A substantial number of marriages end in divorce, and if you’re a federal employee or retiree who is going through a divorce, you need to understand how assets such as your Thrift Savings Plan can be divided by court order.
There is no federal law that prescribes any automatic award of your TSP account balance to a former spouse. You will either agree with your (soon to be ex) spouse as to the division, or the law of your state will govern the portion that is awarded. The TSP requires a Retirement Benefits Court Order (RBCO) which can be either a court decree of divorce, annulment, or legal separation; or a court approved property settlement that is incidental to such a decree. A Qualified Domestic Relations Order (QDRO) might qualify as a RBCO.
The Thrift Savings Plan has a booklet, Court Orders and Powers of Attorney, which can be found in the “forms and publications” section of the TSP website. This 31 page publication has good information, a helpful checklist and sample language that can help you or your attorney in crafting documents that will pass muster. The requirements for a RBCO can be found in this booklet.
See also this Fedweek download for a primer on the impact of divorce on all your federal benefits, including the TSP.
A court order will freeze your TSP account from withdrawals and loans until the divorce action has been finalized. If you have an outstanding loan, the outstanding balance of the loan is included in the account balance for the purpose of calculating the award to the former spouse, unless is is specifically excluded in the court order.
The court order can specify the award as either a dollar amount or a percentage (no order can require the TSP to pay more than the participants total vested account balance).
The TSP is part of your federal retirement package along with your CSRS and FERS annuity. Different rules apply to your annuity and information about your federal annuity and divorce can be found in the Handbook for Attorneys which can be found on the Office of Personnel Management website.
If you end up getting divorced at some point in the future, make sure that your attorney has a thorough understanding of the rules covering federal benefits. A standard QDRO might not be approved by either OPM or the TSP unless is meets specific criteria that can be found in the above referenced handbooks. If you cannot find an attorney with expertise in federal benefits, provide them with the handbooks.