Maryland ranks as one of the states with the highest number of Federal employees with approximately 260,000 at the end of 2010. With the national divorce rate still hovering around 50%, it stands to reason that a significant number of Maryland Separation and Divorce Agreements (MSA) will cover at least one Federally-employed spouse.
In most cases, divorce professionals fully cover all the basics:
- What is their total compensation in terms of salary and bonuses?
- What is the spouse’ classification – CSRS or FERS?
- How much Creditable Service do they have?
- What are their projected pension benefits at retirement?
- What is the balance in their TSP?
- Who is covered under their health plan?
- How much Life Insurance do they have through their employer?
What is many times overlooked is an employee’s participation in the Voluntary Contribution Plan (VCP). This Plan is only available to CSRS and CSRS-offset employees. The maximum contribution is 10% of the employee’s basic pay that is invested an account that earns tax-deferred interest. At retirement, the employee can either withdraw the entire amount, transfer to an IRA or increase their pension benefit.
If an employee is currently contributing to the Plan, the contribution will show up the bi-weekly wage statement. But suppose the employee stopped making contributions years ago? What if the spouse was a Federal Employee but is now employed in the private sector?
A Federal employee can go online to see what their benefits are. They can also contact OPM and see if they ever filed Form 2804 (Application to Make Voluntary Contributions. I am just not sure how many spouses going through divorce will voluntarily do this work.
This is a situation where working with a divorce team consisting of an experienced divorced attorney and a Certified Divorce Financial Analyst (CDFA™) would be a prudent decision. If the CDFA™ discovers a $50,000 Marital Asset that otherwise would not have been exposed, their fee “(squeeze) would certainly be worth the juice.”
John Faggio is a CPA, CFP, and CDFA™ with extensive experience in Federal Employee Benefits. Email or call John at 410-988-7333 for an initial, flat-fee, consult to learn about the pitfalls associated with the divorce of federal employees.