Federal Employees are eligible to receive a retirement benefit known as the FERS Program (Federal Employees Retirement System). The GS employee retirement is, for many, their largest asset. (Click this link for the OPM retirement benefits webpage: https://www.opm.gov/retirement-center/.) Under New York divorce law, FERS may be subject to equitable distribution. How much is going to be divided in the divorce depends on several factors. In this article, we will explore divorce and federal employee retirement benefits.
Table of Contents
Introduction to FERS Program
The FERS program stands for the Federal Employees Retirement System and is the retirement system for most GS employees. It includes three components: a basic benefit plan, Social Security, and the Thrift Savings Plan (TSP). The FERS basic benefit plan is the largest component of the FERS retirement system. It provides an annuity benefit based on your years of service, your high-3 average salary, and the age at which you retire. Click here for OPM’s FERS Retirement Guide
How is FERS Calculated?
The amount of your FERS retirement benefit is determined by a formula that takes into account your years of service, your high-3 average salary, and your age when you retire. To calculate your FERS program benefit, you’ll need to determine your high-3 average salary and then use a FERS benefit calculator to calculate your benefit amount. The Official of Personnel Management has a website that provides some useful information about FERS. https://www.opm.gov/retirement-center/fers-information/
How is the High-3 Average Salary Determined?
Your high-3 average salary is the average of the three highest years of your salary over the course of your federal employment career. To determine your high-3 average salary, you’ll need to look at your pay stubs and then calculate the average of the three highest years.
Dividing FERS Retirement Benefits in a Divorce
Federal employees who are going through a divorce in New York should be aware that their FERS retirement benefits may be subject to division. Under federal law, a qualified domestic relations order (QDRO) can be used to divide FERS benefits in a divorce. A QDRO is a court order that assigns a portion of the benefit to the former spouse.
Under New York Divorce Law, FERS program will be divided according to the Majauskas Formula. The court will divide the years of marriage, by the number of years participating in FERS. That number is the marital percentage. Generally, the courts will award half of that percentage to the other spouse.
For example, if there were 20 years of marriage, with 20 years of overlapping participation in the FERS program, the marital percentage is 100% and the spouse gets 50%. If there were 10 years of marriage with 20 years of service, the marital percentage is 50% and the spouse gets 25%.
For more information on property division in a divorce click here.
Overview of New York Equitable Distribution
The equitable distribution law in New York is outlined in Domestic Relations Law §236B. This law states that when two people are divorcing, the court must make an equitable distribution of the marital property. This means that the court must decide how to divide the assets in a way that is fair and just. The court will consider various factors when making this decision, such as the age and health of each spouse, the duration of the marriage, and each spouse’s financial situation.
In general, all assets acquired during the marriage are subject to equitable distribution in New York. This includes both tangible assets, such as real estate and vehicles, and intangible assets, such as stocks and bonds. It also includes retirement accounts, pensions, and other forms of income. Additionally, some debts may be subject to equitable distribution if they were incurred during the marriage.
The law defines marital property as any assets or debts acquired by either spouse during the course of the marriage. This includes assets or debts acquired prior to the marriage, provided the title or deed was in both spouses’ names.
In addition, any assets or debts acquired during the course of the marriage, regardless of who purchased them, are considered marital property. This includes things like real estate, bank accounts, investments, and retirement accounts.
The law defines separate property as any assets or debts acquired prior to the marriage.
For example, if a spouse owned a home before the marriage, it would be considered separate property. The same would be true if a spouse had a for the FERS Program. However, if the marriage encompassed part of the federal time, then part of the FERS retirement would be marital.
The Thrift Savings Plan (TSP) and Divorce
In addition to the FERS program, there is also the Thrift Savings Plan (TSP), the federal government’s retirement savings plan. It is a tax-deferred retirement savings vehicle for federal employees. When a couple divorces, the TSP account may be subject to division.
The court may divide the TSP account between the spouses and issue a QDRO. If the TSP was created in marriage, then in divorce it will be, generally divided equally. If part of the TSP existed before marriage, then that amount will be exempt from equitable distribution.
Military Retired Pay and the FERS Program
Your Federal Employment Retirement System (FERS program) retirement benefits cannot include any military service in the computation if you are receiving a military pension, apart from two exceptions.
The first exception is if you were granted the pension due to a service-connected disability received from a battle with the enemy of the USA, from an instrumentality of war, or from duty during a wartime period.
The second exception is when you are retired from the Armed Forces’ reserve component as per Chapter 1223 of Title 10 of US Code. If you desire to have your military service credited in your FERS retirement, you must waive your military pension and pay the deposit for post-1956 military service before resigning from your job.
To collect FERS program credit for military service that happened after 1956, one must make a payment. The amount of this deposit depends on the dates of service: 3% of basic pay for services through December 31st, 1998; 3.25% for services between January 1st, 1999 and December 31st, 1999; 3.4% for services between January 1st, 2000 and December 31st, 2000; and 3% for services from January 1st, 2001 onward.
Before leaving their government job, personnel should pay their post-1956 military service deposit to their employing agency. For personalized help to calculate the payment, they can consult their local servicing personnel center, which has access to their employment records.
If the Military Retired pay which you are waiving was earned before marriage, that will be exempted from equitable distribution. Similarly, if the Military Credit occurred prior to marriage, that time will also be exempted from equitable distribution.
Qualified Domestic Relations Orders (QDROs)
A qualified domestic relations order (QDRO) is a court order that assigns a portion of your FERS retirement benefits to your former spouse. The QDRO must be approved by the Office of Personnel Management (OPM) before it can be enforced.
The OPM has specific requirements for QDROs, so it’s important to make sure your order meets all of the requirements. Once the order is approved, then the former spouse will receive their share directly from the government.
Strategies to Maximize Retirement Benefits After Divorce
It’s important to remember that your FERS retirement benefits are a valuable asset and should be protected in a divorce. There are strategies you can use to maximize your retirement benefits after a divorce. For example, you can maximize the amount of your benefits by making additional contributions to your Thrift Savings Plan (TSP). You can also take advantage of a FERS retirement calculator to estimate your benefits and plan for the future.
Conclusion
Going through a divorce can be a challenging time, and it’s important to make sure your FERS program benefits are protected. By understanding how to calculate FERS retirement benefits and using strategies to maximize your benefits, you can ensure that you’ll have the retirement security you need in the future. If you have questions about calculating FERS program benefits in a divorce, call Port and Sava at (516) 352-2999 for a free telephone consultation.
