FEDweek

Change in Divorce Settlements Policy Challenged

The inspector general at OPM has challenged how that agency in 2016 changed a longstanding policy regarding how a divorce court order affects FERS annuity benefits, saying the agency “did not provide any public notice” that the change was being considered and that many retirees learned of the decision “only when their annuity amounts changed – many years after the parties had divorced.”

OPM at that time ruled that a divorce order apportioning a portion of a FERS retiree’s benefits to a former spouse applies automatically to the FERS “special retirement supplement” if the retiree is eligible for one, as well as to the basic annuity. The supplement, which approximates the value of a Social Security benefit earned during years covered by Social Security as a federal employee, is paid to those who retire before age 62 until they reach that age, when regular Social Security benefits begin. The prior policy was that divorce awards did not reduce the supplement unless they specifically divided that benefit.

OPM applied the new policy to ongoing payments and also recomputed them retroactive to the date an individual’s supplement was originally paid, reducing annuities to make up for what it determined to be overpayments to the retirees and underpayments to the former spouses due to its former policy.

“OPM’s new policy has been causing immediate financial disruption to annuitants. Moreover, OPM’s new policy improperly changes previously litigated final state court orders without notice to annuitants,” a report said. In one of several cases the IG examined, that resulted in a debt to the former spouse of more than $28,000.

The report said that the law did not require a change in policy, that OPM failed to meet its obligation to go through formal rule-making before carrying it out, and that OPM had no authority to apply its new policy retroactively.

OPM management disagreed on all those points; the IG in turn stuck to its positions, leaving the two sides deadlocked and the revised policies still in place. A court challenge is possible as well.