Divorce is an unfortunate reality for many people, and it can affect several important aspects of a person’s life, from where they live and how much time they spend with their children, to their health insurance coverage and retirement benefits.
Although some people going through a divorce may think they know what to expect in terms of asset division, based on the experiences of divorced friends and family members, each case is different. For federal employees, it can be particularly complicated as the laws that stipulate how benefits are distributed differ from those in the private sector and can sometimes conflict with state law.
The Division Of Federal Benefits Is Negotiable
Federal employees should keep in mind that many aspects of how their federal benefits are affected by divorce are negotiable. Everything from the percentage of their pension and Thrift Savings Plan that can be awarded to their former spouse, to their healthcare coverage and survivor benefits, can be settled with the assistance of a divorce attorney.
FERS And CERS Pensions Are Not Governed By ERISA
In divorces involving employees in the private sector, the Employee Retirement Income Security Act (ERISA) establishes rights related to retirement for former spouses after a divorce, but this does not apply to federal employees.
Therefore, federal employees should not expect their retirement to be divided in the same manner as acquaintances in the private sector. Working with divorce attorneys who are experienced in the division of federal benefits can help ensure federal employees’ best interests are protected.
Although the rights that former spouses of current and former federal employees have to their retirement benefits, as set out by chapters 83 and 84 of the United States Code Title 5, are similar in some ways to those of ERISA, there are some important differences to keep in mind.
For example, ERISA allows courts to require a plan to start paying a former spouse benefits when the participant has reached the plan’s earliest retirement age, whether they have actually retired or not.
However, even when a decree of divorce from a state court has awarded a share of a federal retirement annuity to a former spouse, Title 5 does not allow any part of a FERS or CSRS annuity to be paid out to a former spouse until the employee has officially separated from their federal service, has applied for a FERS or CSRS annuity, and is eligible to receive one. In other words, these retirement benefits cannot be affected by court orders until they are actually payable.
Another significant difference between Title 5 and ERISA is the way in which beneficiaries are designated in defined contribution plans. Under ERISA, married participants in defined contribution plans are required to obtain written consent from their spouse before naming someone else as the beneficiary of the plan, in the event of their death.
However, federal regulations permit Thrift Savings Plan holders to name anyone they choose as the beneficiary of the plan should they pass away without informing or obtaining consent from their spouse or anyone else.
The Division Of FERS, CSRS And TSPs
The amount of an employee’s federal retirement benefits that is awarded to a former spouse is based partially on how long the federal employee worked. A fraction is used to establish the marital share of the pension, with spouses potentially receiving as much as half of the marital share.
A court order related to a divorce or separation may divide a refund that a federal employee receives of their retirement contributions made prior to retirement, divide an annuity, garnish an annuity to cover child support or alimony, allow a former spouse to continue their health insurance coverage or require them to assign life insurance.
As a type of retirement account, a Thrift Savings Plan is considered marital property and the court considers it to be jointly owned property from the marriage date through the separation date.
A Retirement Benefits Court Order (RCBO) can be used to divide a TSP; this may be a decree of divorce, annulment or legal separation. A TSP can also be divided using a property settlement agreement in cases where the spouses have worked out an arrangement in which property or other assets are exchanged allowing the federal employee to keep their full TSP.
These court orders freeze the TSP account; this means that loans and withdrawals from the account may not be made until the divorce is final. Outstanding loan balances will automatically be factored into the account balance before calculating the former spouse’s award unless it has been specifically excluded from the court order. Payments can be made whether or not the federal employee has retired.
Request A Consultation With The SIEGELLAW Divorce Attorneys
Going through a divorce can be challenging, particularly when federal retirement plans are at stake. Working with divorce attorneys experienced in these cases can help protect federal employees. To learn more about how federal retirement is handled in divorce or to talk to a family law attorney, contact the experienced professionals at SIEGELLAW to request a consultation.