This article addresses the options for dividing a member’s Federal Employees’ Retirement System (FERS) or Civil Service Retirement System (CSRS) benefits in the event of divorce. FERS covers federal employees hired after 1983; those hired prior to 1983 are covered by CSRS. Orders dividing ERISA governed retirement benefits are commonly referred to as QDROs (Qualified Domestic Relations Orders); however, FERS and CSRS are not governed by ERISA and an order dividing FERS or CSRS due to divorce is called a “court order acceptable for processing” or COAP. The paragraphs below cover, in general terms, the most common issues addressed in COAPs for CSRS and FERS benefits.
Methods of Division
Court orders must provide a method of computing the former spouse’s interest, i.e. the order must provide a formula that can be implemented by the Office of Personnel Management (OPM). The former spouse’s share should be expressed as either a fixed amount or a percentage or fraction of the employee annuity. All variables in any formula submitted to OPM must be ascertainable from the face of the COAP or in OPM records, such as the employee’s periods of creditable service and basic pay rates. The most common method of division for a COAP utilizes a “marital fraction.” Using this formula, a former spouse would receive a share of the employee’s annuity or refund of employee contributions equal to 50 percent times the fraction created by the number of months of civilian and military service performed by the employee during marriage (from date of marriage through date of separation) divided by the total number of months of civilian and military service performed by the employee. This would be described as the former spouse’s “pro rata share.”
Survivor Benefits
To qualify for “surviving spouse” benefits, a former spouse must have been married to the employee for at least 9 months, or a child must have been born of the marriage, or the employee’s death must have been accidental.
Survivor Benefits can be paid to both a former spouse and the employee’s spouse at the time of death (if the employee remarried). However, an Order directing OPM to provide survivor benefits to a former spouse will not be honored if it would cause the total of survivor annuities payable under the Plan to exceed 50% of the employee’s unreduced basic annuity. Typically a former spouse will be awarded at least a portion of the survivor benefits to ensure that all payments to the former spouse do not cease upon the employee’s death.
It is also important to note that if the employee’s former spouse dies or remarries before reaching age 55, then there will be no payment of a survivor annuity.
Survivor benefits will only be awarded if the employee makes an election at the time of retirement that provides for survivor benefits – he/she cannot choose a self-only annuity. There are a myriad of annuity options that can be affected by divorce and remarriage which are beyond the scope of this article; however, employees should contact an attorney or OPM to fully understand their options.
Gross Annuity / Net Annuity/ Self Only Annuity
If a court order states the former spouse’s share of the employee annuity as a formula, percentage, or fraction, OPM must be able to determine which of the 3 types of annuity defined below on which to apply the calculation. OPM will apply the formula to gross annuity unless the COAP states otherwise. Thus, if the parties want to use a net annuity or self-only annuity for the COAP calculation, it should be agreed to by the parties during the dissolution or legal separation process.
Gross annuity means the monthly annuity payments by FERS or CSRS that are payable after reducing the self-only annuity to provide for a survivor annuity, if any, but before any other deduction. Unless the court order provides otherwise, gross annuity also includes any lump-sum credit payments.
Net annuity means the monthly annuity payments under FERS or CSRS that are payable after deducting from the gross annuity any amounts owed by the employee to the United States, for health and life insurance premiums, and for withheld state and federal taxes (excluding excessive exemptions), and amounts payable to another person under another COAP or a child support enforcement order. Other terms used for net annuities include “disposable annuity” and “retirement check.
Self-only annuity, as mentioned in the survivor benefits section, means the monthly annuity payments under FERS or CSRS to a retiree who has elected not to provide a survivor annuity to anyone. This type of annuity is also called “life rate annuity,” “unreduced annuity,” or “annuity without survivor benefit.”
For further reading, the rights of former spouses under qualifying court orders and COAPs that award FERS and CSRS benefits at divorce are detailed in the Code of Federal Regulations. Part 838 of Title 5.
If you need help with a FERS or CSRS Order, please call QDRO Helper at 619-786-QDRO / 619-786-7376 or email us at info@qdrohelper.com.
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