It is important to realize that the Thrift Savings Plan will not automatically follow a qualified domestic relations order (QDRO) issued by a court. Image: ingae/Shutterstock.com
By: John Grobe2024 Update: What happens to your Thrift Savings Plan if you go through a divorce?
“A man in love is incomplete until he is married – then he’s finished.” Said oft-married (nine times) Zsa Zsa Gabor.
Around 40% of first marriages end in divorce. So, what happens to your Thrift Savings Plan if you go through one?
Well, your TSP account can be divided by means of a court decree of divorce, annulment or legal separation; or by a court order or court-approved property settlement agreement that is incident to such a decree.
The TSP has a name for such a document; they call it a “retirement benefits court order” and we will call it a RBCO in this article.
It is important to realize that the Thrift Savings Plan will not automatically follow a “qualified domestic relations order” (QDRO) issued by a court. QDROs apply to retirement plans in the private sector. Private sector plans are covered by the Employee Retirement Income Security Act of 1974 (ERISA). Government plans, including the TSP and FERS/CSRS are covered by Title V of the United States Code. A QDRO could be submitted to the TSP, but the TSP will evaluate it in accordance with Title V and the TSP’s own rules, and will not honor the QDRO if it isn’t compliant.
There are four basic requirements that a RBCO must meet.
1) It must be issued by a court of U. S. jurisdiction (i.e., a court in any of the 50 states, the District of Columbia, Puerto Rico, Guam, the Northern Mariana Islands or the U. S. Virgin Islands);
2) It must expressly relate to the TSP including to referring to the “Thrift Savings Plan”. The TSP will not accept references to “government retirement benefits” or even references to “Thrift Savings Account”. If multiple accounts are involved (e.g., civilian, uniformed service, beneficiary participant) they each must be specifically identified;
3) Any payment must be specifically described; the TSP will only award a specific dollar amount or a percentage of the account as of a specific past or current (not future) date;
4) The order can require a payment only to the participants current or former spouse or dependents.
Awards are paid proportionally from all TSP investment funds, though the core funds (i.e., C, S, I, F, and C) must be depleted before funds held in the Mutual Fund Window are accessed.
An RBCO can also be used to prevent a participant from withdrawing all or part of their TSP account during a divorce proceeding.
TSP accounts can be garnished with a writ, order, summons, or other similar document that acts to enforce a participant’s child support or alimony obligation. Such garnishment, called by the TSP a “legal process” must meet the requirements found at 5 U.S.C 8437 e (3) and % C.F.R part 1653, subpart B.
It is especially important to be aware that, for death benefit purposes, your designated beneficiary will receive your account even if you have divorced. The TSP will follow the wishes you expressed on your form TSP-3, Designation of Beneficiary, or, if no beneficiary has been designated, the standard order of precedence for federal benefits. If your former spouse is the designated beneficiary on your TSP-3, they will receive your account upon your death even if you wouldn’t have wanted them to, or even if they had given up all rights to your TSP account as part of the divorce.
Regarding any outstanding TSP loans, the account balance used for calculating a court-ordered award will include the balance of any outstanding loan unless the court order specifically provides otherwise.
There is a lot more arcana on divorce and other items in the TSP’s booklet Court Orders and Powers of Attorney which can be found in the forms and publications section of the TSP website. You, or your attorney, should refer to this publication to make sure all the TSP requirements are met. The most recent version on the publication is from December of 2023.
John Grobe, President of Federal Career Experts, is an expert in the area of federal employee retirement and benefits. This expertise comes from his 26 year federal career in which he managed the retirement program in a 3,500-employee office of a large federal agency.
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