Written by attorney Francis H Koh

Divorce Retirement Benefits: Thrift Savings Plan

Part of the divorce process involves the division of assets. These assets can include retirement benefits, although how they are split depends upon the type of plan. There are three main types of plans in the retirement system: Social Security, the Federal Employees’ Retirement System (FERS) Basic Annuity, and the Thrift Savings Plan (TSP).

What is a Thrift Savings Plan?

A Thrift Savings Plan is a defined contribution plan that offers the same types of savings and tax benefits that are similar to private corporations’ "401(k)" plans. TSP maintains separate accounts for civilians, uniformed services and beneficiary participants, so if a participant has more than one account the court order must identify each account and the type of the account separately.

What happens to a TSP in Divorce?

A court decree of divorce, annulment, or legal separation can make an award from a participant’s TSP account to someone other than the participant, such as the participant’s spouse or former spouse.

This requires a separate order by the court. They are known as Retirement Benefits Court Orders (RBCO) and they will only be honored by the Federal Retirement Thrift Investment Board (Board) if they are issued in connection with a divorce, annulment or legal separation. The Board will recognize preliminary court orders prior to decree in order to freeze the participant’s TSP account as well as amendatory court orders issued subsequent to the decree.

A valid Retirement Benefits Court Order can be issued at any time in the divorce proceeding and be accepted by the Board to split the TSP. It can be made in any court decree of divorce, annulment, or legal separation or a court order or court-approved property settlement agreement incident to such a decree. The TSP account is usually split evenly 50/50 based on the amount accumulated in the account during the marriage; however, the RBCO can set out a specific amount or percentage that is agreed to by the parties

What are the requirements to qualify as a Retirement Benefits Court Order?

The Court Order must satisfy four basic requirements:

  1. The order must be issued by a court in any of the 50 United States, DC, Puerto Rico, Guam, Northern Mariana Islands, or the Virgin Islands, or by any Indian court.
  2. The RBCO must expressly relate to the TSP account of a participant, therefore the Order must specifically contain the name "Thrift Savings Plan." Any descriptive language relating to the award should be written in terms of the individual participant’s "account" or "account balance" and not in terms of a "benefit,"
  3. If the order requires a payment from a TSP, the amount of the payment must be clearly determinable. This will be accomplished by either awarding a specific dollar amount to be paid from the participant’s account or gives a specific fraction/percentage/ or formula that shows the amount to be paid out of the account. The order should also include a date/event at which time the amount of the entitlement should be calculated
  4. The order must require payment to a person other than the TSP participant. Payments can be made only to the current or former spouse, the attorney for the current or former spouse, the participant’s dependent children or other dependents or their attorney. Payment cannot be made jointly, such as to the children and the current spouse, nor can it be made payable to creditors of the parties to the divorce.

A QDRO is not required for the Board to qualify a Court Order as a Retirement Benefits Court Order; rather it must simply meet the requirements set out by the Board. Therefore, if a QDRO does not meet the requirements set out by the Board it will not qualify as a RBCO and will not be accepted to disburse payments.

Steps after TSP receive Court Order

After the TSP Service Officer receives a court order which purports to award benefits from the TSP, the account is frozen so the participant cannot withdraw the account or receive a loan on the account.

However, this will not stop the participant from making contributions, changing contribution allocation or investment choices. The TSP Service Officer will then determine whether the court order is complete. If the order is not complete the service officer will request the parties to submit a complete copy of the order, and if that copy is not received within 30 days the account will be unfrozen.

If the order is complete the TSP will freeze (or retain the freeze) on the participant’s account and will determine whether the order is a qualifying retirement benefits court order and if it qualifies, how the account should be divided.

If the court order does not qualify as a retirement benefits court order than the account will remain frozen for 45 days from the date on which the service officer informs the parities in writing that the order does not qualify – or the parties can agree and send in an agreement signed by both that allows for the freeze to be removed.

The TSP service officer will write and mail a decision letter to the participant and provide a copy to all parties who have a legal interest in the action.

Disputing a Payment

A decision by the TSP regarding a court order is considered a final administrative action by the TSP and court-ordered payments that are already made cannot be reversed. In order to cancel or suspend a pending payment is to send a signed letter of dispute containing a current number and mailing address, which must be received within 25 days from the decision letter. The service officer will then hold the payment until the scheduled payment date and if a valid new or amended order has not been received the TSP will make the scheduled payment, which then cannot be reversed.

Garnishing a TSP Account for a Participant’s Alimony or Child Support Debt

A TSP account can be garnished with a writ, order, summons, or other similar document. In order to be reviewed, the "legal process" must be complete and meet the requirements set out at 5 USC § 8437(e) (3) and 5 CFR 1653(b). These requirements are the same as those set out for a qualifying RBCO, except they are orders to garnish the TSP account.

Additional factors to consider

There are two ways to speed up the payment process from the TSP. Using the form language in the court order, as mentioned above, and not raising any extraneous issues in the order would be one way. Moreover, including the payee’s Social Security number and mailing address will also speed up the process since payment will be made upon receipt of this information.

If the spouse is designated on the Form TSP-3 as a beneficiary, the TSP is required to pay out to that person even if the parties are separated or divorced or have remarried, or the former spouse has relinquished all rights to the account. It is important to fill out a a new Designation of Beneficiary form when going through a divorce, which would cancel or change the participant’s current beneficiary designation.

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