Retirement & Financial Planning Report

OPM has been asked to reverse a two-year-old change in policy regarding how divorce settlements affect FERS annuity benefits, with the Federal Law Enforcement Officers Association saying the change was made outside the normal processes for such revisions and with “little to no regard for the financial harm it has inflicted on retirees.”

OPM in mid-2016 decided 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 prior policy was that divorce awards did not reduce the supplement unless they specifically divided that benefit. 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.

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.

Early this year, the inspector general office of OPM said that there was no legal need to change policy, that OPM failed to meet its obligation to go through formal rule-making before carrying out such a change, and that OPM had no authority to apply the change retroactively.

In its recent letter to recently installed acting OPM director Margaret Weichert, the law officers’ association said the unexpected new cost to some retirees has been above $20,000 and it cited the IG report as well as a subsequent decision from an MSPB hearing officer criticizing the change. OPM’s action “constituted a reinterpretation of current law that was outside of the agency’s authority and was done absent a specific grant of authority from Congress or through a notice-and-comment rule making process,” the letter said.

OPM has not responded; earlier it disagreed with the IG’s assessment and kept the new policy in place.

More on the FERS social security supplement at ask.FEDweek.com