A FERS Pension Is Different From a Thrift Savings Plan (TSP)
The Federal Employees Retirement System (FERS) is the primary retirement pension system for most civilian employees of the federal government. Like the Texas Teacher Retirement System (TRS), the Employees Retirement System of Texas (ERS), and military retired pay, FERS is a defined benefit pension plan. It should not be confused with the Thrift Savings Plan (TSP), which is a separate defined contribution retirement account similar to a 401(k).

Many federal employees participate in both FERS and the TSP. Although both are retirement benefits, they are separate assets that must be analyzed and divided independently during a divorce.

Who Participates in FERS?
FERS covers millions of federal civilian employees across the United States. Examples include:

• Federal Bureau of Investigation (FBI) employees

• Drug Enforcement Administration (DEA) agents

• Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) agents

• United States Marshals

• Customs and Border Protection (CBP) officers

• Border Patrol agents

• Secret Service personnel

• Transportation Security Administration (TSA) employees (certain retirement categories)

• Internal Revenue Service (IRS) employees

• United States Postal Service (USPS) employees

• Veterans Affairs (VA) employees

• Social Security Administration employees

• Federal court personnel

• Administrative employees working for federal agencies throughout the government

Although retirement eligibility may differ depending upon the employee’s position, FERS generally provides a monthly retirement annuity based upon years of federal service and salary history.

The Employee Contribution Balance Does Not Reflect the Value of the Pension
Unlike a 401(k), a FERS pension is not simply an investment account with a balance that can be divided.

The retirement benefit is the right to receive a monthly annuity calculated under federal law. While employees contribute toward the retirement system during their careers, the contribution balance does not represent the value of the pension itself.

In many cases, the lifetime retirement benefit is worth substantially more than the employee contributions reflected in payroll records.

Accordingly, attorneys and courts generally do not divide a FERS pension based upon employee contributions. Instead, the court divides the community property interest in the future retirement benefit.

Only the Community Property Interest May Be Divided
Texas is a community property state. Retirement benefits earned during the marriage are generally presumed to be community property, while retirement benefits earned before marriage are generally separate property. See Tex. Fam. Code §§ 3.002, 3.003, 3.007, and 7.001.
If a federal employee began earning FERS service credit before the marriage, that portion of the pension generally remains the employee’s separate property. Only the retirement benefits earned during the marriage are generally subject to division by the divorce court.

Determining the community interest frequently requires reviewing federal employment records, service dates, and the dates of marriage. A current retirement estimate alone rarely provides enough information to properly characterize the pension.

The Former Spouse May Receive Monthly Retirement Benefits After the Divorce
A divorce terminates the community estate. It does not continue after the divorce decree is signed.

If a court awards part of the community interest in a FERS pension to the non-employee spouse, the former spouse receives a separate property interest in that awarded portion. When the federal employee later retires and begins receiving FERS retirement benefits, the former spouse may receive the percentage or amount awarded by the court pursuant to a qualifying court order.

The former spouse receives those payments because of the property division ordered by the divorce court—not because the community estate continues after the divorce.

A Pension Valuation May Require an Expert
Some divorcing spouses prefer to value the community interest in the pension and offset that value with other marital assets rather than divide future monthly retirement payments.

Valuing a FERS pension requires actuarial calculations involving projected retirement dates, life expectancy, discount rates, survivor benefit elections, and future monthly benefits. Because these calculations are highly specialized, forensic accountants and actuaries are frequently retained to prepare pension valuations.

Although hiring an expert increases litigation costs, a valuation may provide additional flexibility when negotiating the overall property division.

FERS Requires a Court Order Acceptable to the Office of Personnel Management
A Final Decree of Divorce alone generally is not sufficient to divide a FERS pension.

The United States Office of Personnel Management (OPM) requires a qualifying Court Order Acceptable for Processing (COAP) before it may pay retirement benefits directly to a former spouse. A COAP is different from the Qualified Domestic Relations Orders (QDROs) used for many private retirement plans and must satisfy specific federal statutes and OPM regulations.

Because federal retirement orders are highly technical, careful drafting is essential. Failure to comply with OPM’s requirements may delay benefits or require additional court proceedings to correct the order.

Tell Your Attorney If You Worked for the Federal Government Before Marriage
If you began federal employment before you were married, you should tell your attorney immediately.

Service credit earned before marriage may constitute separate property under Section 3.007 of the Texas Family Code. Early identification of a separate property claim allows your attorney to gather employment records and retirement information necessary to distinguish the separate property portion of the pension from the community property portion earned during the marriage.

Fergus & Tomanka Can Help Protect Your Federal Retirement Benefits
Federal retirement benefits are among the most valuable assets many families own. Properly characterizing the community property interest, preserving separate property claims, determining whether an actuarial valuation is appropriate, and preparing a Court Order Acceptable for Processing all require careful planning and familiarity with both Texas family law and federal retirement regulations.

At Fergus & Tomanka, we regularly represent clients in divorces involving FERS pensions, Thrift Savings Plans, military retirement benefits, TRS, ERS, and other public retirement systems. We work with qualified financial experts when appropriate and prepare the specialized retirement orders necessary to ensure that your retirement benefits are divided accurately and in accordance with both Texas and federal law.