Death, Divorce, Money and Retirement

By on July 8, 2005 in Current Events, Retirement with 2 Comments

Love, money, death and divorce. The intense emotions of a marriage don’t always stop when a couple is divorced or retired.

When a spouse is a retired federal employee, there are not only emotions involved; there is also the question of the retirement annuity. Perhaps a long-time spouse does not want his or her former partner to benefit from his long years of federal service. And, no doubt, many divorcees would not want a former partner to enhance their financial situation when the former fed dies.

But it happens. Here is one case that shows how a former spouse may benefit from the death of a retired federal employee.

Larry and Judith were married for 24 years. They divorced in 1988. Larry retired under the Civil Service Retirement System in 2002 with about 39 years of federal service.

A Colorado court issued an order dividing up Larry’s retirement benefits. Judith was to receive $770.38 as long as Larry is alive. But, according to OPM, when Larry dies and if Judith is still alive, her monthly payment would increase to about $2708 according to the calculations of an administrative judge of the MSPB.

That didn’t seem fair to Larry so he filed an appeal of the OPM decision and the case went to the Merit Systems Protection Board. The administrative judge (AJ) agreed with Larry and concluded it was "absurd" that a spouse would get such a financial windfall upon the death of her former husband. The AJ concluded that $770.38 was the approximate amount Judith would receive before and after Larry’s death if he should die before she did.

But the MSPB did not agree with its AJ.

The MSPB agreed that the court order was unclear as to the amount Judith would get upon Larry’s death. As stated by the MSPB: "We are…left with a court order that unambiguously provides for a former spouse survivor annuity but does not provide a fixed amount, complete formula or other term by which the survivor annuity can be calculated."

But, to no great surprise, OPM has a regulation for this state of affairs. According to OPM, when a court order does not specify an amount, a former spouse gets the maximum permissible annuity.

So, under this OPM regulation, Judith would get a big pay increase as she would get maximum annuity upon the death of her former husband, which the administrative judge calculated could be about $2700. And, said MSPB, this was not an "absurd" conclusion at all. Indeed, concluded the Board, it is similar to a person receiving a large life insurance payout upon the death of the policyholder even though the beneficiary did not receive anything during the person’s life.

The case may not be over as Larry can go into court to try and reverse the MSPB decision. But, for now, his former wife will get a pay increase when he dies. Landrith v. OPM and Landrith, DE-0831-04-0029-I-1 (June 27, 2005).

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.