Getting a divorce is typically a complicated process, but for federal employees, there are additional considerations that can make the proceedings even more daunting. Continue reading for an overview of everything you should know about a federal divorce.
Each Case Is Individual
There are several types of pensions available to civilian federal employees, and some federal employees, especially former ones, are not always aware of their pension entitlements. Moreover, some current federal employees are part of the Federal Employee Retirement System, or FERS, while others participate in its predecessor, the Civil Service Retirement System, CSRS. Each of these pensions has different aspects to consider.
Some have default rules governing a spouse’s entitlement and do not need to be divided in a retirement court, while others have certain restrictions that need to be followed. For example, there may be restrictions related to a former spouse remarrying, such as losing certain benefits, including survivor annuities, if they remarry before age 55.
There are also extra payments that come with federal pensions to consider. In order to divide these assets properly, they must each first be identified. For example, the different pensions offer cost of living adjustments in varying amounts and allow employees to choose to get a refund of their contributions in a lump sum unless expressly prohibited by a court order.
There may also be extra payments in foreign service pensions resulting from post-retirement assignments. Employees in FERS who retire before they can collect Social Security may be entitled to supplemental annuity, while some federal employees receive retirement income and employment income as a “phased-in” retiree. Meanwhile, participants in CSRS sometimes have voluntary contribution accounts that give them a separate stream of income.
Health And Life Insurance
Under certain circumstances, a former spouse may be able to maintain an entitlement to a Federal Employee Health Benefit (FEHB) insurance policy in a divorce. This applies to spouses who have an entitlement to the employee benefit and a survivor benefit. Although the receiving spouse must pay their own insurance premium, they can take advantage of group rates and hundreds of plans from which to choose.
Federal employees take part in the Federal Employee Group Life Insurance Program, or FEGLI, which covers them at a multiple of their yearly salary. These policies do not have a cash value, but their ownership can be assigned by a court order. These policies may also cover children.
If the divorce occurs while the federal employee is still employed,the amount of the spouse’s share of FERS will be unknown. If a spouse has been awarded a share, a Court Order Accessible for Processing will be entered and sent to the Office of Personnel Management to be kept on file until the employee retires. Once their total number of months of service is known, the marital share will be calculated and the spouse will receive their payments.
Other Benefits For Federal Employees
In a divorce, there are other federal benefits to consider. For example, an employee may have a flex savings account, long-term care insurance, student loan forgiveness or some other type of benefit.
One type of benefit that many federal government employees participate in is the Thrift Savings Plan, or TSP. This is a special type of retirement investment and savings plan that functions in a similar manner to a 401K. A TSP is considered marital property that is jointly owned from the date of the marriage through the date of the separation.
It may be divided using a retirement benefits court order or a property settlement agreement that has been approved by the court. A court will order the TSP account to be frozen; until the divorce is finalized, no withdrawals or loans can be made from the account. Outstanding loan balances on the account are included in the balance when determining a former spouse’s award.
The money may be sent in a taxed or non-taxed manner and can be paid even if the employee has not yet retired. It is also worth noting that TSP accounts can be garnished for outstanding spousal support or child support payments. A spouse can be awarded as much as 50% of the marital share of a TSP in a divorce, or they may be willing to receive something else in place of the TSP of equal value.
ERISA Does Not Apply
Because federal pensions are not subject to ERISA, spouses cannot begin to collect their share of a pension before the employee does.
Request A Consultation With The Maryland Divorce Attorneys
Dividing federal government retirement assets can be a tedious process that requires expert guidance. The attorneys at SIEGELLAW are experienced in cases involving federal government pensions. Contact SIEGELLAW today to discuss your case or schedule a consultation.