QDRO CORNER: Concurrent Payments of FERS and CSRS Pensions

When a person becomes employed by the federal government will determine whether they earn an interest in the Civil Service Retirement System (“CSRS”) or the Federal Employees’ Retirement System (“FERS”). CSRS was closed at the end of 1983 and FERS began in the beginning of 1984.

Former federal government employees may have an interest in both CSRS and FERS systems. These employees may have been an employee under CSRS, left the employ of the federal government for a period, and then returned when FERS was the pension system provided to employees.

When these benefits are paid to the retired participant, they are paid in a single, combined payment. The retired participant receives an annual statement which describes the benefit paid from each retirement system, and any COLA applied thereto. In addition, if a survivor benefit was selected at retirement (or awarded pursuant to a Court Order) the statement will show the amount of benefit and to whom it is awarded.

This annual statement is helpful for a few reasons. First, the amount awarded to the soon-to-be former spouse can easily be calculated. This knowledge will help both parties plan financially for the future.

Second, to confirm whether the retiree is receiving a benefit from one or both pension systems. Some people who were CSRS employees at the time the plans switched were required to or had the option to switch to FERS. For these participants, they would no longer have a CSRS interest, as it would have been transferred to FERS. As such, any award to a soon-to-be former spouse from CSRS in this case would worthless.

Alternatively, if the benefit is coming from both systems the parties can properly allocate the division between the plans, or shift the soon-to-be former spouse’s benefit to come entirely from one plan. Parties may want to shift the soon-to-be former spouse’s benefit to be from one plan only so that there is only one domestic relations order needed.  

Finally, the domestic relations order dividing the pension interest must state the name of the plan it is dividing. Being able to confirm if a retiree is receiving benefits from one or both retirement systems is incredibly helpful to ensure the former spouse will receive the proper amount of benefits. If this is not confirmed, the former spouse may receive less than anticipated once payments to the former spouse begin, and may have waived interest in all other benefits. This situation would leave the former spouse potentially without recourse to enforce the agreement and get what they expected.

If the annual statement is not available for any reason, it is best practice to include in the agreement as much information as possible to ensure the former spouse receives the intended amount, such as the amount that the retiree receives on a monthly basis, and the estimated amount the former spouse should receive on a monthly basis. In addition, if the parties believe but are unsure if the benefits are entirely from one retirement system, the agreement should include a paragraph that the parties will cooperate to ensure the former spouse receives they entire benefit, including, if necessary, a second Court Order to divide the other pension interest and direct payment of the difference from the retiree until the second Court Order is put in place.

Finally, a consideration here too is whether enough information is being exchanged for the parties to be making informed decisions. If the attorney has any concern that a party is not going to receive the agreed upon amount they should be sure to send their client a written communication with their concerns, recommended action, and suggested language for the agreement.  This will make clear the attorney’s concerns with the agreement and proposed solutions. This communication will help to protect the attorney against any malpractice claims in the event the agreement does not provide the former spouse with the expected benefits.

If you have a case where a party may have both benefits and you need assistance in drafting settlement agreement language, proposing language for a judgment of divorce, or determining the best way to divide the benefits to implement the parties’ intended division, call us. We offer consultations on federal benefits and flat fee retainers for defined scopes of work in this area. Contact our office at 240-396-4373 to schedule a consultation today.