Old QDRO on Civil Service Retirement System

[Effen]

Anyone work with Civil Service Retirement System (Postal worker)?  I am looking at a QDRO for a friend and wondering how something might be interpreted.

This is an older QDRO (2003) and is very short.  It splits the benefit according to the Majauskas formula, then is says, "The alternate payee shall be treated as a surviving spouse for the purposes of a joint and survivor annuity and pre-retirement survivor annuity purposes".  Thats about it - it is only 4 paragraphs long.

The participant has retired and the AP is getting benefits, but the question is, what happens if the participant dies.  There was nothing in the QDRO about required form of payment, but I am wondering if the Normal Form in the Civil Service Plan is a J&S and therefore, saying that that the AP is treated as the spouse for the J&S annuity means they will continue to receive a survivor's portion if the participant predeceases the AP.

Any thoughts?  I assume the only way to know for sure would be to ask the PA, but I wondered if anyone had any thoughts before we did that.

 

[Effen]

I did find this in the Q/A's under the CRRS site"

"A married federal employee who retires under either CSRS or FERS automatically receives a joint and survivor annuity unless both the employee and the spouse decline it in writing, in which case the worker will receive a single-life annuity"

Would that mean that unless the AP signed off on a SLA, that J&S coverage should be in effect?

 

[QDROphile]

It never hurts to check what the plan administrator thinks the applicable forms are now. It is, you know, federal government administration.

[david rigby]

3 hours ago, Effen said:

Would that mean that unless the AP signed off on a SLA, that J&S coverage should be in effect?

Reasonable, but not conclusive.  However, as QDROphile implies, it would be prudent to get some documentation.  BTW, my limited experience with the federal pension program is that they do not use "DRO" or "QDRO"; instead, the term "court order" is used, but terminology may not be consistent.

[Peter Gulia]

Rules for domestic-relations orders directed to the Civil Service Retirement System or Federal Employees Retirement System [FERS] are in the Code of Federal Regulations at title 5 part 838.

As David Rigby mentions, the defined terms include “court order” (conceptually similar to how ERISA § 206(d)(3) defines a DRO) and “court order acceptable for processing” or COAP (conceptually similar to a QDRO, in the sense of an order the system recognizes to do something under the plan). 5 C.F.R.§ 838.103 https://www.ecfr.gov/current/title-5/chapter-I/subchapter-B/part-838/subpart-A/subject-group-ECFR6ebcec98dccc68e/section-838.103

For rules about survivor annuities, see title 5 part 831 subpart F—5 C.F.R. §§ 831.601 to 831.685 https://www.ecfr.gov/current/title-5/chapter-I/subchapter-B/part-831/subpart-F.

[Effen]

I appreciate what you are saying, but this one uses the words "Domestic Relations Order", and "This Order is intended to meet the requirements of a qualified domestic relations order ...".  I don't think any of that really matters since the AP is receiving payments, so they have honored it, regardless of what is was called.  

I will suggest the AP contact the PA and confirm the death benefit payable to the AP, if any.

Thanks for your responses.

[Peter Gulia]

No matter what the court order is labeled or recites, the regulation setting up the defined term “court order acceptable for processing” was published on July 29, 1992.

While the lingo might not matter (because it seems the system accepted the 2003 court order as a COAP), the regulations might affect how the order relates to the annuity the plan provides, and whether your friend gets a “former spouse survivor annuity” (also a defined term in the regulations).

The regulations about survivor annuities date from May 13, 1985. Those regulations too affect the annuity the plan provides, and might affect how the order relates to the annuity the plan provides.

Those points recognized, it might be efficient for your friend to ask an Office of Personnel Management employee or agent what OPM believes are the nonretiree’s benefits.

While I imagine your friend doesn’t expect you to sort through the detailed regulations, I furnished the citations and hyperlinks because some BenefitsLink readers welcome an opportunity to read primary sources.

[fmsinc]

The proper phraseology for FERS and CSRS Orders administered by OPM is Court Order Acceptable for Processing - COAP. 

An Order labeled as a QDRO will be rejected See - 

https://www.ecfr.gov/current/title-5/chapter-I/subchapter-B/part-838

"A substantial number of State court orders are drafted under the mistaken belief that the Employee Retirement Income Security Act (ERISA) (29 U.S.C. 1001 et seq.) applies to CSRS benefits. Sections 1003(b)(1) and 1051 of title 29, United States Code, exempt CSRS from ERISA, because CSRS is a “governmental plan” as defined in section 1001(23) of title 29, United States Code. Accordingly, OPM does not honor ERISA Qualifying Domestic Relations Orders (QDRO's) except to the extent that the law governing CSRS expressly authorizes compliance with State court orders. OPM will honor the orders to the extent permitted by CSRS. However, many provisions of ERISA QDRO's are not authorized under CSRS. Most significantly, a court cannot require that payments to the former spouse begin before the employee actually retires (i.e., begins to receive benefits) and, unless the order expressly provides that the former spouse is entitled to a survivor annuity, the payments to the former spouse cannot continue after the employee dies."

The rules are all different since CSRS and FERS is not under ERISA.  Ex: Only shared interest allocations of benefits are available.  No separate interest allocations are allowed.

It is the full and unreduced "self only" amount of the Employee's/Retiree's retirement that is that is allocated, not the "gross" (the self only less cost of survivor annuity)" or "net".  See 5 CFR 838.103.

There are no joint and survivor annuity benefits. It's a "former spouse survivor annuity" 

The parties are identified as the Employee/Retiree and the Former Spouse.  

If the Former Spouse remarries prior to age 55 she irrevocable loses the survivor annuity whether or not it's in the COAP.  

The maximum survivor annuity for FERS is up to 50% of the self only amount of the retirement annuity.  55% under CSRS. 

There is a cost to the survivor annuity. 20% of the amount of survivor annuity selected payable monthly starting at the time the Employee enters pay status.  It is imperative to state who will pay the the cost. If you are silent...the Employee/Retire pays it all.   See 5 CFR 838.807(c).    

THE FACT THAT AN EMPLOYEE MAY RETIRE DURING THE MARRIAGE AND SELECT A MAXIMUM SURVIVOR BENEFIT ON THE APPLICATION FOR IMMEDIATE RETIREMENT (SEE ATTACHED) DOES NOT SURVIVOR A LATER DIVORCE.  IT MUST BE REINSTATED BY A QDRO.   

Since the Employee may die in service you need to address the Basic Employee's Death Benefit.  There is no cost and the benefit is huge. 

And the above if just the tip of the iceberg.  There are defaults what will cause paid to your clients and must be addressed.    See 5 CFR 838.237(c)(3).

If it's FERS, don't forget the special annuity supplement. 

Don't forget to mention COLAs for the the retirement and survivor benefits.   

In many states, if the parties don't specifically identify survivor annuity benefit in their MSA, or of the judge doesn't mention it in the JAD, the Former Spouse will not get it .... period full stop.  That's the law in Maryland and Tennessee.  I don't know about New York.  

Your friend better find somebody in NY or anywhere for that matter before he/she is sued for malpractice and paid a visit by Bar Counsel for violation of the Rules of Professional responsibility.  

Treading on dangerous waters here.  

DSG

 

Appl for Immediate Annuity CSRS SF2801.pdf Appl for Immediate Annuity FERS SF3107.pdf

[JM]

Hello Effen, 

Yes, the correct term for a CSRS or FERS order is a "COAP" but they are all Domestic Relations Orders so "DRO" is sufficient.  You cannot say "QDRO" as that is a term associated with ERISA plans for which CSRS/FERS is not.  But as the order on file was deemed acceptable for processing (or else the former spouse would not be getting a share of the pension), we really do not need to worry about what it's called.

The Attorney Handbook states that unless the COAP is specific as to the survivor benefit amount, the maximum former spouse survivor annuity would be paid.  OPM would have issued a letter to both parties outlining their interpretation of the COAP and how much the survivor benefit would be assuming the retiree died immediately.  The retiree's paystub may also indicate the survivor benefit currently in effect and/or they can call OPM to get confirmation.

A few things to note as well:  (1) If the order was silent as to who pays the cost to provide the survivor benefit then OPM will deduct it from the retiree's benefit only.  That means your friend may be paying the cost for the former spouse's survivor annuity!  (2) If the order is silent as to what happens upon the former spouse's death if they predecease the retiree, the former spouses share will revert back to the retiree and not go to former spouse's estate.  I would check the COAP to see if that is covered..but with four paragraphs I'm guessing no.  (3) If the former spouse remarried prior to their age 55 then the survivor benefit is terminated..so if that happened here OPM needs to be notified.  (4). The Majauskas formula is the typical marital/coverture fraction found in many states to determine the marital/community property interest.  It is possible that OPM interpreted this formula to be applied to the maximum former spouse survivor annuity (what OPM calls the "pro-rata" approach...and pro-rata has two distinct definitions under the CFR), so it may be that the survivor benefit, if still in play, is based on the Majauskas formula and not the maximum survivor benefit. 

-JM 

[Effen]

Coming back to this, we did find a letter from the Office of Personnel Management that talks about the marital share and the amount of the "former spouse's retirement benefit".  That part is all good and matches what is actually being paid.

However, the next sentence says, "We intend to honor the court's former spouse's survivor annuity award.  The current former spouses monthly benefit payable is $X."

The strange thing (from my perspective) is X does not equal the former spouse's gross annuity or the portion being paid to the former spouse.  It is smaller than the gross benefit, but more than 2 times larger than the AP's portion.  Does this mean that if the former spouse predeceases the AP, that the AP's benefit will increase?  Or, would the same coverture fraction be applied to the "former spouse's survivor annuity award"?  What is a "former spouse's survivor annuity" and how is it different than the "retirement benefit"?

[JM]

Hi Effen,

The former spouse survivor annuity (FSSA) is a court ordered survivor benefit for a former spouse that can be up to the maximum survivorship allowed under the plan (CSRS is 55% of self only and FERS Is 50% of self only).  The court order can award a portion of the max FSSA as well with the remainder of the available survivorship going to the employees current spouse, etc.    The term "pro-rata" is often used in COAPs and this term has two meanings.  If applied to the self only then it's 50% of the typical coverture fraction applied to total monthly = former spouse's benefit, but if "pro-rata" is also applied to the FSSA then it's actually 100% of coverture fraction awarded former spouse.  You can award a specific $ or % of the FSSA as well, so really all boils down to what the COAP said.

[Effen]

Thank you.  Getting specific, if the letter says, "We intend to honor the court's former spouse's survivor annuity award.  The current former spouses monthly benefit payable is $X.", then the AP can expect to receive $X if the participant predeceases, even though X is greater than the amount they are currently receiving.  They should not expect that X would be adjusted in any way.  Is that correct?

That was the only mention about the FSSA in the letter from OPM.  It was a 2 sentence paragraph.  I didn't see anything in the COAP/QDRO about it.

[JM]

Yes, the former spouse can receive a different dollar amount while employee is alive and then a different amount if former spouse was named for FSSA and employee predeceases.  It can be set to be $0, less but still greater than $0, equal or more than what former spouse was receiving while both parties are alive.

[david rigby]

20 hours ago, Effen said:

Thank you.  Getting specific, if the letter says, "We intend to honor the court's former spouse's survivor annuity award.  The current former spouses monthly benefit payable is $X.", then the AP can expect to receive $X if the participant predeceases, even though X is greater than the amount they are currently receiving.  They should not expect that X would be adjusted in any way.  Is that correct?

Hi Effen.  Would it help to address these specific questions directly to the CSRS?