Federal government retirement benefits are considered one of the most valuable marital assets to be split when going through a divorce. Therefore, it is important for both federal government employees and their spouses who are considering a divorce to understand how these assets are handled legally to ensure their interests are protected.
What Is FERS?
The Federal Employee Retirement System or FERS, is a retirement plan that is provided to U.S. federal civilian employees. First instituted in 1987 to replace the Civil Service Retirement System, it is a defined-benefit plan whose eligibility is determined based on the worker’s age and their years of service.
Federal employees are enrolled in the program automatically and receive retirement benefits from three sources: Social Security, a Basic Benefits Plan and a Thrift Savings Plan. These benefits are structured as annuities and are paid to retired employees each month starting a month after they have left government service.
Employees whose service with the federal government began before 1987 fall under the Civil Service Retirement System, or CSRS, rather than FERS. With both plans, however, the payments can be either partly or entirely marital depending on how the employee’s service overlapped with their marriage and therefore will be subject to division during the divorce.
The marital share of pensions is determined using a fraction that represents the number of months during a couple’s marriage that the spouse was considered a federal employee and was earning service toward their pension. The denominator used in this fraction represents the total number of months the employee worked for the federal government; this can result in a 50% share to the spouse.
However, if the employee is still working for the federal government at the time of their divorce, it will not be possible to make this calculation. If a divorce settlement agreement or trial awards a spouse a share of an employee’s pension, a Court Order Acceptable for Processing, or COAP, will be entered in the case and sent to the Office of Personnel Management, where it will remain on file until the employee in question retires.
Once the total number of months of service is available, it will be used to determine the marital share. The spouse’s payments will then begin at the same time as those issued to the retiree.
In some cases, the spouse may be designated as the beneficiary of the employee’s survivor benefit plan, or a portion of the plan, to offer protection to the spouse should the retiree pass away before the spouse when the payments are being made.
Which FERS Benefits May Be Affected By Court Orders In A Divorce?
A court order for a divorce or separation may affect issues such as:
- Dividing a FERS annuity
- Dividing a refund of FERS employee retirement contributions
- Allowing a former spouse to continue coverage with the Federal Employees Health Benefits Program (FEHB)
- Requiring an employee to cover their children under FEHB
- Providing a survivor annuity that is payable upon the death of the employee
- Requiring an employee or retiree to provide their Federal Employees’ Group Life Insurance coverage to a former spouse or children
Thrift Savings Plans
A Thrift Savings Plan, or TSP, is offered to federal government employees and is similar to the 401(k) plans found in the private sector. Employees who opt to participate in a TSP can contribute to it via payroll deductions and choose specific investments. While employees are also permitted to take out loans against a TSP, they must obtain written consent from their spouse before doing so if they are married.
The amount of money that was contributed to a TSP during the marriage is considered marital property, and the start and end date of the marriage determine this period. It can be divided using a Retirement Benefits Court Order, or RBCO. The spouse may elect to have their share of the federal employee’s TSP issued to them via direct transfer or placed in another retirement account or a distribution.
The transfer of these funds will take place after the divorce has been finalized, but the spouse is not required to wait until the employee retires to obtain their share of the TSP.
Request A Consultation With A Reputable Legal Team
Divorce can be a stressful time, and ensuring that assets such as federal benefits are divided in a fair and equitable manner is a major concern for both parties. The experienced divorce attorneys at SIEGELLAW can help spouses navigate this tedious aspect of divorce and ensure that the spouse’s interests are protected.
With more than three decades providing litigation services in Maryland divorce and family law, SIEGELLAW is able to help with high-asset divorces, mediation and division of property. For more information or to schedule a consultation, contact the legal team at SIEGELLAW today.