Do you know what that divorce from years ago is going to do to your federal retirement? Even though you may be a couple of years away from retirement, early out offers and changes in retirement law may tempt you to jump ship and retire sooner than you had originally planned. That old divorce decree should be part of your retirement financial planning.
So, if you have a divorce in your history since May 1985 which mentions your federal retirement, get out that decree and look it over.
- Does your decree say that a QDRO or Qualified Domestic Relations Order is to be written to implement a division of benefits?
- Have you sent in a conformed “fuzzy seal” copy to the OPM Court Orders Branch in Washington DC to know that your order meets the OPM criteria for payment? You should have received a letter back stating how OPM will pay your former spouse. If this is not what you had in mind when you divorced, NOW is the time to go back to court and get things straightened out.
- Does you decree award any part of your retirement to a former spouse?
- Does the formula for dividing the retirement meet the OPM criteria?
- Does that former spouse get any kind of a survivor benefit awarded in the decree?
There are many different paragraphs that can be put into a decree or into the implementing orders which can turn your retirement into a search for another job. If your decree awards any kind of a survivor benefit to a former spouse, you will need to have a conformed “fuzzy seal” copy to send in with your retirement application, so now is the time to go back to the courthouse where you were divorced and get that “fuzzy seal” copy of the original decree and any modifying orders.
If your decree states that a QDRO or a COAP will be written and one has not been written, OPM will wait to receive that order before dividing your retirement with a former spouse and this will slow down your retirement processing and receipt of a full retirement check. So, now is the time to get that done. You might even find out one was written by your former spouse and entered into the court record without your knowledge. If this QDRO order gives your former spouse more that the original decree, OPM will treat it as a modification of the original decree and go with the latest order on file.
When OPM receives the QDRO or COAP, it will process it proactively, not going back and making back payments to your former spouse. This means that you will get to make those payments and pay the taxes on the money your former spouse received before OPM started making the payment. Once OPM begins making payments to the former spouse, OPM will take taxes out of the former spouse’s share and that payment will be taxable to the former spouse.
OPM will interpret the language in your decree for awarding a portion of your retirement to your former spouse. It will not accept any language which references a state court decision or a (such and such name) formula. All the variables must be spelled out in the order or the word “prorata” used. Unless there is specific language in the decree which stops the calculation of your high-3 as of the date of your divorce/separation, your final high-3 salary will be used. There is also specific language which can include or exclude the counting of sick leave time and creditable military time in the calculation.
If you are thinking that the remarriage of your former spouse means s/he doesn’t get anything from your retirement: think again. Unless your decree specifically states that fact, the remarried former spouse will still be eligible for the portion of your retirement specified in the decree. If s/he was awarded a survivor benefit, and remarried before age 55, the former spouse loses the survivor benefit. However, if you two were married for 30 years, your former spouse gets to keep the survivor benefit, even if s/he remarried before age 55.
Even the death of a former spouse may not stop the payments if your decree states that his/her benefit will continue to be paid to the court or the estate or children upon your former spouse’s death.
If your former spouse was awarded a “full” survivor benefit or a “maximum” survivor benefit in the decree and you now have a current spouse at time of retirement, you will need to consider your survivor benefit elections carefully. The survivor benefit is not free in retirement. If the decree is silent as to who pays for the survivor benefit or it states that you do – here is up to another 10% of your retirement you won’t get. Then if your current spouse is dependent on you for health benefits or income, you will need to consider electing an “insurable interest” for your current spouse at retirement. Read the section in the retirement application on instructions for survivor benefits elections very carefully.
Bottom line……If you have a divorce in your history, get it out now as part of your retirement planning.
I once had a client ask me “I am thinking of retiring and getting a divorce in the near future – which should I do first?”
My answer “Get a retirement estimate from your agency first and decide if you can live on half of it. If the answer is yes, then get your divorce before you retire. That way, if the divorce turns out to be more costly than you first thought, you can always work longer.”
The preceding is a high level overview of things to consider. Individual circumstances and orders may affect the final outcomes. OPM has the final say in how they pay benefits.
Ann Ozuna is TheFederalRetirementLady.com and assists feds and their attorneys making sense of what happens to federal benefits in a divorce. Her website is www.thefederalretirementlady.com  .
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The information provided may not cover all aspect of unique or special circumstances, federal regulations, law, and financial information is subject to change. To ensure the accuracy of this information, contact an attorney familiar with divorce law and review your official documents, personnel file, and circumstances concerning this issue. This article is not intended nor should it be considered legal or investment advice. All articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.
Last 5 posts by Ann Ozuna
- Federal Benefits in Divorce – After the Decree, now what?  - July 6th, 2011
- How an Annuity & the TSP Are Divided in a Divorce  - April 29th, 2011