Federal Government retirement assets are often some of the most valuable marital assets. It is important to understand how those assets are treated in a divorce, whether you are the Federal Government employee or the spouse of an employee.
Types of Federal Government Retirement Benefits
There are two types of retirement assets that a Federal employee typically has: a defined benefit (or “pension”) plan and a defined contribution plan known as the “Thrift Savings Plan.”
Federal Pensions and Divorce
Employees who commenced service with the Federal Government prior to 1987 participate in the Civil Service Retirement System (“CSRS”). Most current employees, however, participate in the Federal Employees Retirement System (“FERS”). Under either plan, the employee is eligible to receive monthly payments after they retire. Those payments can be partly or entirely marital (and therefore subject to division in the divorce) depending on whether the employee’s service overlapped with the marriage.
What is the “Marital Share” of the Federal Pension?
The “marital share” of the pension is determined by a fraction. The numerator of the fraction is the number of months during the marriage (between the date of marriage and the date of separation) that the employee was employed and earning service toward the pension. The denominator of the fraction is the total number of months of the employee’s service. The spouse can be awarded up to 50% of the marital share.
What if the Federal Employee is Not Yet Retired?
Oftentimes, the employee is still employed at the time of the divorce. Therefore, the amount of the spouse’s share will not be known. If the spouse has been awarded a share of the employee’s pension in their settlement agreement or after a trial, an order known as a Court Order Acceptable for Processing (“COAP”) will be entered in the divorce case. The COAP will then be sent to the Office of Personnel Management (“OPM”), where it will be kept on file until the employee’s retirement. At that time, the total number of months of service will be known, and the marital share will be calculated. Payments to the spouse, calculated pursuant to the COAP, should commence at the same time as payments to the retiree.
The spouse can also be designated as the beneficiary of all or a portion of the employee’s survivor benefit plan. This award will protect the spouse if the retiree dies before the spouse while payments are being made.
Thrift Savings Plan “TSP”
Federal Government employees can choose to participate in the Thrift Savings Plan (“TSP”), which is similar to the private sector’s 401(k) plan. Employees can contribute to the account by way of payroll deductions, and can choose from a variety of investments. Employees can also take loans against their TSP (although married FERS employees must first obtain their spouse’s written consent). The amount contributed to the TSP during the marriage (from the date of marriage to the date of divorce) is presumed to be marital property, and can be divided by a court order known as a Retirement Benefits Court Order (“RBCO”). The spouse can receive his/her share of the employee’s TSP by direct transfer to another retirement account (such as an IRA), a distribution (which will be taxed), or a combination of both. The transfer can occur after the divorce is final. The spouse does not need to wait until the employee has retired in order to receive his/her share of the TSP.
Help with Federal Government Retirement Assets and Divorce
Dividing Federal Government retirement assets during divorce can be one of the most tedious parts of the process. The lawyers at Cooper Ginsberg Gray have litigated and negotiated cases involving federal government pensions. Whatever the Federal retirement issue, our collective experience allows us to approach the matter with the knowledge required for a fair distribution. Contact our office today to learn more about our services.