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How does divorce impact a federal employee and their ex-spouse? Learn about dividing your FERS pension, TSP, and survivor benefits. Federal retirement benefits and marital court order.
Federal Employee Divorce and FERS Retirement Pension, TSP, and Survivor Benefits
Going through a divorce as a federal employee involves understanding how your federal pension and TSP, along with other federal benefits such as the FERS Supplement, are treated during the divorce proceedings. The complexities of dividing federal assets require careful consideration, especially when dealing with the FERS (Federal Employees Retirement System) and the TSP (Thrift Savings Plan).
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Understanding Federal Employee Retirement Systems
The retirement systems for federal employees include mostly the newer FERS, but also the older CSRS (Civil Service Retirement System). FERS, established in 1987, covers most federal employees, incorporating social security, a basic annuity, and the TSP.
Estimate your retirement pension with our Federal Annuity Calculator.
Impact of Divorce on FERS Benefits, Retirement Plan
A divorce can significantly impact your FERS benefits. Your former spouse might be entitled to a portion of the federal FERS plan, TSP, and even survivor benefits. The exact distribution is typically determined by a divorce decree and any related court order, which will stipulate the exact proportion that the ex-spouse is entitled to. The division of assets is part of the overall divorce settlement. A typical compromise is to divide the annuity in half for the years of service in which the marriage occurred.
Legal Framework: Court Orders and Acceptable Processing
The legal framework governing the division of assets hinges on court orders. A court order acceptable for processing, often referred to as a COAP, is required by the OPM (Office of Personnel Management) to divide the pension benefits. This order must precisely outline how the annuity, TSP, and survivor benefits are to be split between the federal employee and their ex-spouse to ensure the benefits are divided correctly.
Dividing the FERS Pension is Divided with Former Spouse
Dividing a fed’s pension in a divorce involves several considerations. The COAP must specify how the pension will be split, whether through a shared interest approach, where the ex-spouse receives a percentage of each payment, or another method determined by the court. The OPM requires an order from the court acceptable for processing to ensure the division adheres to the law. This division impacts the retirement income of both the federal employee and the former spouse, potentially altering their retirement plans.
Role of a Divorce Attorney in Negotiations
A divorce attorney plays a crucial role in negotiating the division of federal retirement assets, especially when dealing with FERS. Like with financial planning for federal employees, where an advisor who understands federal benefits is critical, having a lawyer who has extensive knowledge in the federal space is just as important. They can also advise on the implications of different settlement options, like how the TSP or FEHB (Federal Employees Health Benefits) may be affected by the divorce decree.
Calculating the Value of FERS Retirement Benefits
Calculating the value of federal pension benefits, specifically FERS benefits, requires actuarial valuations to determine the present value of the pension, considering factors like the years of service, projected retirement date, and life expectancy. This valuation helps in fairly dividing federal assets during divorce proceedings, but a fair division is not guaranteed. If written in the COAP, a former spouse can receive the entire pension.
Will Ex-Spouse get a Portion of the FERS Supplement as well as the Pension?
Yes, an ex-spouse would generally receive a portion of the federal FERS supplement, as well as the pension, if the federal employee retires and is eligible for the annuity supplement. The exception would be if the court order acceptable for processing specifically excludes the annuity supplement from being divided as marital property.
Estimate your benefits with out FERS Supplement Calculator.
Thrift Savings Plan and Divorce
After a divorce, the TSP account is typically divided according to the order from the courts. OPM ensures that the division adheres to federal regulations. Usually, a separate account is created for the former spouse to manage their share of the retirement savings. This TSP is subject to division as a part of the overall divorce settlement like with pension plans. Typically how long the marriage lasted is a factor when coming to an agreement on how much the former spouse is entitled to.
Strategies for Dividing TSP Assets
Here’s how TSP assets can be divided during a divorce. Common strategies include:
- Allocating a percentage of the TSP account to the former spouse via a court order.
- Offsetting the TSP division with other assets to achieve an equitable distribution of marital property.
The choice of strategy often depends on the specific circumstances of the divorce and the financial goals of both the federal employee and the ex-spouse. Again, a divorce attorney can assist in navigating these options.
Dividing FERS Federal Pension Survivor Annuity
Divorce can have a major impact on FERS survivor benefits, and like with the pension benefit plan, a divorce decree can award a federal employee’s former‑spouse a survivor annuity, which must be explicitly stated and properly submitted to OPM to be enforceable. If the order isn’t written correctly or never reaches OPM, your intended survivor election cannot be honored. You do not need to wait until the end of an employee’s federal service to submit this document. It should be sent as soon as the retirement benefits court order is finalized.
FERS Annuity Supplement Survivor Benefits
Regarding survivor benefits, the FERS supplement also includes a survivor benefit if the federal employee retires before 62 and dies in retirement before age 62. If the employee has designated a survivor, that individual, often the ex-spouse, could be entitled to a portion of the federal annuity and supplement. Again, the COAP will dictate the specifics meaning each situation is unique when dividing marital assets during a FERS divorce.
How a Fed-Expert Financial Advisor can Help
At PlanWell, we offer federal retirement resources including a learning center for federal retirement plans and calculators for federal retirement planning along with FERS and TSP Webinars.
Want a free consultation to review your financial goals? Schedule a meeting now.
