Splitting Up and Splitting Benefits

The isolation that we’ve all been living with during the pandemic is apparently taking its toll on couples who were already experiencing marital difficulties. Many of those people are nearing retirement. According to the Pew Research Center, divorce rates among people over 50 have doubled since the 1990s.

Recently, I’ve received an increasing number of emails from federal employees and retirees on the topic of divorce. Here’s one that I got this week:

My ex-spouse and I are both federal employees with Federal Employees Retirement System coverage. Our court order requires that both of our FERS annuities be divided by the equitable mathematical percentage formula regarding numbers of years of service divided by the total number of years of marriage. Now my ex-spouse has stated there is a possibility they will be terminated from their federal position prior to retirement. A federal employee friend told me that if one gets terminated or fired from their federal position, they automatically forfeit their federal pension. That doesn’t seem correct, since ex-spouses may purposely get fired just to spite their former spouse from getting their rightful portion of the FERS pension. 

Really? Can someone have so much contempt for their ex-spouse that they would get fired to avoid paying the marital share of their government pension? If so, it probably won’t work. Getting terminated doesn’t stop someone from receiving their earned retirement benefit unless they’re fired for one of the following reasons:

• Delivering defense information to a foreign government
• Disclosure of classified information
• Espionage, treason or advocating the overthrow of government
• Perjury in relation to the above acts, or
• Perjury involving false testifying in connection with a matter relating to the interference or endangerment of security or defense to the United States.

Under ordinary circumstances, getting fired won’t keep your ex from receiving part of your benefit. To do that, you’d have to never file for your retirement benefit. 

I’ve seen this play out. One case involved a couple who were both federal employees and provided for each other in a court order. When each of the ex-spouses retired, they were obligated to provide the other with 50% of the marital share of their retirement benefit. What this couple failed to consider was, first, that they would probably not be retiring at the same time and, second, it would be extremely difficult for either one to live on only their own retirement after being reduced for the court-ordered benefits. One of the two wanted to retire and the other wanted to work until they couldn’t any more. They should have thought of this when they were drafting their divorce decree.

On top of that, there were no survivor benefits awarded in the decree, so if one of the ex-spouses dies before the other, the survivor would not receive any of their ex’s retirement, and also would no longer have to have their own retirement apportioned, since the ex would be deceased. 

Another issue that arises when there is a divorce decree that awards retirement or survivor benefits to a former spouse of how important it is to understand exactly what the dollar amount of the wording in the decree really means. For example, consider the following language in one divorce agreement:

The wife is a participant in the CSRS and has earned substantial pension benefits during the marriage. The husband shall own as his sole and separate property one-half of the marital share of the wife’s gross monthly annuity, to be calculated under the following formula: one half times a fraction, the numerator which is the 19 years and 3 month and the denominator of which is the total years and months of creditable service at the time the wife retires or otherwise separates from service. The husband’s share shall include a survivor’s benefit annuity and shall be received if, as, and when the wife receives her gross monthly annuity. The husband shall be responsible for preparation, entry, and submission of the Court Order Acceptable for Processing to secure his share.

The wife in this agreement is ready to retire, so she has requested a retirement estimate be prepared from her agency’s human resources office. The estimate will show the amount of a benefit she has earned during her federal career, and it might even show the reduction for the survivor benefit. However, the HR specialist will generally not attempt to compute the value of the former spouse’s share of the retirement benefit. This leaves the employee on their own to interpret the meaning of the divorce agreement and apply the formula outlined to the retirement estimate prepared by the HR specialist.

One such employee found out the hard way that she underestimated what would be left after the Office of Personnel Management computed the net amount of her retirement after reducing her benefit to provide for the marital share of her retirement along with the nearly 10% reduction to provide her ex with a full survivor benefit. Her ex offered to rescind his right to the survivor benefit. But since she’s already retired, the chances of having his offer accepted is next to zero.

According to Dan Jamison, author of the FERSGUIDE, after the death or retirement of an employee, OPM will not accept a court order that changes the survivor annuity. Depending on how the order was written, OPM might accept a cancellation letter from the employee’s spouse.

But what happens when the divorce decree doesn’t specifically mention a survivor annuity? This is not good news for the former spouse. Even if the couple was married at the time of retirement and had elected to provide a survivor benefit on the employee’s retirement application, if the marriage later ended in divorce, the survivor benefit is not payable unless it was included in the specific language required by OPM in the divorce decree.

One such case was argued in the U.S. Court of Appeals in 2013. The former spouse who was attempting to claim a widow’s benefit lost the case because the court order was amended, but not until seven years after the death of the retiree. The judge explained that the original divorce decree was “silent on the question of a survivor annuity” and the subsequent amendment was “ineffective under the statute” because it was issued “after the retirement and death of the retiree.”

If you’re involved in a divorce, Jamison says you should remember three things:

• Be sure your attorney is familiar with the rules for processing a divorce for a federal employee or retiree. How many divorces have they handled involving federal employment rules? Do they have a copy of the OPM handbook for attorneys?
• File a copy or have your attorney file a copy of your court order with OPM and be sure it has been declared “acceptable for processing.” If you’re not sure this has been done, contact the OPM Court Order Section.
• Retirement benefits aren’t the only benefits at stake when a federal employee divorces. Also be aware of the rules pertaining to the FERS supplement, Social Security benefits, Federal Employees Health Benefits, Federal Employees Group Life Insurance, and Thrift Savings Plan investments.