Lawyer presenting chart to judge

I wrote a while back on a case concerning the importance of having a promissory note for a loan from a friend or family member because the spouse must prove that the payment was a loan to be repaid, not simply a gift. And in that post, I gave rather short shrift to another aspect of the court’s ruling where it addressed the division of a FERS pension and applied a similar principle – because the spouse seeking to divide the FERS did not put on evidence of asset value, the Court had no way to ascertain whether it was an asset that should be divided. The issue of an asset value is important enough to have a more thorough post.

For those unfamiliar with the Federal Employees Retirement System, or FERS, it is a defined benefit pension plan, whereby a retiree is paid a monthly annuity after retiring based upon length of service, age, and years of credit. FERS pays 1% of the employee’s “high-three” average salary for each year of service under age 62, and 1.1% per year for employees at least 62 years old with 20 or more years of service. See this page on the Office of Personnel Management website for a more detailed breakdown of the FERS calculations.

So an employee who retired at age 68 with 35 years of service would receive 36.6% of his/her “high three” pay upon retirement (29% for 29 years through age 62, then 6.6% for 6 years after that).

Husband Contributed to FERS

During the marriage, the husband was a federal employee who had undeniably contributed to the Federal Employees Retirement System. However, the wife did not obtain a copy of the “FERS packet,” nor put on evidence of how much the husband had contributed, how much the account was worth, nor how much the husband would receive upon retirement. She merely asked the court to divide the FERS without any evidence of the asset value.

FERS Personal Statement of Personal Benefits (“FERS Packet”)

A Personal Statement of Personal Benefits, also known colloquially as a FERS Packet, provides a whole variety of data about the employee necessary to calculate FERS, including date of birth, creditable service, annual basic pay, and, importantly, how much FERS annuity is payable at ages 62, 65, and 68.

FERS & Promissory Note

While there are ways to prove at least some value without the FERS packet, ultimately, the packet is needed to implement the division, either with a formal valuation from a CPA or for preparing a formal order to divide the FERS (known as a Court Order Acceptable for Processing).

Not having the FERS packet is not as crazy as it may seem. Some family law attorneys who do not regularly have cases involving federal employees may not know that the packet exists, so they may not ask for it. Moreover, if you have the years of service (typically something both spouses know), then a judge can order a “defined benefit” retirement plan divided according to a coverture (“time rule”) formula, with the marital share calculated by dividing the months of marriage overlapping service by the total months of service at retirement. In such cases, evidence of the specific value does not affect how the formula a court will order for its division.

Evidence of Asset Value

In Wood, the absence of any evidence of asset value was fatal to the wife’s case. The husband conceded that he would receive a FERS pension and contributed to it through a payroll deduction, but testified he could not place a value on his pension, nor could he obtain a statement of benefits (note – he probably did not try very hard).

The wife argued that because the husband contributed to FERS, and it was undeniable that he would eventually receive a monthly benefit from it upon retirement, the court should divide the asset despite no evidence showing the value of the asset.

The trial court declined to divide the FERS without evidence of value, the wife appealed, and the Court of Appeals upheld that order:

“A district court is required to find the approximate current value of all property owned by the parties. But when no evidence of the value of a particular asset is presented, there is no error in the court’s failure to include that asset in the property division. Without any evidence to show the value of father’s FERS defined benefit retirement account, the court did not err in failing to value or divide it.”

Wood, ¶ 24 (Unpublished decision) (Cleaned up).

Takeaway – Get the FERS Personal Statement of Benefits

Obtaining a FERS packet is sometimes challenging but never impossible. At Graham.Law, we regularly have clients obtain their Personal Statement of Benefits, so we have it on hand when the other side asks. We always ask the other side for the full packet rather than relying upon trying to divine how much the FERS is worth through federal leave & earnings statements (aka “paystubs”).

Employees can obtain the full packet from their local personnel service center, and talking to their HR person is a good starting point. Failing that, they could try one of OPM’s benefits officers (we’ve not had to do it, so we can’t vouch for how well that would work). But ultimately, we’ve never had a case where the FERS packet was utterly unattainable, though we have frequently had to educate our clients and counsel on the other side by providing a sample FERS packet (sufficiently redacted) to show what is needed.

Finally, if you have a spouse who is unable or unwilling to get the FERS packet, a lawyer can always introduce at least some evidence of value by eliciting:

  • How much the employee contributes to FERS (it’s on his/her paystub).
  • How long the employee has been a federal employee.
  • Ask the Court to take judicial notice of 5 U.S. Code § 8415, which sets forth the formula for FERS benefits.
  • Finally, introduce a demonstrative exhibit with your estimate of benefits based upon the employee’s current pay and years of service. It won’t be precise, but having something is better than nothing.

For more information about the Federal Employees Retirement System, the OPM’s FERS information pages are chock full of information, pamphlets, and forms.

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