Getting a divorce is a complex undertaking under the best of circumstances, but when one of the divorcing parties is a federal employee, it can be even more complicated. The benefits that federal employees receive can form a substantial part of the financial considerations in the divorce because they include major concerns such as health insurance coverage and lifelong annuity payouts.
Current and retired federal employees need to be aware that the federal laws governing the division of their benefits in a divorce can sometimes conflict with state laws. In these cases, the federal law will prevail. The following checklist of divorce considerations applies to most federal employees.
Federal Employees Health Benefits (FEHB)
The spouses of federal employees who are enrolled in the Self Plus One or Self and Family FEHB options will remain eligible for coverage under the federal employee’s FEHB enrollment while the couple is legally separated or in the process of getting their marriage annulled.
The former spouse will lose their coverage under the federal employee’s FEHB enrollment at midnight on the day that the divorce or annulment is finalized. No court order can require the federal employee to continue providing this coverage. However, the former spouse can choose to continue it at their own expense under the Spouse Equity Act, the Temporary Continuation of Coverage Provision or conversion to an individual policy with the federal employee’s FEHB carrier.
Federal employees can continue to cover other eligible family members with their FEHB plan, or they can switch to the Self-Only option or another plan using the Standard Form 2809.
Federal Employees Group Life Insurance (FEGLI)
Federal employees who participate in a FEGLI life insurance program may wish to change the beneficiary of their policy following a divorce. Many employees designate their spouse as the recipient of the proceeds of the policy when they die, and this is not automatically changed in the case of a divorce. Employees must fill out Standard Form 2823 to designate a different beneficiary.
However, a court order can require a federal employee or retiree to assign their FEGLI coverage to a former spouse or children and/or name their former spouse or children as beneficiaries under FEGLI.
FERS And CSRS Benefits
Benefits under the Civil Service Retirement System (CSRS) or Federal Employees Retirement System (FERS) are not governed by the same rules that affect private sector pensions as in the Employee Retirement Income Security Act (ERISA).
A fraction is used to determine the marital share of a pension. It indicates the number of months during the marriage that the spouse was a federal employee earning service toward their pension compared to the total number of months that employee worked for the federal government. Spouses can receive up to 50 percent of the marital share.
A Court Order Acceptable for Processing (COAP) is used in cases where the employee is still working for the federal government at the time of divorce and it is therefore not possible to calculate the marital share. This order is kept on file by the Office of Personnel Management (OPM) until the employee retires, at which point their total number of months of service will be used to calculate the marital share so that payments to the former spouse can commence.
FERS Benefits That Can Be Affected By Divorce-Related Court Orders
Court orders in a divorce or separation can:
- Divide FERS annuities
- Divide FERS employee retirement contribution refunds
- Provide a survivor annuity to be paid upon the employee’s death
Thrift Savings Plan (TSP)
The money contributed to a TSP throughout the marriage is considered marital property and is subject to division using a Retirement Benefits Court Order (RCBO). The spouse can choose to receive their share of the TSP through a direct transfer, or it can be placed in a different retirement account or distribution. This transfer will occur after the divorce is finalized. However, the spouse does not have to wait until the federal employee’s retirement to receive their share of the TSP.
Federal employees are not allowed to take out a loan against their TSP while they are married without obtaining prior written consent from their spouse.
Federal Annuities
A court order for a divorce, legal separation or annulment can apportion or divide an annuity. The spouse’s share will be stated as a fixed amount or a percentage or fraction of the annuity and cannot exceed the amount of money payable after taking deductions for insurance and taxes.
Discuss Your Case With the Experienced Maryland Family Law Attorneys
Ensure your interests are protected during a divorce with help from an experienced legal team. If you are a federal employee who is concerned about the division of benefits in divorce, contact Milstein Siegel by phone or request a consultation online. Our Maryland divorce attorneys are dedicated to helping you pursue your goals and protect your future.