Dividing FERS Retirement Plans

In a case that predates Alabama’s statute on the division of retirement plans (Ala. Code § 30-2-51(b)), the Alabama Court of Civil Appeals has affirmed the trial court’s analysis of the division of a Federal Employees’ Retirement System (FERS) plan in divorce. In Harmand v. Harmand, Case No. 2040365 (Ala. Civ. App. November 23, 2005), the Appeals Court rejected the husband’s argument that federal law preempted state law, his argument that it was impermissable to make him the payor of benefits to the wife, and that it was impermissable to require that he make payments without discounting them for taxes incurred.

The parties divorced in 1995, before the effective date of the retirement division statute on January 1, 1996. The Appeals Court therefore ruled that the statute does not apply to this case. The parties had reached agreement in their divorce and had provided that the wife was to receive 1/2 the husband’s FERS retirement plan and that, if necessary, the parties would cooperate to submit a Qualified Domestic Relations Order (QDRO) to FERS. The parties did in fact submit and implement a QDRO providing that the wife was entitled to 50% of the husband’s gross monthly annuity under the Civil Service Retirement System.

The husband worked eight more years under his FERS plan before he retired. Upon his retirement with a gross monthly benefit of $1,014, the United States Office of Personnel Management (OPM) calculated that the wife’s “pro rata share” (taking into account the period of the marriage in relation to the total period of the husband’s employment) was 29.23% rather than 50%. Thus, her benefit from OPM was not $507 per month but only $296.39 per month.

When the wife filed a contempt petition, the trial court heard evidence ore tenus and ordered that the husband pay the wife an extra $210.61 to make up the difference in what the court had ordered and what FERS was paying. The trial court also ordered the husband to pay back the intervening shortfall at the rate of $100 per month.

The husband argued on appeal that federal law preempts state law and that the state court lacked authority to order the husband to pay the wife 1/2 his retirement plan, because this division exceeded the wife’s “pro rata share.” The Appeals Court examined the husband’s argument at length and determined that federal law expressly allows for decrees from state courts to determine the division in divorce of federal employment plan benefits.

The husband also argued that he should not be required to serve as payor to the wife. The Appeals Court rejected this argument too, pointing out that (a) there was nothing in the decree to preclude the husband’s serving as payor and (b) the husband had an administrative remedy available to him, namely that of submitting a revised QDRO to OPM that would accomplish the parties’ and the court’s original intent of a 50% benefit to the wife.

Finally, the husband argued that it was impermissable of the trial court to require him to deliver tax-free to the wife a benefit on which he had already paid income tax. The Appeals Court noted that (a) there was nothing in the record demonstrating the calculation methodology of OPM in withholding taxes, and (b) again, the husband could solve this problem by submitting a revised QDRO.

17 comments

  1. Michael says:

    Thank you for your time.

    I retired under FERS in 1996. No deposits or withdrawals have taken place since that time. I married in 2003 and unfortunately it looks like we my be divorceing. During our marriage my wife’s income has always been equal to or greater than mine. Any idea what my chances might be in keeping my FERS retirement.

    Thanks again.

    Michael

  2. Lee Borden says:

    I assume this divorce would be in Alabama. If so, your chances are excellent. Judges lack the authority to transfer retirement plans after a marriage of less than 10 years.

  3. Pat Clemons says:

    I have a husband who is retiring in two months. Would I be better off divorcing him before or after he retires?

  4. Lee Borden says:

    I’m not sure it matters at this point. His retirement seems already scheduled, so I would be surprised if it makes a big difference in the way the judge looks at all of this. The one thing that occurs to me is that if you are planning on sharing his retirement, it might be smoother for the two of you to structure the terms of your divorce before he makes the election about his form of benefit (single life annuity, joint/survivor annuity, etc.).

  5. mike says:

    i am in tennessee, married 5.1/2 years. have 85,000 in a fers retirement 401k at the post office.

    if i divorce her now, will she get any of this money, or half of what i contributed since i married her
    may 29, 2004???

  6. Lee Borden says:

    I’m not knowledgeable about TN law. In my state she would not receive any of your retirement, although the judge could take into account the enrichment of your retirement during the marriage to allocate the other assets and debts of your marriage.

  7. mike says:

    lee
    mike again.

    its my understanding that the tsp office does not accept qdro’s
    the court order must be specific and it is very strict with a time element.
    it has enriched from 29,000 to about 84,000 where it sits today.
    about 6,000 in debts i have.
    i do not know what surprises await when they pull her credit history to see what debts she has since we married.
    i could be in for a surprise.
    i know she does not have any credit, since her last husband in 1999 she committed credit card fraud and forgery
    and taking his pre marital assets etc.
    i pay the mortgage on the house, her name is only on the deed, her contribution throughout the marriage is zero
    on anything.]
    she claims she wants the house and half my assets.
    there are no other assets except my paycheck.
    i have 485k in trust assets in a revocable living trust which is all inherited money and money from prior to the
    marriage.
    part of this inherited money went in a joint account, 170k for only about 1 month and two weeks as a pass through
    back to the trust.
    i did not have a single account to put the inherited money into at the time, and so it went temporarily in there
    for 6 weeks.
    My wife and her lawyer can make a claim i commingled it, however this is inherited money that was left to me
    despite what i did, and it went back to the trust, so i do not feel they could win and claim half of that, do you??

    also the interest i receive from the assets pays the mortgage on the house, however i still am not commingling
    money because the principal and the interst it generates is two separate entities that are not being mixed up.

    i have repeatedly asked her to get a job over the 5.5 years of our marriage, however she refuses because she
    is highly co dependent and cannot function on her own without me giving hewr money all the time, and im tired
    of this being the reason for the marriage, to be taken advantage of and used.
    therefore i hope i can get a lawyer who makes sure she gets no alimony either.

    your thought on all this???

    awaiting youyr reply

  8. Lee Borden says:

    My thoughts are that you are choosing to provide to your wife’s lawyer, your next door neighbor, and the world an astonishing amount of confidential personal information about yourself and your case. I fear you will later regret sharing so freely.

  9. mike says:

    Lee

    your reply is not what i asked. Please reanswer the questions if you would.
    all is subject to change. i did not expect,nor do i believe,nor do i appreciate that posting
    No i will not regret anything, i did no wrong, i will not pay a price for doing nothing wrong.

  10. mike says:

    Mr Borden

    You started out OK, but after this last posting, your reply was an attack.

    Now you have silenced! Why???

    For your information, anyone who marries in my opinion is a fool. I guess i was a fool. Marriage for me serves
    no purpose other than to provide the legal system and the lawyers a chance to financially destroy men
    for relationships that dont work.

    I vow to write the lawmakers overseeing domestic law and the president of the United States to overhaul
    the Marital Domestic Laws for the 50 states to comply all the same. and change a number of the equations,
    factors, and rules on property and assets distribution.

    Men will not get taken to the cleaners once this all goes down.

    You know as well as i do Divorce Lawyers financially rape their clients, as you are all the highest paid
    Lawyers. It makes me mad to see the laws allow divorce lawyers to steal all their clients money because two
    people made a mistake and need to move on.

    Divorce is a dirty business and does not need to be, but the laws allow you all to set the rules and
    charge a fortune for repair of the problem, rather than charging a reasonable fee and helping two people
    get their lives back together.

    Mr Borden, you have not anywhere near said all you know, you have just silenced because you have no good
    comeback and are caving in. You simply choose not to answer. When the going gets tough, the tough get going!!!

    Your first posting was good, this last one i dont know, you developed an attitude in your reply, and did not
    answer the questions i asked. says something about you, doesnt it. Your nose is in the air my friend.

    Can you take it pal so far.

    Getting tough aint it!

    Care to reply, and by the way if you cant reply nicely this next go around, then as you said, you said all you know
    or intend to say, and let me add to this, that it is not saying much and your useless.

    As far as im concerned, you can delete your website and your Blog and make it disappear for all i care, and do
    everybody a favor, get it, and may the visitirs her get it.

    Care to reply

  11. Phil says:

    Lee. I live in Alabama. Married for 7 1/2 years. Wife never worked, ever. No children. No debt. All money is in her/his Roth IRA and taxable investment account. Rest of assets are my FERS retirement. I.E. FERS annuity, SS, and TSP. I have only been a Fed employee for two years. Rest of time was military, and I bought by military “years” to contribute towards FERS retirement annuity percentage.

    Question: If I divorce in the State of Alabama, I understand there is an equitable distibution law if both parties can not decide terms of divorce. I understand I would give my wife half of our “monies” in terms of taxable accounts and Roth IRA’s. Correct?

    What does she get from my FERS though? Is she entilted to part of the annuity, SS, and TSP?

  12. Lee Borden says:

    In an adversarial divorce after a marriage of less than 10 years, the judge has no authority too allocate retirement plans; they’re off limits. Of course, the parties are free to do what they wish in an uncontested divorce, including moving retirement plans around.

  13. Debra says:

    I live in California and was married for 15+ years. I worked the whole marriage but did not have a retirement. He did and during the process of the QDRO for the TSP it was discovered he also had a FERS. Not wanting to delay the divorce that was to finalize in a week AND not wanting to delay the QDRO (I needed my share of the TSP to pay bills) I was informed by the Mediator and the QDRO attorney that I could go back later and file a COAP.

    The other day I read something on the Internet (that I can no longer locate) that stated if a divorce is final I will not be able to have the COAP and have lost the chance to receive benefits. Did I read this wrong? The mediator does not seem familiar with the OPM rules.

    Also since I found out about the non-disclosed FERS I have been torn about taking 1/2 of his Pension after getting 1/2 of the TSP. I had believed that if I remarried I would not be entitled to benefits after he retires. I figured that was okay since I wouldn’t be retiring on my single status savings. But I just found out that is not the case because I am 60 not 55 years. Is there a way to apply for it now but elect not to take my portion once he retires if I do not need it?

  14. Lee Borden says:

    The question you ask does not depend on FERS; it’s one of state law. I can’t speak for CA. In my state, you would no longer be able to seek a share of your Ex’s retirement. The answer for your Ex’s pension is going to be the same as that for the FERS plan.

  15. Jim says:

    FERS, TSP.. Married 15 years in TX. After everything gets split up… If you remarry for a number of years would the current wife get anything? It kinda sounds like everything always accumulates to the ex even though you would add more retirement years ect., additional TSP contributions…

  16. Lee Borden says:

    I THINK you’re asking about a case where a plan participant has divorced after a lengthy marriage and has shared his or her retirement with the other spouse, and then subsequently marries another spouse. I think your question is whether the second spouse is eligible to share in the retirement plan of the participant in a subsequent divorce. I can’t speak for your state, but in mine, if the second marriage were of the length that would support division of a retirement plan (10 yr. or more), the portion of the retirement plan that accumulated during the marriage would be a marital asset and available for division in a divorce.

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