OPM’s Apportionment of FERS Annuity Supplements under Federal Circuit Review

For decades, the Office of Personnel Management (OPM) applied divorce court orders granting marital share of former employees’ retirement only to their basic annuity. In 2016, OPM began to apply the share to the annuity supplement. The Federal Law Enforcement Officers Association (FLEOA) has been on the front end of a fight against this changed practice, filing a complaint with OPM’s Office of Inspector General in 2018, and most recently filing an amicus brief in a pending Federal Circuit case last month.

The case involves Ronald Moulton, a retired Air Traffic Controller (ATC) with 25 years of service at the Federal Aviation Administration. Certain federal employees, like ATCs and law enforcement officers, who complete 25 years of service in certain positions are entitled to immediate annuity as well as an annuity supplement under 5 U.S.C. § 8421. The annuity supplement is designed to replicate the social security benefit available at age 62 for employees retiring earlier. Per section 8421(c), annuity supplements are to be computed “the same way” as basic annuity. 

Moulton is a divorcee. In divorce proceedings, a Colorado state court awarded Moulton’s former spouse a pro rata share of his monthly annuity under FERS and benefits he would receive based on his ATC service. When a federal employee and his or her spouse divorce, payments that would otherwise be made to the employee shall be paid to another person “if and to the extent expressly provided for in the terms of … any court decree of divorce” under 5 U.S.C § 8467.

After Moulton retired in 2010, OPM calculated the benefit owed to Moulton’s former spouse without inclusion Moulton’s annuity supplement. Nearly 6 years later, OPM informed Moulton that it made a mistake, that Moulton’s annuity payment would be prospectively reduced, the former spouse’s annuity payment would be prospectively increased, and that OPM would retroactively collect from Moulton additional benefits. OPM made a similar change to other former employees’ annuity supplements around the same time. Moulton requested reconsideration, and OPM issued a final decision.  

Moulton appealed OPM’s final decision to a Merit Systems Protection Board administrative judge. The administrative judge reversed OPM’s final decision, and OPM filed a petition for review with the full Board. The Board affirmed the administrative judge’s decision last year.

To determine whether OPM incorrectly adjudicated the benefit owed to Moulton’s former spouse, the Board both began with the language of the statute.  OPM argued that the statute is clear and required it to apportion the annuity supplement the same as basic annuity. The Board disagreed. It held that OPM improperly read the statutory sections in isolation, rendering the “expressly provided for” language of 5 U.S.C. § 8467 inoperative.

The Board found that payment of basic annuity to someone other than an employee, like Moulton’s former spouse, can only occur if “expressly provided for” in some sort of judicial decree or order. Because computation and payment of an annuity supplement is to be treated the same way as the payment of basic annuity, the Board found that OPM would apportion payment of the annuity supplement only on express order. The Board found that the Colorado state court’s order did not expressly provide for the division of Moulton’s annuity supplement, and ordered OPM to rescind its final decision, stop apportioning the annuity supplement, and refund all previously apportioned annuity supplement amounts to Moulton.

OPM appealed the Board decision to the U.S. Court of Appeals for the Federal Circuit. The question before the Federal Circuit is whether the annuity supplement statute, 5 U.S.C. § 8421, authorizes apportionment of a retirement annuity supplement only when expressly provided for in a court order. In October, FLEOA filed an amicus brief in the appeal. FLEOA agreed with the decision rendered by the Board and the position taken by Moulton on appeal.

FLEOA stated that its members, federal law enforcement officers, frequently rely on the annuity supplement to provide income to themselves before they become eligible for social security. Much of FLEOA’s brief described the impact that OPM’s 2016 change in apportionment of annuity allocations has had on its members. It provided examples of the unexpected costs the change has had on its members who budgeted for retirement and carefully negotiated divorce settlements under the impression they would receive the full annuity supplement, not their former spouse.                                               

OPM’s deadline to submit a reply brief is December 6, 2024. Oral arguments will be held before the Federal Circuit issues its decision. We will report on this case when the Federal Circuit issues its decision.

Read the MSPB decision.

Read the Federal Circuit’s grant of petition.

Read FLEOA’s amicus brief.