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Dividing your TSP with your spouse in divorce

On Behalf of | Aug 20, 2021 | Property And Asset Division

If you work for the federal government, you likely have a Thrift Savings Plan (TSP) to help you save for your retirement. If you contributed to your TSP during your marriage, all amounts contributed during the marriage are marital property. When divorcing the Court may divide the marital portion of all retirement accounts, including your TSP as well as traditional private-sector retirement plans and Individual Retirement Accounts.

If your spouse works in the private sector and has a retirement plan through their employer, those are divided using a specialized order, called a qualified domestic relations order (QDRO). TSPs are divided using a different type of court order called a retirement benefits court order (RBCO), only used to divide TSP accounts.

Can you use a QDRO to divide a TSP?

No. Private-sector retirement plans follow regulations laid out in the Employee Retirement Income Security Act of 1974 (ERISA); these require a QDRO. The TSP, like other government retirement plans, is covered under Title V of the U.S. Code. Therefore, the order dividing the TSP is the RBCO and has  to comply with the requirements contained in Title V.

What requirements does an RBCO have to meet?

If you submit an RBCO, it has to meet four basic requirements:

  1. It must be issued by a U.S. court.
  2. It must refer only to a Thrift Savings Plan and cannot make reference to “government retirement benefits” or any other plans.
  3. The amount to be paid to the non-owner spouse must be listed as a specific dollar amount or percentage of the total amount in the TSP account.
  4. Payments can only be designated for a spouse.

It’s important to remember that the RCBO doesn’t change your designated beneficiary. If you listed your spouse and you no longer want them to inherit the funds in the TSP, you’ll need to change your beneficiary too.

What you need to know if your spouse has a TSP

If your spouse is the one with a TSP, it’s still important to understand how an RBCO works for your own protection. For example, getting an RBCO at the same time your judgment of divorce is signed or as soon as possible afterwards can prevent a spouse  from cleaning out their TSP before you receive your share.. Until the court signs your RBCO, your spouse has the ability to withdraw funds from their account.

If you have a “mixed marriage” of a TSP and ERISA-based plans, it’s wise to understand how both of these valuable assets are divided in divorce to better protect yourself and the assets to which you’re entitled.