Many people do not realize that retirement plans, whether through work or individual savings, qualify as marital property subject to division – a spouse is entitled to half of the portion that accrued during the marriage. So, if an individual worked twenty years for a company and developed a sizable retirement account, and that individual after those twenty years marries and divorces five years later, the former spouse would have a claim to one-half of only 5/25 – or 10% — of the pension. While the former spouse does not have access to the first 25 years of the pension, the former spouse does indirectly benefit by coming into the property after it already had a substantial balance. Generally, the former spouse rolls this amount into a separate retirement account created through a Qualified Domestic Relations Order (QDRO), and can access the benefits when the employee former spouse retires.
If that seemed somewhat complicated, it gets much more so when dealing with federal employees. Unlike the typical employee who has either an IRA or an employer-funded 401(k), federal employees accrue multiple benefits that, through relatively recent changes to federal legislation, become subject to division during divorce. It is helpful for both the federal employee and his or her spouse to know the types of benefits available: a monthly marital share apportionment (i.e., a portion of the federal retiree’s annuity); a survivor annuity benefit; a portion of the Thrift Savings Plan (TSP); and coverage under the Federal Employees Health Benefit (FEHB) and the Federal Employees Group Life Insurance (FEGLI) benefits plans. Further, if the employee becomes partially disabled or retires early, other benefits can also come into play.
We could not cover all of the rules related to these different benefits in this space. Rather, we wanted simply to make federal employees and their spouses aware of the array of benefits in play during divorce.
Second, while every plan administrator of a QDRO has its own special forms and procedures, the regulations of the Office of Personnel Management are much denser and require an experienced and sophisticated attorney to navigate successfully. Failure to complete proper paperwork at the proper times could result in faulty QDROs that do not reflect the intent of the court or the parties. It would be smart for both the federal employee and spouse to become very knowledgeable about these regulations as early as possible.
Third, the survivor annuity benefit can be extremely tricky, particularly if the federal employee remarries. Both the employee and the spouse should consult an experienced attorney in this particular area of law to see that their wishes will be respected in electing survivor benefits.
If you have questions about federal retirement benefits and divorce, contact us – we can help.