Federal Employee's CSRS & FERS Federal Civil Service Retirement
& Financial Planning Resources
Divorce Issues & Impact Menu
Studies have shown that one of the top five things that can wreck your
retirement is divorce or a legal separation just prior to retirement and that is
especially true for the federal employee. Whether you are CSRS/CSRS Offset or
FERS/TransFERS, your retirement is property subject to division and can be cut
by more than half. Your TSP can also be decimated, and survivor elections for any subsequent
spouse limited or extremely expensive if you and your divorce lawyer don’t
understand how federal benefits can be awarded in a divorce.
Federal benefits are not subject to ERISA, the law used to divide private
sector retirements. Rather, the Office of Personnel Management (OPM)
governs how benefits may be awarded and requires certain orders or wording
in a decree based on a separate law also passed in 1984. Improper
wording in an order or decree can send the federal employee back to court
for a clarification order or could make the fed worth more to the former
spouse in death after retirement than they were while living. Award of
a “full survivor benefit” to a former spouse could make it prohibitively
expensive to award the survivor benefits to a subsequent spouse and allow
him or her to keep federal health benefits upon your demise.
IMPORTANT: Question your attorney’s knowledge
of official OPM divorce related documents listed under
Resources in advance prior to putting down a retainer.
As a minimum, your retirement benefits, survivor benefits and who pays
for them, your rights to withdraw your contributions upon quitting, and your
TSP are up for discussion. Your decree could also require you to
maintain and pay for a certain level of life insurance. You cannot
keep a former spouse on your health insurance after divorce even if you
still must provide family plan insurance for your minor children.
Depending on the presence or absence of survivor benefits wording in the
decree, your former spouse may be eligible for Temporary Continuation of
Coverage (TCC) for 3 years for a cost of 102% of single premium or Spouse
Equity Act Continuation of Coverage for a cost of 100% of single premium.
Former spouses must make application in a timely manner to get this
coverage.
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.
Your agency can only give you limited assistance in valuing your
retirement benefits. The amount you have paid into the retirement
system is not the amount up for division, but rather the stream of payments
you will receive after retirement. The agency may be able to give you
a retirement estimate as of a certain date, but is not able to give you a
“present value” of that stream of payments nor advise you on how to divide
them.
The Thrift Board is a little more helpful in that they will give you a
value of the account and/or loans as of a specific date, can freeze the
account from withdrawals, and change beneficiary information with a
written/faxed request.
Once you are divorced and have any reference to the division of your federal
retirement benefits in your decree, it is worth sending a certified copy of
your decree and order(s) to the OPM Court Orders Branch, PO Box 17,
Washington DC 20044 in advance of your retirement. They will tell you
if your order is acceptable for processing (a COAP) and what they say it
will do to your retirement. If that is not what you had in mind, you
will have to go back to court and get your decree amended to comply with
OPM’s requirements.
If you have an order dividing your TSP, your former spouse can process
that order immediately with the TSP and will be responsible for any taxes
due on the withdrawal. TSP’s Court Orders branch is at:
TSP Legal Processing Unit
CODIS — P.O. Box 4390
Fairfax, VA 22038-4390
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. The OPM Booklet is at
www.opm.gov/forms/pdfimage/RI84-1.pdf. OPM has a larger Handbook
for Attorneys which contains all the clauses and acceptable language for the
Retirement Benefits Court Order and Domestic Relations Order which should be
prepared to divide your retirement and TSP. The 165 page publication is
also available for download from OPM. (http://www.opm.gov/retire/pubs/pamphlets/ri83-116.pdf)
The TSP Handbook is at
http://www.tsp.gov/forms/tspbk11w.pdf.
IMPORTANT: Question your attorney’s knowledge
of these documents in advance prior to putting down a retainer.
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