QDRO Corner: Thrift Savings Plan UPDATE
Effective June 1, 2022, the TSP has a new administrator for processing court orders AND a new record keeper. The switch to the new administrator had caused substantial headaches in many areas, resulting in an investigation by the Government Accountability Office which is scheduled to begin before the end of the year.
As it relates to family law, however, here is the relevant information regarding the changes to TSP:
1. Valuation dates for dividing a TSP account prior to June 1, 2022 MUST be the end of a quarter. If the date is not such a date, then the TSP court order administrator will use the closest quarter-end date for the valuation date. What does this mean for parties? Take control and pick a quarter-end date for any valuation date prior to June 1, 2022.
2. Division forms allowed: a percentage of the account as of a date certain (or the transfer date) or a dollar amount specifying whether gains and losses are to be included on the dollar amount if as of a specific date. **Historically the TSP would allow for a percentage of the account’s accrual between two dates. This division type is no longer accepted, and will result in a rejected Order. How to handle this change? Treat the TSP like any other defined contribution account, and if there is a premarital interest, subtract it from any transfer calculation.
3. The TSP court order administrator charges $600 to review and implement the court order. Previously no such fee was charged. How to handle this change? Include in any agreement or court argument how the fee should be paid, if entire by one party or the other, or shared between the parties. It will come from the retirement account and/or the funds being transferred depending on which party is supposed to cover this fee.
The above items tend to be more hurdles to jump over while reaching an agreement. This final major change makes it (somewhat) easier to submit the order to the TSP court order administrator.
1. Scans of certified court orders can be uploaded directly to the TSP court order administrator. Although making a submission includes submitting your own email address, I am yet to receive a confirmation email. However, after making the online upload, the webpage refreshes to say that a determination will be made in 20 business days. Many orders that we have submitted have not received a determination letter within 20 business days. Instead, we have had to call TSP to confirm the order was still under review.
On the whole, what does this mean for parties seeking a divorce where a TSP is involved? Only that there are a few more pieces to consider in the negotiations.
One final piece of information: many orders submitted during the transition period were lost. If you submitted an order in May/early June and have not heard back, you may want to call TSP to check if they have the order, as you may need to resubmit it.