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FLORIDA – DIVORCE – FEDERAL RETIREMENT BENEFITS (FERS)
DRAFTING GUIDANCE – SURVIVOR ANNUITIES

ACTIVE EMPLOYEE - MORE THAN TEN YEARS OF SERVICE

Subject:

Negotiation of Death and Survivor Annuity Benefits of an Active FERS Employee.

This article is limited to divorce involving a FERS employee that meets the following criteria:

  • An active FERS employee having more than ten years of credited federal service at the time of divorce.

DEATH AND SURVIVOR BENEFITS

Benefit – Part One:

Basic Employee Death Benefit (BEDB). 1

  • 50% of the employee's final salary (average salary, if higher), plus
  • For 2014, a lump sum payment of approximately $32,000.00. 2

ATTORNEY ALERT:

Unlike the Survivor Annuity Benefit, the Basic Employee Death Benefit is available to active employee's with not less than eighteen months federal service. This benefit is not available to retired employees.

For active FERS employees with more than ten years of credited federal service, there is an additional Benefit.

Benefit – Part Two:

Former Spouse Survivor Annuity.

The maximum Former Spouse Survivor Annuity is 50% of the member's or retiree's Basic Annuity. 3 4

1 Available to a Former Spouse married to an Active FERS employee for more than nine months. At the time of the employee's death this employee had not less than 18 months of credited federal service.

2 Increased annually by COLA.

3 This is a "fractional" survivor benefit. The maximum is 50% of the Basic Annuity. But, it can be a lesser percentage of the Basic Annuity.

4 This comment is limited to the FERS Plan. Do not generalize from this comment as to the size of a Survivor Annuity under an ERISA Plan.

Eligibility for a Former Spouse Survivor Annuity.

To be eligible for a Survivor Annuity the Former Spouse was married to an active FERS employee who had not less than ten years of credited federal service. Former Spouse eligibility requirements:

  • Married to active employee for nine months
  • Active employee with more than ten years of service. 5

Survivor Annuity Paid Upon the Death of an Active Employee.

A monthly annuity not greater than 50% of the benefit that would be payable to the Employee, had this individual retired on the date preceding her or his date of death. This calculation is be made without reference to:

5 U.S.C. 8412(h)

Meaning, the calculation will be made without reference to the employee attaining her or his "Minimum Retirement Age" (MRA).6 Had a living employee retired prior to attaining MRA the annuity would be subject to an Early Retirement Reduction Percentage. Death of an active employee is not subject to this Reduction.

Clarification and Caution:

The discussion that follows is for information and education purposes. The fact that it is supportive of the Employee Spouse is not intended to indicate that the author is advocating this position. Rather, it is our intent to present material that is of interest to both the attorney representing the Employee

Spouse and the attorney representing Former Spouse.

The informed Florida attorney representing the Employee Spouse will seek to limit her or his survivor annuity negotiations to the ambit of current

5 The length of marriage requirement is 9 months, not 10 years. See 5 U.S.C. 843.102.

6 Your MRA is

Born Before 1948 55

In 1948 55 and 2 months

In 1949 55 and 4 months

In 1950 55 and 6 months

In 1951 55 and 8 months

In 1952 55 and 10 months

In 1953-1964 56

In 1965 56 and 2 months

In 1966 56 and 4 months

In 1967 56 and 6 months

In 1968 56 and 8 mo.

In 1969 56 and 10 months

In 1970 and after 57

Florida case law. Thus, she or he will give strong consideration to the language (and limitations) of Boyett (703 So. 2d 451).

In this endeavor the Florida attorney representing the Employee Spouse will avoid conflating the Boyett formula which deals with the measurement of the retirement annuity to be paid to a Former Spouse subsequent to the retirement of the employee with an Survivor Annuity paid as a result of the death of the active employee. What is emphasized in this article is:

Regarding the assignment of benefits to a Former Spouse, Florida attorneys recognize that separate and distinct calculations are required to measure and award to a Former Spouse:

  • Retirement Annuity
  • Survivor Annuity

The attorney representing the Employee Spouse will treat these unique benefits separately.

Be Clear!

The "Marital" portion of any Former Spouse Survivor Annuity will be not greater than half the size of the Retirement Annuity award to this Former Spouse. Reason: the maximum Former Spouse Survivor Annuity is 50% of the employee's (decedent's) Basic Annuity.

What is emphasized in this article is:

The procedure to measure the Former Spouse's Survivor Annuity award should not the same as the procedure to measure the Former Spouse's retirement annuity.

For the statistics used in the illustration that follows see Appendix "A". Found at the end of this article.

Step I.

Illustration of Calculation of the Marital Retirement Annuity. 7

Given:

7 For all calculation illustrations, the symbol "*" means "multiplied by".

Based on the data provided at Appendix A, calculations are made in a manner consistent with the Boyett decision (703 So. 2d 451).

Total Monthly Accrued Benefit: $1,642.74

(1.1% * 24 years * $74,670.00) ÷ 12 = $1,642.74

Coverture Fraction: 87.5%

Numerator: 21 years

Denominator: 24 years

Marital Monthly Accrued Benefit: $1,437.40

($1,642.74 * 87.5% = $1,437.40)

Step II.

Illustration of Calculation of the Boyett Former Spouse Survivor Annuity.

Begin with the Boyett Marital Monthly Accrued Benefit: $1,437.40 8 The Former Spouse Survivor Annuity is 50% of the Retirement Annuity. Therefore the maximum Former Spouse Survivor Annuity in this matter is: $1,437.40 * 50% = 718.70

Clarification of Above Calculation.

Full Monthly Marital Annuity: $1,437.40

Assume Half awarded to Former Spouse: $718.70

Survivor Annuity is Half of Monthly Annuity: $359.35

Alternate Outcome When Attorney Representing the Employee Spouse is Less Informed.

Full Monthly Marital Annuity: $1,437.40

Assume Half awarded to Former Spouse: $718.70

Survivor Annuity is Half of Monthly Annuity: $718.70

In effect this alternate outcome results in the Former Spouse receiving a 100% Survivor Annuity.

Commentary.

The informed attorney recognizes that the Retirement Annuity and the

8 Recall, this is the total monthly annuity multiplied by the Coverture Fraction.

Former Spouse Survivor Annuity are not identical. The Survivor Annuity Maximum is 50% of the Retirement Annuity. This Ratio must be maintained when assigning Retirement Assets of a Defined Benefit Plan. Since this article is intended for information and education, it is not for the author to state that these are the maximum benefits that may be paid to the Former Spouse of a FERS employee.

APPENDIX [A

Employee

Dan Wishbone

Date of Birth

3/1/1967

Date of Marriage

3/1/1992

Date of Hire

3/1/1989

Date Action Commenced (9)

3/1/2013

Valuation Date (VD)

3/1/2014

Valuation Date Age

47

Life Exp @ VD

32

Coverture Fraction

87.5%

Numerator

(yrs. of service while married)

21

Denominator

(total service to end of marriage date)

24

Normal Retirement Age

60

Annual Benefit Accrual Rate

1.1%

Final Avg. Pay

$74,670.00

Mo. Benefit at 3/1/2013

$1,642.74

Marital Mo. Benefit 3/1/2013

$1,437.40

9 End of Marriage Date, for this illustration.