officers. The Public Safety
the employee’s FERS contributions divided by 36.
Officers’ Benefits program, administered through the Bu-
•
reau of Justice Assistance, provides a tax-free death bene-
If a FERS survivor annuity is paid, allocate the
fit to eligible survivors of public safety officers whose death
employee’s FERS contributions between the 3-year
is the direct and proximate result of a traumatic injury
annuity and the survivor annuity. Make the allocation
in the same proportion that the expected return from
sustained in the line of duty. The death benefit is not
each annuity bears to the total expected return from
includible in the decedent’s gross estate for federal estate
both annuities. Divide the amount allocated to the
tax purposes or the survivor’s gross income for federal
3-year annuity by 36. The result is the tax-free part
income tax purposes.
of each monthly payment of the 3-year annuity.
A public safety officer is a law enforcement officer,
firefighter, or member of a public rescue squad or ambu-
lance crew. A chaplain killed in the line of duty after Sep-
CSRS or FERS Survivor Annuity
tember 10, 2001, is also a public safety officer. The
chaplain must have been responding to a fire, rescue, or
If you receive a CSRS or FERS survivor annuity, you can
police emergency as a member or employee of a fire or
recover the employee’s cost tax free. The employee’s cost
police department.
is the total of the retirement plan contributions that were
This program may pay survivors a temporary benefit up
taken out of his or her pay.
to $3,000 if it finds that the death of the public safety officer
How you figure the tax-free recovery of the cost de-
is one for which a final benefit will probably be paid. If there
pends on your annuity starting date. This is the day after
is no final payment, the recipient of the temporary benefit is
the date of the employee’s death. The methods to use are
liable for repayment. However, the Bureau may not require
the same as those described near the beginning of Part II
all or part of the repayment if it will cause a hardship. If that
under Recovering your cost tax free.
happens, that amount is tax free.
The following discussions cover only the Simplified
For more information on this program, you may
Method. You can use this method if your annuity starting
contact the Bureau of Justice Assistance by call-
date is after July 1, 1986. You must use this method if your
ing 1– 888 – 744 – 6513, or 202 –307 – 0635 if you
annuity starting date is after November 18, 1996. Under
are in the metropolitan Washington, D.C., calling area.
the Simplified Method, each of your monthly annuity pay-
ments is made up of two parts: the tax-free part that is a
Additional information about this program is also
return of the employee’s cost and the taxable part that is
available on the Internet at
the amount of each payment that is more than the part that
BJA.
represents the employee’s cost. The tax-free part remains
the same, even if your annuity is increased. However, see
Exclusion limit, later.
FERS Death Benefit
Surviving spouse with no children receiving annuities.
You may be entitled to a special FERS death benefit if you
Under the Simplified Method, you figure the tax-free part of
were the spouse of an active FERS employee who died
each full monthly annuity payment by dividing the
after at least 18 months of federal service. At your option,
employee’s cost by a number of months based on your
you can take the benefit in the form of a single payment or
age. This number will differ depending on whether your
in the form of a special annuity payable over a 3-year
annuity starting date is on or before November 18, 1996, or
period.
later. To use the Simplified Method, complete Worksheet A
Page 17
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