Title 5, Government Organization and EmployeesRelease 119-102

§8420 Insurable Interest Reductions

Title 5 › PART III — EMPLOYEES › Subpart G — Insurance and Annuities › CHAPTER 84 — FEDERAL EMPLOYEES’ RETIREMENT SYSTEM › SUBCHAPTER II — BASIC ANNUITY › § 8420

Last updated Aug 21, 2026|Official source

Summary

When an employee or Member retires and the Office finds them in good health, they can choose to cut their own annuity so someone who has an insurable interest can get an annuity instead. The retiree must name that person in writing. The retiree’s annuity is reduced by 10%, plus 5% for each full 5 years the named person is younger, up to a 40% total cut. If the named person dies, the retiree’s annuity is recomputed and paid as if it had not been reduced, starting the first day of the month after that death. If the named person is the retiree’s spouse, the spouse must give up any right to a survivor annuity under the rules. That spouse-rule does not apply if the retiree has a former spouse who would be entitled to a survivor annuity.

Full Legal Text

Title 5, §8420

Government Organization and Employees, Source: USLM XML via OLRC

(a)(1)At the time of retiring under section 8412, 8413, or 8414, an employee or Member who is found to be in good health by the Office may elect to have such employee’s or Member’s annuity (as computed under section 8415) reduced under paragraph (2) in order to provide an annuity under section 8444 for an individual having an insurable interest in the employee or Member. Such individual shall be designated by the employee or Member in writing.

(2)The annuity of the employee or Member making the election is reduced by 10 percent, and by 5 percent for each full 5 years the individual named is younger than the retiring employee or Member, except that the total reduction may not exceed 40 percent.

(3)An annuity which is reduced under this subsection shall, effective the first day of the month following the death of the individual named under this subsection, be recomputed and paid as if the annuity had not been so reduced.

(b)(1)In the case of a married employee or Member, an election under this section on behalf of the spouse may be made only if any right of such spouse to a survivor annuity based on the service of such employee or Member is waived in accordance with section 8416(a).

(2)Paragraph (1) does not apply in the case of an employee or Member if such employee or Member has a former spouse who would become entitled to an annuity under section 8445 as a survivor of such employee or Member.

Reference

Citations & Metadata

Citation

5 U.S.C. § 8420

Title 5, Government Organization and Employees

Last Updated

Aug 21, 2026

Release point: 119-102