What do I need to know as a FERS employee if I am getting a divorce?
For federal employees under the Federal Employees Retirement System (FERS), the Office of Personnel Management (OPM) and the related Handbook RI 83-116 state that a valid court order is required for a divorced former spouse to receive a portion of the employee's annuity or survivor benefits.
Division of FERS annuity:
Court order required: A former spouse has no automatic right to an employee's FERS annuity after a divorce. The division must be specifically addressed in a court order, such as a divorce decree or a Court Order Acceptable for Processing (COAP).
How OPM pays: If the court order meets OPM's requirements, the agency will pay the former spouse's share of the annuity directly. The court order must clearly state the portion to be paid as a fixed dollar amount, a percentage, or a formula that OPM can easily interpret.
Payments end at death: A former spouse's share of the monthly annuity ends upon the death of the annuitant, unless the court order also specifies survivor benefits.
Survivor Independence Benefits
Court-ordered survivor annuity: The court order can require the federal employee to provide a survivor annuity for the former spouse. In the case of a FERS employee, the court can award the former spouse any percentage up to a maximum of 50%.
Effect on current spouse: A court-ordered survivor benefit for a former spouse takes priority and reduces the maximum amount that can be paid to a new spouse. The current spouse may receive the remainder of any eligible survivor benefits.
Remarriage: A former spouse's survivor annuity ends if they remarry before age 55, unless the marriage lasted 30 years or longer.
Health insurance (FEHB)
Termination of coverage: Upon divorce, a former spouse's coverage under the employee's Federal Employees Health Benefits (FEHB) plan terminates.
Continuing coverage options: Former spouses may have options to continue health coverage, including:
Temporary Continuation of Coverage (TCC): The former spouse can continue their coverage for up to 36 months but must pay the full premium plus a 2% administrative fee. To be eligible, the employing office must be notified within 60 days of the divorce.
Former Spouse Health Equity: If the former spouse is awarded a portion of the employee's annuity or a survivor annuity, they may be eligible to re-enroll in FEHB in their own right. Eligibility is contingent on being covered under the employee's family plan for at least one day during the 18 months prior to the divorce.
Thrift Savings Plan (TSP)
Separate order required: The TSP is considered a marital asset but is divided separately from the FERS annuity. A separate court order, known as a Retirement Benefits Court Order (RBCO), is required to allocate funds from the TSP to a former spouse.
Distribution to former spouse: The RBCO will specify the exact dollar amount or percentage to be paid. The TSP issues a one-time, lump-sum payment to the former spouse. The former spouse can then roll over the funds into another retirement account, like an IRA.
Important considerations:
Formal notification: OPM and the former spouse must be notified of the divorce and provided with a certified copy of the court order, including all relevant documentation.
Timeliness: Some actions, like electing a survivor annuity for a new spouse or applying for continued health coverage, have a limited time frame.
Legal counsel: Due to the complexity of federal regulations, it is highly recommended to consult with an attorney who specializes in federal divorce cases to ensure that all court orders are drafted correctly to meet OPM's requirements.
For more information visit OPMs website: https://www.opm.gov/retirement-center/publications-forms/pamphlets/ri84-1.pdf
OR sign up for a free consultation with one of our FERS experts: https://www.thrasherfinancialgroup.com/contact-us-for-complimentary-fers-benefits-analysis
