As part of a divorce settlement, your ex-spouse can file a Retirement Benefits Court Order (RBCO) that can distribute your retirement account. Filing Qualified Domestic Relations Orders (QDROs) can result in the split of a Civil Service Retirement System (CSRS) or Federal Employees Retirement Benefit System (FERS) payment. This can be an issue of concern when it comes to a divorce.
QDROs and FERS
If you are in the process of getting a divorce, one of your main concerns is probably whether your soon-to-be-ex will be able to get part of your retirement account. The answer to this is yes, it is entirely possible. The court orders are limited by the rules in the publication, Court-Ordered Benefits for Former Spouses.
Under these rules the court can:
- Divide FERS annuity payments
- Divide FERS contribution refunds
- Provide a survivor annuity
- Continue former spouse health insurance under FEHBP
- Require coverage of children under FEHBP
- Require assignment of FEGLI to the former spouse
- Require you to name the former spouse or children as FEGLI beneficiaries
You also need to know that under these rules your retirement benefits can be garnished for alimony or child support.
FERS Divorce Calculator
To be valid, the court order must include a method for computing the former spouse’s interest in your FERS benefits. This must be in a form that can be easily implemented by the Office of Personnel Management (OPM). This can be expressed as a percentage of the annuity or as a flat dollar amount.
The most common form of a FERS divorce calculator is in the form of a marital fraction. This is typically 50 percent of the annuity times the number of months from the date of the marriage to the date of separation. This would then be divided by the total number of months of eligible service by the employee and would be called the “pro-rata share” for the FERS divorce calculator.
You must be aware that the exact wording of the court order affects how it is interpreted and applied. For instance, if the decree does not state that the retirement amount division is limited to the years you were married, your spouse’s pro-rata share could be as much as 50 percent of your benefits without the length of time of the marriage entered into the equation. The good news is that each of you will be responsible for only your portion of the taxes on the annuity payments.
What About Survivor Benefits?
In the case of your accidental death, your former spouse might be able to receive your survivor’s benefits under certain circumstances. You must have been married at least nine months before your death. If the beneficiary is a child, the child must have been born into the marriage. If you remarried, the benefit can be paid to a current spouse and an ex-spouse at the same time.
Certain rules apply to survivor’s benefits and your ex-spouse might receive only a small portion of what your current spouse receives. If your former spouse remarries before the age of 55, they will forfeit any claim to your survivor’s benefits. Another thing to consider is that OPM will not provide an estimate of your retirement benefit amount or your ex-spouse's benefits until you reach the age of retirement.
The rules for divorce and death benefits for an ex-spouse are complex. You should contact an attorney to find out how divorce will affect your FERS and death benefits for your ex-spouse and children.
- 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.
Adam Luehrs is a writer during the day and a voracious reader at night. He focuses mostly on finance writing and has a passion for real estate, credit card deals, and investing.