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Retirement Planning


Whether you are close to federal employee retirement or just starting out in your career, this is the place to share ideas with your federal colleagues on creating a secure financial foundation.


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Chubakah  
#1 Posted : Thursday, January 25, 2007 10:00:10 AM(UTC)

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If my wife retires before me and she has a QDRO at OPM on me and I don;t retire and I also ahare in her retirement benefits but at a lesser percentage will she have to pay me once she retires? Also would she not be entitled to any retirement benefits from me until I retire if I retire.
captainmux  
#2 Posted : Friday, January 26, 2007 4:05:24 AM(UTC)

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If your ex wife has submitted a court order (including a QDRO) and if it has been declared "acceptable for processing" by OPM, your ex will start to collect her part of your pension at the same time you do.

...and vice versa.



quote:
Originally posted by Chubakah:
If my wife retires before me and she has a QDRO at OPM on me and I don;t retire and I also ahare in her retirement benefits but at a lesser percentage will she have to pay me once she retires? Also would she not be entitled to any retirement benefits from me until I retire if I retire.
Chubakah  
#3 Posted : Friday, January 26, 2007 9:33:39 AM(UTC)

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Sorry about the confusion in my question.

My wife will retire this year. As part of the divorce settlement I am supposed to get a part of her pension. She is a school principal and not a part of the CSRS/FERS system. I am a CSRS employee. I do not plan to retire. I will work as long as physically able. Do I have entitlement to her pension even though I am not retiring and will not be getting my pension yet.

Under this scenario I will still be working but should be getting a piece of her pension when she retires and I will not have to give her anything until I retire. Is this clear?
postalwiz  
#4 Posted : Friday, January 26, 2007 10:08:19 AM(UTC)

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What does your divorce decree says?
jose53earl  
#5 Posted : Friday, January 26, 2007 2:34:05 PM(UTC)

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http://community.federalsoup.com/4/OpenTopic?a=tpc&s=4944011921&f=2514011031&m=9481072921&r=9361051431#9361051431

Hello Chubakah!!
Sorry, but I am a little confused. Based on your posts last year (see link), I was reassured to learn that you were in a similar situation as myself: A CSRS-Offset retiree getting ready to receive a Social Security check with the accompanying CSRS annuity offset. Now, it appears that you haven't retired yet and I am again worried about what I can expect when I turn 62 this May.
Please explain, and hopefully again put my mind at ease!!

Thanks
captainmux  
#6 Posted : Friday, January 26, 2007 8:22:13 PM(UTC)

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If you're wondering whether it is a requirement that you must be retired to receive a portion of her pension, I doubt it. Wiz is on the right track. If your court order or QDRO says that's a requirement, then it is.

Otherwise, if she retires and you keep working, you will still be getting your usual pay plus your court awarded portion of her pension. She will be getting a portion of her pension only and nothing from your pension. OPM will not give her a penny of your pension until you actually begin to receive yours no matter what it says in your court order. Some retirement plans (private, states, schools, etc.) will begin to distribute the employee's pension to the former spouse before the employee retires but not OPM. If your CO says something like your ex is entitled to begin receiving her share of your annuity upon your earliest retirement eligibility date, regardless of whether you retire or not, OPM will ignore that.

Rest assured, though, that if your court order gives your ex either "a prorata share" or "a percentage of your pension's value as of the time of your divorce" that as much as one dollar out of every five that you are adding to your annuity will eventually go to your ex.

C3PO



quote:
Originally posted by Chubakah:
Sorry about the confusion in my question.

My wife will retire this year. As part of the divorce settlement I am supposed to get a part of her pension. She is a school principal and not a part of the CSRS/FERS system. I am a CSRS employee. I do not plan to retire. I will work as long as physically able. Do I have entitlement to her pension even though I am not retiring and will not be getting my pension yet.

Under this scenario I will still be working but should be getting a piece of her pension when she retires and I will not have to give her anything until I retire. Is this clear?
danab  
#7 Posted : Sunday, February 04, 2007 11:24:55 PM(UTC)

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I have appreciated reading all the past discussions on CSRS pension division in a divorce settlement. In a mediated settlement situation, which I am about to enter into, I am left with some basic questions:

1)Doesn't OPM generally have to honor any agreed upon COAP or whatever else it is called (I know not a QDRO unless this is worded in the correctly) that is correctly worded in the settlement document.

2) In the OPM documentation, there seems to be some flexibility in which the COAP document can be formulated--again, if it is properly written up.

3) so it seems as though in a mediated settlement you could i.e. add COLA's or not, and/or settle based on todays salary assuming this is the day one stopped working (then deferred based on age 62 retirement--rather than have to split based on formula that takes into account all future pay raises etc.

4)Do any of you have experience with mediated CSRS settlements and can tell me about possiblity flexibilty or tailoring of agreed upon settlement

5) and last--if there is this flexibility, why are there so many complaints about how OPM does it's figuring...Don't they have to figure exactly as stated in COAP mediated agreement?

........wheww thanks
captainmux  
#8 Posted : Tuesday, February 06, 2007 1:41:51 AM(UTC)

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ANSWER 1)
Not exactly. OPM interprets the meaning of language in the court order (or QDRO) against the meaning assigned to that language in its regulations. The regulation language is, in at least one instance, totally different from the common interpretation, any reasonable mathematically valid interpretation or what the lawyers call a “reasonable person’s interpretation”.

ANSWER 2)
State courts have the flexibility to write the court order using certain language that OPM suggests. If you use nonconforming language, you take your chances.

ANSWER 3)
If you want to split assuming this is the day you stopped working, you’re talking about a deferred annuity. Most people (the reasonable person interpretation) would assume that if you used the words “50% of the value as of the date of the divorce”, you would be talking about a deferred annuity or, as you put it, “assuming this is the day one stopped working“. But, don’t be misled into thinking OPM will interpret it that way. If you use those words, OPM will give your ex a “prorata share” of your annuity, AS OF YOUR RETIREMENT, which is based on “all your future pay increases, etc.” If you don’t believe it, check 5 CFR 838.621.

ANSWER 4)
My advice to you is: Calculate the actual dollar value of your pension on the date of your divorce and put the dollar amount in your court order. Ignore this advice at your own peril. Ignore this advice and it will cost you thousands of dollars. I kid you not.

And, it’s not hard to do, either. Just take your high, 3-year average salary AS OF THAT DATE and multiply it by your retirement factor AS OF THAT DATE. The retirement factor differs for CSRS and FERS but the math is the same. Don’t forget that your deferred annuity won’t start until you reach age 62 so make sure to put that date in there, too.

Your CO should look something like this: “Mr. DanaB is awarded $1,234.56 per month from Ms. DanaB’s Federal retirement annuity, commencing July 4, 2015. That amount is to be paid directly to him by OPM until the death of either of them, whichever comes first.”

ANSWER 5)
There are so many complaints because many of us go away from our divorces thinking that our exes will get only half of what we added to our pensions during our marriages. We think that whatever we add to our pensions after our divorces is 100% ours. What else could the words “as of” possibly mean?

When we actually do retire, we discover that OPM is going to give them more than that … often MUCH more than that. OPM regulation 5 CFR 838.621 is the ultimate bait and switch act. Even lawyers think they’re doing the right thing for their clients by getting them a 50-50 split of the so called “marital portion” of their retirement annuities. But OPM’s fuzzy math ensures otherwise.

One final piece of advice: Don’t believe everything your lawyer tells you. Very few of them actually know what they’re doing when it comes to a Federal pension. Many of them will use the language in 838.621 thinking they’re doing you a service. Don’t trust them. Do your own math. Be your own advocate. Remember that your pension could easily be the most valuable asset you are going to split. In today’s dollars it could easily be worth more than the annuity in your house. It pays to do it right.


quote:
Originally posted by danab:
I have appreciated reading all the past discussions on CSRS pension division in a divorce settlement. In a mediated settlement situation, which I am about to enter into, I am left with some basic questions:

1)Doesn't OPM generally have to honor any agreed upon COAP or whatever else it is called (I know not a QDRO unless this is worded in the correctly) that is correctly worded in the settlement document.

2) In the OPM documentation, there seems to be some flexibility in which the COAP document can be formulated--again, if it is properly written up.

3) so it seems as though in a mediated settlement you could i.e. add COLA's or not, and/or settle based on todays salary assuming this is the day one stopped working (then deferred based on age 62 retirement--rather than have to split based on formula that takes into account all future pay raises etc.

4)Do any of you have experience with mediated CSRS settlements and can tell me about possiblity flexibilty or tailoring of agreed upon settlement

5) and last--if there is this flexibility, why are there so many complaints about how OPM does it's figuring...Don't they have to figure exactly as stated in COAP mediated agreement?

........wheww thanks
postalwiz  
#9 Posted : Tuesday, February 06, 2007 2:15:44 AM(UTC)

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My advise to you is buy your spouse out if you
can afford it; careful with any wording on the
divorce papers; had someone who thought that the
old spouse was going to just get monies based on
his high 3 at the time of divorce; lawyer did not
put in the divorce papers, ended up paying monies
based on his high 3 at time of retirement, one of the reasons people think badly of OPM. It is better to buy spouse with monies now than it is to tie up your monies when you retire.
captainmux  
#10 Posted : Tuesday, February 06, 2007 2:37:28 AM(UTC)

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Of course, the downside to that strategy is that if you pay your ex based on a projected 30-year retirement and you never get there (you die), your ex has your money in his/her bank acount all that time, as if you had lived. It's like paying off on your life insurance policy before you're dead.

Think twice, but, if you want to trade its value for something else of comparable value (like the equity in your house, for example), it might be a good trade-off....

quote:
Originally posted by postalwiz:
My advise to you is buy your spouse out if you
can afford it; careful with any wording on the
divorce papers; had someone who thought that the
old spouse was going to just get monies based on
his high 3 at the time of divorce; lawyer did not
put in the divorce papers, ended up paying monies
based on his high 3 at time of retirement, one of the reasons people think badly of OPM. It is better to buy spouse with monies now than it is to tie up your monies when you retire.
postalwiz  
#11 Posted : Tuesday, February 06, 2007 2:48:33 AM(UTC)

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Life is full of ifs and in this case he has to
plan for the future and buying her out is an alternative, some spouses because of the instant
gratification will take the cash and yes she or
he may have it sitting in the bank and then you die? that is life but at least it will clear him
of any financial obligations towards someone if he does live long enough to retire or better yet
the divorce may ask for spouse support from the minute they divorce! having a deduction off your
annuity of $500 $600 a month could put a real
dimmer on your plans at retirement.
captainmux  
#12 Posted : Tuesday, February 06, 2007 3:19:43 AM(UTC)

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Yup. That's why I advise to think twice....

quote:
Originally posted by postalwiz:
Life is full of ifs and in this case he has to
plan for the future and buying her out is an alternative, some spouses because of the instant
gratification will take the cash and yes she or
he may have it sitting in the bank and then you die? that is life but at least it will clear him
of any financial obligations towards someone if he does live long enough to retire or better yet
the divorce may ask for spouse support from the minute they divorce! having a deduction off your
annuity of $500 $600 a month could put a real
dimmer on your plans at retirement.
danab  
#13 Posted : Saturday, February 17, 2007 10:54:58 PM(UTC)

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I do appreciate the idea of putting a dollar amount in the COAP agreement/per month. I will heed your advice on OPM and how their payout could not reflect what I had in mind when COAP is written.

What is not clear to me is basic strategies in Divorce mediated settlement involving things like my CSRS pentions: Many sources suggest that pension like mine can be used as a bargaining chip or for asset trading/negotiation.

I get the impression that my wife will just come into mediation--formerly advised by attorney but no accompanied by--and assume that mediation is pretty tightly formed by law (colorado here; equitable distribution state).

So is it within the norms of mediation (based on some of you who have done this)for a govt employee to consider my wife's share of the pension as something up for some negotiation? If we both own the house 50/50 that is a no-brainer. BUT outside of court, is the norm in mediation that her share of my pension is similar? OR as I asked above, is it a negotiation chip for say--less time or money for spousal support?

thanks
edalder  
#14 Posted : Sunday, February 18, 2007 12:10:40 PM(UTC)

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You might be able to contact a pension valuation firm and get a present day dollar value put your pension. (Your attorney can probably recommend a place to you.)

As to how your pension is split, have you two been married to each other for your entire Federal civilian career or at least 30 years of it? If so, a 50-50 split would be the norm in most jurisdictions. If she has only been married to you for 15 of those 30 years, then she might only be entitled to 25% of it. In other words, her property interest is likely proportional to how long she was married to you versus how long you had to work to earn it as of when you two decided to split (or your divorce was official).

Once you put a value on your pension, you can discuss whether she will waive her right to a share of your pension in exchange for something else that she perceives to be of equal value. (For example, maybe she gets the house instead.)

FWIW, I have heard that some people can get the value of the pension discounted if your soon to be ex (STBX) will be eligible for a Social Security benefit. So, if the shoe fits, you might want to ask your attorney about that one as well.

These negotiations are fairly trickly, especially in the context of a divorce. I would not attempt to figure this one out without legal advice.
Kivi
captainmux  
#15 Posted : Sunday, February 18, 2007 11:08:15 PM(UTC)

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Given the way the OPM regulation is written, if you want to limit your ex to a percentage of your pension that you earned while married (usually 50%) then the *only* way to do it is to place the dollar value in the CO. The numbers can't be twisted but the words can. (Isn't that what lawyers do?)

When you mediate a settlement, you have to make sure you're trading apples and apples. Basically, what I mean is that you need to know (or agree to) the *present value* of your future pension. There are tools to calculate that but a lawyer is not someone I would automatically trust to do it. You need an accountant or, like Kivi says, a pension valuation firm/individual.

Why? Because you don't know what *today's value* of your future pension is. There are too many unknowns. For starters, how long will you live? That will have a big impact on how many pension payments you will ultimately receive, don't you think? How long will your ex live? What will inflation do to the value of the future payments?

There are ways to calculate all these things based on actuarial statistics, inflation assumptions, present value formulas, etc. If you know what you’re doing, you can do it with an Excel spreadsheet but the DIY approach might not fly with your ex of her lawyer.

Let's take an example. Let's say you and your wife own a house and that your equity is worth $100,000 (i. e., $50K each). Let's say you're CSRS, your high-3 is $80,000 and you have 15 years of service. Here is what your pension is worth: 26.25% of $80,000 or $13,000 per year. Those monthly payments would start when you're 62 and continue (with COLAs) until you die. 50% of that is a stream of $6500/year payments, *also* beginning when you reach age 62 and *also* continuing until your death. This isn't rocket science and it isn’t magic; it's in the Federal law and the laws of arithmetic.

Now, what's worth more, 50% of your equity in the house or 50% of your pension? Let's take the extremes. Suppose you give her your half of the house and she gives you "her half" of your pension.

15 years later, you retire. When you reach age 62, you begin to get what she would have gotten if you hadn't bought it back, i. e., $6500/year. Of course that's not worth as much as it is today because of inflation but let's ignore that for a while. If you live to the age of 92, you will have gotten $195,000 that would otherwise have gone to her. You win. ... sort of ... because by then, she has had the equity in the house for decades.

What if, on the other hand, you die 5 years after you retire? What if you die *before* you retire? Under that scenario, you have given up a certain $50,000 in exchange for something that never materialized.

But, you may still want to go ahead with it, even knowing the risk. There's a lot to be said for a clean break ... where your ex has no claim on your pension.

The bottom line is this. First, understand the risk you are taking. And, second, make sure you're trading apples for apples. Get someone who is knowledgeable about the value of annuities to calculate the present value of what you're negotiating.

Let’s say your pension valuation advisor calculates the present value of 50% of your pension (as of your divorce) to be worth $35,000. (That’s how much money, lump sum, you would have to put in the bank, at the agreed inflation rate assumption, that would yield $6500/year from your 62nd birthday until your death, using actuarial statistics.) Should you trade that for your half of the house (worth $50,000)? Answer: It depends. There is something to be said for having your ex out of your life … f-o-r-e-v-e-r!

What if, on the other hand, your pension turns out to be worth $80,000 in present value? Why would your ex trade something that’s worth $80K for something that’s only worth $50K? That’s where your lawyer’s negotiating skills come into play. It’s a matter of convincing her that a $50,000 “bird in the hand” is worth more that an $80,000 “bird in the bush”. By taking the deal, she forgoes the *risk* that you will die before she ever gets a nickel.

I want to address what Kivi said about how your ex’s interest is "likely proportional to how long she was married to you". DON’T FALL FOR THAT! That is NEVER the case. That does make the calculations easier but it is *grossly* unfair to you.

The value of your annuity did not grow proportional to how much time you were married. Don’t be swayed into dividing it up that way.

The only equitable and mathematically valid way to determine the “marital portion” of the value of your pension is to calculate how much it was worth when you were married, then calculate how much it is worth when you divorce, then subtract the former from the latter. That is the one and only correct way to determine how much of the current value of your pension is attributable to the time in service during your marriage.

How do you do that? Simple, really. You plug in your actual high-3 and your actual retirement factor (CSRS of FERS, as appropriate) for both dates and use the formulas that are in the LAW.

Another thing Kivi writes about is discounting to offset SS. There, I agree with him (her?). In principle, anything and everything that (1) has value and (2) was attained during the marriage is negotiable. You can, and should, figure out the value of everything you acquired during your marriage and divide it equitably, trading off one thing of value for another thing of value. That’s what the mediation is all about.

Again, my standard caution for any fed going through a divorce is this: If you agree to split the marital portion of your pension down the middle and give that to your ex, payable as you would have gotten it, DO NOT, DO NOT, DO NOT put the words “50% as of” in your court order without putting in the dollar amount. If you do, you will be forfeiting a very large share of the amount you add to the value of your pension AFTER YOUR DIVORCE to your ex.

Good luck!


quote:
Originally posted by danab:
I do appreciate the idea of putting a dollar amount in the COAP agreement/per month. I will heed your advice on OPM and how their payout could not reflect what I had in mind when COAP is written.

What is not clear to me is basic strategies in Divorce mediated settlement involving things like my CSRS pentions: Many sources suggest that pension like mine can be used as a bargaining chip or for asset trading/negotiation.

I get the impression that my wife will just come into mediation--formerly advised by attorney but no accompanied by--and assume that mediation is pretty tightly formed by law (colorado here; equitable distribution state).

So is it within the norms of mediation (based on some of you who have done this)for a govt employee to consider my wife's share of the pension as something up for some negotiation? If we both own the house 50/50 that is a no-brainer. BUT outside of court, is the norm in mediation that her share of my pension is similar? OR as I asked above, is it a negotiation chip for say--less time or money for spousal support?

thanks
sophie3535  
#16 Posted : Tuesday, February 20, 2007 10:09:36 AM(UTC)

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You keep posting this same warning and advice to those divorcing. But you do realize, don’t you, that the way OPM interprets percentage awards to be at the time of retirement is in keeping with significant and binding laws of many states?

The most frequently cited case is that of Bangs v Bangs (59 Md. App. 350 1984) which defined the coverture basis (percentage of years married to years of service) that OPM uses. The “Bangs” forumula is used by many states and allows for the percentage to be determined AT THE TIME OF RETIREMENT, not the time of divorce. Maryland, and other states, deem “post-divorce salary increases or growth of the retirement funds” to be “marital”. Ohio has the Hoyt v Hoyt finding that is similar. The Maryland Bangs formula was upheld in Kelly v Kelly, 118 Md. App. 463, 702 A 2d999 (1997).

By telling people to make sure their attorneys put the former spouse's award in dollar terms means that the former spouse’s portion will not be eligible for COLAs even after retirement. If a soon-to-be former spouse is wise, they will seek the assistance of a pension specialist who will advise them NOT to accept this. In the end, fighting between the participant who told his attorney to take your advice, and the spouse's attorney, backed up by the pension specialist, will cost the participant MORE and he/she will lose if divorcing in a state where post-divorce retirement funds/salary are indeed deemed marital.

In short, OPM is using a legal ruling in interpreting percentage awards “if, as, and when” the employee retires, rather than at the time of divorce. You may not like the ruling, but it is the law in some states and more importantly, at OPM. When a divorce takes place, as is often the case, near the time of retirement, then it doesn’t matter much. Yes, when a divorce in a marriage of little more than 10 years takes place 20 years prior to retirement, then you have a point, that much of what was added to the former spouse’s award was earned after the divorce.

But, rather than telling people to put something into their property settlement agreement that will not stand up in court, unless they can slip it by their spouse, you might suggest they look for a state that deems post-divorce retirement/salary funds as “separate” and not marital. Or advise people to do what they can to ‘buy out’ their soon-to-be ex-spouse at the time of divorce. Here’s a list of states and the relevant rulings (Scroll down a little)

http://www.pensionappraisers.com/specialissues/postretirementcols.shtml
captainmux  
#17 Posted : Wednesday, February 21, 2007 2:17:18 AM(UTC)

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Thanks for the opportunity to clarify. If you have misunderstood what I have said (and, obviously, you have), maybe there are others who have, too.

Never have I said that the prorata formula is illegal. Certainly, it is allowed in many states. Whether (as you say) “it is the law in some states” or not, is another matter. I presume you mean that it is allowed by law, as one of several alternative ways to divide a pension, and not that it is the ONLY METHOD of division allowed by law.

The prorata formula (known in various forms, under various names, under case law in states) is certainly a valid way to divide a pension. I stipulate that.

As I have advised others on this Web site, if that’s what you agreed to do, or if that’s what the court ordered OPM to give your former spouse, then you shouldn’t be surprised if that’s what OPM does. After all, OPM is SUPPOSED to carry out the “order” of the court.

My problem – and the problem I caution my fellow feds about – is that OPM, UNDER CERTAIN CIRCUMSTANCES, DOES NOT carry out the order of the court. This is exactly what happens when the court says to OPM, “Give the former spouse 50% of whatever the employee’s annuity was worth on the day of their divorce.”

I say that “a 50% share” of an employee’s pension as of some date prior to retirement is one thing and that “a prorata share” of the same employee’s final base annuity is an entirely different thing. In other words, they are not equal. They should not be treated as equal. But they are.

Let’s take this example. Betty is a CSRS employee who starts working for the Government in 1970. She also marries Bob in 1970. In 1990, they divorce. Her high 3-year salary in 1990 is $48,000. The judge gives Bob 50% of the value of Betty’s pension as of 1990. But the court order doesn’t state that value. In 2000, Betty retires. How many dollars per month should OPM give to Bob?

The way I figure it, 50% of the value of Betty’s pension, as of 1990, was $725 per month. (It would have started whenever Betty reached age 62.) But, the prorata share formula would give Bob $1500 per month.

Which is correct? If the court had ordered OPM to give Bob a prorata share, then I would be the first to agree that Bob should be getting $1500/month and Betty would have no right to squawk. But, look again. The court didn’t give him a prorata share. The court gave him 50% of the value of Betty’s 1990 pension … an entirely different amount.

Let’s say there are three ways to divide a pension. Call them A, B and C. (This doesn’t include things like trading a present cash value, which is an entirely different matter.)

A is a calculated (by a pension appraisal firm, if you like) dollar amount that is equivalent to 50% of the value of Betty’s pension as of 1990. For example, the CO says, “Bob is awarded $725 per month starting in January 2007” (Betty’s 62nd birthday). That’s a pretty clear instruction, right?

B is the same percentage of the value of Betty’s pension as of the date of the divorce but the dollar amount isn’t stated. Instead, the court order says, “Bob is awarded 50% of the value of Betty’s pension as of 1990.” The court thinks OPM should be able to do that calculation.

C is a prorata share. As you say, this is a totally valid method used to divide a pension in many states … maybe all states for all I know.

Now, if you read the OPM regulations, here is what they say.

If the court order awards A, we’ll give the former spouse A. [See Attorney Handbook, para. 201, page 71]

If the court order awards C, we’ll give the former spouse C. [Ditto, para. 204, page 73]

But (and here’s where the OPM regulation is clearly wrong), if the court order awards B, we’ll give the former spouse C. [Ditto, 5 CFR 838.621(c) & (d), page 63]

In other words, if the court’s INTENT is to award a prorata share, all the court has to do is use the words “prorata share”. Like magic, the court’s order will be executed as intended. Mission accomplished.

But, if the court’s INTENT is to award 50% of the value of the employee’s annuity as of the divorce, then God forbid that the court should use those words in the court order. Because, if it does, OPM will give the former spouse the prorata share, INSTEAD. And, remember, they are not the same.

That’s why I advise anybody who is going through this to figure out the dollar value they INTEND to award, and put that dollar value in the CO. Calculate it yourself or have your agency or a pension appraiser do it for you. But, don’t – DO NOT – trust OPM to back calculate it after your divorce. They won’t do it (See Attorneys’ Handbook, 838.305(e), page 50).

I don’t really care how you and your STBX agree to divide your pension. If you want to give him/her a prorata share, be my guest. But, if you decide to limit his/her share to, say, half of what you added to its value while you were married, then be careful. Be careful how you say it or it may not turn out the way you were led to believe it would.

I think that, when a lawyer advises a Federal employee client to give his/her STBX 50% of the value of his/her annuity as of the divorce, the employee will often see that as fair and equitable (like I did) and will quickly agree. They will probably think (as I did) that their STBX’s share is fixed and that they can go on with their lives and rebuild their retirement nest eggs without ever having to share it with their STBX.

But that is deceiving. If a lawyer follows the OPM Handbook for Attorneys without understanding it, his/her client is going to lose.

I don’t think OPM’s regulation is well understood at all by attorneys. I think in many cases they actually believe they are doing well for their clients by getting them “50% as of”.

Look, I have nothing to gain by exposing OPM’s bait & switch regulation. I, and many other feds and retires have already been victimized by it. It’s too late for me. I am merely trying to caution other fellow feds to watch out for its consequences for their own good.

Re COLAs after retirement, Sophie is right. If the CO awards a fixed dollar amount AND you want to give your STBX annual COLAs, then you have to specify that in the CO. Silence, in this case, denies the COLA.



quote:
Originally posted by sophie3535:
You keep posting this same warning and advice to those divorcing. But you do realize, don’t you, that the way OPM interprets percentage awards to be at the time of retirement is in keeping with significant and binding laws of many states?

The most frequently cited case is that of Bangs v Bangs (59 Md. App. 350 1984) which defined the coverture basis (percentage of years married to years of service) that OPM uses. The “Bangs” forumula is used by many states and allows for the percentage to be determined AT THE TIME OF RETIREMENT, not the time of divorce. Maryland, and other states, deem “post-divorce salary increases or growth of the retirement funds” to be “marital”. Ohio has the Hoyt v Hoyt finding that is similar. The Maryland Bangs formula was upheld in Kelly v Kelly, 118 Md. App. 463, 702 A 2d999 (1997).

By telling people to make sure their attorneys put the former spouse's award in dollar terms means that the former spouse’s portion will not be eligible for COLAs even after retirement. If a soon-to-be former spouse is wise, they will seek the assistance of a pension specialist who will advise them NOT to accept this. In the end, fighting between the participant who told his attorney to take your advice, and the spouse's attorney, backed up by the pension specialist, will cost the participant MORE and he/she will lose if divorcing in a state where post-divorce retirement funds/salary are indeed deemed marital.

In short, OPM is using a legal ruling in interpreting percentage awards “if, as, and when” the employee retires, rather than at the time of divorce. You may not like the ruling, but it is the law in some states and more importantly, at OPM. When a divorce takes place, as is often the case, near the time of retirement, then it doesn’t matter much. Yes, when a divorce in a marriage of little more than 10 years takes place 20 years prior to retirement, then you have a point, that much of what was added to the former spouse’s award was earned after the divorce.

But, rather than telling people to put something into their property settlement agreement that will not stand up in court, unless they can slip it by their spouse, you might suggest they look for a state that deems post-divorce retirement/salary funds as “separate” and not marital. Or advise people to do what they can to ‘buy out’ their soon-to-be ex-spouse at the time of divorce. Here’s a list of states and the relevant rulings (Scroll down a little)

http://www.pensionappraisers.com/specialissues/postretirementcols.shtml


[This message was edited by CaptainMux on February 21, 2007 at 02:24 PM.]
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