OPM Policy Change on Divorce Matters – URGENT (by: Dan Jamison)

/in /by
OPM has silently changed the way that they process divorce court orders.  If you have been divorced, and a portion of your annuity was awarded to your former spouse, YOU MUST READ THIS.

 The policy change has to do with the Retiree Annuity Supplement, or RAS.  Since the inception of FERS, the RAS was not subject to apportionment, unless the order 1) expressly stated that the RAS was to be apportioned or, 2) was an award based upon the Net Annuity.  Orders that awarded a portion of the Gross Annuity or Self-Only Annuity did NOT have a RAS apportionment under OPM policy.

OPM, citing 5 USC 8421(c), now believes that the RAS should be apportioned to the former spouse in the same way that the “regular” FERS annuity is apportioned in the order. OPM started mailing out letters in mid-July and the change was reflected on the 8/1/2016 annuity payment.  I assume letters will later go out to folks that have not yet retired, so stay tuned.  Many of you are affected by this, but you do not know it yet.  I will be posting a copy of one of the annuitant letters on the member-only portion of my website very soon.

If your order awarded your former spouse a portion of your annuity based upon a percentage or a formula, OPM will now also apportion the RAS to the former spouse using the same formula or fraction.

It is my belief and understanding that if an order awards the former spouse a discrete dollar-amount award, then OPM will not apportion the RAS.  Even if the order expressly directs OPM not to apportion the RAS, I’m not convinced that OPM will abide by that directive, as they may cite the precedence of federal law over state orders.  This issue is still developing.

Folks, this is HUGE.  OPM is not only applying this prospectively, but for those in annuity pay status, they are going back 36 months!  Suppose the apportioned amount of your RAS to be paid to your former spouse is $300/month.  OPM is awarding the former spouse $10,800 and taking an extra $300 from your annuity for the next 36 months to pay it pack to OPM, in addition to the $300 a month prospectively.  That means your annuity will be $600 a month lower for the next 36 months.

For those of you not in annuity pay status, plan accordingly when budgeting for retirement, as you may be paid less by OPM than you planned for.  Of course, at age 62, it’s a moot point since the RAS ends then.  Also, if you over-earn and do not receive the RAS, the former spouse will not be paid anything. If you phase out and earn a reduced RAS, the former spouse’s award will be based upon the portion you are actually entitled to after the earnings test.

I will be creating a page on the members-only part of my website with updates and resources for you.  I am still determining how I can best help everyone, but to start, I am drafting a “pony” letter regarding the issue that can be used as a basis for a letter you send to your elected officials.  I will also draft a sample OPM reconsideration letter.  Remember, even if you are an on-board employee that has not received a letter from OPM, you are affected by this and should make your concerns know to your elected representatives. There was no advance publication of this change or comment period.  This appears to be a decision made by OPM’s policy folks rather than the Court Order Benefits Branch at OPM.
OPM Federal Long-Term Care Insurance Plan

As many of you know, OPM lets a new contract for the FLTCIP every 7 years.  By now, everyone should have received a notice that the premiums are going up gains, sometimes by more than 200% depending on your plans.  Mine rose 123% and I’ve had mine for 12 years.Many in the federal-news arena have commented on this issue.  It appears that LTC is such a relatively-new product that the insurance companies don’t really know what this will actually end up costing them.  In 7 years, I believe you can expect another increase.The FLTCIP letter will provide you with several options, and one that will keep your premiums the same with some adjustment for benefits received.  In my situation, I was able to drop from a 5% inflation factor (ACIO) to a 3.6% inflation factor to keep my daily benefit and premium the same.Many of you may decide, “that’s it” and drop out.  If that’s the case, on most option letters, you will see a “paid-up limited benefit” premium option.  What that means, is that suppose you’ve paid in $20,000 in LTC premiums, but now you just want out.  That $20,000 is still in the plan to pay benefits, so at least you will may potentially get your $20,000 back if you make a claim.  It beats walking away from $20,000 in paid-in premiums and getting nothing in return.Since there is still quite a bit of time until the 9/30/2016 deadline to make an election, it can’t hurt to shop for a LTC policy and compare the benefits with OPM’s plan and look to see if the new plan is like term life insurance, were the premiums are locked in and you will not suffer this angst every 7 years.