There are many factors that spouses must consider when going through a divorce. Beyond questions of child custody, a major concern for many couples is the division of their assets, a matter that can be particularly complicated when one spouse receives federal employee benefits.
Here is a guide for federal employees who are preparing for a divorce:
FERS And CSRS
While the Employee Retirement Income Security Act (ERISA) determines how private sector pensions are divided in divorce, federal employees need to understand that it does not apply to the way their retirement income is handled.
The division of benefits that federal employees receive under the Federal Employees Retirement System (FERS) and Civil Service Retirement System (CSRS) is carried out using a fraction that determines the marital share of the pension.
This fraction represents the number of months in the couple’s marriage that the spouse worked as a federal employee and who was earning service toward their pension versus the total number of months of their employment with the federal government. A spouse may receive as much as 50% of the marital share of the pension.
In cases where an employee is still working for the federal government when the divorce takes place, it will not be possible to calculate their marital share as their retirement date will be unknown at that point. In these cases, a Court Order Acceptable for Processing (COAP) is kept on file by the Office of Personnel Management until the employee’s retirement. At that time, the employee’s total months of service can be used to calculate the marital share, and the payments to the federal employee’s former spouse will begin.
Divorce-related court orders can divide FERS annuities and employee retirement contribution refunds, in addition to establishing the payment of a survivor annuity upon the employee’s passing.
Thrift Savings Plan (TSP)
A Retirement Benefits Court Order (RCBO) is used to divide the money in a federal employee’s Thrift Savings Plan. Any amount that the federal employee contributed to their TSP during the marriage is considered by the court to be marital property and is therefore subject to division. The money may be issued to the spouse through a direct transfer or placed in a different type of retirement account or distribution.
Unlike FERS, the spouse will not have to wait until the federal employee has retired to obtain their share of a TSP. Instead, the transfer takes place once the divorce has been finalized.
As a federal employee, it is important to keep in mind that you will not be permitted to take out a loan against your TSP while still married without first receiving written consent from your spouse.
Federal Employees Health Benefits (FEHB)
For employees who are enrolled in the self plus one or self and family FEHB options, their spouses will continue to be eligible for coverage under their enrollment while they are in the process of getting divorced, legally separated or obtaining an annulment. On midnight of the day that the divorce is finalized, the former spouse loses this coverage, and a court order cannot be used to require the federal employee to continue furnishing such coverage.
If the federal employee’s former spouse chooses to continue FEHB coverage, they may do so but will be required to pay 100% of the cost on their own. They may also choose to convert it to an individual policy with the employee’s FEHB carrier.
Federal employees can choose to continue covering other family members under their FEHB plan or change to the self only option.
Employees have from 31 days prior to their divorce until 60 days afterward to change their health insurance enrollment, with the change going into effect on the beginning date of the pay period after their employee office receives their election.
Federal Employees Group Life Insurance (FEGLI)
Life insurance is another important consideration in divorce, particularly when it comes to beneficiaries. After a divorce, federal employees who take part in the Federal Employees Group Life Insurance program may want to change the name of their policy’s beneficiary as this will not be automatically changed.
Otherwise, if the employee passes away, their former spouse could receive the proceeds of the policy if they had been originally designated as the recipient. Court orders may require federal employees or retirees to assign this coverage to their former spouse or children or name them as beneficiaries in some cases.
Discuss Your Case With An Attorney Experienced In Federal Employee Divorces
Due to the highly complicated nature of divorces involving federal benefits, federal employees should consider having a divorce attorney with experience in these cases on their side. The Maryland family law attorneys at SIEGELLAW can help federal employees navigate the divorce process and ensure their rights are protected. Contact us today to request a consultation.