This guide covers how federal pensions and other benefits are handled in divorce.
Here are some of the benefits that we’ll be discussing:
No. Court orders that affect private-sector pensions are generally governed by the Employee Retirement Income Security Act (ERISA) or IRS regulations.
The Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) are governmental plans which follow federal regulations and are exempt from ERISA.
The rules that govern Federal employees’ retirement benefits are in Title 5 of the United States Code and Title 5, part 838, of the Code of Federal Regulations.
No. CSRS and FERS benefits cannot be divided using a QDRO as those plans are not subject to the terms of ERISA.
However, FERS and CSRS benefits can be divided using a Court Order Acceptable for Processing (COAP) which is functionally very similar to a QDRO.
Under ERISA, the former spouse’s share of the benefit can begin when the employee reaches the minimum retirement age, even if the employee is still working (so long as individual plan policies and procedures allow for it-which most do).
However, this benefit is not available under CSRS or FERS because a COAP cannot provide a benefit to a former spouse until the benefit is actually payable to the CSRS or FERS member.
This means the employee must be eligible for the benefit and must have made a proper application for the benefit, before the former spouse commences receipt of benefits from FERS/CSRS.
However, a former spouse may also employ a tool called a ‘Gillmore Election’ whereby the member spouse pays the former spouse directly for benefit entitlements as if the Member Spouse had retired.
Gillmore elections are not used in every case and the potential negative ramifications to a non-employee spouse should be carefully considered (a Gillmore election might impact support obligations, for example).
A court order related to a divorce or separation can affect the following issues:
A court order related to a divorce or separation cannot impact these issues:
The Office of Personnel Management (OPM) governs how benefits may be awarded.
It requires that certain words or orders must be contained in a divorce decree.
When these rules are not followed, a federal employee may have to go back to court to clarify the decree.
After you are divorced and have any reference to the division of your federal retirement benefits in your decree, you should send a copy of your decree and order to the OPM Court Orders Branch, PO Box 17, Washington DC 20044 before your retirement.
You will be notified if your order is acceptable for processing and what the division will do to your retirement.
If your order is not acceptable, you will need to have it amended in court to comply with OPM’s rules and regulations.
OPM is notorious for taking a very long time to process State Court orders, due to their antiquated procedures, which have not been updated. In many cases, it could take several years for processing to complete.
The Washington Post article entitled “Sinkhole of Bureaucracy” discussed the long outdated, inefficient system of OPM in more detail.
To claim court-ordered benefits from OPM, the former spouse or attorney must file a certified copy of the court order and all other required supporting information with OPM.
After this takes place, OPM must continue to be advised of the current mailing addresses of both the former spouse claiming benefits and the federal employee or retiree whose benefits are affected.
OPM must also know any changes in circumstances that could affect the payout of benefits.
In addition, if there are any disputes with the employee/retiree, they must be submitted to the appropriate state court to be resolved.
If a court order is deemed as acceptable, OPM will notify the former spouse that this is the case, and the date spousal benefits begin to accrue (if known), and the formula used to compute it. If there is a disagreement on these items, a court order that clarifies this information must be obtained.
OPM will also inform the employee, retiree, or ‘other interested party’ that the former spouse has applied for benefits, the court order is acceptable for processing, the date payment will commence (if appropriate), amount, and formula.
To contest the validity or the amount, a court order must be submitted invalidating or amending the one submitted by the former spouse.
The former spouse should file the above information as soon as possible.
Do not wait for the employee to retire, even if the spousal benefit begins years in the future.
If you are already retired when divorce occurs, any survivor election you may have made at retirement is terminated unless the decree specifically says it is to continue.
Subsequent survivor elections for the former spouse cannot exceed what was elected at retirement.
A survivor annuity can be made payable to a former spouse after the death of an employee if it has been provided for by in the parties Marital Settlement Agreement of Judgment of Dissolution.
A retiring employee can also voluntarily elect to awarding a partial or full annuity to provide a former spouse survivor annuity.
There is a caveat if the employee gets remarried which says this election can be made only if the current spouse consents to it.
The other thing to note is that a court-ordered survivor annuity is not available unless a marriage lasted at least 9 months.
If the former spouse remarries before they turn 55 years old, the former spouse survivor annuity ends (unless the employee and the former spouse were married for at least 30 years).
If an employee dies, a court-ordered survivor benefit is payable to a former spouse if the employee completed at least 18 months of creditable civilian service and dies while under the Civil Service Retirement System (CSRS) or Federal Employees Retirement System (FERS) retirement coverage.
If a separated former employee dies before retirement under CSRS, no survivor annuity can be paid to a former spouse, regardless of the terms of the court order.
Under FERS, in certain limited circumstances, a survivor annuity for a former spouse may be payable if a separated former employee dies before retirement.
It is a retirement plan for federal employees and uniformed service members similar to a civilian 401(k) plan. Like all other marital assets in a divorce, a Thrift Savings Plan (TSP) may be divided equitably as part of the settlement agreement.
Knowing whether your spouse has a TSP and the value of the TSP is critical to negotiations when determining property distribution upon divorce.
If a civilian employee is covered by FERS, a TSP is one piece of a three-part retirement package that also includes the FERS basic annuity and Social Security.
If federal employee is covered by the CSRS or he or she is a member of the uniformed services, the TSP is a supplement to their CSRS annuity or military retired pay.
Yes. If you have more than one TSP account, all will likely be marital property divided in your divorce.
The exception is for accounts or funds contributed to prior to the marriage. Usually, these will be considered separate property.
The TSP office will assist spouses by providing the participant’s, or beneficiary participant’s, account balance, any outstanding loan balances, and quarterly and annual account statements.
This can only be provided upon written request.
To make a request, please contact the TSP Legal Processing Unit at P.O. Box 4390, Fairfax, Virginia 22038 or fax them at 703-592-0151.
In your request, you must include the following:
To prevent withdrawal of funds from your spouse’s TSP account, obtain a court order as soon as possible.
Once the TSP office receives a valid court order dividing the TSP account, it will place a freeze on all funds.
This will prevent new loans or withdrawals, but it will not prevent the participant from making investment decisions or payments on any existing loans.
Yes. With a valid order, your TSP account or your spouse’s TSP account can be garnished to force payment of a child or spousal support obligation.
Plan members may be covered under the Federal Employees Health Benefits (FEHB) Program.
If a formers spouse is awarded part of the annuity or a survivor annuity by a court order, then they may be able to enroll in FEHB coverage, even if the retirement benefit is not yet payable.
A former spouse cannot retain coverage under the employee’s family enrollment but may seek coverage on their own under the Spouse Equity provision.
If a former spouse who does not qualify for FEHB under the Spouse Equity provisions of the law, they may apply for Temporary Continuation of Coverage (TCC).
A former spouse who loses coverage as a family member because the marriage ended is eligible to convert to a non-FEHB individual policy with his or her insurance carrier.
Federal employees can get vision and dental coverage under the Federal Employees Dental and Vision Insurance Program (FEDVIP).
However, former spouses of employees or annuitants are not eligible for FEDVIP, even if a court order gives them FEHB eligibility.
A court order cannot require an agency or retirement system to enroll an employee or annuitant in a FEDVIP plan to cover his/her children if he/she refuses to do so.
OPM and the Thrift Savings Board have free summary publications available for download which explain how the systems work and what they and your agency can and cannot do for you as you are working through your divorce property negotiations.
You can download a copy of the OPM Booklet for review.
The TSP Handbook is also helpful.
Federal employees may be required to assign Federal Employees’ Group Life Insurance (FEGLI) coverage to former spouses or their children.
Federal employees may also be required to name their former spouses and children as beneficiaries under FEGLI.
Military benefits are subject to their own set of laws and regulations, so these benefits really belong in a totally separate category.
There are special provisions for military retirement payments to former spouses.
The controlling statute is the Uniformed Services Former Spouses’ Protection Act.
A service members’ rights are protected under the Servicemembers Civil Relief Act.
Military pay is technically not a pension and benefits do not accrue over time.
ERISA and the tax code do not apply because retired military pay is considered a federal entitlement.
As such, military retirement pay can either be reduced or lost if a service member commits acts of misconduct.
A state court does not issue a QDRO when dividing military retirement pay.
Instead, an Order Dividing Retired Military Pay is issued.
The service members retirement pay can be issued as part of an overall settlement that satisfies a division of assets that may include property, alimony and child support.
Only disposable retired pay is divided and is calculated after deductions are made for (a) previous overpayments, (b) forfeitures ordered by court-martial, (c) military or VA disability pay, and (d) amounts deducted to provide an SBP annuity.
A former spouse cannot receive benefits until the service member actually retires which can take place after 20 years of creditable service.
Members of the National Guard and Reserve service members who complete 20 years of qualifying service are eligible to collect retirement pay beginning at age 60.
Former spouses must have been married to the service member for at least 10 years during a time when the service member received 10 years’ worth of creditable service.
This is known as the 10/10 Rule.
Retired military pay can still be divided if the 10/10 Rule is not met but payment must come directly from the service member and may be applied when a court has ordered it as part of a property division.
It does not apply to an award of alimony or child support.
Defense Finance and Accounting Services (DFAS) is the agency responsible for making retired military pay to service members and former spouses.
The 10/10 Rule applies for payments made directly by DFAS.
Courts cannot divide military disability payments.
However, a service member may waive his or her disability payment rights as part of a divorce settlement, but a court may not force this issue through a judgment.
If you or your spouse have military benefits, be sure to check out our Definitive Guide to Divorce and Military Benefits to learn more.
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Jason Crowley is a divorce financial strategist, personal finance expert, and entrepreneur. Jason is the managing partner of Divorce Capital Planning, co-founder of Divorce Mortgage Advisors, and founder of Survive Divorce. A leading authority in divorce finance, Jason has been featured in the Wall Street Journal, Forbes, and other media outlets. He is a Chartered Financial Analyst, Certified Financial Planner practitioner, and Certified Divorce Financial Analyst. You can email him at jason@survivedivorce.com.
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