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FEDERAL EMPLOYEES RETIREMENT SYSTEM (FERS)

DIVORCE

NEGOTIATING AND AWARDING SURVIVOR BENEFITS

FLORIDA ONLY

This article seeks to acquaint attorneys with the consequences of incautious negotiation and allocation of Survivor Benefits to a Former Spouse of a Federal Employee (FERS) incident to divorce. [1]

The analysis in this article drew upon the Florida Supreme Court's language found in Boyett (703 So. 2d 451):

[W]e believe that this [settlement] gives effect to the statutory definition of marital assets in section 61.075(5)(a), Florida Statutes (1993), n3 and to section 61.076(1),

Significantly §61.076(1), provided:

[D]istribution of retirement plans upon dissolution of marriage.—

(1) All vested and nonvested benefits, rights, and funds accrued during the marriage (emphasis mine) in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs are marital assets subject to equitable distribution.

Issue:

Based on the phrase "accrued during the marriage" what is the "appropriate language" that is to be inserted into the Marital Settlement Agreement and COAP in order to implement attorney intent regarding the Former Spouse Survivor Annuity (FSSA)?

Be clear: Uninformed drafting is likely to result in unintended Office of Personnel Management (OPM) interpretations of attorney settlement language?

This article suggests that "appropriate language" is often subject to federal interpretation by Office of Personnel Management (OPM). Attorneys are urged to use caution, confirming that their Florida terminology is consistent with Federal Terminology. When language requires clarification the federal interpretation prevails.

FOCUS.

The Former Spouse Survivor Annuity (FSSA) available upon the divorce of a FERS employee.

The Basic Facts for this Discussion are as Follows.

FERS Employee Listajo Pacaro

Date of Birth 6/1/1971

Date of Marriage 6/1/1996

Date of Hire 6/1/1997

Date Action Commenced 6/1/2014

Valuation Date 6/1/2014

Valuation Date Age 43.00

Time in Plan (Married) 17

Total Time in Plan at Divorce 17

Note the Full Benefit was acquired

during the marriage, thus the

Coverture Fraction is 100%

Based on the above Fact Pattern.

Total Monthly Benefit at Divorce $1,100.00

Half of Monthly Benefit to FS $550.00

Commentary:

This article presumes Boyett controls. Thus the benefit of the Former Spouse is fixed at either:

  • Date Action For Divorce Filed
  • Date of Divorce

Based on the above fact pattern the Fixed monthly benefit payable to the Former Spouse is: $550.00

Now that the Former Spouse's pension (living benefit paid over the lifetime of the retiree) has been established, it becomes necessary to consider the survivor annuity benefit award to this Former Spouse.

Size of the Former Spouse Survivor Annuity Award.

By Statute: The maximum FSSA award is 50% of the Retiree's Basic Annuity. Alternatively, the FSSA may be any monthly sum not less than $1.00. [2]

Discussion.

From the above data, Assume the Former Spouse's monthly pension award is $550.00.

Then The Difficult Issue.

Based on the above fact pattern how shall the monthly pension award of $550.00, be equated to a survivor annuity award? [3]

Argument of attorney representing Former Spouse.

The FSSA should be equal to her pension benefit. Thus, in this matter the FSSA is $550.00

Argument of attorney representing FERS Employee.

Since the monthly pension award to this FS is $550.00, and by definition the maximum FSSA is 50% of the retirement annuity, it follows that the equated FSSA in this matter is:

Full Spouse Annuity: $550.00

50% of Full Spouse Annuity: $275.00.

WHAT IF.

The attorney representing Former Spouse suggests that the language to give the FS her equated FSSA that the FS simply be awarded a "prorata" share of the FSSA. The less knowledgeable the attorney representing the Employee Spouse perceives this language to be consistent with her argument and agrees.

Was this an equitable compromise?

Consider the Following Scenario.

  • Listajo Pacaro remarries on June 1, 2015
  • Listajo Pacaro designated his new wife to the balance of his survivor annuity benefit not paid to his first wife.
  • Listajo Pacaro dies on June 1, 2018.

His pension status on June 1, 2018.

Total Monthly Accrued Benefit on 6/1/2018 $1,694.00

Recall, both attorneys accepted the idea of a "prorata" FSSA as fair and equitable. How will OPM interpret this term? [4]

OPM Calculation of "prorata" FSSA. [5]

Total Years Married and in FERS 17 Years

Total Years of Service at Death 21 Years

Total Monthly Benefit At Death $1,694.00

(1.1% * 21 * $88,000)/12

Maximum FSSA at Death $847.00

($1,694.00 * 50% = $847.00)

Prorata Percentage 80.95%

(17 ÷ 20 = 80.95%)

Prorata FSSA Paid to FS $686.00

($847.00 * 80.95% = $686.00)

Expectancy of Wife # 2 $572.00

Actually Paid to Wife #2 $161.00

Reaction:

The attorney representing the Employee Spouse thought the result would be a monthly FSSA of: $275.00

The attorney representing Former Spouse may have thought otherwise.

Result:

The unanticipated percentage of increase in the benefit paid to the FS based on use of the term "prorata" 149%

The unanticipated percentage of decrease in the benefit paid to Wife #2 based on use of the term "prorata" 71.79%

Wife # 2 has a pension expert compute the

present cash value of her "lost" survivor annuity $116,355 [6]

Comment.

The Office of Personnel Management (OPM) interprets the language of the Court Order Acceptable for Processing (COAP) based on the language in the Florida Order as understood by OPM (based on the C.F.R). [7]

The informed attorney representing the FERS employee avoids insertion of language in the Marital Settlement Agreement (as provided above) and ensuing COAP that could be interpreted by Office of Personnel Management to award the Former Spouse the Full Former Spouse Survivor Annuity. Instructive of unintended drafting against Federal Benefits is the Perry Decision; 243 F.3d 1337.



[1] A FERS participant is a Federal Employee whose Service Computation Date (SCD) is after December 31, 1983.

[2] See 5 U.S.C. 8442(b) and Title 5 C.F.R. 838.921.

[3] For ease of discussion: "Pension" shall mean benefit paid while the retiree is alive. "Survivor Annuity" shall mean the benefit paid to the FS subsequent to the death of the retiree.

[4] See 5 C.F.R. 838.922.

[5] Prorata share means the fraction of the maximum survivor annuity allowable under §831.641 or §842.613 of this chapter whose numerator is the number of months of Federal civilian and military service that the employee performed during the marriage and whose denominator is the total number of months of Federal civilian and military service performed by the employee.

[6] Based on a 5% interest assumption and life expectancy of 37.7 years.

[7] A COAP is the federal equivalent of a QDRO.