Federal Employees' Retirement System: Present Value Conversion Factors for Spouses of Deceased Separated Employees

Federal Employees' Retirement System; Present Value Conversion Factors for Spouses of Deceased Separated Employees

SUPPLEMENTARY INFORMATION:

In this issue of the Federal Register , OPM is publishing a notice with revised normal cost percentages under the Federal Employees' Retirement System (FERS) Act of 1986, Public Law 99-335, 100 Stat. 514, as amended, based on economic assumptions and demographic factors adopted by the Board of Actuaries of the Civil Service Retirement System. By statute under 5 U.S.C. 8461(i), the revisions to the actuarial assumptions require corresponding changes in factors used to produce actuarially equivalent benefits when required by the FERS Act. There are two sets of factors in this direct final rule: (1) Basic Employee Death Benefit Factors, which did not change, and (2) Early Commencing of Survivor Annuities Factors, which were revised. Additionally, one column was removed from the factor table below. The following paragraphs summarize these changes.

Basic Employee Death Benefit Factors

Section 843.309 of title 5, Code of Federal Regulations, regulates the payment of the basic employee death benefit. Under 5 U.S.C. 8442(b), the basic employee death benefit may be paid to a surviving spouse as a lump sum or as an equivalent benefit in 36 installments. In its meeting on June 16, 2025, the Board of Actuaries of the Civil Service Retirement System (the Board) reviewed the long-term economic assumptions and determined that they should remain unchanged; therefore, the factors used to convert the lump sum to 36-installment payments under 5 CFR 843.309(b)(2) will remain unchanged.

Early Commencement of Survivor Annuities Factors

Section 843.311 of title 5, Code of Federal Regulations, regulates the benefits for the survivors of separated employees under 5 U.S.C. 8442(c). This section provides a choice of benefits for eligible current and former spouses. If the current or former spouse is the person entitled to the unexpended balance under the order of precedence under 5 U.S.C. 8424, he or she may elect to receive the unexpended balance instead of an annuity. If the separated employee died before having attained the minimum retirement age, the annuity commences on the day the deceased separated employee would have been eligible for an unreduced annuity as specified under this section. If the current or former spouse instead elects to receive an adjusted annuity earlier, beginning on the day after the death of the separated employee, the annuity is actuarially reduced to compensate for it being paid at an earlier date, and is reduced using the factors in appendix A to subpart C of 5 CFR part 843 to make the annuity actuarially equivalent to the present value of the annuity that the spouse or former spouse otherwise would have received. This reduces the risk of any unfunded liability to the Civil Service Retirement and Disability Fund. These revisions amend appendix A to subpart C of 5 CFR part 843 to conform the factors to the revised actuarial assumptions.

Removal of the "1950 Through 1966" Column

In addition to amending the factors, OPM also edited the table titled "With at least 30 years of creditable service." The current table is separated into two columns. One column containing factors for individuals born after 1966 and a second column containing factors for individuals born from 1950 through 1966. The second column, for individuals born from 1950 through 1966, has been removed because individuals born before 1966 have already reached their minimum retirement age. Since the purpose of these factors is to reduce annuities when a separated employee dies before attaining the minimum retirement age, the factors for individuals born from 1950 through 1966 are unnecessary.

30-Day Comment Period

OPM has determined that a 30-day period for comments on this direct final rule is sufficient to allow for meaningful public input. These revisions to appendix A to subpart C of part 843 are necessary under 5 U.S.C. 8461(i). Under section 8461(i) and 5 CFR part 841, subpart D, OPM is required to make changes to the factors used to produce actuarially equivalent benefits under the FERS Act whenever the Board of Actuaries established under 5 U.S.C. 8347(f) revises related actuarial assumptions. In June 2025, the Board of Actuaries made such revisions. Accordingly, OPM must now implement these revisions and is proposing the corresponding changes, which must go into effect on the first day of the fiscal year.

Expected Impact of This Rule

OPM is issuing this direct final rule to revise the table of reduction factors for early commencing dates of survivor annuities for spouses of separated employees who die before the date on which they would be eligible for unreduced deferred annuities. The current factors can be found in appendix A to subpart C of 5 CFR part 843.

Of all the applications for survivor annuity death benefits OPM receives annually, OPM expects this rule to impact approximately one percent of those survivor annuity death applications it receives that are based on the death of a separated employee. Of the changes this rule implements, the most significant change is to conform the factors to the revised actuarial assumptions when the current or former spouse elects to receive an adjusted annuity beginning on the day after the death of the separated employee. The annuity is reduced using the factors in appendix A to subpart C of 5 CFR part 843 to make the annuity actuarially equivalent to the present value of the annuity that the spouse or former spouse otherwise would have received. When OPM updates the FERS normal cost, the FERS law at 5 U.S.C. 8461(i) requires that OPM make corresponding changes to the factors used to produce actuarially equivalent benefits under FERS. Specifically, this rule is needed to revise the present value conversion factors for certain benefits payable under FERS to current and former spouses of deceased separated employees. This rule allows certain survivors to make choices about what benefits they want to receive and, in some instances, when they want the benefits to begin. Considering the small number of survivor annuities affected, OPM does not anticipate this rule will substantially impact local economies or have a large impact in local labor markets.

Regulatory Compliance

1. Notice and Comment

Although 5 U.S.C. 553(b) and 1105 and 1103(b)(1) generally require OPM to seek comment on certain rules, the requirement for comment is not required when OPM for good cause finds that comment is unnecessary. 5 U.S.C. 553(b)(B). The amendments made by this rule are statutorily mandated. Providing a comment period on the result of mathematical computations resulting from the changed actuarial assumptions is unnecessary and, to the extent that it would delay benefit payments, is contrary to the public interest. Furthermore, OPM historically has not received comments on previous iterations of this rulemaking.

2. Regulatory Review

OPM has examined the impact of this rule as required by Executive Order 12866 and Executive Order 13563, which direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public, health, and safety effects, distributive impacts, and equity). This rule was not designated as a "significant regulatory action" under Executive Order 12866 and, therefore, was not reviewed by the Office of Management and Budget (OMB). Therefore, this rule is not an Executive Order 14192 regulatory action because it is not significant under Executive Order 12866.

3. Regulatory Flexibility Act

OPM certifies that this rule will not have a significant economic impact on a substantial number of small entities.

4. Federalism

This rulemaking will not have substantial direct effects on the States, on the relationship between the national government and the States, or on distribution of power and responsibilities among the various levels of government. Therefore, in accordance with Executive Order 13132, the Director of OPM certifies that this rulemaking does not have sufficient federalism implications to warrant preparation of a Federalism Assessment.

5. Civil Justice Reform

This regulation meets the applicable standards set forth in section 3(a) and (b)(2) Executive Order 12988.

6. Unfunded Mandates Reform Act of 1995

This rule will not result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any year and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

7. Congressional Review Act

The Office of Management and Budget's (OMB) Office of Information and Regulatory Affairs has determined that this is not a "major rule" as defined by the Congressional Review Act (5 U.S.C. 804(2)). OPM will submit to Congress and the Comptroller General of the United States a report regarding the issuance of this action.

8. Paperwork Reduction Act

Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) (PRA), unless that collection of information displays a currently valid OMB Control Number.

This rule involves an OMB approved collection of information subject to the PRA titled "Application for Death Benefits (FERS)/Documentation and Elections in Support of Application for Death Benefits when Deceased was an Employee at the Time of Death (FERS)," OMB Control Number 3206-0172. The public reporting burden for this collection is estimated to average 60 minutes per response, including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. The total burden hour estimate for this form is 16,751 hours. The system of record notice for this collection is: OPM SORN CENTRAL-1 Civil Service Retirement and Insurance Records.

For the reasons stated in the preamble, the Office of Personnel Management amends 5 CFR part 843 as follows:

PART 843-FEDERAL EMPLOYEES RETIREMENT SYSTEM-DEATH BENEFITS AND EMPLOYEE REFUNDS

Subpart C-Current and Former Spouse Benefits