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Divorce happens, including to federal employees and retirees. When it does, it affects many aspects of life, including benefits flowing from federal employment.
Those benefits can be a substantial part—even the major part—of the financial considerations because they involve important matters such as lifelong annuity payouts and health insurance coverage.
However, this is an especially tricky area for federal employees and retirees because the federal law governing those benefits in some ways conflicts with state law—and when they conflict, the federal law prevails.
Divorce Decree and Your Federal Benefits
A state court order related to a divorce or separation for example can divide your annuity; divide a refund of your retirement contributions made when you leave federal service before retirement; permit your ex-spouse to continue health insurance coverage; require you to assign your life insurance; garnishee your annuity to pay alimony and/or child support; or require certain distributions from your Thrift Savings Plan account.
But because federal employment matters are governed by “spouse equity” provisions in federal law, standard court orders used to divide private sector pension plans—commonly, what are called qualified domestic relations orders—likely will not be valid under the Civil Service Retirement System or the Federal Employees Retirement System.
And state court orders cannot affect several types of benefits payable under CSRS and FERS at all. For example, under the private sector Employee Retirement Income Security Act, a former spouse’s share of a retirement benefit can begin when the employee reaches the minimum retirement age, even if the employee is still working.
However, this is not available under the CSRS or FERS because court orders cannot affect a retirement benefit until the benefit is actually payable.
This means that the employee must be not only eligible for the benefit but must actually have retired and applied for it.
Similarly, eligibility for children’s survivor benefits is governed by federal law and cannot be affected by state court orders.
That means that divorce orders involving federal employee benefits must be crafted specifically to comply with federal law. That’s not necessarily an easy thing!
Unfortunately, the government as an employer will provide only limited help. Neither an employing agency nor the Office of Personnel Management will advise an employee, spouse or an attorney about how to draft a court order to award CSRS or FERS benefits.
The government will provide only certain information—and only in response to a subpoena signed by a judge or a release signed by the retiree or former employee and with other complications, as well.
Employing agencies can provide employment and pay information service with that agency, a statement of retirement system coverage (CSRS or FERS), and the amount of money withheld by that agency to the employee’s credit in the retirement fund.
But if a current employee has previous employment with a different agency, information about the employee’s contributions to the retirement fund during the prior service is only available from OPM. OPM also will provide similar information about retirees and former employees.
And while the government can prepare estimates of benefits that the employee has already earned, it won’t determine a division of benefits between spouses, or the “present value” of an annuity.
Also, agencies do not provide estimates that take into account future promotions, program changes, or anything else that would require speculation. And even if an agency does provide an annuity estimate, it is not binding on the government.
In a divorce proceeding, it is vital to understand the unique requirements of federal benefits policies, and to make sure they are followed. Going through a divorce is difficult enough as it is. Getting these considerations right the first time at least makes it no more difficult than it has to be.
Impact of Divorce on a Federal Annuity
A court order following annulment of marriage, legal separation, or divorce can divide or apportion an annuity. The order must expressly direct the Office of Personnel Management to pay a portion of your monthly benefit.
The spouse’s share must be stated as a fixed amount, a percentage or fraction of your annuity, or by a formula with a readily apparent value. The amount cannot exceed the money payable after deductions for taxes and insurance.
Following the dissolution of a marriage after retirement, any survivor benefit you elected at retirement is no longer payable.
A monthly survivor benefit would be payable to your former spouse after your death if one is provided by court order or your new election. Your marriage must have lasted for at least nine months to allow a court-ordered benefit.
In addition, a retiring employee may voluntarily elect a fully or partially reduced annuity to provide a former spouse survivor annuity. However, if the employee has remarried, this election may only be made if the current spouse consents to it.
A former spouse survivor annuity ends if the former spouse remarries before becoming age 55 unless you and your former spouse were married for at least 30 years.
Under the Civil Service Retirement System, the maximum benefit payable after your death to survivors other than children is 55 percent of your annual benefit. Under the Federal Employees Retirement System, the maximum is 50 percent.
So, the benefit payable to a current spouse equals the difference between the court-ordered benefit for an ex-spouse and the maximum benefit payable. For example, if the court awarded your former spouse a benefit equal to 35 percent of your CSRS annuity, your current spouse could only receive a benefit equal to 20 percent.
An insurable interest election can be made at retirement to provide a current spouse with additional survivor benefits if the retiree is in good health.
Note: While orders can be changed before the employee retires or dies, in general they cannot be modified to affect survivor benefits after the employee retires or dies.
Survivor Reductions—Your annuity will be reduced if your former spouse was awarded a survivor annuity by qualifying court order. If you are divorced after retirement from a spouse to whom you were married at retirement, OPM will honor the terms of a qualifying court order for that person to the extent that your annuity was reduced at retirement; if you did not elect to provide a survivor annuity for that spouse at retirement, the court order will not be honored.
Generally, a survivor reduction for a spouse ends when your marriage ends because of death, divorce, or annulment. The former spouse survivor reduction ends if your former spouse dies, remarries before age 55, or loses entitlement to the annuity under the terms of the court order that required you to provide the benefit.
The former spouse reduction does not end if you and your former spouse were married for at least 30 years, even if your former spouse remarries before reaching age 55. When you make a post-retirement survivor election, OPM will send you detailed information describing when reductions end.
The reduction to provide an insurable interest survivor annuity stops when:
• the person you named to receive the insurable interest benefit dies;
• the person you named is your current spouse and you change the insurable interest election to a regular current spouse survivor annuity within two years after the last reduction to provide a former spouse survivor annuity ends;
• you marry and elect to provide a survivor annuity for your spouse and choose to cancel your insurable interest designation; or
• you marry the person named to receive the insurable interest annuity and elect to provide a regular survivor annuity for him or her.
Note: Your annuity will continue to be reduced if you have a current or former spouse who is entitled to survivor benefits either by your election or court order.
Death While in Service—If death occurs as an employee, 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 CSRS or FERS systems. Under CSRS, a survivor annuity is payable. Under FERS, a lump-sum death benefit is payable, and a survivor annuity is also payable if the employee has 10 years of creditable service.
If a separated former employee dies before retirement under CSRS, no survivor annuity can be paid to a former spouse, despite the terms of a court order. In certain limited circumstances, under FERS, a survivor annuity for a former spouse may be payable if a separated former employee dies before retirement.
Refunds—A court order may provide for all or part of a refund of employee retirement contributions to be paid to the former spouse. A court order also may block payment of a refund, but only if the order directs OPM not to pay the refund and the order also grants a survivor annuity or a portion of a retiree annuity to a legally separated or former spouse.
FEHB – Health Insurance Following a Divorce
Former spouses may enroll for Federal Employees Health Benefits coverage in their own right if they meet the spouse equity requirements of the FEHB law.
Former spouses of federal employees or retirees may not continue to receive FEHB coverage under the employee or retiree’s enrollment after divorce. OPM will not honor a court order requiring it to provide FEHB coverage to a former spouse, because federal law preempts state law in matters relating to the nature and extent of coverage or benefits.
To continue FEHB coverage after divorce the former spouse must:
(1) be covered as a family member under the employee/retiree’s FEHB enrollment for at least 1 day during the 18 months prior to divorce;
(2) be entitled to receive a portion of the retirement annuity after the employee retires or a survivor annuity at the time the employee/retiree dies;
(3) within 60 days after divorce, apply to the agency employing office where the federal employee worked at the time of divorce by submitting written notice that he or she wants to continue FEHB coverage under the spouse equity provisions of the FEHB law (if divorce occurred after retirement the employing office is the retirement system); and
(4) not remarry prior to age 55.
An individual who qualifies as a former spouse must enroll for FEHB coverage in his or her own right and must pay both the employee’s and the government’s share of the premium. Coverage is prospective from the first day of the pay period after the employing office receives all properly completed qualifying documents.
Former spouses who do not meet the criteria for FEHB coverage may continue coverage for 3 years from the date of the divorce under “temporary continuation of coverage” which requires paying both the enrollee and employer shares of the premiums, plus an administrative fee.
A court order acceptable for processing granting the former spouse a portion of the retiree’s annuity provides the former spouse with a monthly payment after the employee retires and continued FEHB coverage until the employee dies.
A court order acceptable for processing granting a survivor annuity provides the former spouse with continued FEHB coverage until the former spouse dies, but the annuity does not begin until the employee/retiree dies.
A court order acceptable for processing providing both a portion of the retirement annuity and a survivor annuity ensures an annuity payment from the date of retirement or death and continued FEHB coverage until the former spouse dies.
To avoid a break in coverage, a former spouse may want to enroll for a temporary continuation of FEHB coverage, pending a decision on eligibility for coverage as a former spouse.
FEGLI – Life Insurance Following a Divorce
A federal employee or former employee (including an annuitant) may make an irrevocable assignment of his or her coverage under the Federal Employees’ Group Life Insurance policy to another person or to a trust.
Individuals who assign their FEGLI ownership continue to be insured under FEGLI. However, they irrevocably transfer to the assignee many of the attendant rights, benefits, and responsibilities for their basic, standard optional, and additional optional insurance. (Family optional insurance cannot be assigned.)
Assignments of insurance are generally made to comply with the requirements of a court order upon divorce or for personal financial
An assignment automatically cancels a prior designation of beneficiary.
An assignment of FEGLI coverage may be made by a federal employee or former employee in order to comply with a court order for divorce. Frequently, the court will order a federal employee or former employee to name a former spouse as the beneficiary of his or her life insurance proceeds. However, under the FEGLI law, an insured person may change his or her designation of beneficiary at any time.
This is true even if a court order directs otherwise, because the FEGLI law preempts state law, and court orders based on state law, to the extent that the state law is inconsistent with the FEGLI contract.
Assigning FEGLI coverage to a former spouse, however, provides a means for ensuring that, when FEGLI benefits are awarded to a former spouse in a divorce, the employee is not able to circumvent the award by changing the designation of beneficiary or cancelling the coverage at some later date.
The law does not authorize OPM to enforce or comply with the provisions of a court order directing OPM or a federal employee or former employee to assign FEGLI coverage.
The law merely allows the employee or former employee to make an assignment of FEGLI coverage, if he or she so chooses. It is the responsibility of the court-designated assignee to ensure that the order is enforced.
If an insured owns more than one type of coverage he or she must assign all of the insurance. An insured may not assign only a portion of the coverage. An insured may not name contingent assignees in the event the primary assignee predeceases him or her.
If the assignment of the insurance is to two or more persons, the insured must specify percentage shares, rather than dollar amounts or types of insurance, to go to each assignee.
Once insurance is assigned, the assignee to whom the insured transfers FEGLI ownership may, for the insurance assigned to him or her:
(1) designate beneficiaries, (2) convert the insurance to an individual policy if the insured’s eligibility for group insurance ceases, and (3) cancel the insurance or reduce the amount of coverage.
When insurance is assigned to more than one person, these people must agree when exercising the right to cancel or reduce coverage.
The federal employee or former employee (assignor) retains the right to elect new insurance coverage, though all new insurance (excluding family optional insurance) is subject to an existing assignment.
The assignor also retains the right to decide, at time of retirement or receipt of workers’ compensation, to maintain more than the minimum percentage of his or her basic life insurance.
The assignor also continues to be responsible for premium payments under the group policy. Premium payments will continue to be withheld from the assignor’s pay, annuity, or compensation.
An assignment is not to be confused with a designation of beneficiary under the FEGLI program.
A federal employee or former employee may designate a person or legal entity to receive any FEGLI insurance payable at death.
Designations of beneficiary do not convey any ownership rights under the insurance policy and can be changed by the federal employee or former employee at any time.
Upon assigning FEGLI coverage, however, the employee or former employee gives up the right to make a designation of beneficiary or change beneficiaries, and the assignee assumes those rights.
Divorce and FEDVIP, FLTCIP, FSAs
Federal Dental and Vision Insurance Program–In the event of a divorce, an enrollee may decrease FEDVIP coverage from self and family to self plus one or to self-only, or from self plus one to self-only. If not done between 31 days before to 60 days after the divorce, it must wait until the next annual benefits open season and the higher level of premiums will continue for the meantime.
Former spouses are not eligible for FEDVIP coverage unless separately eligible such as by being a federal employee himself or herself; there is no spouse equity, temporary continuation of coverage or right to convert to an individual policy in FEDVIP.
Federal Long Term Care Insurance Program--A former spouse who was enrolled in the FLTCIP at the time of a divorce may keep that coverage by continuing to pay the premiums. However, a former spouse not covered at the time of a divorce would not be eligible to initially enroll afterward, unless separately eligible such as by being a federal employee himself or herself.
Flexible Spending Accounts–Divorce or legal separation is a qualifying status event allowing changes in allotments to flexible spending accounts.
Garnishment–Federal salaries and retirement benefits are subject to garnishment to provide child support, alimony or both under court orders.
The Thrift Savings Plan and Divorce
A court decree of divorce, annulment or legal separation can make an award from a participant’s TSP account to someone other than the participant, such as a former spouse.
The TSP will honor such orders if they are issued in connection with such an action and they comply with the Board’s regulations. The TSP also will honor preliminary court orders for the purposes of freezing a participant’s account as well as amendatory court orders issued after such a decree.
When the TSP receives a court order, the account of the participant is frozen, meaning that the participant is not allowed to withdraw the account, except to meet certain IRS mandatory distributions, or receive a loan from the account. All other account activity is permitted, however.
If the TSP determines that the court order is qualifying, it issues a statement regarding the effect that compliance will have on the account and a description of the method by which any entitlement was calculated, the results of the calculation and the circumstances under which payment will be made.
The TSP will make only one disbursement under a court order even if the order on its face requires a series of payments.
After a payment is made, the account will be unfrozen.
If you really need to get into the weeds:
Technical guidance on retirement and insurance matters is at http://www.opm.gov/retirement-services/publications-forms/pamphlets/ri38-116.pdf, and on matters involving the TSP at https://www.tsp.gov/forms/legalDocuments.shtml.