The Federal Employees Retirement Service is a pension scheme for government employees. It uses the defined benefit system, meaning it pays a set amount; this is in contrast to the defined contribution system where the pension amount depends on investment performance. Ordinary systems for valuing a person's retirement savings for divorce settlement purposes are inadequate.
Pension Benefit Value
Verify that the person is indeed a member of FERS. There are several other government employee pension schemes that work in different ways that can affect a plan's value.
Forecast the expected average salary across the three highest paid years of the person's career. This is an estimate but can be based on previous career history and advancement.
Forecast the number of years the person will be working in the job.
Multiply the average salary by the number of years to be worked and divide the result by 100. This gives the expected annual pension payment. This may be adequate information for a FERS division.
Total Benefit Value As Lump Sum
Calculate the expected lifespan after retirement for the employee if you also want to work out the total benefit the person is expected to receive.
Adjust the figures to take account of the fact that the payment amount after retirement will be adjusted each year in line with the cost-of-living adjustment.
Adjust the total payment amount to current value by reducing for each year between now and the planned retirement date by the rate of inflation.
Usually, a FERS division involves the employee agreeing to pay a proportion of the pension payments to the ex-spouse after retirement. Making a lump sum payment to the ex-spouse at the time of divorce is likely to be very expensive and considered an unfair. burden. A FERS division order or agreement should take into account the possibility that the employee will claim a partial contributions refund as a lump sum rather than take the full benefits. The order will need to specifically address how such a payment should be divided.
A court order is needed to enforce the division of the benefits from a FERS plan. The Office of Personnel Management, which administers FERS, will not take notice of a division that is simply listed in a domestic relations order. Do not fall for the argument that the value of the plan is simply the amount of money the person has contributed through salary deductions. This is both inadequate, leaving out the money contributed by the government, and largely irrelevant, as the "value" of the pension the person has built up does not depend directly on contributions.