Divorce and Federal Employee Retirement

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.

The payment of a divorced spouse’s share in the employee’s benefit will commence when the employee retires or reaches retirement age as defined by FERS or CSRS. If the employee dies before then, no annuity payments will be made. Likewise, annuity payments will terminate when the retired federal employee dies.

Reduced payments will continue to the divorce spouse only if he or she also receives a former spouse survivor annuity per the court order. This annuity must be awarded at the time of the divorce and before the federal employee retires. Or, the employee can voluntarily elect to provide the survivor annuity for his or her divorced spouse. The divorced spouse is entitled to receive a former spouse survivor annuity only if he or she is also awarded a portion of the employee’s retirement annuity.

There are also specific requirements for the length of service that the employee must work to be eligible for an annuity. If the employee doesn’t meet the minimum requirement, there will not be any benefit paid to either spouse, except for a refund of the employee’s contributions. In fact, even if the employee is fully eligible to receive a monthly annuity, he or she can still elect to take a lump sum refund of contributions upon retirement instead of the monthly annuity payment. A court order acceptable for processing should address the division of a refund of contributions, just in case the employee chooses to take a refund instead of the annuity.

There is another type of federal employee retirement benefit called a thrift plan. The employee contributes a percentage of income to the plan. It’s similar to a 401(k) plan, but is operated by an agency of the federal government. It is administered by a different department than the FERS or CSRS, so the court order dividing the asset will have to comply with additional requirements to be acceptable.

For additional information about divorce and a federal employees benefits programs, federal employee pay rates, and more visit these web pages:

Federal Retirement Programs: Other Retirement Publications for booklets, especially the guidebook for family law attorneys. The booklets can be downloaded or printed from your printer.

Salaries and Wages for current pay information for federal employees.

http://www.opm.gov/ for more information from the Office of Personnel Management. Be sure to read the sections on health insurance and life insurance.

http://www.tsp.gov/ for information about the Thrift Savings Plan.

Here’s a short list of key things to remember about federal employee benefit plans and divorce.

  1. CSRS and FERS are different from private pension plans and cannot be divided by a Qualified Domestic Relations Order.

  2. You need specific, statutory language in a court order acceptable for processing by the Office of Personnel Management.

  3. The former spouse’s benefit terminates when the federal employee dies, unless the former spouse has an interest in a survivor annuity.

  4. The Thrift Savings Plan is a separate retirement plan, is administered by a different agency than the OPM and also requires specific language in a court order.

  5. There is a Federal Employee Group Life Insurance (FEGLI) program.

  6. There are federal health insurance benefits.

  7. Federal employees under Civil Service Retirement System do not contribute to social security, but can have a TSP account in which they contribute up to 7% of their basic pay. Federal employees under the Federal Employee Retirement Systems (FERS) contribute to social security. Their retirement
    package is three-tiered: (1.) Annunity contributions to FERS, (2.) Social Security contributions, and (3.) Thrift Savings Plan up to 12 percent of their basic pay plus a 1% contribution and matching contributions (up to 5% on a percentage scale) from the employing agency.