Retirement plan interests are often one of the most valuable assets, other than real estate, that most couples will have to allocate during a divorce. Chapter Four in Divorce Strategy explains the different types of retirement assets and describes how they can be handled during a divorce. An outline of the subsections in the chapter follows. Then, there is an excerpt from the chapter.

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divorce and retirement

A few months ago, Debbie wrote asking about her interests, as the spouse of a federal employee, in her husband’s federal employee retirement benefits (retirement annuity). Her husband claimed she couldn’t get any of his federal employee annuity as federal law didn’t permit its division. He was mistaken.

Unlike private pension plans, the Federal Employee Retirement System (FERS) and the Civil Service Retirement System (CSRS) are born totally from federal laws and regulations. In a divorce, the division of a FERS or CSRS benefit is done by specific language in a court order, not by a qualified domestic relations order. There are very strict and specific deadlines that must be met by anyone wanting to receive a portion of the employee’s annuity. In addition, there are certain ancillary benefits a divorced spouse could receive only if the court order specifically addresses these benefits.

The administration of FERS and CSRS is handled by the Office of Personnel Management (OPM). Acourt order acceptable for processing is required by OPM before it will do anything with a federal employee’s retirement annuity.

The court order can divide the retirement annuity by a specific dollar amount or by a specific percentage, up to 100% of the retiree’s net annuity. If the divorced spouse wants to share in any future cost of living allowances (COLA), the court order must provide for it, particularly if the division of the retirement benefit is expressed in a dollar amount. A percentage division of the benefit generally includes COLA’s. In either event, the language in the order must give clear instructions to OPM about how it is to divide the employee’s retirement benefit and how the former spouse’s share is to be determined.Continue reading