Thrift Savings Plan (TSP) “Targeted Awards,” Yes/No?

In divorce, TSP accounts are divided with a special order called a Retirement Benefits Court Order (RBCO). Requirements for drafting a RBCO that will be approved by the TSP Plan Administrator are contained in Title 5 Code of Federal Regulations (C.F.R.) Part 1653, “Court Orders and Legal Processes Affecting Thrift Savings Plan Accounts” (for brevity, referred to as “Part 1653”). In TSP lingo, the account owner is known as the “Participant.” The party receiving a portion of the Participant’s account in divorce is known as the “Payee.” In the past few months, I’ve helped a couple of attorneys correct draft RBCOs that would not have been approved by the TSP Plan Administrator — and they all dealt with the same subject. In each situation, they were attempting to order TSP to limit the award to the Payee to only the Participant’s Traditional TSP subaccount.

Part 1653.2, “Qualifying Retirement Benefits Court Orders,” establishes that a RBCO is not enforceable against the Plan if it “designates the TSP core fund, source of contributions, or balance (e.g., traditional, Roth, or tax-exempt) from which the payment or portions of the payment shall be made.” See Part 1653.2(b)-(b-7). In short, whether the award to Payee is a fixed-dollar amount or a percentage award, TSP will pay the award from a spread across all subaccounts. Targeted awards are not allowed.

Author Jim Cramp is a retired active duty colonel and principal attorney at the Cramp Law Firm, PLLC.  The firm specializes in Military and Federal Civil Service divorce matters, as well as other family law matters that affect Military and Federal Civil Service families.