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A Handbook for Attorneys on Court-ordered Retirement, Health Benefits and Life Insurance Under the Civil Service Retirement Benefits Federal Employees Retirement Benefits Federal Employees Health Benefits
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A Handbook for Attorneys on Court-ordered Retirement, Health Benefits and Life Insurance Under the Civil Service Retirement Benefits Federal Employees Retirement Benefits Federal Employees Health Benefits Federal Employees Group Life Insurance Program United States Office of Personnel Management Retirement and Insurance Service RI Revised July 1997 Blank Page Table of Contents Table of Contents Introduction... 1 Retirement... 5 Preparing a Court Order... 6 Exemption from ERISA... 6 Benefits payable... 6 Information Available From the Federal Government... 7 Information available on current employees... 7 Information on retirees and former employees... 8 Information Not Available From the Government... 8 CSRS Statutory Provisions Exemption from legal process; recovery of payments Payment of benefits; commencement, termination, and waiver of annuity Survivor annuities Lump-sum benefits; designation of beneficiary; order of precedence FERS Statutory Provisions Exemption from legal process; recovery of payments Court orders Rights of a former spouse Definitions Lump-sum Benefits; designation of beneficiary; order of precedence Retirement Regulations How the Regulations Are Organized Table of Contents Subpart A--Court Orders Generally ii Table of Contents ORGANIZATION AND STRUCTURE OF REGULATIONS ON COURT ORDERS Purpose and scope Regulatory structure Definitions Civil Service Retirement System Court order Court order acceptable for processing Employee Employee annuity ERISA Federal Employees Retirement System or FERS Former spouse Former spouse survivor annuity Gross annuity Member Net annuity Reduction to provide survivor benefits Refund of employee contributions Separated employee STATUTORY LIMIT ON COURT'S AUTHORITY Exemption from legal process except as authorized by Federal law DIVISION OF RESPONSIBILITIES OPM's responsibilities State courts' responsibilities Claimants' responsibilities Employees' and retirees' responsibilities PROCEDURES APPLICABLE TO ALL COURT ORDERS Computation of time Payment schedules Minimum awards Receipt of multiple court orders Settlements Administrative appeal rights ADDRESS FOR FILING COURT ORDERS WITH OPM Appendix A to Subpart A of Part 838--Addresses for Serving Court Orders Affecting CSRS or FERS Benefits Subpart B--Procedures for Processing Court Orders Affecting Employee Annuities REGULATORY STRUCTURE Purpose and scope iii Table of Contents AVAILABILITY OF FUNDS Amounts subject to court orders APPLICATION AND PROCESSING PROCEDURES Application requirements OPM action on receipt of a court order acceptable for processing OPM action on receipt of a court order not acceptable for processing Contesting the validity of court orders Processing amended court orders PAYMENT PROCEDURES Commencing date of payments Suspension of payments Termination of payments Collection of arrearages Payment of lump-sum awards Court orders barring payment of annuities Death of the former spouse PROCEDURES FOR COMPUTING THE AMOUNT PAYABLE Cost-of-living adjustments Computing lengths of service Minimum amount of awards Subpart C-- Requirements for Court Orders Affecting Employee Annuities Purpose and scope Language not acceptable for processing Qualifying Domestic Relations Orders Benefits for the lifetime of the former spouse Expressly dividing employee annuity Providing for payment to the former spouse OPM computation of formulas Specifying type of annuity for application of formula, percentage or fraction.. 54 Subpart D--Procedures for Processing Court Orders Affecting Refunds of Employee Contributions REGULATORY STRUCTURE Purpose and scope AVAILABILITY OF FUNDS Amounts subject to court orders APPLICATION AND PROCESSING PROCEDURES Application requirements iv Table of Contents Timeliness of application OPM action on receipt of a court order acceptable for processing OPM action on receipt of a court order not acceptable for processing Contesting the validity of court orders PAYMENT PROCEDURES Correcting failures to provide required spousal notification Court orders barring payment of refunds PROCEDURES FOR COMPUTING THE AMOUNT PAYABLE Computing lengths of service Subpart E-- Requirements for Court Orders Affecting Refunds of Employee Contributions Purpose and scope Expressly dividing a refund of employee contributions Providing for payment to the former spouse OPM computation of formulas Barring payment of refunds Subpart F--Terminology Used in Court Orders Affecting Employee Annuities or Refunds of Employee Contributions REGULATORY STRUCTURE Purpose and scope IDENTIFICATION OF BENEFITS Identifying the retirement system Distinguishing between annuities and contributions COMPUTATION OF BENEFITS Prorata share Cost-of-living and salary adjustments Computing lengths of service Distinguishing between formulas and fixed amounts Types of annuity MODEL PARAGRAPHS Appendix A to Subpart F of Part 838--Recommended Language for Court Orders Dividing Employee Annuities TABLE OF CONTENTS Series--Special Technical Provisions Language required in Qualified Domestic Relations Orders v Table of Contents 100 Series--Identification of the benefits and instructions that OPM pay the former spouse Identifying retirement benefits and directing OPM to pay the former spouse Protecting a former spouse entitled to military retired pay Series--Computing the amount of the former spouse's benefit Award of a fixed monthly amount Award of a percentage Award of a fraction Award of a prorata share Award based on a stated formula Awarding COLA's on fixed monthly amounts Excluding COLA's on awards other than fixed monthly amounts Series--Type of annuity Awards based on benefits actually paid Awards of earned annuity in cases where the actual annuity is based on disability Series--Refunds of employee contributions Barring payment of a refund of employee contributions Dividing a refund of employee contributions Series--Death of the former spouse Full annuity restored to the retiree Former spouse share paid to children Former spouse share paid to the court Subpart G--Procedures for Processing Court Orders Awarding Former Spouse Survivor Annuities REGULATORY STRUCTURE Purpose and scope LIMITATIONS ON SURVIVOR ANNUITIES Maximum former spouse survivor annuity APPLICATION AND PROCESSING PROCEDURES Application requirements OPM action on receipt of a court order acceptable for processing OPM action on receipt of a court order not acceptable for processing Contesting the validity of court orders Effect on employee and retiree election rights PAYMENT PROCEDURES vi Table of Contents Commencing date of payments Termination of entitlement Rights of current and other former spouses after termination of a former spouse's entitlement Payment of lump-sum awards by survivor annuity Cost-of-living adjustments Subpart H-- Requirements for Court Orders Awarding Former Spouse Survivor Annuities Purpose and scope CSRS limitations Language not acceptable for processing Qualifying Domestic Relations Orders Employee annuity cannot continue after the death of the retiree Court orders must expressly award a former spouse survivor annuity or expressly direct an employee or retiree to elect to provide a former spouse survivor annuity OPM computation of formulas in computing the designated base Amended court orders Cost must be paid by annuity reduction Subpart I--Terminology Used in Court Orders Awarding Former Spouse Survivor Annuities REGULATORY STRUCTURE Purpose and scope vii Table of Contents IDENTIFICATION OF BENEFITS Identifying the retirement system Specifying an award of a former spouse survivor annuity COMPUTATION OF BENEFIT Determining the amount of a former spouse survivor annuity Prorata share defined Cost-of-living adjustment before the death of a retiree MISCELLANEOUS PROVISIONS Court orders that provide temporary awards of former spouse survivor annuities Court orders that permit the former spouse to elect to receive a former spouse survivor annuity MODEL PARAGRAPHS Appendix A to Subpart I of Part Recommended Language for Court Orders Awarding Former Spouse Survivor Annuities TABLE OF CONTENTS Series--Computing the amount of the former spouse's benefit Award of the maximum survivor annuity Award that continues the pre-divorce survivor annuity benefits Award of a prorata share Award of a fixed monthly amount Award of a percentage or fraction of the employee annuity Award based on a stated formula as a share of employee annuity Award of a percentage or fraction of the maximum survivor annuity Award based on a stated formula as a share of maximum survivor annuity Changing amount of former spouse survivor annuity based on remarriage before retirement Changing amount of former spouse survivor annuity based on remarriage after retirement Series--Paying the cost of a former spouse survivor annuity Costs to be paid from the employee annuity Costs to be paid from former spouse's share of the employee annuity Series--Refunds of employee contributions Barring payment of a refund of employee contributions Dividing a refund of employee contributions viii Table of Contents Former Spouse Health Benefits Coverage FEHB Statutory Provisions Definitions Election of Coverage Health Benefits Regulations Subpart H--Benefits for Former Spouses Introduction Definition Who may enroll Coverage Type of enrollment Proof of dependency Exclusions from coverage Child incapable of self-support Meaning of unmarried child Application time limitations Effective dates of coverage Generally Change required because of insufficient annuity Termination of enrollment Coverage of members of the family Cancellation Employing Office Responsibilities Application for benefits Administration of the enrollment process Qualifying court order Premium payments Withholding from annuity Life Insurance Assignment of Life Insurance Coverage FEGLI Statutory Provisions Termination of Insurance; Assignment of Ownership ix Court Orders Affecting Civil Service Retirement Benefits Federal Employees Retirement Benefits Federal Employees Health Benefits and Federal Employees Group Life Insurance Benefits Statutes and Regulations Introduction This publication contains the Federal statutes and regulations applicable to court orders affecting retirement benefits under the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS). The United States Office of Personnel Management (OPM) administers both of these retirement systems. CSRS covers most employees first hired before FERS generally covers employees This publication is for attorneys and others who are involved in the preparation of divorce and separation agreements that involve a current or former employee of the Federal Government. first hired by the Federal Government after 1983, plus other Federal employees who elected to transfer from CSRS to FERS. The publication also includes the statutes and regulations describing the conditions under which a former spouse's Federal Employees Health Benefits (FEHB) coverage may be continued after a divorce, as well as the statute under which an employee or former employee may make an irrevocable assignment of his or her Federal Employees' Group Life Insurance (FEGLI) coverage. This publication is for attorneys and others who are involved in the preparation of divorce and separation agreements that involve a current or former employee, including an annuitant, of the Federal Government who is or was covered by the CSRS or FERS. The pocket at the end of this publication contains a 3.5 inch diskette containing the model language that may be used in drafting court orders. The diskette contains three files with the model language in three common word processor formats. COMODEL.WP is in WordPerfect format. COMODEL.WRD is in Word format. COMODEL.GEN is in a generic word processor format. Note: Certain individuals who may be covered by other retirement systems (such as the Foreign Service Retirement System) still participate in the FEHB and FEGLI programs. The rules concerning continuation of FEHB coverage for former spouses after divorce and assignment of FEGLI coverage to a former spouse also apply to this group of individuals. Introduction 2 RETIREMENT Retirement OPM published revised regulations on court orders affecting retirement benefits in the Federal Register on July 29, These regulations synthesize our experience in processing court orders since They are designed to make it easier for parties in a divorce to ensure that court orders will be acceptable to OPM for processing, and that OPM will divide CSRS or FERS benefits, or provide a survivor benefit, in accordance with their wishes. The new regulations, which are reproduced in this document, are very detailed as to what constitutes a court order that is acceptable for processing, and as to the exact meaning of court order terminology. The definitions in these Appendices to the regulations contain model paragraphs that attorneys can use to ensure that, in drafting orders, the language they select will both produce the intended result and meet OPM's processing requirements. regulations are designed to give the most commonly-used meaning to words most often encountered in court orders. This will allow OPM to accept as many court orders as possible rather than rejecting orders, which would require the parties to return to State court. To further facilitate preparation of acceptable orders, The regulations... apply to court orders that OPM receives on or after January 1, appendices to the regulations contain model paragraphs that attorneys can use to ensure that, in drafting orders, the language they select will both produce the intended result and meet OPM's processing requirements. While the regulations themselves apply to court orders that OPM receives on or after January 1, 1993, a court order prepared using them also will be acceptable under the regulations that apply to orders that OPM receives before January 1, In addition, OPM strongly encourages use of the model language to ensure that a court order will be acceptable for processing by OPM. OPM's role is ministerial, rather than that of a mediator in marital property disputes. OPM's role is ministerial, rather than that of a mediator in marital property disputes. This latter role belongs to the State courts. If a court order is so flawed that it is not sufficiently clear to satisfy our requirements, the appropriate action is for the parties to return to the State court to correct the problem. Likewise, if a party contends that the court intended its order to have a different meaning than the clear meaning it has under these regulations, the proper forum for the individual's complaint is the State court. OPM will require employees and former spouses to settle disputes in the State courts where they belong, not in Federal proceedings. The courts issuing the orders are in the best position to determine the meaning of their own orders. Please note that this publication does not contain information on garnishment of pay or annuity of an employee or annuitant for alimony or child support. OPM's regulations governing garnishments may be found in Part 581 of title 5 of the Code of Federal Regulations. Preparing a Court Order Exemption from ERISA 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 et seq.) applies to CSRS or FERS benefits. Sections 1003(b)(1) and 1051 of title 29, United States Code, exempt CSRS and Retirement FERS from ERISA, because CSRS and FERS are governmental plans as defined in section 1001(23) of title 29, United States Code. ERISA created the term qualified domestic relations order (QDRO) to describe a court order that summarizes the division of retirement benefits under ERISA plans. QDRO's are not acceptable to affect CSRS or FERS benefits. OPM has seen from experience that attorneys prepare these orders on the assumption that they can provide any benefits available under ERISA to CSRS and FERS. (For example, the most important difference between ERISA plans and CSRS and FERS is that under ERISA the former spouse's share of the benefit can begin when the employee An order labelled as a QDRO is not acceptable. reaches the minimum retirement age, even if the employee is still working. However, this benefit is not available under CSRS or FERS. The availability of this early benefit, or lack of availability, can seriously alter negotiations over a settlement agreement.) Since CSRS and FERS are exempt from ERISA, some provisions that ERISA plans must honor do not apply to CSRS and FERS. For OPM to be able to process court orders in the way intended by the parties, OPM and the court must be speaking the same language. To assure that the court has used our terminology, rather than ERISA's terminology, an order labelled as a QDRO is not acceptable. However, this prohibition against labelling the order as a QDRO does not apply if court orders also expressly state that they are written in conformity with OPM's regulations. This exception will guarantee that the purpose of the ban--that the court understands that we are exempt from ERISA and that the court is using the terminology as provided in the regulations--is satisfied by requiring that any QDRO mention the regulations. Model paragraph 001 in appendix A to subpart F of the regulations provides the required language. (See page 74.) 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 et seq.) applies to CSRS or FERS benefits. Sections 1003(b)(1) and 1051 of title 29, United States Code, exempt CSRS and FERS from ERISA. Benefits payable A court order may affect any of three types In preparing a court order, attorneys should keep in mind that we consider each of the three types of awards as separate and independent of the other two, and should exercise great care in each type of benefit they intend to affect. of retirement benefits paid by OPM. The regulations treat each of the three--employee annuities, refunds of employee contributions, and survivor annuities--independently. In preparing a court order, attorneys should keep in mind that we consider each of the three types of awards as separate and independent of the other two, and should exercise great care in each type of benefit 5 Retirement they intend to affect. Our requirement that the award of each type of benefit be independent does not mean that the court award of one type of benefit cannot affect another. For example, awarding a former spouse survivor annuity requires a reduction in the employee annuity. If the former spouse has also been awarded a portion of the gross or net employee annuity, the former spouse's portion of the employee annuity will be affected. State court orders cannot affect several types of benefits payable under CSRS and FERS. OPM must pay any accrued annuity that is not paid before a retiree's death and any unexpended balance of an employee's retirement contributions that are paid as a death benefit in accordance with the order of precedence established by Federal law. Similarly, eligibility for children's survivor benefits is governed entirely by Federal law and cannot be affected by State court orders. A complete court order requires three separate provisions--one addressing each type of benefit that the court can affect. The employing agency is the proper source for employment and pay information about a current employee's service with that agency. A complete court order requires three separate provisions--one addressing each type of benefit that the court can affect. However, frequently, courts intend to award only a portion of the employee annuity or a survivor annuity, rather than a complete retirement package. A court that intends only to divide an employee annuity needs to consider only subparts A, B, C, and F of these regulations. Similarly, if the
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