Divorce and Your Benefits
When it comes to splitting up, it’s important to pay attention to the details.
If you have gone through a divorce, are going through one, or may go through one in the future, you should be aware of the potential impact on your federal benefits. In many cases, employees are not sure exactly how much their former spouse is entitled to receive from their Civil Service Retirement System or Federal Employees Retirement System benefit. Some people are not aware of the difference between retirement benefits, the FERS annuity supplement and survivor benefits, and the meaning of such terms as “marital share” and “court order acceptable for processing.”
Let’s look at three of the most important concepts.
Court Order Acceptable for Processing
To understand why this phrase is so misunderstood, consider the definition of a COAP found in the Handbook for Attorneys on Court Ordered Retirement and Insurance Benefits: “a court order as defined in this section that meets the requirements of subpart C of this part to affect an employee annuity, subpart E of this part to affect a refund of employee contributions, or subpart H of this part to award a former spouse survivor annuity.”
This means that the court order must be written in specific language that is understood by the Office of Personnel Management regarding retirement annuity benefits under CSRS and FERS, refunds of retirement contributions and survivor annuity benefits. That specific language is outlined in the 127-page handbook, which was last revised in July 1997.
In addition, it is very important that your divorce decree/court order be filed with OPM’s Court Order Section so that it can be officially declared as a COAP. (The information required to submit your court order to OPM is outlined in an OPM pamphlet titled, Court Ordered Benefits for Former Spouses.) If it does not get filed properly and benefits may not be paid as you or your former spouse may have understood in your divorce agreement.
For example, in a recent Federal News Radio report, Mike Causey wrote about a divorce that took place in 2001 in which a court order required “assignment” (that is, ownership) of Federal Employees Group Life Insurance benefits be made in the name of the former spouse. Not only is there a special form to execute an assignment of FEGLI, but a certified copy of the divorce decree must also have been filed with the appropriate agency (OPM in this case).
The retiree passed away, and when the former spouse learned of the death, she contacted OPM to claim the assigned insurance benefits. Instead of receiving the benefits, she learned that her former spouse had changed the beneficiary in 2003. Because the court order had not been previously filed with OPM, she may be facing a losing battle in trying to reclaim a benefit that was already paid out to the new beneficiary.
Retirement benefits are payable while you are alive and survivor benefits are paid to your survivors after your death. Sounds simple, right? But it can get complicated.
Retirement benefits while both parties are alive are apportioned to the former spouse at the time of the federal employee’s retirement according to the court order that is on file and acceptable for processing at OPM. The former spouse usually receives 50 percent of the marital share (months of marriage divided by months of federal service) or a specific dollar amount as specified in the court order.
At the time the retiree dies, the former spouse may have been awarded the full survivor benefit—or at least the marital share of the survivor benefit payment—and that benefit is payable to the former spouse who survives the retiree. But what happens when the divorce decree doesn’t specifically mention a survivor annuity under CSRS or FERS? This is not good news for the former spouse. Even if the couple was married at the time of retirement and had elected to provide a survivor benefit on the employee’s CSRS or FERS retirement application, if the marriage later ended in divorce, the survivor benefit is not payable unless it was included in the specific “magic language” required by OPM in the divorce decree.
One such case was argued in the argued in the U.S. Court of Appeals in 2013. The former spouse who was attempting to claim a widow’s benefit lost the case because the court order was amended, but not until seven years after the death of the retiree. The judge explained that the original divorce decree was “silent on the question of a survivor annuity” and that the subsequent amendment was “ineffective under the statute” because it was issued “after the retirement and death of the retiree.”
The FERS annuity supplement is paid in addition to the monthly FERS retirement benefit. Sometimes the FERS supplement is called a “Social Security bridge” payment, because it covers the time between FERS retirement and qualifying for Social Security retirement. The amount represents what you would receive for your FERS civilian service from Social Security and is calculated as if you were eligible to receive Social Security benefits on the day you retired. The supplement is paid to those employees who retire younger than age 62 with an Immediate and unreduced FERS retirement.
According to a new report from OPM’s Office of Inspector General, concerns are being raised about an apparent change in policy regarding the calculation of the FERS supplement when a portion of the retirement benefit was awarded to a former spouse in a divorce decree. For almost 30 years, OPM only apportioned the FERS supplement to a former spouse if it was specifically mentioned in a court order. But starting in July 2016, without publicity or warning, OPM began apportioning the FERS supplement to the former spouse in the same manner as the FERS basic retirement benefit.
OPM also applied this new interpretation retroactively to the date when the retiree started receiving a supplement, resulting in a debt due from the retiree to the former spouse. According to the IG’s report, OPM’s new policy has been causing immediate financial disruption to annuitants.
Dan Jamison, author the FERSGuide, said the disturbing thing about the report is the non-public nature of OPM's move and that the agency apparently did not follow standard procedures in making a rule change.
These three concepts relating to court orders and benefits payable to former spouses show how important it is to be sure your divorce decree is in compliance with OPM’s specific requirements. If you’re involved in a divorce, here are three things to remember:
- Be sure that your attorney is familiar with the rules for processing a divorce for a federal employee or retiree. How many divorces have they handled involving federal employment rules? Do they have a copy of the OPM Handbook for Attorneys?
- File a copy or have your attorney file a copy of your court order with OPM and be sure it has been declared “acceptable for processing.” If you’re not sure this has been done, contact the OPM Court Order Section.
- CSRS or FERS retirement benefits aren’t the only benefits at stake when a federal employee divorces. Also be aware of the rules pertaining to the FERS supplement, Social Security benefits, Federal Employees Health Benefits, FEGLI, and Thrift Savings Plan investments.
Photo: Flickr user craig Cloutier