QDRO Corner: A FERS Annuity Doesn't Have to Revert to the Employee

When parties divorce and the FERS annuity is divided pursuant to a COAP and then the former spouse dies, the default is for the former spouse’s share to revert back to the employee.

I’m often asked whether the former spouse’s share of the FERS monthly annuity can be transferred to someone else in this scenario, rather than having the share revert back to the employee.

OPM (the administrator of the FERS plan) will only transfer the former spouse’s share to a specifically named third party as a part of the COAP if that third party is the child of both parties. If the former spouse’s share is to be paid to any other third party, the COAP must designate either a central location such as a specific bank account, or the former spouse’s estate. If, however, the estate is elected, then keep in mind that the funds will be taxed for going through probate (according to each state’s laws) and then the estate must remain open until the death of the employee, which will cause delay and maybe an administrative headache. Additionally, note that if the former spouse was to receive a survivor annuity, the survivor annuity does not transfer to anyone. Only the former spouse’s share of the monthly annuity during the life of the employee can continue to be paid beyond the death of the former spouse.

Similarly, I’ve also been asked the opposite question recently: the parties designate that the former spouse’s share goes to the parties’ child upon the death of the former spouse if predeceasing the employee. The former spouse dies, and the parties’ adult child is now receiving the former spouse’s share, whereas the employee could really use those funds. As the former spouse is now unable to sign a new COAP, the only way for the employee to recoup those funds is to ask the adult child for them, and hope their child voluntarily pays it over, post-tax.