What is a Court Order Acceptable for Processing (COAP)

A court order acceptable for processing (COAP) gives the former spouse or dependent of a federal employee the right to receive all or a portion of the benefits of a government retirement plan in the event of a divorce. A COAP is a marital assets settlement order issued and approved by a court of any state.

BREAKING DOWN Court Order Acceptable for Processing (COAP)

The Court Order Acceptable for Processing is a court ruling that provides guidelines and directions to be used by the Office of Personnel Management (OPM) in administering the retirement benefits to be paid. A COAP with vague or flawed directives will not be processed by the OPM, and the parties involved in the marital settlement will be re-directed to the state courts to solve the issue. Also, in the case of contention where one party misunderstands or disagrees with the COAP, all parties involved have to settle the dispute with the court, which can clarify or amend its orders for better comprehension. 

Determining a COAP

The Employee Retirement Income Security Act (ERISA) is a federal law that governs the distribution of benefits from a private retirement plan. Qualified retirement plans like defined contribution plans, defined benefits plans, employee stock ownership plans (ESOP), and 401(k)s are all governed by ERISA. In the event of marital dissolution, the court requires a Qualified Domestic Relations Order (QDRO) to make a judgment on how the retirement benefits of an employee will be distributed. An attorney sends a Domestic Relations Order (DRO) to the plan administrator who assesses and confirms whether it is a qualified order based on whether its required payments aligns with the plan’s payments and federal laws. If qualified, the court makes a judgment that requires the plan administrator to distribute the employee’s benefits accordingly. The laws that apply to federal plan benefits are different from those that govern qualified plan benefits.

Retirement benefits provided by the military, federal government, county, city, or state are not classified as qualified retirement plans, hence ERISA directives do not apply to them. Federal employee retirement benefits are governed by Federal Employees Retirement System (FERS), Civil Service Retirement System (CSRS), Thrift Savings Plan (TSP), and military retired pay. A DRO is sent to the OPM who administers the plan. If the language of the DRO stipulates ERISA terms, the DRO will be rejected as ERISA laws do not apply to federal pension benefits. If the DRO is acceptable, the attorney relays this to the court to order the commencement of processing the benefits. A DRO that is qualified under a federal retirements plan is called a Court Order Acceptable for Processing (COAP) and is the equivalent of the QDRO in the private sector.

What Kinds of Benefits Are Covered by a COAP?

The three types of retirement benefits divisible in a COAP are: (i) employee annuity, (ii) former spouse survivor annuity, and (iii) refund of employee contributions. A benefit awarded in one of the three areas may affect the benefit of the other two areas. For example, if a COAP awards a former spouse with survivor annuity payments, the employee’s annuity will be reduced.

The employee annuity is the monthly benefit payable to the annuitant or employee upon retirement. The COAP has to indicate whether the retirement system is FERS or CSRS and must specifically direct OPM to pay the former spouse. If there are no directives on who makes the payment, OPM is assumed to make the payments. However, if the directive of the COAP is for the annuitant to make the payments, OPM would not process the request on their end. COAP also includes directives for how OPM should compute the portion of the annuity that is due to the former spouse. The computation can be stipulated as a fixed amount or a percentage or fraction of the employee annuity based on the years of marriage. The COAP must also be specific as to the type of annuity that the computational shares should be made (e.g., the COAP language can read 20 percent of gross annuity or 50 percent of the net annuity).

A former spouse survivor annuity is the benefit payable to a former or current spouse under COAP upon the death of the plan’s beneficiary. Explicit instructions by COAP given to OMP on how to compute the former spouse survivor annuity must be done prior to the beneficiary’s death or retirement, whichever comes first. When a federal employee retires, a portion of his/her annuity will be paid to his/her former spouse as ruled by the COAP. However, if the employee does not stipulate a survivor benefit in the event of his/her death, the annuity payments given to the former spouse while the retired employee was alive will stop if the employee dies. A new order that comes in after the employee’s death to continue paying a former spouse will not be honored. To qualify for survivor benefits, a former spouse must have been married to the employee or retiree for at least 9 months and not had something to do with the death of the employee. In terms of benefit payments for child support, the child must have been born of the marriage. To keep receiving survivor benefits, the former spouse must not remarry before the age of 55, unless s/he was married to the late employee for at least 30 years. In the case of a self-only annuity, where a retiree has elected not to provide annuity benefits to any survivor, the surviving former spouse will not be awarded payments after death.

Any refund of employee contributions is payable when the employee is terminated from his/her job before s/he retires. A COAP may provide that all or a portion of the refund be paid to a former spouse. The COAP may also prevent payment of a portion of the refund of retirement contributions be made to a former spouse.