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This discussion is based on Troyan, Inc.’s experience
in preparing more than 800 Domestic Relations Orders
against the Federal Retirement System. Note that there
are two Federal Retirement Systems. CSRS, covers individuals
hired before 1/1/84 and FERS, covers individuals hired
after 12/31/83. An Order against either of these Retirement
Systems is not termed a “QDRO”, the correct
term is “COAP”, Court Order Acceptable
for Processing. If ERISA or QDRO terminology is employed
in your Order, OPM (Office of Personnel Management)
automatically rejects your Order unless the following
language appears therein:
The Court has considered the requirements and standard
terminology provided in part 838 of Title 5, Code of
Federal Regulations. The terminology used in the provisions
of this order that concern benefits under the Civil
Service Retirement System or the Federal Employees
Retirement System are governed by the standard conventions
established in that part.
Your Order may provide either a formula award to a
FORMER SPOUSE (do not use the term Alternate Payee)
or a monthly benefit, fixed as of a date certain
(your jurisdiction’s end of marriage date). If
you elect to use a Traditional Coverture Fraction (see
Practice Aid “Drafting The Allocation of Benefit
Provision”), then the award must be termed a “pro-rata” award.
OPM will interpret pro-rata as follows:
The Former Spouse will receive 50% of “the portion
designated in the order” of the actual benefit
calculated as of the date of the actual retirement
of the Member. The portion designated in the Order
will be interpreted as: Numerator– the months
of credited service during the period of marriage up
to the cutoff date. Denominator– the total months
of credited service up to the date of the Member’s
retirement.
Alternatively, if your agreement provided the Former
Spouse with a “Specific Dollar Award” (see
Practice Aid “Drafting The Allocation of Benefit
Provision”), as of the end of marriage date,
then your Order must provide:
The Former Spouse is not to share in any pre-retirement COLA or pay adjustment, from the date so specified
up to the date of the Member’s retirement.
Unlike ERISA Defined Benefit Plan’s, a COAP,
may provide that the Former Spouse is to receive a
fixed amount, e.g. $80,000.00. Absent additional clarifying
language, OPM will pay the Former Spouse one half of
the Member’s Gross Annuity until the sum specified
has been paid. If the Former Spouse dies and the COAP
so provides any unpaid balance will be paid in the
same manner to his/her estate or to his/her children.
Absent language dealing with this potential for a reversion,
the unpaid balance reverts to the Member. Alternatively,
and again unlike an ERISA Defined Benefit Plan a COAP
will pay to a Former Spouse one monthly amount for
one period and another sum for a second period, e.
g. $500.00 per month until the Member attains age 65
and thereafter $250.00 per month. The Referencing Event
for the adjustment must be a statistic in the OPM data
base (such as the Member’s date of birth).
The informed practitioner also recognizes that the
impact of the 1992 Regulations (57 FR 33570) was to
give OPM broad latitude in the establishment of guidelines
for Court Orders. This knowledge is essential to adroit
crafting of the awards clause in a manner consistent
with the interests of your client. Troyan, Inc. is familiar
with these Regulations. For example: if the allocation
of benefits provision of your Order is silent on Post-retirement
COLA, then the Former Spouse automatically participates
in this valuable benefit. To bar a Former Spouse’s
participation in this entitlement your Order must affirmatively
and specifically state that the Former Spouse is not
to participate in post-retirement COLA.
Regarding Survivor Annuities
OPM will accept either a fractional survivor benefit
award or a full survivor benefit award (55% of the
Member’s Self Only annuity) to the Former Spouse,
provided your Order contains specific language as to
the procedure to be used to compute the “Former
Spouse Survivor Annuity” (do not use the ERISA
term Joint & Survivor Annuity). Avoid use of expressions
akin to the following:
The Former Spouse is to receive as a Survivor Benefit,
50% of the “Marital/Community Portion” of
the Member’s benefit. The expression “Marital/Community
Portion” is not treated in the CFR, and the term “Member’s
benefit” is to vague in view of the various forms
of “Member benefits” covered in the statutes
(See Title 5 USCA Chapters 83 & 84).
The informed practitioner is aware of the fact that
this survivor annuity has a cost (expressed as a reduction
in benefit). For a discussion of “Actuarial Equivalence” see
Practice Aid “Actuarial Equivalence”. Absent
clear language regarding the allocation of the cost
of this annuity, OPM automatically allocates cost on
a pro-rata basis using the Member’s “Gross
Annuity”, for this calculation. The “Gross
Annuity” is the “Self-Only Annuity” less
the cost of the Survivor Annuity. The prudent attorney
will specify how the cost of the Survivor Annuity is
to be allocated between spouses.
Drafting Alert:
If the practitioner fails to specify
which annuity is to be divided, then OPM automatically
applies the “Gross Annuity.”
ALERT:
Attorneys must be clear on the following circumstance
and outcome:
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The parties are divorced, and there is no mention
of survivor benefits in the Property Settlement Agreement.
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The Member then dies or retires before any COAP
seeking to remedy this omission is dated and executed.
Result:
The benefit is permanently lost to the Former
Spouse (Newman v. Love, U.S. Ct. of Appeals, 962 F.2d
1008). For any circumstance involving
items one and two above, the controlling date is the date of the first
writing dividing marital/community property.
Finally, unlike an Order against an ERISA Defined Benefit Plan, a COAP
may provide that while the Member is alive but subsequent to the death
of the Former Spouse payments due the Former Spouse may be continued to
her estate or her children.
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