Federal employees have access to an excellent program for retirement savings, the Thrift Savings Plan (TSP). If you are a federal employee with a TSP account you may wonder what becomes of your account after divorce. What does she get, and what do you get?
The ABCs of TSPs
A TSP account is a useful investment vehicle for Federal civilian employees and members of uniformed services (careful: uniformed services means more than military and includes members of the Public Health Service, USPHS, and the National Oceanic and Atmospheric Administration, NOAA, on active duty). Combined with Social Security and the Federal Employees’ Retirement System (FERS) Basic Annuity, it forms a tripartite retirement system whose value accrues all during your government service.
What is a Retirement Benefits Court Order?
A TSP account can be divided up by a court order. This court decree can stem from a divorce, annulment, legal separation, or property settlement agreement. TSP itself will expect the court order to comply with (and here we quote in all its legal glory):
The requirements found in 5 United States Code (U.S.C.) §§ 8435(c) and 8467, and 5 Code of Federal Regulations (C.F.R.) part 1653, subpart A.
Just try to sneak something by TSP that follows subpart B of part 1653 instead of subpart A; we dare you. We double dare you.
Anyway, TSP refers to the court order as a “retirement benefits court order,” and proceeds to divide up your retirement account according to the order itself.
Freezing, Dividing and Conquering Your TSP
The first effect of such a court order is to freeze your TSP account so you cannot take anything out that might otherwise go to your ex-wife.
Again, though, TSP does not make your wife’s attorney’s job easy. The court order has to:
- Name the “Thrift Savings Plan” specifically (as opposed to general language like “federal retirement benefits”)
- Stipulate that the participant may not obtain a TSP loan or withdrawal
- Seek to divide a participant’s TSP account
Suppose you borrowed against your account to pay for your last vacation, and have monthly repayments of $400. Then you begin divorce proceedings. You still have to make those $400 monthly payments, but you are cut off from withdrawing or borrowing any more money.
The TSP will follow the court order on dividing the account either by a percentage or a given dollar amount, usually tied to the value of the account on a determined date (often the date the account is frozen). The TSP will send the amount dictated by the court to a Roth IRA, a traditional IRA, or an eligible employer plan in your wife’s name. She cannot get a check and hightail it to Vegas.
Can a TSP Be Garnished?
Your TSP account can be garnished for outstanding payments for either spousal support or child support. Again, the court must order this through a “legal process” that is broadly defined as “a writ, order, summons, or other similar document in the nature of a garnishment that is brought to enforce a participant’s child support or alimony obligation.”
Like the court-ordered division of assets on the account, the garnishment begins by freezing the account, then follows the legal process to transfer the specified dollar amount of the garnishment to your ex-wife’s retirement account.
Marital Property & Your TSP
Why, you may ask, is all this happening to you? In Virginia, a retirement account is considered “marital property,” defined as all jointly-owned property acquired from the date of the marriage to the date of separation. Your home is marital property; your retirement account accumulated during the marriage is marital property even if you are the only name on the account.
This stems from Virginia’s recognition that your wife had something to do with making you a fit employee who had the earnings capacity to hold down the federal job. She helped raise your children, she listened to you complain about the uniforms the Public Health Service folks wear (honestly; they look like airline pilots and maitre ds). Whatever she did, the law presupposes she made your work lighter and is entitled to halfsies.
Defending Your TSP Account
Your attorney should examine any court order with a careful eye toward detail. If the specific Thrift Savings Plan is not mentioned, TSP itself will not proceed with the order. If nothing else, your attorney may be able to delay enforcement of the order if it does not comply with the TSP’s requirements. Unfortunately, that will not remove the freeze, only delay the division of funds.
A second line of defense — useless if you are already married and lacking a time machine — is a premarital agreement that spells out your TSP account as your separate property. If you started working for the federal government (or started wearing the uniform of USPHS or NOAA) before marrying your wife, you have a strong case that the TSP account is separate property, not marital property.
Too late to sign the prenup? Consider reducing the amount you put into your TSP account, using TSP-1, Election Form (TSP-U-1 for members of the uniformed services). Since you know she will get around half of the contributions anyway, stop contributing!
For helpful and accurate advice on the financial aspects of divorce, please call The Firm for Men at (757) 383-9184. We can put you in touch with a lawyer who will fight to help you hold onto as much of your money as possible, including your TSP account, through your divorce. Our office is located in central Virginia Beach, convenient to Norfolk, Chesapeake, Portsmouth, and beyond!