Key Takeaways
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Divorce can significantly impact your federal retirement benefits, including your pension, Thrift Savings Plan (TSP), and survivor benefits. Understanding the rules can help you avoid costly mistakes.
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Court orders play a major role in how your retirement assets are divided, and failure to update beneficiary designations can lead to unintended consequences.
How Divorce Can Change Your Federal Retirement Plans
- Also Read: 3 Major Retirement Planning Errors That Federal Employees Often Make—And How to Avoid Them
- Also Read: What Federal Workers Are Doing to Keep Their FEHB Coverage Affordable as Costs Continue to Climb
- Also Read: How Younger Federal Employees Are Leveraging FEGLI for Long-Term Financial Protection
1. Your Pension May Be Divided
Understanding Court Orders and Their Impact
Your federal pension under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS) can be divided during divorce proceedings. This is typically done through a court-issued order called a Court Order Acceptable for Processing (COAP). A COAP instructs the Office of Personnel Management (OPM) on how to divide your pension benefits with your former spouse.
How Much of Your Pension Can Be Affected?
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The portion your ex-spouse receives is usually based on the number of years you were married while you were a federal employee.
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If you were married for 10 years or longer while working as a federal employee, your ex-spouse may be awarded a portion of your pension.
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Some states have community property laws that require a 50/50 split of marital assets, while others allow more flexibility in division.
Survivor Benefits and Your Ex-Spouse
Your former spouse may still be eligible for survivor benefits unless you remove them. You must elect a survivor annuity at the time of retirement for them to continue receiving benefits after your death. If you don’t take action, OPM may automatically reduce your annuity to provide for your former spouse, even if you are remarried.
What You Should Do
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Review your divorce decree to understand how your pension will be divided.
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Update your survivor benefit elections when finalizing your divorce to prevent unintended reductions to your annuity.
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Consult a legal expert with experience in federal benefits to avoid common mistakes.
2. Your Thrift Savings Plan (TSP) Is Also Subject to Division
TSP and Divorce Settlements
Your Thrift Savings Plan (TSP) can be split as part of your divorce settlement. A court order can instruct the TSP to transfer a portion of your account balance to your ex-spouse. However, the distribution rules differ from other retirement accounts.
Key Facts About TSP Division
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The TSP requires a Retirement Benefits Court Order (RBCO) to divide your account.
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A former spouse does not automatically receive a portion of your TSP; the court must specify the division in the decree.
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Funds transferred from your TSP to your ex-spouse can be rolled over into an IRA or another eligible retirement plan to avoid immediate tax penalties.
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If you are still employed, a TSP distribution due to divorce does not allow you to exceed your annual contribution limits to compensate for the loss.
What You Should Do
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Check the divorce decree to see if your TSP will be divided.
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Ensure the RBCO is properly worded so that the TSP processes the order correctly.
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Consider the tax implications of any withdrawals or transfers.
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If you remarry, update your beneficiary designations to reflect your current wishes.
3. Federal Employee Health and Life Insurance May Change
FEHB Coverage After Divorce
If you were covering your spouse under the Federal Employees Health Benefits (FEHB) program, they will lose coverage after the divorce. However, they may continue coverage temporarily through Temporary Continuation of Coverage (TCC) or purchase a private plan.
FEGLI Life Insurance and Divorce
The Federal Employees’ Group Life Insurance (FEGLI) program allows you to update your beneficiary designations after a divorce. However, if you fail to make changes, your ex-spouse could remain the beneficiary of your life insurance policy.
What You Should Do
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Remove your ex-spouse from your FEHB plan if they are no longer eligible.
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Ensure life insurance beneficiaries are updated to prevent unintended payouts.
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Consider the cost of health insurance for your ex-spouse, as they may need alternative coverage.
Why Staying Proactive Matters
Failing to update your retirement and insurance documents can lead to financial complications. Federal benefits operate under strict rules, and the government will follow court orders and beneficiary designations exactly as they are written—even if they no longer reflect your wishes.
Steps to Take Immediately
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Review your divorce decree to understand its impact on your benefits.
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Ensure all court orders are correctly processed by OPM and TSP.
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Update your beneficiaries on TSP, FEGLI, and other federal benefits.
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Consult a financial advisor or legal professional experienced in federal retirement benefits.
If you need assistance in navigating your benefits after a divorce, contact a licensed agent listed on this website who can help you make informed decisions and secure your financial future.
