The division of property is common during a divorce. From bank accounts and real estate to investments and vehicles, the court system will attempt to divide assets as fairly as possible. One of the most common concerns that people have when starting divorce proceedings relates to retirement savings. Many people work their entire lives to build a nest egg for retirement and fear that their savings will be depleted by their ex.
Retirement is a tricky subject in divorce, especially for federal employees and retirees. Federal retirement accounts are not governed by all the same laws as private-sector retirement accounts. It is important to have a solid understanding of how federal retirement savings are handled in a divorce and whether there is a chance that an ex-spouse could gain rights to these funds.
Are Federal Retirement Accounts Divided In A Divorce?
The court does not automatically grant an ex-spouse rights to the other spouse’s federal retirement benefits; however, an ex-spouse may be granted a portion of a federal retirement account if the court orders it.
The final divorce agreement may include a court order that requires an employee to give up a portion of his or her retirement to an ex-spouse. The court order should also clearly outline how the benefits are to be divided. Without this court order, the owner retains the retirement account.
An ex-spouse may believe that she is entitled to his or her spouse’s federal retirement after a divorce. In this case, she may apply in writing to the Office of Personnel Management to inquire about his or her share of the benefits.
It can be difficult to predict the effect that a divorce will have on federal retirement benefits as the amount awarded to an ex-spouse is partly based on how long the federal employee has worked.
In addition, an ex-spouse cannot claim any money until the employee chooses to retire, even if the employee postpones retirement and continues to work. Ex-spouse may qualify for a share of any cost-of-living adjustments if stated in a court order.
What Types Of Federal Retirement Plans Can Be Divided?
The type of federal government plans an employee has plays a role in whether an ex-spouse may receive any funds and how much an ex may be awarded. Federal employees generally participate in either the Civil Service Retirement System (CSRS) or the Federal Employees’ Retirement System (FERS). Employees in both systems may also participate in a Thrift Savings Plan (TSP).
A court order related to a separation or divorce could divide an annuity, divide a refund of an employee’s retirement contributions made before retirement, require an employee to assign their life insurance, permit an ex-spouse to continue health insurance coverage, or garnish an annuity to pay for alimony or child support. In some cases, a court order may also require certain distributions from a TSP account.
Matters of federal employment are governed by spouse equity provisions and court orders used to fairly divide private-sector retirement plans are not valid under CSRS and FERS. An ex-spouse can only receive rights to federal retirement funds after a divorce if a court order is created that expressly directs the Office of Personnel Management to pay the ex a portion of the monthly benefit.
How Are Survivor Benefits Handled In A Divorce?
The Survivor Benefit Plan (SBP) is an important component of a federal retirement plan that allows a retiree to provide a continuous lifetime annuity to their dependents after death. If survivor benefits are granted to an ex-spouse in a court order, the benefits would go to the former spouse upon the death of the account holder, even if the federal employee had remarried.
If an ex-spouse does receive a portion of a federal employee’s pension or any part of the survivor benefits, they would also be eligible for Federal Employees Health Benefits (FEHB) coverage under the Spouse Equity Law. However, a nonfederal ex-spouse cannot keep Federal Employee Dental and Vision Insurance Program (FEDVIP) coverage after a divorce from a federal employee.
How To Protect Federal Retirement After A Divorce
When contemplating a divorce or starting the process, it is important to consider how best to protect retirement assets. Consider utilizing the following tips before the divorce proceedings begin:
- Perform Extensive Research – Gain a solid understanding of divorce laws in the state.
- Acquire Professional Representation – Hire a divorce attorney who has experience dealing with federal retirement plans.
- Stay on Top of Paperwork – Promptly send all divorce agreement documents and court orders to the proper plan and account custodians.
- Reevaluate Survivorship – If an ex-spouse receives part of the pension, the federal employee should also be listed as the survivor or beneficiary on the plan to continue to collect benefits if the ex-spouse should die.
Request A Consultation With A Milstein Siegel Divorce Attorney
Going through a divorce can be difficult, especially when federal retirement plans are involved. Working with an experienced divorce attorney can ensure the process goes smoothly. For more information about how federal retirement plans are handled in a divorce or to speak with an experienced family law attorney, contact Milstein Siegel.