Dividing Thrift Savings Plan
The TSP statement lands on the kitchen table like a loaded weapon: six figures of retirement money that California calls community property but the federal government treats like a sacred cow. Unlike a 401(k) down the street, the Thrift Savings Plan will not accept a standard Qualified Domestic Relations Order cooked up by a state judge.
One wrong clause and the entire submission bounces back, wasting months and racking up attorney fees while the market moves against you. A military divorce lawyer who understands the TSP’s unique language can freeze, value, and divide the account in half the time it takes a civilian firm to Google the forms.
Step One: Freeze Before The Market Moves
- File a notice of adverse interest with TSP within 48 hours of retention
- Obtain the participant’s most recent statement and quarterly performance data
- Calculate community versus separate contributions using marriage date cutoff
- Request a participant-only withdrawal freeze to prevent loans or withdrawals
The TSP will flag the account for ninety days once they receive our one page letter, buying us time to draft a proper Retirement Benefits Court Order (RBCO). We email the freeze notice to TSP-LE-Legal@tsp.gov and copy the participant so there are no accusations of hiding assets. In a recent case we stopped a $50,000 loan that would have evaporated the marital share just weeks before trial.
Step Two: Draft The RBCO That TSP Actually Accepts
The order must use exact TSP language: “The payee is awarded $XX,XXX from the participant’s account” or “The payee is awarded XX% of the account balance as of MM/DD/YYYY.” Vague phrases like “one half of the marital portion” get rejected because TSP administrators will not interpret state law.
We also include the participant’s social security number, birth date, and mailing address for both parties, plus a directive that TSP fees come off the participant’s share so the receiving spouse is not shortchanged.
We submit a draft to TSP legal before the judge signs, a free pre-approval service that catches 99 percent of errors. Last year we had zero rejections out of forty one RBCOs because we follow the checklist line by line. Civilians skip this step and then wonder why their QDRO bounced.
Step Three: Tax Smart Distribution Choices
Once the RBCO is approved, the receiving spouse can roll the funds into their own IRA, leave it in a separate TSP account, or take an immediate cash distribution. We run a tax projection for each option because a lump sum can push you into a higher bracket while a rollover defers taxes until retirement. For clients nearing age 59 ½ we sometimes recommend the direct split to take advantage of TSP’s rock bottom expense ratios.
Remember, TSP loans must be repaid before division or the outstanding balance reduces the marital share. We always demand the participant’s loan history to ensure the community is not subsidizing a separate debt. And we calendar the thirty day implementation window because TSP will not process anything after the account owner retires and rolls the money into an IRA.
Do not let a generic family lawyer treat your TSP like any old 401(k). Contact our office today and we will run a free freeze letter while you watch, so your share is locked before the next market swing or secret loan disappears the money you earned.
