Federal DBP
Federal Employee Defined Benefit Plan Explained
Division of federal employee defined benefit plan benefits is never perfect, but QDROCounsel domestic relations orders attempt to provide for as fair a division as possible. Since federal law preempts state law, certain federal restrictions impact both parties. The order generated is the most common equitable award to a former spouse applicable in most cases. If you need to deviate from QC’s domestic relations order or just want to weigh other options in dividing the pension, contact QDROCounsel Support to be referred to a QDRO Expert from our referral network.
Overview
Federal employees are always in a defined benefit plan, either the Federal Employees’ Retirement System (FERS) or the Civil Service Retirement System (CSRS). FERS was established on January 1, 1987 and succeeded CSRS after that date. If an employee started after January 1, 1987, the employee is a FERS covered employee. If the employee started before that date, the employee is likely a CSRS member although some did convert to FERS. It does not matter which system (FERS or CSRS) is referenced in your divorce documents or subsequent domestic relations order. 5 CFR § 838.611.
A defined benefit plan is a retirement plan or pension plan that provides a specific pre-determinable amount of benefits to a participant at the participant’s projected date of retirement. In other words, a form of pension that guarantees the participant a stated benefit at their retirement date. The benefit amount is based on a formula that incorporates the participant’s years of service and final average compensation. The form of benefit paid is a monthly payment over the participant’s lifetime. The FERS and CSRS pensions are traditional defined benefit plans (monthly payments over time). The award to the alternate payee (also referred to as former spouse) can only be as a “shared interest” domestic relations order which generally means the former spouse will receive a share of the member’s benefit upon retirement.
By virtue of employment with the federal government, the employee may elect to participate in the Thrift Savings Plan (TSP), which is a defined contribution plan. Almost all federal employees contribute to the TSP which is similar to a 401k. See Explanations – Private & Public DCP
If you not certain whether a participant is a TSP participant, the parties may contact TSP directly to inquire once TSP is served with a copy of the Judgment of
Dissolution. The contact information is as follows:
Federal Retirement Thrift Investment Board
Thrift Savings Plan Service Office National Finance Center
PO Box 61500
New Orleans, LA 70161-1500
Tel: 504-255-5777
Fax: 504-255-5001
The FERS/CSRS domestic relations order is called a Court Order Acceptable for Processing (often referred to as a COAP) which is administered by the Office of Personnel Management (OPM).
The biggest issue with OPM is timely implementation of the COAP. OPM will not review any order for compliance prior to entry of such order by the court. While the COAP drafted has been accepted by OPM in the past, any review by OPM may result in required modifications. Once served with a COAP, it may take 6 months or more before OPM sends an acceptance letter. If you have not received any notice from the OPM after 4 months from date of service, you should follow up directly with the OPM by telephone. If you do not get any response, you should contact your U.S. Senator’s or U.S. Representative’s office for further help which often provides the best results.
Note that for a retired employee, the official rule from OPM describing the commencing date of payments is as a follow: The COAP is “effective against an employee annuity accruing beginning the first day of the second month after OPM receives the Order.” 5 CFR 838.231.
For simplicity, QC references the following terms which are generically used by the public (1) “QDRO,” “(Q)DRO” or “DRO” to refer to any domestic relations order dividing retirement benefits, private and public. (2) “Participant” to refer to any participant, member or employee in a retirement plan. (3) “Alternate Payee” to refer to any alternate payee, payee, former spouse, or nonmember spouse to receive a portion of a participant’s retirement benefits. However, the actual (Q)DRO generated will refer to the appropriate terms required by that plan.
Notwithstanding the foregoing, for federal employee benefits, QC often refers to the “Participant” as the “Employee” and the “Alternate Payee” as the “Former Spouse.” The DRO is also referred to as the “Court Order Acceptable for Processing.”
Also, any reference to the date of divorce in QC also applies to the date of legal separation, if applicable
Generally, no discovery is needed other than to know whether the employee has retired and started commencing benefits. The COAP can be drafted based federal law and your state’s law.
If the employee is retired, you may want to obtain the employee’s retirement application to determine whether there is a survivor benefit available which is discussed below. The employee will have to provide that application to you. Even with a court ordered subpoena (signed by a judge), it is almost impossible to receive information from OPM or any federal agency.
How should former spouse’s share be allocated?
Language:
The following language or similar language is in almost all COAPs awarding the former spouse’s marital interest based on the Marital Fraction (Time Rule) as follows:
Marital Fraction (Time Rule) Award
The FERS and CSRS pensions are traditional defined benefit plans (monthly payments over time). The award to the alternate payee (also referred to as “former spouse”) from the participant (also referred to as “employee”) can only be as a “shared interest” domestic relations order payable once the employee commences benefits. The form of benefit paid is a monthly payment over the participant’s lifetime. Usually FERS/CSRS is divided using to the Marital Fraction (also interchangeably referred to as a “coverture fraction,” “proportionate share,” “prorata share,” or “time-rule formula” depending on the state).
The Marital Fraction is defined generally as follows:
A marital fraction (not greater than 1.0) multiplied by 50% and then multiplied by the Employee’s Self Only unreduced monthly annuity. The marital fraction is defined as follows: the numerator of which is the number of months of service performed under the Plan from the Date of Marriage to the Date of Division, and the denominator of which is the total number of months of the Employee’s service performed under the Plan.
The “Date of Division” is the applicable marital division date based on your state’s law, court order or the parties’ agreement. The “Self Only” annuity is the gross monthly benefit before any reductions.
The presumption is that the Former Spouse is awarded 50% of the marital fraction. However, in some cases it may be that the parties have offset assets and the percentage of the marital fraction will be some other percentage. If you believe the division should NOT be by the marital fraction, please contact QDROCounsel Support for further assistance.
Apportionment on the basis of the marital fraction is appropriate for a federal employee. The longer the member accrues benefits before or after marriage, the smaller the fraction defining the total marital interest of which the former spouse is entitled, but the larger the value of the pension. In almost all states, a former spouse who owns a marital property interest in a employee’s federal benefits, owns a marital property interest in those benefits as subsequently enhanced.
A few states follow the coverture fraction approach but freeze the value of the benefit payment to the value of the pension at date of divorce. If the employee is already retired at divorce, freezing the value of the benefit at divorce has no impact.
Language:
The following language or similar language is in most COAPs awarding the Former Spouse’s marital interest in three possible ways: (1) Marital Fraction (Time Rule), (2) PERCENTAGE, or (3) SET AMOUNT as follows:
MARITAL FRACTION (TIME RULE):
PERCENTAGE
Former Spouse is entitled to ??% of Employee’s self-only monthly annuity (including any annuity supplement) under the Plan.
SET AMOUNT
Former Spouse is entitled to $?? per month from Employee’s gross monthly annuity under the Plan.
Explanation:
The FERS and CSRS pensions are traditional defined benefit plans (monthly payments over time). The award to the alternate payee (also referred to as “former spouse”) from the participant (also referred to as “employee”) can only be as a “shared interest” domestic relations order payable once the employee commences benefits. The form of benefit paid is a monthly payment over the participant’s lifetime.
Usually FERS/CSRS is divided using to the Marital Fraction (also interchangeably referred to as a “coverture fraction,” “proportionate share,” “prorata share,” or “time-rule formula” depending on the state). The Marital Fraction is defined generally as follows:
A marital fraction (not greater than 1.0) multiplied by 50% and then multiplied by the Employee’s Self Only unreduced monthly annuity. The marital fraction is defined as follows: the numerator of which is the number of months of service performed under the Plan from the Date of Marriage to the Date of Division, and the denominator of which is the total number of months of the Employee’s service performed under the Plan. The “Date of Division” is the applicable marital division date based on your state’s law, court order or the parties’ agreement. The “Self Only” annuity is the gross monthly benefit before any reductions.
Apportionment on the basis of the marital fraction is appropriate for a federal employee. The longer the member accrues benefits before or after marriage, the smaller the fraction defining the total marital interest of which the former spouse is entitled, but the larger the value of the pension. In almost all states, a former spouse who owns a marital property interest in a employee’s federal benefits, owns a marital property interest in those benefits as subsequently enhanced.
A few states follow the coverture fraction approach but freeze the value of the benefit payment to the value of the pension at date of divorce. If the employee is already retired at divorce, freezing the value of the benefit at divorce has no impact.
If the DRO does not award 50% of the Marital Fraction (e.g. either the percentage of the Marital Fraction is not 50% or the award is a specific dollar amount or percentage of Employee’s total benefit), that is because the parties have agreed or the Court has ordered that award. A percentage or set amount award is likely used in the following situations: (1) 100% of the benefit accrued during marriage so the award is 50% to the Former Spouse; (2) The parties have offset the pension against another asset and adjusted the percentage or amount accordingly.
Former Spouse Survivor Annuity
If the employee predeceases the former spouse, in almost all states the former spouse’s marital or community property interest includes any survivor benefits payable by FERS/CSRS. The presumption is that the award to the Former Spouse should include a share of any survivor benefit should the Employee predecease the Former Spouse, if available.
At retirement, the Employee selected from various options to determine Employee’s form of benefit. Generally, CSRS/FERS benefits are paid either (1) based on either the life of Member or (2) the life of Employee and a spouse with a spouse survivor annuity. The Employee’s benefit will include a spouse survivor annuity unless the spouse waives it. The survivor annuity for a former spouse is called the “Former Spouse Survivor Annuity.” CSRS and FERS offer different percentages of the Former Spouse Survivor Annuity. The maximum survivor annuity payable is 55% of the employee’s monthly benefit for CSRS and 50% of the employee’s monthly benefit for FERS.
Civil Service Retirement System
The maximum “cost” of the survivor benefit is generally 2.5% of the first $3600 of the retiree’s annual annuity and 10% of the remainder. The maximum survivor annuity payable is 55% of the employee’s monthly benefit for CSRS.
Federal Employees Retirement System
The maximum “cost” of the survivor benefit is generally 10% of the retiree’s annual annuity. The maximum survivor annuity payable is 50% of the employee’s monthly benefit for FERS.
If this is a legal separation, the Former Spouse will continue to qualify as the Employee’s “legal spouse” for purposes of any spouse survivor annuity so long as the parties remain legally separated. The COAP will state this fact and also provide the survivor benefit allocation elected by the user in the event the parties’ legal status changes to divorce.
If the employee is NOT retired and receiving retirement benefits, no discovery is needed.
If the employee is retired, it is always a good idea to know whether the employee elected the Spousal Annuity at retirement if possible. However, if in doubt, always include the survivor annuity in the COAP just in case it may be payable. To know with certainty, review the employee’s retirement application which will indicate whether the employee elected the Spousal Annuity (Joint & Survivor Annuity) at retirement. The employee will have to provide that application to you. Even with a court ordered subpoena (signed by a judge), it is almost impossible to receive information from OPM or any federal agency.
To help determine without the retirement application whether there is a survivor annuity, note the following: The form of benefit is either (1) a Single Life Annuity with benefit payments based on the Employee’s life, or (2) a Joint and Survivor Annuity with benefit payments based on the lives of the Employee and a Spouse. The maximum survivor annuity payable is 55% of the employee’s monthly benefit for CSRS and 50% of the employee’s monthly benefit for FERS. If employee retired before divorce the form of benefit must be a Joint & Survivor Annuity with the maximum payable unless waived by the then spouse. To award the Former Spouse Survivor Annuity to a Former Spouse, the Employee must have retired with a Spousal Annuity and Former Spouse was the spouse at the time of retirement.
If the employee retired after divorce without a court order filed, served and accepted by OPM as a COAP awarding a survivor benefit, generally no survivor benefits are payable from OPM. The employee either retired with a Single Life Annuity or if remarried a Joint and Survivor Annuity with a subsequent spouse.
Unless a former spouse is married more than 30 years, the former spouse will not be eligible for survivor benefits if the former spouse remarries before reaching age 55. (5 U.S.C. §8445(c); 5 CFR §§843.304-843-305).
Once the divorce judgment is filed, it may NOT be possible to award the Former Spouse Survivor Annuity in the event of employee’s death or retirement if the Former Spouse Survivor Annuity is not specifically awarded in the first court order dividing the marital property (usually the divorce judgment) pursuant to the “First Order Rule.” 5 CFR 838.806. Failure to include a specific award for survivor benefits in the divorce judgment may result in loss of those survivor benefits to the former spouse.
Moreover, in most cases, the former spouse’s right to receive the former spouse’s marital/community property interest in FERS/CSRS as a survivor benefit is NOT protected unless an acceptable COAP is filed and served on FERS/CSRS awarding the Former Spouse Survivor Annuity before the earlier of Employee’s death or retirement.
The award of the Former Spouse Survivor Annuity in the COAP cannot exceed the amount elected by the employee at retirement.
If the Former Spouse Survivor Annity is awarded to the Former Spouse, there are 2 issues to consider namely (1) what amount payable should be awarded to the Former Spouse and (2) should the Former Spouse Survivor Annuity cost be divided equally between the parties. Most parties agree that the following allocation reflects as closely as possible a fair division of the Former Spouse Survivor Annuity and QC’s COAPs divide the Former Spouse Survivor Annuity in this manner.
- BEFORE RETIREMENT: If the Employee dies unmarried (not married to a qualified spouse), the Former Spouse receives 100% of the maximum survivor annuity payable by the Plan. This allocation is made because if the Employee dies unmarried preretirement, the Employee’s survivor benefits cannot be paid to anyone else. Accordingly, the benefit is allocated to the former spouse rather than those funds reverting back to FERS/CSRS to maximize what is payable. The effect of this award is that the Former Spouse will receive 50% of what the Employee would have received if retired under FERS and 55% of what the employee would have receive if retired under CSRS.
- BEFORE RETIREMENT: If the Employee dies married to a qualified spouse (at least 1 year), the Former Spouse receives a prorata share of the maximum Former Spouse Survivor Annuity as defined in 5 CFR § 838.922 which is the “prorata” definition that OPM applies to the survivor annuity under United States Code, Title 5, Section 8341(h)(1) [CSRS] and Section 8445 [FERS]. The prorata share under 5 CFR § 838.922 is equal to the entire marital fraction share. Any remaining separate property interest in the Former Spouse Survivor Annuity may be allocated to Employee’s subsequent spouse, if applicable. The effect of this award is that the Former Spouse will receive a survivor benefit equal to the same amount the Former Spouse would have received had the Employee lived.
- AFTER RETIREMENT: If the Employee dies before the Former Spouse, the Former Spouse receives a prorata share of the maximum Former Spouse Survivor Annuity as defined in 5 CFR § 838.922 which is the “prorata” definition that OPM applies to the survivor annuity under United States Code, Title 5, Section 8341(h)(1) [CSRS] and Section 8445 [FERS]. The prorata share under 5 CFR § 838.922 is equal to the entire marital fraction share. Any remaining separate property interest in the Former Spouse Survivor Annuity may be allocated to Employee’s subsequent spouse, if applicable. The effect of this award is that the Former Spouse will receive a survivor benefit equal to the same amount the Former Spouse would have received had the Employee lived.
- 4. If the Former Spouse dies before the Employee, the Former Spouse’s share shall revert to the Employee. The effect of this award is the Employee will receive Employee’s entire monthly benefit if the Former Spouse predeceases the Employee.
- The cost of the Former Spouse Survivor Annuity will be divided equally between the parties. The effect of this allocation is that the Former spouse’s share shall be reduced by 50% of the cost of the Former Spouse Survivor Annuity. The Employee’s share shall be reduced by 50% of the cost of the Former Spouse Survivor Annuity.
Important Issues and Understandings:
(1) Unless a former spouse is married more than 30 years, the former spouse will not be eligible for survivor benefits if the former spouse remarries before reaching age 55. (5 U.S.C. §8445(c); 5 CFR §§843.304-843-305).
(2) Once the divorce judgment of Dissolution is filed, it may NOT be possible to award the Former Spouse Survivor Annuity in the event of employee’s death or retirement if the Former Spouse Survivor Annuity is not specifically awarded in the first court order dividing the marital property (usually the divorce judgment) pursuant to the “First Order Rule.” 5 CFR 838.806. Failure to include a specific award for survivor benefits in the divorce judgment may result in loss of those survivor benefits to the former spouse.
(3) In most cases, a former spouse’s right to receive the former spouse’s marital or community property interest in FERS/CSRS as a survivor benefit is NOT protected unless an acceptable COAP is filed and served on FERS/CSRS awarding the Former Spouse Survivor Annuity before the earlier of employee’s death or retirement.
(4) The parties agree that Former Spouse’s share shall at least remain the same in the event Employee dies before Former Spouse. To make that happen, the Former Spouse must be awarded 100% of the Marital Fraction of the Former Spouse Survivor Annuity since the maximum amount payable under the FSSA is 55% of the Employee’s monthly benefit for CSRS and 50% of the Employee’s monthly benefit for FERS.
(5) If the Former Spouse was awarded 50% of the Marital Fraction of the Former Spouse Survivor Annuity, Former Spouse’s monthly benefit after the Employee’s death would be reduced by 50%. The presumption is that it is more equitable NOT to reduce Former Spouse’s monthly benefit by 50% since the Former Spouse likely needs those funds to meet monthly expenses and since that interest accrued during the marriage. However, in doing so, the Employee loses Employee’s ability to potentially award the Employee’s marital interest in the Former Spouse Survivor Annuity to a possible subsequent spouse.
(6) In consideration for the foregoing, if the Former Spouse dies before the Employee, the Former Spouse’s share reverts back to the Employee instead of the parties’ joint children or the Former Spouse’s estate. However, in doing so, the Former Spouse loses the Former Spouse’s ability to potentially leave the Former Spouse’s monthly benefit to beneficiaries.
(7) The Order is drafted to split the cost of the Former Spouse Survivor Annuity between the parties since both parties have a potential benefit in the event of the death of the other. The effect is that both parties pay for the possibility of receiving more than their respective marital/community share. The allocation assumes the parties prefer to receive more funds while alive than secure the ability to possibly leave funds to a beneficiary. The allocations outlined hereinabove result actuarially in the most equitable division in most cases.
(8) There is no perfect way to allocate federal employee’s benefits. In most cases, the global allocation of survivor benefits and costs outlined herein is fair enough to avoid the retention of actuaries and pension experts. The allocations above are based on the most common fact pattern and the most common agreement of divorced parties in most cases. QDROCounsel cannot make a determination as to what is the most fair allocation of this benefit based on your parties’ circumstances.
If the parties do not agree to the above assumptions, there are other variations that those presented above. However, the case facts and possible solutions would need to be examined by a pension division specialist. Contact QDROCounsel Support to be referred to a QDRO Expert from our referral network.
The following language is in the COAP when the Former Spouse Survivor Annuity is awarded and the Employee is NOT retired:
Death of Employee – Former Spouse Survivor Annuity.
Employee’s Death Prior to Retirement.
(a) In the event of Employee’s death prior to retirement and Employee is NOT married to a spouse that qualifies for a Spouse Survivor Annuity, then the Former Spouse is awarded the maximum Former Spouse Survivor Annuity under United States Code, Title 5, Section 8341(h)(1) [CSRS] and Section 8445 [FERS].
(b) In the event of Employee’s death prior to retirement and Employee IS married to a spouse that qualifies for a Spouse Survivor Annuity, then the Former Spouse is awarded a prorata share of the maximum Former Spouse Survivor Annuity as defined in 5 CFR § 838.922 which is the “prorata” definition that OPM applies to the survivor annuity under United States Code, Title 5, Section 8341(h)(1) [CSRS] and Section 8445 [FERS]. The prorata share is equal to the entire marital fraction as defined in 5 CFR § 838.922.
Employee’s Death After Retirement. From and after Employee’s retirement, the Former Spouse has the right to elect and is awarded a prorata share of the maximum Former Spouse Survivor Annuity as defined in 5 CFR § 838.922 which is the “prorata” definition that OPM applies to the survivor annuity under United States Code, Title 5, Section 8341(h)(1) [CSRS] and Section 8445 [FERS]. The prorata share is equal to the entire marital fraction as defined in CFR § 838.922.
For the purposes of the prorata share under 5 CFR § 838.922 herein, the marriage began on ?? and ended, for purposes of this Order, on ??.
This Order is the Employee’s election to provide the Former Spouse Survivor Annuity awarded herein.
The Former Spouse can irrevocably elect to waive the Former Spouse Survivor Annuity awarded herein at any time in writing and in the form prescribed by the OPM. Any waiver of the Former Spouse Survivor Annuity shall not affect Former Spouse entitlement to receive the Former Spouse’s share outlined hereinabove in Paragraph III.B(1).
50% of the cost necessary to provide the Former Spouse Survivor Annuity herein shall be allocated to Former Spouse.
The parties are hereby informed that the Former Spouse Survivor Annuity is not available to Former Spouse if Former Spouse remarries before becoming age 55, unless married to Employee more than 30 years. (5 U.S.C. §8445(c); 5 CFR §§843.304-843-305).
Should the Former Spouse no longer qualify for the Former Spouse Survivor Annuity or should a waiver of the Former Spouse Survivor Annuity occur, the Court reserves jurisdiction to revise this Order such that should Former Spouse predecease Employee, Former Spouse’s share of Employee’s Plan benefits shall be paid to the surviving children of the marriage or Former Spouse’s estate.
If the Former Spouse Survivor Annity is awarded to the Former Spouse, there are 2 issues to consider namely (1) what amount payable should be awarded to the Former Spouse and (2) should the Former Spouse Survivor Annuity cost be divided equally between the parties. Most parties agree that the following allocation reflects as closely as possible a fair division of the Former Spouse Survivor Annuity and QC’s COAPs divide the Former Spouse Survivor Annuity in this manner.
(1) If the Employee dies before the Former Spouse, the Former Spouse is awarded the Former Spouse Survivor Annuity in the same amount to which Former Spouse would have been entitled if the divorce had not occurred. The parties make this agreement regardless of the percentage of the Survivor Annuity elected at retirement is 100% of the Survivor Annuity (50% of the FERS monthly annuity or 55% of the CSRS monthly annuity) or some lesser percentage e.g. 20% of the Survivor Annuity. Note that the then spouse not former spouse would have to agree to any percentage less than 100% of the Survivor Annuity on the retirement application. The effect is that whatever was elected by the Employee at retirement, the parties agree that the Former Spouse will receive the same amount to which Former Spouse would have been entitled if the divorce had not occurred.
(2) If the Former Spouse dies before the Employee, the Former Spouse’s share shall revert to the Employee. The effect of this award is the Employee will receive the Employee’s monthly benefit.
(3) The cost of the Former Spouse Survivor Annuity will be divided equally between the parties. The effect of this allocation is that the Former Spouse’s share shall be reduced by 50% of the cost of the Former Spouse Survivor Annuity. The Employee’s share shall be reduced by 50% of the cost of the Former Spouse Survivor Annuity.
Important Issues and Understandings:
(1) Unless a former spouse is married more than 30 years, the former spouse will not be eligible for survivor benefits if the former spouse remarries before reaching age 55. (5 U.S.C. §8445(c); 5 CFR §§843.304-843-305).
(2) Once the divorce judgment of Dissolution is filed, it may NOT be possible to award the Former Spouse Survivor Annuity in the event of employee’s death or retirement if the Former Spouse Survivor Annuity is not specifically awarded in the first court order dividing the marital property (usually the divorce judgment) pursuant to the “First Order Rule.” 5 CFR 838.806. Failure to include a specific award for survivor benefits in the divorce judgment may result in loss of those survivor benefits to the former spouse.
(3) In most cases, a former spouse’s right to receive the former spouse’s marital or community property interest in FERS/CSRS as a survivor benefit is NOT protected unless an acceptable COAP is filed and served on FERS/CSRS awarding the Former Spouse Survivor Annuity before the earlier of employee’s death or retirement.
(4) The award of the Former Spouse Survivor Annuity in the COAP cannot exceed the amount elected by the employee at retirement.
(5) The Order is drafted to split the cost of the Former Spouse Survivor Annuity between the parties based on the presumption that both parties have a potential benefit in the event of the death of the other. The effect is that both parties pay for the possibility of receiving more than their respective marital/community share. The allocation also presumes the parties prefer to receive more funds while alive than secure the ability to possibly leave funds to a beneficiary.
(6) The impact as to whether this award is as equitable as possible depends on the length of time that employee worked as a federal employee while married and the percentage of the Spousal Annuity elected upon retirement for example as follows:
- If the parties were married for at most of the time the employee worked as a federal employee and the election was the maximum Survivor Annuity, this award in the COAP would be most equitable. Both parties would incur the cost of the possibility of a potential increased benefit in the event of the death of the other. This situation is the most common.
- If the parties were married for at most of the time the employee worked as a federal employee and the election was 20% of the Survivor Annuity, this award may not be equitable. Both parties would incur the cost of the possibility of a potential increased benefit in the event of the death of the other; however, the employee receives a windfall with the reversion of former spouse’s interest to employee since the amount of the Former Spouse Survivor Annuity is smaller than that maximum possible Survivor Annuity. This may be agreeable to the parties or the parties may want to adjust the COAP so that either employees pay for 100% of the cost of the Survivor Annuity or former spouse’s interest reverts to former spouse’s beneficiaries/estate.
- If the parties were married for a short period of time while employee worked as a federal employee and the election was 20% of the Survivor Annuity, this award may be equitable. Both parties would incur the cost of the possibility of a potential increased benefit in the event of the death of the other.
- If the parties were married for a short period of time while employee worked as a federal employee and the election was 100% of the Survivor Annuity, both parties would incur the cost of the possibility of a potential increased benefit in the event of the death of the other; however, the former spouse receives a windfall with the possible larger increase in the monthly benefit to the maximum Survivor Annuity payable than the possible larger increase to the employee if the former spouse dies first. Moreover, if the parties are splitting the cost of the survivor annuity and the monthly annuity payable to the former spouse while the employee is alive is quite small, the former spouse may receive little or no monthly benefit while the employee is alive depending on the length of marriage during the employment. This may be agreeable to the parties or the parties may want to adjust the COAP so that either former spouse pay for 100% of the cost of the Survivor Annuity (if possible) or former spouse’s marital interest in the former spouse survivor annuity is reduced to just the marital interest.
(7) There are 3 California cases below which involve the allocation of survivor benefits and costs as follows: 1. Sonne v. Sonne (2010) 185 Cal.App.4th 1564 (appellate decision – “Sonne II”); 2. In re Marriage of Cooper (2008) 160 Cal.App.4th 574 (“Cooper“) and 3. In re Marriage of Smith (2007) 148 Cal.App.4th 1115 (“Smith“). Analysis and application of these cases involve the retention of an actuary and pension expert.
(8) There is no perfect way to allocate a retired employee’s benefits. In most cases, the global allocation of survivor benefits and costs outlined herein is fair enough to avoid the retention of actuaries and pension experts. The allocations above are based on the most common fact pattern and the most common agreement of divorced parties in most cases. However, depending on the option elected by the Employee at retirement and the length of marriage, the award may not necessarily be consistent with California law. QDROCounsel cannot make a determination as to what is the most fair allocation of this benefit based on your parties’ circumstances.
If the parties do not agree to the above assumptions, there are other variations that those presented above. However, the case facts and possible solutions would need to be examined by a pension division specialist. Contact QDROCounsel Support to be referred to a QDRO Expert from our referral network.
The following language is in the COAP when the Former Spouse Survivor Annuity is awarded and the Employee is retired:
Death of Employee – Former Spouse Survivor Annuity.
Under United States Code, Title 5, Section 8341(h)(1) [CSRS] or Section 8445 [FERS], Former Spouse is awarded a Former Spouse Survivor Annuity under the Plan in the same amount to which Former Spouse would have been entitled if the divorce had not occurred.
This Order is the Employee’s election to provide the Former Spouse Survivor Annuity awarded herein, and the Employee shall promptly complete and file OPM form RI20-064A (and any other applicable form) with the OPM no later than 2 years from the date of divorce and shall provide a copy thereof to the Former Spouse.
The Former Spouse can irrevocably elect to waive the Former Spouse Survivor Annuity awarded herein at any time in writing and in the form prescribed by the OPM. Any waiver of the Former Spouse Survivor Annuity shall not affect Former Spouse entitlement to receive the Former Spouse’s share outlined hereinabove in Paragraph III.B(1).
50% of the cost necessary to provide the Former Spouse Survivor Annuity herein shall be allocated to Former Spouse.
The marriage began on ?? and ended, for purposes of this Order, on ??.
The parties are hereby informed that the Former Spouse Survivor Annuity is not available to Former Spouse if Former Spouse remarries before becoming age 55, unless married to Employee more than 30 years. (5 U.S.C. §8445(c); 5 CFR §§843.304-843-305).
Should the Former Spouse no longer qualify for the Former Spouse Survivor Annuity or should a waiver of the Former Spouse Survivor Annuity occur, the Court reserves jurisdiction to revise this Order such that should Former Spouse predecease Employee, Former Spouse’s share of Employee’s Plan benefits shall be paid to the surviving children of the marriage or Former Spouse’s estate.
Generally, the presumption is that the award to the Former Spouse should include a share of the Former Spouse Survivor Annuity should the Employee predecease the Former Spouse, if available. However, there are times when the Former Spouse Survivor Annuity is NOT awarded generally for the following reasons:
(1) The parties agree or the court orders that the Former Spouse Survivor Annuity should not be awarded.
(2) The Former Spouse remarried before age 55 and was not married to the Member for more than 30 years. Unless a former spouse is married more than 30 years, the former spouse will not be eligible for survivor benefits if the former spouse remarries before reaching age 55. (5 U.S.C. §8445(c); 5 CFR §§843.304-843-305).
(3) The divorce judgment is already filed, and it did NOT award a survivor benefit. For that reason, the party or parties find that due to the “First Order Rule,” it is likely not possible to award the Former Spouse Survivor Annuity. 5 CFR 838.806.
(4) At retirement, the Former Spouse waived an interest in the Former Spouse Survivor Annuity.
If the Former Spouse Survivor Annity is NOT awarded, most parties agree that the following allocation reflects as closely as possible a fair division of this Plan and
QC’s COAPs divide the Former Spouse Survivor Annuity in this manner:
(1) If the Employee dies before the Former Spouse, the Former Spouse’s share ceases. The Employee’s retired pay to the Former Spouse terminates upon the Employee’s death.
(2) If the Former Spouse dies before the Employee, the Former Spouse’s share is paid to either the parties’ joint children or the Former Spouse’s estate.
(3) There is no perfect way to allocate a retired employee’s benefits. The allocations above are based on the most common fact pattern and the most common agreement of divorced parties in most cases when no survivor benefit is payable. However, depending on the facts of your case, the award may not necessarily be consistent with California law. QDROCounsel cannot make a determination as to what is the most fair allocation of this benefit based on the parties’ circumstances.
If the parties do not agree to the above assumptions, there are other variations that those presented above. However, the case facts and possible solutions would need to be examined by a pension division specialist. Contact QDROCounsel Support to be referred to a QDRO Expert from our referral network.
The following language is in the COAP when no Former Spouse Survivor Annuity is awarded:
Death of Employee – Former Spouse Survivor Annuity. Former Spouse hereby waives and is NOT awarded any interest in the Former Spouse Survivor Annuity. Employee’s retired pay to Former Spouse will terminate pursuant to this Order upon Employee’s death.
OR
Death of Employee – Former Spouse Survivor Annuity. Former Spouse Survivor Annuity (“FSSA”) is not available to a Former Spouse if Former Spouse remarries before becoming age 55, unless married to Employee more than 30 years. (5 U.S.C. §8445(c); 5 CFR §§843.304-843-305). Former Spouse meets this criteria and therefore is not entitled to the FSSA. Should this law change, this court reserves jurisdiction to modify this Order with an award of the FSSA if permissible under the Plan rules.
Miscellaneous Provisions
The following language is in the Order:
If not retired:
Benefit Commencement Date. The Former Spouse shall commence receipt of benefits as soon as administratively feasible following the date this Order is approved as a Court Order Acceptable for Processing or on the date the Employee commences receipt of benefits, if later.
If retired:
Benefit Commencement Date. Payments to Former Spouse shall commence as soon as administratively practicable after the date this Order becomes effective.
Explanation: The Former Spouse will commence receiving benefits once the COAP has been approved by OPM or the date the Employee commences benefits, if later.
The following language is in the Order:
COLAs. Cost of living adjustments shall be applied to Former Spouse’s share.
Explanation: The Former Spouse will receive any cost of living adjustment that the Employee would receive.
The following language is in the Order:
Each party shall be responsible for all tax consequences arising out of their respective account distributions. Each party shall indemnify and hold the other party harmless from all tax consequences arising out of his or her respective account distributions.
Explanation: This paragraph just means that the former spouse pays taxes on whatever payment is made to the former spouse. The member does NOT pay taxes on former spouse share.
The following language is in the Order:
Health Insurance. This award shall qualify the Former Spouse for Spouse Equity FEHB immediately upon Former Spouse’s determination of eligibility for such FEHB Spouse Equity Coverage.
Explanation:
The COAP includes a paragraph regarding health insurance for a former spouse (FEHB Spouse Equity Coverage for Former Spouse) based on what currently has been found to be acceptable to ensure coverage by the Office of Personnel Management’s (“OPM”) and/or the employing office of the agency for which Employee worked when the marriage ended if the Former Spouse is otherwise eligible and timely meets the application deadlines.
There are important application deadlines for Temporary Continuation Coverage and FEHB coverage to that must be met by Former Spouse to obtain and ensure coverage. In addition, Former Spouse must meet the requirement of eligibility for said insurance.
The following website provide more information regarding obtaining health insurance:
http://www.opm.gov/insure/health/eligibility/former_spouses.asp.
Here is a link within the link above:
https://www.opm.gov/healthcare-insurance/healthcare/reference-materials/reference/former-spouses/
Even if Former Spouse meets eligibility requirements, completes and timely provides all documents in the form currently acceptable to OPM and/or the employing office of the agency for which Employee worked when the marriage ended, these government agencies mess up or change their policy of what is considered acceptable to qualify for the insurance. If there is an issue, often the Former Spouse is able to obtain assistance from Former Spouse’s Member of Congress. Or contact QDROCounsel Support to be referred to a QDRO Expert from our referral network.
WARNING AGAIN! You should IMMDIATELY review the attached links and make sure applications to be submitted meet the requisite deadlines!
The following language is in the Order:
Refund of Employee Contributions. The United States Office of Personnel Management is directed not to pay Employee a refund of employee contributions if Employee terminates employment after Employee is eligible to participate in the Plan.
Explanation: The Order ensures that the Former Spouse will receive a monthly benefit if the Employee is NOT retired. If the employee is retired, this paragraph does not apply.
The following language is in the Order:
Military Retired Pay. If Employee waived military retired pay to credit military service under the Plan, Former Spouse shall receive Former Spouse’s interest in such benefits based upon the percentages set forth hereinabove.
Explanation: This paragraph provides for the Former Spouse to receive Former Spouse’s share of benefits if the Employee was in the military and waived the credits accrued in the military to receive such credits under FERS/CSRS.
The following language is in the Order:
Purchased Credited Service. If Employee is eligible, and elects to make payment for the purpose of converting military or civilian service to credited service under the Plan, Former Spouse shall have the right to pay Former Spouse’s share of such payment, and to receive Former Spouse’s share of benefits based on such service, to the extent such service was performed during the marital period. The Court specifically reserves jurisdiction to resolve any issues regarding purchased credited service including amending this Order, if applicable.
Explanation: If Employee elects to convert military/civilian time to FERS/CSRS service and such time is attributable to marital period, Former Spouse is eligible to participate in that conversion.
The following language is in the Order:
Death of Employee – Death Benefits. Should the Plan pay any death benefits upon the death of Employee, Former Spouse shall receive a share of any death benefits payable based upon the proportionate share of Former Spouse’s interest set forth in Paragraph III.B(1) above. The Employee shall name the Former Spouse as beneficiary of any lump sum death benefits payable to the extent necessary to provide for the lump sum death benefits granted herein and shall provide a copy thereof to the Former Spouse.
Explanation: If, upon Employee’s death pre-retirement, a lump sum death benefit is paid by FERS/CSRS, Former spouse shall share proportionately in that lump sum payment. This only applies if the Employee is not yet retired.
Disability. If the Employee should retire for disability, the Court reserves jurisdiction over any issues between the parties regarding payment to the Former Spouse if the retirement was before the Employee was eligible for retirement based on service.
Explanation: QC is not aware of any OPM regulation or statute that limits payment to Former Spouse of Former Spouse’s share should the Employee retire for disability. In some cases, based on state law the Court may want to award the Employee 100% of the disability pension until the Employee would have otherwise been eligible for retirement based on service. This Order reserves jurisdiction over that issue. For federal employees, it rarely comes up. This paragraph only applies if the Employee is not yet retired.
The following language is in the Order:
Phased Retirement Program. Should the Employee elect to participate in the U.S. OPM’s Phased Retirement Program, OPM is hereby instructed to pay to Former Spouse each month a prorata share, as determined in paragraph III.B(1), of Employee’s self-only monthly “Phased Annuity” under the Plan for as long as the Employee is participating in the Phased Retirement Program. Former Spouse’s share of Employee’s Phased Annuity shall receive cost of living increases if available under the Phased Retirement Program. Upon Employee exiting the Phased Retirement Program and entering into Full Retirement, OPM is instructed to pay to Former Spouse a prorata share, as determined in paragraph III.B(1), of Employee’s self-only monthly “Composite Annuity”. If Employee should predecease Former Spouse while participating in the Phased Retirement Program, then pursuant to paragraph III.I(2) herein, Former Spouse shall be awarded a prorata share in the Former Spouse Survivor Annuity.
Explanation: Phased Retirement is a human resources tool that allows full-time employees to work part-time schedules while beginning to draw retirement benefits. This only applies if the Employee is not yet retired.
The following language is in the Order:
- Retain Coverage and Employee’s Failure to Act. The Employee shall timely make all elections necessary or advisable to carry out the terms of this Order. The Employee shall not diminish the benefits to be provided to the Former Spouse or in any way take any action which would adversely affect the Former Spouse’s Share or survivor benefits nor omit to take any action required for the Former Spouse to receive the Former Spouse’s Share of the employee annuity or survivor benefits. Employee shall not take any act, or fail to act, where such act, or failure to act, prevents, decreases, or limits the collection by Former Spouse of the sums awarded hereunder.
Explanation: The paragraph provides protection so that the Employee cannot reduce or eliminate benefits that are due to the Former Spouse.
The following language is in the Order:
Review by OPM and Required Alterations. The parties understand that OPM will not review any order for compliance with the Plan provisions prior to entry of such order by a qualified Court. The review by OPM may result in required modifications to this order.
Explanation: OPM will NOT preapproval any COAP. QC’s COAPs have been accepted by OPM in the past. Notwithstanding the foregoing, there are times when modification are requested. Be sure to contact QDROCounsel support if that occurs.
The following language is in the Order:
Orders Pending Retirement and OPMs Implementation of Direct Payments.
- In the event that direct payment to Former Spouse is delayed, then upon Employee’s receipt of each payment, Employee shall promptly pay to Former Spouse, the Former Spouse’s share of each payment. In this connection Employee will be acting as Former Spouse’s trustee in distributing Former Spouse’s share of such payment to Former Spouse. Employee shall continue these interim payments until deduction for Former Spouse’s share is taken from Employee’s monthly payment.
- As stated in Paragraph III.F below, each party shall report and be responsible for the taxes on the share of the benefits received by each. Should Employee be required to pay taxes on the share received by Former Spouse in this subparagraph, Former Spouse shall promptly reimburse and hold Employee harmless therefor.
- The court reserves jurisdiction to adjust any over-or under-payment between the parties once payments have commenced from OPM. It is intended that there be no gap or overlap between the Employee-paid and OPM-paid benefits received by Former Spouse.
Explanation: Both parties’ rights are protected pending implementation of direct payments from OPM. The court reserves jurisdiction to adjust any over or under payment during this interim period.
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