Date:December 19, 2017
According to New Hampshire divorce attorney Michaila M. Oliveira at the Law Office of Manning & Zimmerman PLLC, New Hampshire case law gives concrete guidance on how to divide vested retirement benefits, including pensions, 401Ks, IRAs, and other retirement assets in the event of divorce. But what about those optional additional benefits that may be offered as part of a spouse’s retirement plan but may not be included in the valuation of the retirement asset for purposes of judicial division? Often these provide a benefit that can be negotiated into a divorce – either as a voluntary benefit provided to the former spouse or in exchange for some other asset/benefit.
Survivor annuities are one of the optional benefits that may be offered as part of an employee retirement plan. The importance of such a benefit is often only clear long after a divorce is finalized. Survivor annuities are a benefit that allows a designated survivor to receive a monthly benefit equal to a defined percentage of an employee’s pension after the employee has died. The designated survivor then receives this benefit until his/her own death.
Generally, when an employer offers a survivor annuity as part of an employee’s retirement benefits package, the employee must actively “elect” or choose to purchase the annuity option. Often, election is done at the time of retirement, however, this is not true of all survivor annuities, particularly the annuity available to US military members. Survivor annuities generally come with a separate monetary cost.
The most important practical consideration for dealing with survivor annuities in a divorce is that the annuity, almost universally among the all of the particular benefit plans available, must specifically be addressed in the Decree of Divorce. If the annuity is not addressed within the Decree, then it may be near impossible for a surviving former spouse to collect the benefit – even if the parties planned for that to happen.
Below is a description of three of the more common survivor annuities that may be encountered in a New Hampshire divorce:
Eligible federal government employees have the option to elect to purchase the FERS survivor annuity. There are two levels of FERS annuities – the full survivor annuity and the reduced survivor annuity. While the term “full” survivor annuity would lead one to believe that the surviving present or former spouse would receive 100% of the employee’s pension, that is incorrect. The full annuity, at the time this article was published, pays 50% of the employee’s pension to their designated survivor after the employee’s death. The cost to elect this full survivor annuity is 10% of the employee’s pension payment per month from the date of retirement through the date of death. The reduced annuity pays 25% of the employee’s pension. The cost to elect the reduced survivor annuity is 5% of the employee’s pension payment per month from the date of retirement through the date of death. If the employee is married at the time of election, the employee will need his/her spouse’s written permission to choose anything other than the full annuity.
Federal employees may also elect not to purchase any of the FERS survivor annuity options. Again, if the employee is married at the time of election, the employee will need his/her spouse’s written permission to choose this option. An important consideration when choosing to purchase any of the FERS survivor annuities is that, after the employee’s death, if the designated surviving spouse is not receiving a survivor annuity benefit then they will not be eligible for FEHB health insurance.
Eligible New Hampshire state government employees have the option to select a reduced pension under a “Survivorship Option” to provide a lifetime pension to a designated survivor. An employee may designate a single beneficiary or multiple beneficiaries, although this option is limited to the employee’s spouse and children. In the case of multiple designated beneficiaries, the employee must specify a distribution percentage for each beneficiary on the retirement application. Cost-wise, the amount of the reduction in the member’s retirement pension will depend on a number of factors.
State employees have a number of different survivor annuity options available to them, with police and fire employees having their own additional options beyond those available to all employees.
Of the common survivor annuity programs described in this article, the New Hampshire Retirement System has the most options available and accordingly the most variability in potential value for a former spouse.
The Survivor Benefit Plan (SBP) is the survivor annuity associated with military retired pay. If the service member or retiree dies first, the spouse or former spouse survivor is eligible to receive 55% of the selected base amount (usually the full pension) for the remainder of his or her life.
A major issue attorneys negotiating SBP benefits should be aware of is the Former Spouse SBP deadline. To effectuate coverage, the service member or retiree must file a DD Form 2656-1 with the Defense Finance and Accounting Service retired pay center within one year of the order which awards the SBP (typically the Decree of Divorce).
The New Hampshire divorce lawyers at Manning & Zimmerman Law will also consider the issue of remarriage. If the former spouse has any plans for remarriage (or even if they don’t have such plans at the time of the divorce), be sure to remind him/her about the “remarriage penalty.” Remarriage of the former spouse before he/she turns 55 suspends his/her SBP coverage. Coverage can be reinstated, however, if the remarriage ends under certain conditions.
For the service member spouse, if the former spouse is alive and set to receive SBP benefits per the parties’ Decree of Divorce, then if the service member remarries, the service member cannot elect any SBP coverage for their new spouse. If the former spouse is alive at the time of the service member’s remarriage, but the former spouse’s benefit is suspended due to his or her own remarriage, then the service member may only obtain eligibility to make a new SBP election by returning to court to obtain a modification of the prior court order requiring SBP coverage.
The New Hampshire divorce lawyers at Manning & Zimmerman Law handling divorces where survivor annuities may be an issue will be sure to research the particular requirements of the issuing employer before entering into any agreements regarding those annuities. The particular language used in the Decree of Divorce may be the difference between a surviving former spouse successfully collecting the survivor annuity and their claim being denied by the issuing employer.
The New Hampshire divorce lawyers at Manning & Zimmerman Law would be pleased to discuss your matter with you and be your partner throughout the process. Our firm is experienced and prepared to deal with any situation that may arise. For a free consultation, please feel free to call us at (603) 210-4464, send us an email to info@MZLawNH.com, or reach out to us using the “contact us” or chat feature on our website.
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