Division of CSRS Retirement in a Divorce in Arizona
If you or your spouse is a federal employee and accumulating benefits in a Civil Service Retirement System there are some things you need to know about how those benefits may be divided in a divorce in Arizona.
The first thing you need to know is that, unlike traditional retirement plans, participants in the CSRS retirement plans do not contribute to social security. If they have accumulated social security benefits and began receiving those benefits there interest in their CSRS plans will be reduced. Federal law, likewise, prohibits the division of either spouse’s social security benefits.
So, what happens when one spouse has a traditional retirement plan which is equally divided but that spouse gets to keep all of their social security on top of their retirement plan while the other spouse has a CSRC plan that is to be divided but that person will receive no social security benefits upon retirement? Well, the Arizona Court of Appeals in the published decision in the case of Kelly vs. Kelly provided an answer to that inequitable result.
The Court of Appeals concluded that the community property laws provided for all community property to be equitably divided in a divorce. The question then became was it fair and equitable to equally divided all of the husband’s CSRC benefits given he would not receive social security benefits and his wife would receive her half of his CSRC benefits and also keep 100% of her social security benefits.
Stated differently, would it have been a more fair and equitable division of all of the parties’ community property to unequally divide the husband’s CSRC benefits to account for the fact the wife would be keeping 100% of her social security when the husband could not collect any social security benefits.
The Arizona Court of Appeals stated in its opinion that “community funds [in social security payments] have been diverted to the separate benefit of one spouse. We believe this situation compels an equitable response.
The appellate court concluded that the proper approach was to find the present value as of the date of the divorce of the social security benefits the husband would have received had he participated in the social security system during the marriage. That present value amount may then be awarded to the husband from his CSRS plan and any remaining amount in the CSRC retirement may then be divided between the parties.
The court concluded its ruling did not conflict with the prior ruling in the Luna case because there was no attempt to value or divide the wife’s social security benefit. Hence, there was no violation of federal law that prohibits a state court from dividing social security benefits in a divorce.
The appellate court commented that an inequity may still exist in the social security benefits each spouse will enjoy in the future if one spouse earned significantly more than the other spouse because the court cannot divide or equalize those social security payments.
It also recognized that inequity was outside the power of the courts in Arizona due to the existence of the federal law. However, it concluded the ruling, in this case, was as close as the court could come to dividing CSRS retirement in a divorce in Arizona.
It is very important to note that the Court of Appeals, in this case, warned that its approach to dividing CSRS retirement pay, in this case, was specific to the facts of this individual case. It warned that each case must be analyzed on the facts of each particular case. So, the outcome may have been different, for example, if the wife had little to no social security benefits. It is important, therefore, to find out what the other spouse will receive in social security benefits when analyzing this issue in other cases.
Call us at (480)305-8300 to schedule your personalized consultation with one of our divorce attorneys with experience in dividing Civil Service Retirement System benefits in a divorce in Arizona.
Chris Hildebrand wrote this article about Civil Service Retirement System benefits in a divorce to ensure everyone has access to information about community property laws in Arizona. Chris is a divorce and child custody attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and actually caring about what his clients are going through in a divorce.