Retirement accounts are one of the largest assets in a divorce and many divorcees in this situation worry about losing their retirement savings. Federal employees often build up their pension over their working years to create a sizable nest egg.
Determining how or if a federal pension should be divided in a divorce can be tricky as the federal laws that govern these benefits often conflict with state laws. Learn more about how federal benefits like pensions are handled in a divorce and how best to protect these assets.
An Overview Of Federal Pensions
Federal pensions refer to the mechanism by which federal employees receive retirement benefits. There are two main types of pension systems available to federal employees, including the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS).
Prior to 1987, most civil federal employees of the U.S. government were covered by CSRS, a retirement system established in 1920. Employees covered by the CSRS did not participate in Social Security. The FERS became effective in 1987 and consists of three main components: annuity plan, Thrift Savings Plan and mandatory participation in Social Security.
Do Private-Sector Rules Apply To Federal Employees?
Court orders in a divorce that affect pensions in the private sector are generally governed by IRS regulations and the Employee Retirement Income Security Act (ERISA). Both the FERS and CSRS are government plans that follow federal regulations and are exempt from ERISA. Federal employee retirement benefits rules and regulations can be found in Title 5 of the United States Code, as well as in Title 5, part 838 of the Code of Federal Regulations.
What Federal Pensions Can Be Impacted By A Court Order In A Divorce?
Court orders related to a divorce or separation can impact a federal pension in several ways. A court order can:
- Divide a CSRS or FERS annuity
- Divide a refund of CSRS or FERS employee retirement contributions
- Allow a former spouse to maintain coverage under the Federal Employees Health Benefits (FEHB) program
- Require an employee to name a former spouse or children as beneficiaries under Federal Employees’ Group Life Insurance (FEGLI)
- Require an employee to assign their FEGLI coverage to a former spouse or child
- Provide a survivor annuity payable upon an employee or retiree’s death
- Require an employee to cover their children under FEHB
What Federal Pensions Cannot Be Impacted By A Court Order In A Divorce?
There are certain times when a court order cannot impact CSRS and FERS benefits in a divorce. A court order cannot:
- Make an employee’s former spouse eligible for Federal Employees Dental and Vision Insurance Program (FEDVIP) benefits
- Make an employee’s former spouse a qualified relative who is eligible to enroll in the Federal Long Term Care Insurance Program
- Require a retirement system or agency to enroll an employee in a FEDVIP plan to cover his or her children
Are Thrift Savings Plans Considered In A Divorce?
A Thrift Savings Plan (TSP) is a popular type of retirement savings and investment plan established by Congress. This defined contribution plan was created for federal employees and members of the uniformed services. In a divorce, TSP accounts are usually considered marital property. The exception is accounts or funds that were contributed prior to the marriage. This money is usually considered separate property.
How Are Federal Pensions Divided In A Divorce?
Court orders for dividing CSRS and FERS benefits must include a method of computing the employee’s interest. This should be a concise formula that can be used by the Office of Personnel Management (OPM) to determine the former spouse’s share. The amount is generally expressed as a fixed amount or as a fraction or percentage of the employee’s annuity.
The most common method of division during a divorce for a court order acceptable for processing (COAP) uses “marital fraction.” With this formula, the former spouse receives a share of the employee’s annuity or a refund of employee contributions.
If a court order states the share of the employee annuity as a percentage, fraction or formula, OPM must determine which type of annuity to apply to the calculation: gross annuity, net annuity or self-only annuity.
Speak With A Divorce Attorney At SIEGELLAW
When pensions and other federal benefits are involved in a divorce, the proceedings can become much more complicated. Working with an experienced law attorney with experience dealing with federal retirement accounts is the best way to ensure that funds are divided fairly and in accordance with court orders.
For more than 30 years, SIEGELLAW has provided representation and litigation services to clients across Maryland. From high asset divorces to the division of property, the dedicated team of attorneys at SIEGELLAW have worked hard to protect the best interests of all clients. Contact the qualified Maryland family law attorneys today to learn more or to schedule a consultation with a divorce attorney.