Divorce or Separation and Federal Benefits?

Even federal workers and retirees get divorced. When it does happen, it has an impact on a variety of living circumstances, including your federal employment benefits.

These benefits may make up a sizable portion of your financial considerations, if not the majority of them, as they cover crucial topics like lifetime annuity payments and health insurance coverage. Here’s what you should know about federal employee benefits when divorced or separated.

FEHB benefits and separation

Your spouse will be eligible to continue receiving benefits under your FEHB plan if you are officially separated or are in the process of annulment or divorce, and you are enrolled in either the Self Plus One or the Self and Family Option.

FEHB benefits in the event of a divorce

Your former spouse’s FEHB coverage will stop at midnight when your divorce or annulment is complete. The decision to keep that coverage after that is up to the individual. This can be done by switching to individual insurance with your own FEHB carrier per the Spouse Equity Act, the Temporary Continuation of Coverage (TCC) clause, or any other legal framework mentioned previously.

You can continue to choose the Self and Family option if you still have family members protected by your FEHB enrollment, or you can switch to Self Plus One if there is only one eligible individual.

You can change to self-only if there is nobody else who is protected by your FEHB enrollment. Any plan or choice can be changed, no matter the circumstances. Filling out the Standard Form 2809 and having it submitted to your agency personnel office (or Office of Personnel Management if you are a retiree) will allow you to make that change within 60 days of your marriage ending. You can find and download the form at www.opm.gov/forms/pdf fill/sf2809.pdf.

Beneficiary designation under FEGLI

If you’re a participant in the FEGLI program, you should look up the person you chose to receive the payout from your life insurance policy in the event of your passing. If you named your ex-spouse as your beneficiary, you might want to update that designation after getting divorced. You must fill out Standard Form 2823 to make a change; it is available for download at www.opm.gov/forms/pdf/fill/sf2823.pdf.

Survivor benefit

When your annulment or divorce is final, the duty that you provide a survivor annuity to your spouse ends. You’ll need to inform your agency—or OPM, if you’re a retiree—that your marriage has dissolved to avoid any future issues.

Other insurance

As long as the insured individual continues to pay the premiums, their enrollment in the Federal Long-Term Care Insurance Program is maintained after a divorce. There are no options for continuing the Federal Dental and Vision Insurance Program’s coverage once it expires. Still, former spouses can reapply if they meet the other requirements, such as federal employees or retirees.

Divorce decree and federal benefits

For instance, a state court order about a divorce or separation can divide your annuity, determine how much of your refund for retirement contributions you made when you left federal service before retirement should go to you, and allow your ex-spouse to keep their health insurance, require that you assign your life insurance, modify your annuity to pay alimony and/or child support, or require certain distributions from your Thrift Savings Plan account.

However, standard court orders used to divide pension plans in the private sector—commonly referred to as “qualified domestic relations orders”—will probably not be recognized by the Civil Service Retirement System or the Federal Employees Retirement System because federal employment matters are governed by “spouse equity” provisions in federal law.

Furthermore, certain benefits payable under CSRS and FERS are not at all subject to the influence of orders from state courts. A former spouse’s portion of a retirement benefit, for instance, can start when the employee reaches the minimum retirement age, even if the person is still employed, according to the private sector Employee Retirement Income Security Act. This is not permitted under the CSRS or FERS because court rulings cannot alter retirement benefits until after they become payable.

This implies that for an employee to be eligible for the benefit, they must not only have reached retirement age but also have submitted an application for it. In the same vein, state court rulings cannot alter the eligibility for children’s survivor payments, which are governed by federal law. Thus, divorce orders, including federal employee benefits, must be specifically written to adhere to federal law.

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After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.

Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.

Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.

Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.

Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.

With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.

Aaron can help you and your family to create, preserve and protect your legacy.

That’s making a difference.

Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.