Federal employees would have a pension benefit provided under the Civil Service Retirement System (CSRS) or the Federal Employees’ Retirement System (FERS) and may also have a civilian Thrift Savings Plan.
Key Issues with Federal Plans
Assignment of Pension Benefit
- A portion of the participant’s pension benefit can be assigned to the former spouse via a QDRO.
- The assigned benefit can be calculated as of the date of the divorce with the benefit based on service performed through the date of the divorce and compensation earned through the date of the divorce.
- The benefit is paid as a shared interest payment to the former spouse when the participant commences benefit payments.
- Unless provision is made for a former spouse survivor annuity, the assigned benefit will not be paid if the participant dies prior to retirement and will cease if the participant is the first to die after benefit payments commence.
Former Spouse Survivor Annuity
- Provides the former spouse with both a pre-retirement and a post-retirement survivor pension benefit.
- The Settlement Agreement should, and the QDRO must, specify how the former spouse survivor annuity will be calculated. Options include the maximum survivor benefit and “the former spouse will keep the survivor annuity to which he/she was entitled at the time of the divorce.”
- The survivor annuity can be split between the former spouse and a current spouse provided the maximum amount is not awarded to the former spouse.
- The former spouse survivor annuity will cease if the former spouse remarries before age 55.
- The Settlement Agreement should, and the QDRO must, specify how the former spouse annuity will be paid for. Options include (1) proportionately reducing the amount payable to each party or (2) providing that the total amount of the reduction will be reflected in the former spouse’s payments.
- Marital portion can be determined by using only the creditable service earned during the marriage.
Thrift Savings Plan
- The civilian Thrift Savings Plan is an individual account plan similar to a 401(k) plan.
- A portion can be assigned to the former spouse with adjustment for earnings (gains/losses) via a Retirement Benefit Court Order (RBCO).
Settlement Agreement Provisions
- Specify date of divorce for determining the amount of the assigned benefit.
- Specify if COLA is awarded on former spouse’s assigned pension benefit.
- Protect former spouse’s pension benefit with provision for a former spouse survivor annuity, specifying how calculated and how paid for. Alternatively, can provide for life insurance.
- Address Thrift Savings Plan including investment gain/loss adjustment.