Divorced former federal employees getting annuity supplements received a surprise in their financial statements in 2016, as the Office of Personnel management retroactively changed their policy on whether a portion of those annuity supplements is due to a retired employee’s ex-spouse, according to a Feb. 5, 2018, Inspector General report.

“Retirees and the former spouses learned of OPM’s decision only when their annuity amounts changed — many years after the parties had divorced, after a state court had ordered a former spouse’s marital share, and after OPM had accepted the state court order for processing,” the report said.

“In addition, OPM applied this new interpretation retroactively to the date when the retiree started receiving an annuity supplement, resulting in a debt due from the retiree to the former spouse. OPM’s new policy has been causing immediate financial disruption to annuitants. Moreover, OPM’s new policy improperly changes previously litigated final state court orders without notice to annuitants.”

Annuity supplements are paid in addition to basic annuity to certain federal retirees who retire before they are eligible for Social Security. For example, law enforcement officers, whose mandatory retirement age is 57, would be forced to deal with a lapse in retirement coverage without annuity supplements.

Previously, the OPM policy was to treat annuity supplements like Social Security, making them not allocable between former spouses unless otherwise outlined in divorce settlements.

The OPM Office of Inspector General became aware of the issue after it was copied on a Sept. 16, 2016, email sent by the Federal Law Enforcement Officers Association to then-Acting Director Beth Cobert. The email raised concerns over OPM’s rule change without public notice, and the OIG then determined that the issue warranted examination.

“The recent report released by OPM’s Inspector General should be alarming to any federal employee,” said FLEOA National President Nathan R. Catura, author of FLEOA’s original letter of concern to OPM.

“The report confirms that the Office of Personnel Management has, in effect, quietly inserted itself into federal retirees’ private divorce proceedings. OPM has decided, as if by fiat, and without any judicial or congressional input, that divorced federal retirees must part with a larger portion of their hard-earned retirement funds.”

According to Catura, FLEOA only became aware of the change after its members received letters from OPM declaring that these retirees had been “overpaid” and now owed the government thousands of dollars.

OPM asserted that the change was made due to legal requirements, though the OIG concluded that “language of the statute simply does not mandate the conclusion that the Basic Annuity and the Annuity Supplement should be deemed to be one and the same.”

The OIG also found that OPM does not have the authority to resolve ambiguities in court documents, meaning that if a court order of a divorce does not address annuity supplements, OPM’s responsibility is to return the order to the court to resolve the ambiguity.

Barring this lack of authority, OPM is still required to issue public comment and notice of such a change, and cannot make the new interpretation retroactive, according to the OIG.

The OIG recommended that OPM cease implementing the changed policy, reverse decreased annuities that were part of the new policy and examine whether it has a legal requirement to make updated guidance available.

OPM disagreed with all three recommendations.

“In effect, there are federal retirees who woke up one morning to find that their well-established divorce settlements had been changed, not by the previous spouse or a judge, but by the United States Office of Personnel Management,” said Catura.

“Worse still, when the impact of OPM’s decision was confirmed by the agency’s Inspector General, who issued numerous recommendations to resolve the problem, OPM rejected every recommendation and asked the IG’s office not to make the report public.”

OPM also attempted to prevent the publication of the OIG report on the basis that it represented a legal argument that could be used by annuitants in appeals over the agency’s decisions. OIG declined the OPM request as it would go against the purpose of the IG outlined in the Inspector General Act of 1978.

Jessie Bur covers federal IT and management.

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