The FERS Supplement, Divorce and Calculating A Retirement Annuity
Divorce can be an expensive action for a federal employee who is retiring. A new decision from the Merit Systems Protection Board (MSPB) provides the latest example of divorce and federal annuity complications.
A federal employee who is retiring has—or at least should have—calculated how much income to anticipate before leaving federal service. A decision from the Merit Systems Protection Board (MSPB) (Ronald L. Moulton v. Office of Personnel Management, and Director of the Office of Personnel Management, 2023 MSPB 26, November 28, 2023) issued in late November will change this calculation for some retiring federal employees.
The decision applies to those who qualify for an annuity supplement under the Federal Employee Retirement System (FERS).
What is the FERS Supplement?
The FERS annuity supplement is a benefit provided to certain federal employees who retire before age 62 and are entitled to an immediate annuity. The FERS supplement:
- Is part of your FERS employee annuity.
- It replaces the amount of the Social Security benefit you would have received if you had retired after you were 62 years old.
- The retiree annuity supplement is specific to FERS; CSRS employees have no comparable benefit.
MSPB’s Order to OPM on the FERS Supplement
This is what action MSPB ordered for OPM:
We ORDER OPM to rescind its December 12, 2017 final decision, stop apportioning the annuity supplement, and refund all previously apportioned annuity supplement amounts to the appellant.
We also ORDER OPM to tell the appellant promptly in writing when it believes it has fully carried out the Board’s Order and to describe the actions it took to carry out the Board’s Order.
How OPM Initially Calculated the Annuity Payments
Here are the facts that led to the MSPB’s recent decision.
Ronald Moulton, a former air traffic controller, filed an appeal of OPM’s decision on the amount he owed to his former wife from his federal retirement annuity.
He was married on November 11, 1988. On July 12, 2004, a Colorado state court entered a divorce decree dissolving the marriage. The court awarded his former spouse a pro-rata share of his “gross monthly annuity” under FERS, including “any benefit the Employee earns based on special ATC [Air Traffic Controller] service.”
Moulton retired in 2010. OPM granted him an immediate retirement with a basic annuity and an annuity supplement under FERS. In December 2010, OPM notified Moulton and his former wife that it would pay her a pro-rata share of the appellant’s basic annuity under the terms of the court order. OPM did not include the appellant’s FERS annuity supplement in its computation.
Former Wife to Receive Larger Monthly Payment and $24,535.30 Missing from Earlier payments
About six years later, OPM sent letters to Moulton and his former wife informing them that the initial calculation was incorrect. According to OPM, the error was that the initial calculation did not include the FERS annuity supplement. Based on the new calculation, OPM concluded the former wife was entitled to a larger monthly payment and also an additional $24,535.30 she would have received over the past few years if the initial calculation had been correct.
OPM advised Moulton it would not collect the underpaid amount until he had exhausted his administrative and appeal rights.
What Led to Change in Calculation by OPM?
In his appeal, Moulton alleged OPM erred in providing his former spouse a share of his annuity supplement. The court order did not provide for dividing his annuity supplement, and OPM’s decision constituted a new “legislative rule” that required notice and comments before it was implemented.
OPM contended its decision was correct as it is required by law to apportion the annuity supplement “in the same way” as the basic annuity to compute a court-ordered division of a FERS retirement benefit. And, if the law is ambiguous, OPM contended its interpretation was entitled to deference.
Why the Court Order is Important
The MSPB administrative judge disagreed with OPM and said the agency was not entitled to deference. The administrative judge determined the law did not expressly provide for division of the appellant’s annuity supplement.
The administrative judge ordered OPM to rescind its final decision and refund all previously
apportioned annuity supplement amounts to the former air traffic controller. OPM filed a petition for review of the AJ’s decision.
The MSPB agreed with the administrative judge that the specific terms of the court order did not expressly provide for a division of the appellant’s annuity supplement.
