San Antonio TX Federal Civil Service Divorce Attorney

San Antonio Federal Civil Service Divorce Attorney

What Does “Federal Civil Service Divorce” Mean?

It means there are 15 key issues that distinguish a Federal civil service divorce from other civilian divorces. The issues are listed in the Table of Contents below.  Explanations are phrased mainly in terms of what a former spouse needs to know.  After all, a former spouse typically has the most to lose.

Civil Service Employee’s Best Strategy

An employee’s best strategy usually is to remain silent on federal benefit issues that a court can affect.  Issues not raised by a soon-to-be former spouse and ruled on by the court generally prove to be lost opportunities.  When issues are raised, then an employee’s best approach is to ensure the former spouse doesn’t overreach and receive more in the divorce decree than the law requires.

Soon-to-Be Former Spouse’s Best Strategy

A soon-to-be former spouse’s best strategy is to raise and successfully argue as many of the 15 key issues as are relevant to the case.  Never forget that courts have no duty to rescue a party from self-inflicted loss due to that party’s ignorance or misunderstanding of important issues.  To do so would require a court to favor one party to the lawsuit over the other—which isn’t allowed.

Table of Contents: 15 Key Issues 

1.  The Law that Applies

The Federal Employees Retirement System (FERS) generally covers employees hired after 1983, while Civil Service Retirement System (CSRS covers those hired earlier.  After FERS was implemented, employees covered by CSRS were given opportunity to convert to FERS.  Many did so.  Thus, most of today’s workforce falls under FERS.  There are many similarities and a few differences between the two systems.  For simplicity, the bulk of discussion will focus on FERS. 

2.  FERS Benefits Divisible in Divorce: A “50,000 Foot” View

3.  FERS Annuity: The Basic “Pension”

4.  FERS Annuity:  Disability Retirement Annuity

5.  FERS Annuity:  Former Spouse Survivor Annuity (FSSA)

6.  FERS Annuity & FSSA: Cost of Living Allowances (COLAs)

7.  FERS Annuity: Payments After the Former Spouse’s Death

8.  FERS Annuity: Refund of Employee Contributions

9.  FERS Annuity: Crediting Military Service toward Retirement

10.  Thrift Savings Plan (TSP)

11.  Federal Employees Health Benefit Program (FEHBP)

12.  Federal Employee’s Dental and Vision Insurance Program (FEDVIP)

13.  Federal Long Term Care Insurance Program (FLTCIP)

14.  Federal Employees Group Life Insurance (FEGLI)

15.  Filing Applications and Court Orders with OPM

Click on the link that follows to learn about common divorce issues in our Family Law section.  Call us if you need more information or wish to discuss your case.

1.  The Law that Applies

Rules and Procedures for Private Employer Plans Won’t Work

Dividing a Civil Service Retirement System (CSRS) or Federal Employees Retirement System (FERS) retirement annuity (“pension”) differs from the vast majority of private employer plans.  Division of private employer plans generally must comply with a Federal law known as the Employee Retirement Income Security Act (ERISA).  CSRS and FERS annuities are exempt from ERISA.  Any court order that attempts to divide a Federal annuity according to ERISA’s rules and using ERISA’s terminology will be rejected by the Office of Personnel Management (OPM), which administers policy and programs for the Federal civilian workforce.   Court orders dividing a Federal annuity must conform to OPM procedures.  OPM calls a court order that conforms to its guidance a “Court Order Acceptable for Processing” or COAP. 

State Law Governs the Percentage Each Spouse Gets

While Federal law and OPM guidance lay out policy and procedures, how much of the annuity each spouse is legally entitled to in divorce is determined by State law.  In Texas, the law is a mix of statutes passed by the Texas legislature and case law that flows from court decisions.  The statutes embrace the Texas community property system and exist mainly in the Family Code.  The case law reflects how Texas judges over time have employed community property principles when dividing property in divorce.   
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2.  FERS Benefits Divisible in Divorce: A “50,000 Foot” View

The “Three Legs”of a FERS Retirement

The FERS retirement plan is made up of three components so it’s frequently described as a three-legged stool.  The main leg is the FERS annuity itself (i.e. the “pension”).  The second leg is the Thrift Savings Plan or TSP, which operates like a 401(k).  The third leg is Social Security.  Both the FERS annuity and TSP can be divided in divorce.  Federal law prohibits Social Security benefits from being divided in divorce. 

Important Items Sometimes Overlooked

Division of the FERS annuity can involve other issues.  Federal law permits State courts to award a former spouse one or more of the following property rights that relate to the annuity:

  1. A share of the annuity itself;
  2. A share of any refund of employee contributions (i.e. payroll deductions); and,
  3. A former spouse survivor annuity (FSSA), which provides an income stream that replaces the annuity payments after the employee’s death. 

Federal law permits TSP to be divided as well.  Sometimes the intense focus on dividing the annuity causes a former spouse or attorney to lose sight of these other pieces.  This could prove to be a costly mistake for a former spouse.     
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3.  FERS Annuity: The Basic “Pension” 

What Determines the Amount of the Annuity (“Pension”)?

FERS is a bit odd in the realm of retirement plans.  It requires a small contribution of the employee’s pay, but the fortunes of the investment marketplace play no role in determining the annuity received at retirement.  Federal law determines the annuity based on the employee’s pay history (i.e. average salary from highest three years’ earnings) and length of service.

The Percentage Awarded Can Be Applied in Three Ways

State law determines how the annuity gets divided in divorce.  Thus, Texas community property law determines the percentage of the employee’s annuity that belongs to the former spouse.  Under Federal law, however, the percentage awarded can be applied to the annuity in three different ways—yielding three different results.  One way clearly benefits the former spouse.  Another way clearly benefits the employee.  The remaining way lies in-between.  OPM will apply a default answer (i.e. the in-between option) if the court’s order fails to specify which of the three methods applies.

The Way that Favors the Former Spouse

Applying the court’s percentage award to a “self-only” annuity clearly favors the former spouse. This option applies the percentage award to the annuity before any deductions. Typical deductions may include the cost of a former spouse survivor annuity (FSSA, discussed later), health insurance, life insurance, and Medicare and Federal withholding taxes.

The Way that Benefits the Civil Service Employee

Applying the court’s percentage award to the “net” annuity clearly favors the employee. This option applies the percentage award to the annuity after all deductions have been applied.

The Way that Splits the Middle

Applying the court’s percentage award to the “gross” annuity produces a result that lies in-between. This option applies the percentage award to the annuity after deduction of any FSSA premium, but before any other deductions.

It’s Important to Pay Attention

The employee, former spouse and both attorneys need to pay attention to these distinctions.  How the annuity gets divided should be a conscious choice and not the product of a default answer.
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4.  FERS Annuity: Disability Retirement Annuity

How Does Disability Retirement Work?             

Employees may be eligible for a disability retirement annuity (“disability pension”) whether or not they have attained regular retirement eligibility.  Generally, the employee must have worked in civil service for at least 18 months.  The employee also must have been determined to be disabled for job purposes because of disease or injury.  It is not necessary that the disability have been incurred on-the-job.  Rather, the Office of Personnel Management (OPM) only requires that the disability render the employee incapable of “useful and efficient service” in their current civil service position. 

For employees not yet retirement eligible under normal rules, OPM calculates the disability annuity using a complex set of formulas.  The disability annuity then is set at the highest amount resulting from the formulas. 

When the employees reaches normal retirement age (i.e. generally age 62), the disability annuity is recomputed into a regular retirement annuity.  Of significance, the years the employee spent on “disability retirement” get added as to his or her years of creditable service—which typically increases the regular retirement annuity.

Disability Retirement Can Be Divided in Divorce

There is no Federal law that prohibits division of an employee’s disability retirement annuity.  OPM accepts State court orders that divide both the immediate FERS disability annuity and the later regular annuity that results from recomputation when the employee reaches normal retirement age.  Despite attempts to liken the FERS disability annuity to worker’s compensation, Texas courts generally have held that the disability annuity is divisible in divorce as community property.  The “disability” label does not overcome the fact that the annuity is a “retirement benefit.”  This represents good news for a former spouse.

Bad News for the Former Spouse

The bad news for a former spouse is that the disability annuity will be offset (i.e. reduced) by any Social Security Disability Insurance (SSDI) the employee may receive.  Per Federal law, SSDI is not divisible in divorce.  Thus, any share of the disability annuity awarded to a former spouse will result in a smaller payment once SSDI kicks in.  A former spouse’s divorce decree should contemplate the possibility that the employee may qualify for a disability retirement at some point prior to normal retirement eligibility. 
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5.  FERS Annuity: Former Spouse Survivor Annuity (FSSA)

 How to Avoid Disaster When the Retirement Annuity Stops at the Employee’s Death             

Ordering a FSSA in the divorce decree remains critically important.  “Spouse coverage” terminates upon divorce.  There is no provision in Federal law for “spouse coverage” to convert automatically into “former spouse coverage.”

The employee’s FERS annuity stops when the employee dies.  Accordingly, the Office of Personnel Management (OPM) mandates that payment of the former spouse’s share of the FERS annuity stop as well.  If awarded in the divorce decree and properly applied for, the former spouse survivor annuity (FSSA) replaces the retirement annuity to provide the former spouse with a continuing income stream.  One word of caution—a former spouse becomes ineligible to receive FSSA payments if they remarry prior to age 55  unless they were married to the employee for 30 years or longer.  Otherwise, FSSA payments stop when the former spouse later dies.  

“Spouse” and “Former Spouse” Annuities Are Not The Same

If the employee already is retired at time of divorce and a “spouse survivor annuity” (SSA) already exists, then ordering a FSSA in the divorce decree remains critically important.  A spouse survivor annuity (SSA) and former spouse survivor annuity (FSSA) are not the same thing.   The SSA terminates upon divorce.  There is no provision in Federal law for the SSA to convert automatically into a FSSA.  A soon-to-be former spouse and his or her attorney should not overlook this important distinction.

The Max a Former Spouse Gets Under CSRS and FERS Differs

Under a CSRS retirement, the default rule is that award of a FSSA results in the former spouse receiving 55% of the CSRS annuity following the employee’s death.  Under a FERS retirement, the default rule results in the former spouse receiving 50% of the FERS annuity.  A State court order can award a lesser percentage.  OPM will reject any court order that states a greater percentage.

If Multiple Former Spouses Exist—the Early Bird May Get the Entire Worm

Unlike the military’s Survivor Benefit Plan, the FSSA benefit can be divided between a former spouse and spouse-widow, or multiple former spouses.  In cases of multiple awards, however, the sum of the percentages each beneficiary gets cannot exceed the percentages stated in the preceding paragraph (i.e. 55% for CSRS and 50% for FERS).  A simple example will help clarify this point.  Two former spouses each could be awarded a FSSA that is 25% of the employee’s FERS annuity (because the total equals 50%, the maximum allowed under FERS).  Two former spouses each could not be awarded a FSSA that is 40% of the employee’s FERS annuity (because the total exceeds 50%).  More importantly, if OPM previously accepted a court order that directed the maximum percentage be paid to a prior former spouse, then there is nothing left to share with another possible beneficiary.  The key take-away is that—once the divorce decree is finalized—don’t delay in completing and filing the post-divorce paperwork with OPM.  It’s not unheard of for a former spouse or attorney to get sidetracked and not file the paperwork until years after the divorce.  That could be a costly mistake since the early bird may get the entire worm. 
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6.  FERS Annuity & FSSA: Cost of Living Allowances (COLAs)

 Cost of Living Adjustments Prevent Erosion of Purchasing Power

A decree that awards a portion of the FERS annuity (regular or disability) or Former Spouse Survivor Annuity (FSSA) doesn’t need to order that the former spouse receive a proportional share of any and all COLAs—but it never hurts to say so.  Under default rules, proportional COLAs will be applied to the former spouse’s share of the employee’s annuity and any FSSA unless the court order directs that they be excluded.  COLAs remain important because they help prevent an erosion of purchasing power. 
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7.  FERS Annuity: Payments After Former Spouse’s Death

 A Former Spouse’s Death Stops Annuity Payments—But Maybe Not             

Federal law permits payments to continue when the former spouse dies first—but only if the COAP orders that outcome… Failure to plan for the possibility of the former spouse dying before the employee can result in a loss of thousands or tens of thousands of dollars of benefits over which the now-deceased former spouse could control distribution.

The default rule in Federal law is that payments to the former spouse end if he or she dies before the employee.  The former spouse’s share of the annuity reverts back to the employee.  That outcome obviously benefits the employee.  If the former spouse’s attorney is paying attention, however, then he or she should know that Federal law permits payments to continue when the former spouse dies first—but only if the decree orders that outcome.  In other words, Federal law permits­ payment to continue until the employee’s death if the decree orders that payments be made to either a child or children of the marriage or to the former spouse’s estate.  If payments are ordered to the estate, then a deceased former spouse could redirect them as he or she intended via an estate planning tool such as a Trust. 

Don’t Confuse This Provision with the FSSA

Do not confuse this provision with a former spouse survivor annuity (FSSA).  The FSSA operates exactly opposite of this provision.  Remember, a FSSA’s purpose is to replace the annuity which by law terminates when the employee dies first.  

How Not to Squander Thousands of Dollars

Failure to plan for the possibility of the former spouse dying before the employee can result in a loss of tens of thousands of dollars over which the now-deceased former spouse could control distribution.  This sad outcome is avoidable if the former spouse and attorney are paying attention. 
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8.  FERS Annuity: Refund of Employee Contributions

 What If The Employee Wants to Cash-In the Retirement?             

   
At the Cramp Law Firm, we file a proper and timely application for a share of any refund of retirement contributions any time we represent the former spouse.
 

Federal law permits State courts to award a former spouse a share of any refund the employee may receive from his or her retirement contributions (i.e. FERS payroll deductions).  A former spouse’s entitlement is not automatic.  A few things must happen in proper form and time.  First, the decree must award a percentage of any refund to the former spouse.  Second, the former spouse—or his or her representative (e.g. attorney)—must apply to the Office of Personnel Management (OPM) for the court-awarded share within prescribed timelines.  The application must be accompanied by a certified copy of the decree.  Other certifications must be made in the application by the former spouse as well.  Third, before a former spouse can receive the court awarded share, the employee must have done two things: (a) separated from Federal employment (without retiring), and (b) applied for a refund of contributions.

Filing the Right Paperwork On Time Matters

Applications can and should be filed in a proper and timely manner after the divorce—even if the employee continues his or her civil service.  Upon receipt, OPM will review all applications and inform the former spouse whether: (1) the application has been accepted or reasons for its rejection; (2) OPM has a record of unrefunded contributions for the employee; and, (3) to the extent possible, the formula OPM will use to divide the unrefunded contributions.  If the employee is still serving, OPM also will state the obvious—that a refund cannot be paid unless the employee separates and applies for a refund. 

Cutting Off a “Scorched Earth” Strategy

Federal law permits a State court order to bar any refund of employee contributions (absent further permission from the court) if three conditions are met.  First, the decree must expressly direct OPM not to pay a refund of contributions.  Second, the decree must have awarded the former spouse a portion of the FERS annuity (“pension”) or a former spouse survivor annuity (FSSA)—or both.  Third, payment of a refund would have to prevent a former spouse from receiving a share of the annuity or FSSA to which they are otherwise entitled.  In short, this provision helps prevent an angry employee from pursuing a “scorched earth” strategy.  A “scorched earth” strategy might look like this: (1) the employee is retirement eligible yet intends to separate from civil service without applying for retirement because he or she wants to deny the former spouse retirement benefits awarded in the divorce; and (2) the employee intends to apply for a refund of retirement contributions so he or she can “take it all with them.”  Again, a properly worded decree can prevent that possibility. 
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9.  FERS Annuity: Crediting Military Service toward Retirement

 A Former Spouse Should Get Credit for “Military Time” Too

When the marriage overlapped both military and Federal civil service, a decree should ensure the former spouse gets credit for “military time” too.  Why?  Both the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS) permit military service to be credited toward a civil service retirement.  Generally, employees wishing to credit military service pay a lump sum into the Civil Service Retirement and Disability Fund to avoid a reduction in their CSRS or FERS annuity after age 62.  A military retiree can also waive his or her military retirement paycheck in order gain credit toward a larger Federal civil service retirement.    

There are three scenarios that impact military service credit.  Each scenario has variations and subparts.  This subject is quite complex and trying to absorb it can make the brain hurt.  A qualified attorney can give an idea of what to expect after discussing the specific facts of your case.  Feel free to stop reading this topic here since you’ve got the gist of things. 

Read On Only If You Want Full Details

For those interested in the details, let’s proceed.  What follows is an explanation of the three scenarios with variations and subparts. 

Scenario One

Scenario 1: The Federal employee has prior military service, but did not serve long enough to get a military retirement.  The marriage overlapped some or all of that military service—and now overlaps the employee’s Federal civil service.  The employee may or may not have already applied for—and paid for—the military time to be credited toward civil service retirement.  The employee’s civil service will continue after the divorce because he or she either is not yet eligible or not yet ready to retire.    

Solution 1: The solution has two variations.

(a)    If the employee already has applied and paid for the military service to be credited toward a prospective civil service retirement, the answer is straightforward.  The portion of military service that overlapped the marriage simply factors into the share of the civil service annuity awarded in the divorce decree. 

(b)   If the employee has not yet applied and paid for the military service credit, then the divorce decree should divide both the military and civil service time to the extent that each overlapped the marriage.  The decree should also contain conditional language that preserves the former spouses “marital interest” in the military time should it later be credited toward a civil service retirement.

Scenario Two

Scenario 2:  The employee is a military retiree pursuing a second career in Federal civil service.  The marriage overlapped some or all of the military service.  The marriage now overlaps the employee’s civil service.  The employee, of course, has not yet applied for civil service retirement (because he or she is still working).  The employee currently receives a military retirement paycheck (for being retired) and civil service paycheck (for still working).  In other words, the employee has not yet “waived” the military retirement paycheck in order to credit that time toward a civil service retirement. 

Solution 2:  The solution two subparts and two variations.

(a)    First, divide the military retirement paycheck in the divorce decree according to the length of time the marriage overlapped military service.  The former spouse will receive his or her share of the military retirement paycheck “now” (in reality, starting about 90 days after the Defense Finance and Accounting Service (DFAS) accepts the court order—which requires “gap protection” that we’ve explained in the “Military Divorce” section of this website). 

(b)   Second, divide the Federal civil service retirement annuity in the divorce decree according to the length of time the marriage overlapped Federal civil service.  The former spouse’s share of the civil service annuity is “contingent.”  The employee must later retire in order for the former spouse to receive his or her share. 

(c)    If the employee eventually opts not to have military service credited toward a civil service retirement, then the former spouse should get two retirement paychecks.  One paycheck would come from DFAS for the former spouse’s share of the military retirement.  The other would come from OPM for the former spouse’s share of the CSRS or FERS annuity—after the employee retires from civil service. 

(d)   If the employee eventually opts to “waive” the military retirement paycheck in order to credit military time toward a civil service retirement, then OPM should combine the two awards automatically.  What would trigger OPM to combine the two awards?  Federal law prohibits a retired servicemember from “waiving” his or her military retirement paycheck in order to credit military service toward a civil service retirement—unless the employee consents to OPM paying the former spouse the same amount he or she was entitled to receive from DFAS.  For safety’s sake, the divorce decree should reserve jurisdiction to enter any “clarifying order” that may be necessary to help OPM sort things out and combine the two awards.

Scenario Three

Scenario 3:  The employee has already retired from Federal civil service and is receiving an annuity paycheck from OPM.  The employee previously served in the military—and may or may not be a military retiree. 

Solution 3:  The solution has four variations.

(a)    First, if the civil service retiree is not also a military retiree—but his or her military service was credited previously toward the civil service retirement—then the answer is straightforward.  The military time is simply factored into the former spouse’s court-ordered share of the civil service retirement to the extent the marriage overlapped both military and civil service. 

(b)   Second, if the civil service retiree is not also a military retiree—yet the employee’s military service time was never credited toward the civil service retirement—then the former spouse’s contingent interest in the marital share of the military time is lost.  It evaporated.  The civil service retiree opted to receive no benefit from his or her military time.  The former spouse will receive no benefit as well.  

(c)    Third, if the civil service retiree is also a military retiree and receiving two retirement checks at time of divorce—a military retirement paycheck from DFAS and civil service paycheck from OPM—then each of the two retirements gets divided according to the extent the marriage overlapped military and civil service.  The former spouse will receive two retirement checks, one from DFAS and one from OPM. 

(d)   Last, if the civil service retiree is also a military retiree who previously “waived” the military retirement paycheck in order to credit military time toward his or her civil service retirement, then the military time is simply factored into the former spouse’s court-ordered share of the civil service retirement to the extent the marriage overlapped both military and civil service

Congratulations to all those who hung in!  As forewarned, it’s easy to see that crediting military service toward a civil service retirement involves a complex set of issues.  That’s why a soon-to-be former spouse should ensure they hire a knowledgeable attorney who can navigate these complex waters safely for them.  Contact the Cramp Law Firm if you need us.
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10.  Thrift Savings Plan (TSP) 

What’s TSP?

TSP offers Federal employees (and military servicemembers) the same types of retirement savings and tax benefits offered by private employers in the form of 401(k) plans.  TSP offers no guaranteed payout at retirement.  Employees contribute a portion of their pay into one of several TSP investment funds—which are similar to mutual funds.  The fortunes of the investment marketplace determine how much will be available at retirement.  Since it is possible for a civil service employee to have more than one TSP account (because they may have multiple beneficiaries), it is important to identify specifically which account or accounts are being divided in divorce.

Avoid a Costly Mistake

Sometimes TSP gets overlooked in divorce because of the intense focus on dividing the Civil Service Retirement System (CSRS) or Federal Employee Retirement System (FERS) annuity—commonly called the pension.  Overlooking TSP could cost a former spouse thousands or tens of thousands of dollars in lost assets.  

Dividing TSP is Unique

TSP requires its own unique language in the decree to divide TSP assets.  Unlike private employer plans, TSP is not governed by the Employee Retirement Income Security Act (ERISA).  Thus, the language that most attorneys and courts are familiar with for ERISA plans will not work when dividing TSP.  A knowledgeable attorney can navigate these complex waters safely and efficiently for a former spouse. 

Avoiding a “Raid” on TSP Funds

If warranted, it is possible to freeze the employee’s TSP account(s) via a temporary court order.  Freezing the account(s) makes it impossible for the employee to make withdrawals or obtain loans against TSP funds before the divorce is finalized.  Preventive action such as this can preserve significant amounts of money for a former spouse—and avoid more costly, messy legal battles. 
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11.  Federal Employees Health Benefit Program (FEHBP)

How to Facilitate Federal Health Insurance for the Former Spouse

Federal law permits a former spouse to enroll in the FEHBP in their own right if they meet the “spouse equity” requirement of the law.  Basically, four requirements must be met:

  1. The former spouse must be covered as a family member under the employee (or retiree’s) FEHBP enrollment for at least one day during the 18 months prior to divorce;
  2. The divorce decree must have awarded the former spouse either a portion of the employee’s civil service retirement annuity (“pension”) or former spouse survivor annuity (FSSA)—or both;
  3. The former spouse must apply for FEHBP—within 60 days after divorce—by sending written notice of desired enrollment under the “spouse equity” provision to the “agency employing office” (i.e. the actual agency where the employee actively works or the Office of Personnel Management (OPM) if the employee already is retired); and,
  4. The former spouse must not remarry prior to age 55

The Former Spouse’s Premiums Will Be Higher

A former spouse who enrolls in their own right must pay both the personal share of the premium and the share normally paid by the Federal Government for employees.  That’s not a small matter since the Federal Government pays about 72% of the total premium for employees.

Other Options May Apply

A soon-to-be former spouse can get information on other health coverage options from the “agency employing office”  (again, the actual agency where the employee actively works or the Office of Personnel Management (OPM) if the employee already is retired). 

The Former Spouse May Not Need to Pay the Family Premium

A former spouse who meets the “spouse equity” requirements has the option of electing “family coverage” for themselves and eligible children.  Electing and paying for family coverage generally proves to be an unnecessary extra expense for a former spouse.  Federal law permits a State court to order the employee to continue coverage under the employee’s FEHBP policy for eligible children of the marriage. 
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12.  Federal Employees Dental and Vision Insurance Program (FEDVIP)

Dental and Vision Insurance is Possible for Children

A former spouse is not eligible for FEDVIP even if a State court order gives them eligibility for medical insurance under the Federal Employees Health Benefit Plan (FEHBP).  Also, Federal law prohibits the employing agency from forcing the employee to cover eligible children under the employee’s FEDVIP policy—but that’s not the end of the story.  A State court can order coverage for eligible children.  But, the State court would have to use its power to hold the employee in contempt, if necessary, for any failure to comply. 
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13.  Federal Long Term Care Insurance Program (FLTCIP)

No Federal Long Term Care Insurance for a Former Spouse

A former spouse is not eligible for FLTCIP even if a State court order gives them gives them eligibility for medical insurance under the Federal Employees Health Benefit Plan (FEHBP).  
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14.  Federal Employees Group Life Insurance (FEGLI)

The Amount of Life Insurance Can Vary

FEGLI consists of the Basic Insurance and Options A, B and C.  The amount of basic insurance is tied to a percentage of the employee’s pay.  Options A and B provide additional coverage on the employee’s life.  Option C provides coverage for a spouse and eligible children.

Federal Life Insurance Can Be Assigned to a Former Spouse “Forever”

Federal law permits an employee to make an irrevocable assignment of his or her FEGLI coverage.  An irrevocable assignment is a really big deal.  “Irrevocable” means that once the assignment is made, the transaction cannot be undone by the employee—ever.  An irrevocable assignment can be made, for example, to a former spouse or Trust (such as for the benefit of the children of the marriage). 

Assignment Cannot Be Piecemeal

An assignment cannot “pick and choose” or “split” options.  Federal law prohibits an employee, for example, from assigning the Basic Insurance to a former spouse while retaining Options A and B for themselves.  Assignment of any one option includes all options—other than Option C.  Federal law prohibits assignment of Option C, which you recall is life insurance on a spouse and eligible children.

Irrevocable Assignment Can Be Ordered by a State Court

Next is a subtle yet important twist.  Federal law permits a State court to order the employee to make an irrevocable assignment as part of a divorce decree.  Federal law, however, does not require the employing agency or OPM to force the employee to comply.  A State court must use its own power to hold the employee in contempt, if necessary, to ensure compliance with any court-ordered irrevocable assignment.      

How an Irrevocable Assignment Differs from a Designation of Beneficiary

It’s critically important to distinguish an “irrevocable assignment” from a “designation of beneficiary.”  With an irrevocable assignment, the employee relinquishes ownership and control of the policy.  The person to whom the assignment is made is called the “assignee.”  The assignee gains the power to alter or cancel the policy, or change the beneficiary designation.  Since FEGLI is group term insurance, the policy does not build up any cash value.  Thus, a former spouse who becomes an assignee cannot “cash in” the policy. 

Almost everyone is familiar with a designation of beneficiary.  Typically, the employee owns the policy and simply designates the person or persons to who will receive payment of the insurance proceeds upon their death.  The employee can cancel the policy or change the beneficiary designation any time.  Federal law prohibits a State court from ordering an employee to make any particular beneficiary designation.  Any language in a State court order that attempts to do so is unenforceable at both the Federal and State levels. 

From a soon-to-be former spouse’s perspective, irrevocable assignment is the way to go if the court can be convinced to order it.

Possible Estate Tax Consequences

An irrevocable assignment may have estate tax consequences.  “Estate tax” consequences should not be confused with “income tax” consequences.  There are no income tax consequences affecting payment of life insurance proceeds.  Under Federal estate tax law, however, the value of an existing life insurance policy is counted as part of the policy owner’s gross estate upon the policy owner’s death.  If the employee dies within three (3) years of making an assignment, the policy’s value will still be counted as part of the employee’s gross estate even though the employee doesn’t technically own the policy at death.  We could explain the rationale behind this quirk in the law, but it’s probably more than you care to know.  Ask and we’ll be glad to explain it if you’re interested.      
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15.  Filing Applications and Court Orders with OPM             

We leave nothing to chance at the Cramp Law Firm.  We file proper and timely applications and COAPs with OPM whenever we represent the former spouse…We do not burden a former spouse client with these critical

The Decree Is Only the First Step 

For a former spouse, getting valuable benefits ordered in your divorce decree is an important step—but not the only step required to realize the benefits.  Some benefits also require that a proper and timely application (which includes a certified copy of the court’s order) be filed with the Office of Personnel Management (OPM).  This can be done by a former spouse or attorney.

We Unburden Former Spouse Clients

We leave nothing to chance at the Cramp Law Firm.  We file proper and timely applications with OPM whenever we represent the former spouse.  We also ensure confirmation of receipt and acceptance for our former spouse clients.  We do not burden a former spouse client with these critical tasks.  Rather, we do the paperwork and follow-up for our former spouse clients because it’s the right thing to do—it provides maximum value and peace of mind from our services.

The Former Spouse Must Apply for Federal Health Insurance

There a just a few things a former spouse must do themselves, such as applying for FEHBP coverage within 60 days of the divorce decree.  We can assist by providing former spouse clients with a “post-divorce checklist” of items to consider and tasks to accomplish.  We’re glad to help.