There are several methods available to address the potential coverage gap for former spouses of civil service employees who terminate CSRS service and pass away before qualifying for retirement benefits.

By Mark K. Altschuler, Actuary

CSRS-coverage-gapA federal QDRO-type order under the Civil Service Retirement System is called a COAP, short for Court Order Available for Processing. Since this is a shared interest order, rather than a separate interest payable for the life of the Alternate Payee (called Former Spouse in a COAP), a survivor annuity is required in the COAP in order to preserve benefits for the Former Spouse in the case of the death of the Participant (called Employee in a COAP). In the Civil Service Retirement System (CSRS), the Former Spouse Survivor Annuity is payable “at the death of the Employee, whether such death occurs while an employee or retiree.”

The question, then, is what happens if the employee terminates service for CSRS and then dies before retiring (i.e., commencing retirement benefits)? Section 8341(h)(1) of Title 5, U.S.C. states that the survivor annuity is payable to a “former spouse of a deceased employee, Member, annuitant, or former Member who was separated from the service with title to a deferred annuity under section 8338(b) of this title.”

This certainly implies that if an employee terminates service before retirement and then dies before retirement, the survivor annuity is not payable, since it is payable to the former spouse of a deceased employee or annuitant – established by either dying in active service as employee or dying in pay status. The exception is a “Member who was separated from service with title to a deferred annuity.” Under §8331(2) of Title 5, U.S.C., a “Member” is defined as a Member of Congress, with some defined exceptions. This makes sense, since Members of Congress are subject to re-election and many do not serve until retirement age, but instead leave Congress with a deferred annuity. However, for regular Civil Service employees under CSRS who terminate service before retirement age and die before retirement, the survivor annuity is not payable to a former spouse.

Hubbard v. Office of Personnel Management

This regulation was tested in the Hubbard[1] case. In Hubbard, William Hubbard, the CSRS employee, was employed with the Department of the Interior from 1967 until his resignation in in 1986, with less than 20 years service, which meant that he was eligible for retirement at age 62. He and Betty Hubbard divorced on January 19, 1996, and on June 9, 1997, the General Court of Justice, District Court Division, Wake County, North Carolina issued a COAP that awarded the former spouse a Former Spouse Survivor Annuity equal to 50% of the employee’s gross monthly annuity. Mr. Hubbard died on July 28, 1998, at age 53, before he was eligible for his retirement benefit. Betty Hubbard applied for a survivor annuity on September 8, 1998 and, by letter dated November 12, 1998, the Office of Personnel Management (OPM) informed her that she was not eligible for a survivor annuity because Mr. Hubbard was not an active employee nor a retired annuitant. Betty Hubbard appealed and on November 23, 1999, OPM issued its final ruling that confirmed the initial finding.

Betty Hubbard then appealed in this decision in Federal Court, basing her claim for a survivor annuity on the language in §8341(h)(1) stating the survivor annuity is payable to a “former spouse of a deceased employee, Member, annuitant, or former Member.” The United States Court of Appeals found that “Member” means a Member or former Member of Congress and that “this provision does not, however, afford former spouses of former employees similar treatment.” Thus, the Court found that Betty Hubbard was not entitled to a survivor annuity, and affirmed the Board’s decision.

Solutions for Coverage During the Gap Period

The remaining question is what protection can be offered the former spouse if the CSRS employee terminates service and dies before retirement? One remedy is the Lump Sum Benefit, which is the balance of retirement contributions made by the employee. This is payable under the order of precedence, where the order of precedence is as follows:

  • Designated beneficiary;
  • Widow or widower;
  • Child or children;
  • If none of the above, to the parents;
  • If none of the above, to the executor of the estate;
  • If none of the above, to the next of kin.

Therefore, naming the former spouse as the lump sum beneficiary in the COAP will designate the former spouse as beneficiary for the Lump Sum Benefit and offer at least some protection if this gap occurs.

Another solution during the gap period is life insurance. While the first choice would appear to be the Federal Employees’ Group Life Insurance (FEGLI), FEGLI coverage terminates after 12 months of nonpay status – so it only covers employees and annuitants, not separated employees. Therefore, private life insurance has to be used as a remedy. Fortunately, the replacement life insurance would only have to be in effect for the period from termination until retirement, as opposed to survivor annuity replacement insurance, which has to be in effect for the life of the retiree. An actuary can prepare a table of year-by-year term life insurance that replaces the present value of the survivor annuity on an annual basis during the gap period. Therefore, this is the solution of choice if such a gap occurs in a CSRS COAP situation.

Based on material from Value of Pensions in Divorce, Fifth Edition, by Mark K. Altschuler and Nora Kelley, Wolters Kluwer Law & Business. For further information on Value of Pensions in Divorce, please see 

[1] Hubbard v. Office of Personnel Management, 247 F.3d 1236 (2001).

An actuary and the president of Pension Analysis Consultants (PAC), Mark Altschuler has performed more than 20,000 pension evaluations. In addition to writing multiple articles for legal publications, he is a noted CLE speaker on pension and QDRO issues.