---
kind: "section"
citation: "5 U.S.C. § 8420"
title: "5"
title_heading: "Government Organization and Employees"
number: "8420"
heading: "Insurable interest reductions"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/5/8420"
units:
  - "Part III — Employees"
  - "Subpart G — Insurance and Annuities"
  - "Chapter 84 — Federal Employees’ Retirement System"
  - "Subchapter II — Basic Annuity"
---

# §8420. Insurable interest reductions

- (a)
  - (1) At the time of retiring under section [8412](/usc/5/8412.md), [8413](/usc/5/8413.md), or [8414](/usc/5/8414.md), an [employee](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20) who is found to be in good health by the [Office](/usc/5/5402.md?p=3) may elect to have such [employee](/usc/5/4701.md?p=a-2)’s or [Member](/usc/5/8401.md?p=20)’s annuity (as computed under [section 8415](/usc/5/8415.md)) reduced under [paragraph (2)](#a-2) in order to provide an annuity under [section 8444](/usc/5/8444.md) for an individual having an insurable interest in the [employee](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20). Such individual shall be designated by the [employee](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20) in writing.
  - (2) The annuity of the [employee](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20) 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](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20), 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](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20), an election under this section on behalf of the spouse may be made only if any right of such spouse to a [survivor](/usc/5/8401.md?p=28) annuity based on the [service](/usc/5/8401.md?p=26) of such [employee](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20) is waived in accordance with [section 8416(a)](/usc/5/8416.md?p=a).
  - (2) [Paragraph (1)](#b-1) does not apply in the case of an [employee](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20) if such [employee](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20) has a [former spouse](/usc/5/8401.md?p=12) who would become entitled to an annuity under [section 8445](/usc/5/8445.md) as a [survivor](/usc/5/8401.md?p=28) of such [employee](/usc/5/4701.md?p=a-2) or [Member](/usc/5/8401.md?p=20).

## Source credit

(Added Pub. L. 99–335, title I, § 101(a), June 6, 1986, 100 Stat. 532.)