Treasury Reclamation of Federal Pension Payments After Death
Why the Deposit Gets Pulled Back
Federal retirement annuities are paid in arrears — the direct deposit that hits the bank on the first business day of a month covers the previous month. When a retiree dies, the annuity terminates on the exact date of death. Any payment deposited after that date is unearned.
Treasury doesn't wait for OPM to sort it out. Under 31 CFR Part 210 (the ACH reclamation rules), the Department of the Treasury sends a Notice of Reclamation to the bank, and the bank debits the overpayment directly from the account. This happens automatically through the Automated Reclamation Processing System (ARPS).
What This Looks Like in Practice
A retiree dies on March 18. They earned a prorated annuity for March 1–18, but OPM can't prorate mid-cycle. The full April 1 deposit (covering March) hits the bank as scheduled. Treasury then reclaims the entire deposit. OPM calculates the prorated amount actually owed (March 1–18) and pays it later as accrued unpaid annuity to the surviving spouse or beneficiary.
If the retiree received $3,000 per month and died on March 18, the family sees $3,000 deposited into the bank on April 1 — and then Treasury debits that $3,000 back. OPM later calculates and pays the accrued unpaid annuity owed through March 18 as a separate payment.
The Joint Account Problem
Most federal retirees have their pension direct-deposited into a joint checking account. When Treasury reclaims the overpayment, it debits the joint account — regardless of who else is on the account and regardless of what other money is in there.
If the surviving spouse has already spent the deposit or moved it to another account, the bank can't execute the reclamation. The bank returns it to Treasury as "insufficient funds," and Treasury initiates debt collection proceedings against the account holders or the estate.
This is the single most common financial shock families face in the first weeks after a federal retiree dies.
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How to Handle It
Leave the last deposit untouched. Do not withdraw, transfer, or spend any pension payment deposited after the date of death. Once the bank processes the reclamation, the money is returned to Treasury and the account is no longer encumbered.
Alert the bank. Let the bank know the retiree has died and that a Treasury reclamation may be incoming. Some banks will flag the account to prevent overdraft fees when the debit hits.
File the survivor claims. OPM pays the accrued unpaid annuity — the prorated amount actually earned through the date of death — as part of the SF 3104 (FERS) or SF 2800 (CSRS) claims process. This is legitimate money owed to the survivor; it just takes longer to arrive because OPM has to calculate the exact amount.
If You Already Spent the Deposit
Contact Treasury's Bureau of the Fiscal Service and OPM's Retirement Customer Service Center (1-888-767-6738) immediately. You may be able to arrange a repayment plan or request a waiver. Under 5 CFR Parts 831 and 845, OPM may waive overpayment recovery if the survivor was without fault and recovery would cause financial hardship or be against equity and good conscience.
Ignoring the debt doesn't make it disappear. If a waiver is denied, the survivor can arrange a voluntary installment agreement that offsets small monthly amounts from the survivor annuity.
The Federal Retiree Death Benefits Guide covers the Treasury reclamation process alongside a timeline tracker and worked dollar examples, so families know exactly what to expect from the bank account in the first 30 days.
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