In accordance with domestic law, your spouse has a certain right to your TSP account and it’s subsequent balance. This includes spouses that are divorced, separated legally, or with annulled marriages unless they have mutually agreed to not exert claims over the TSP account.
Under FERS, unless the spouse waives his/her rights to the TSP account, they are entitled to a specific category of TSP annuity. A proper example of this is a joint-life with 50% survivor benefit and no additional features among many others.
Making TSP Separation Withdrawal
The Thrift Saving Plan or TSP takes into account these rights and laws when one wishes to withdraw from their TSP account or borrow against their existing TSP balance. In the event that a TSP member deprives their spouse the spousal rights of the TSP, it creates a precedent for legal prosecution. Hence, when filling up a withdrawal or borrow request, one must accurately state their marital status with due consideration. Furthermore, they must not falsify the address or forge the signature of their spouse for obvious legal and ethical reasons.
Borrowing Against Your TSP Account
The confines of marriage extend to your TSP account, as you must always attain the consent of your spouse before borrowing a TSP loan. They must be notified about the TSP request before the loan is approved or else it may have legal repercussions.
However, Spousal consent does not equate to co-signer status and it will not obligate them to pay the loan back if you default from your responsibilities.
Making Withdrawals While In-Service
If someone is legally separated or married, they must notify their spouses before and upon TSP separation withdrawal and indicate clearly the specific annuity option chosen. In the event that you have chosen a withdrawal method which isn’t the joint life annuity with 50% survivor benefit, your spouse is supposed to waive their right to survivor annuity. If your spouse does not waive their rights to this, then you cannot withdraw your account.
Any withdrawal that is pending approval will be notified to your spouse by your agency, this applies to spouses of CSRS participants.
Making a Withdrawals After You Have Retired
Under FERS, When making a partial withdrawal, it is imperative that one obtain their spousal consent before the approval of said withdrawal. For the full withdrawal, you spouse’s rights will be applicable if your withdrawal is more than $3,000. They will also get a notification from TSP about your intention to withdraw.
Spouses of CSRS participants will merely get a notification from TSP upon withdrawal.
Exceptions to Spouses’ Rights
Exceptions may be granted to spouses’ rights under certain circumstances. If one is to avail them, they can fill out form TSP16 – available on the TSP website. To apply for this exception, fill up the form, attach required documentation and submit it.
The exceptional circumstances are really strict, and cannot be on a basis of petty marital drama. Prenuptial agreements, separation agreements, a restriction order, or a divorce petition will not affect the criteria of extraordinary circumstances. An example of an unusual situation upon which form TSP16 is granted and spousal rights are waived from TSP authorities is when the spouses’ location is unknown and not contactable.
Court Orders Regarding Spouse Rights on TSP Separation Withdrawal
Court orders are a direct result of legal separation, divorce, annulment, or settlements regarding property and assets. They’re often used to enforce legal obligations for reluctant parents or to satisfy judgments made against parents for child abuse, child support payments, or alimony.
The TSP is obligated to honor court orders as long as there is a connection between the TSP and the action, while simultaneously complying with the board’s regulations. If an order is passed, it can result to your account being frozen so you can neither make a withdrawal nor borrow against your account. For the court order to be deemed as qualified, it must specify the account to which applies as well as an award to be made to (former) spouse.
There isn’t federal law that prescribes automatic awards of your TSP account balance to a former or ex-spouse. You will either agree with your spouse/ex-spouse regarding the division, or the law of the state will intervene and decide it for you by governing the portion that it is awarded. This TSP requires a Retirement Benefits Court Order (RBCO) which may be described as a court decree of annulment, legal separation, divorce or a court approved property or asset settlement. A Qualified Domestic Relations Order (QDRO) may or may not qualify as an RBCO depending on the court.
The Beneficiary Designations
Ensure that upon divorce or separation, you have submitted a designation of beneficiary form if you wish to make any changes whatsoever. This is the one and only way of making sure that your TSP balance is awarded in accordance to your wishes upon your death. In the event that you don’t make changes, the money will ultimately be paid to your ex-spouse even if you have had a new marriage or multiple kids.
TSP will only honor the designation of beneficiary form (Form TSP3), and will disregard wills or any form of separation agreements. The order of precedence of beneficiaries by default is as follows:
• Your spouse, Irregardless of whether they are existing, divorced, separated, or replaced.
• If none, your child or children equally, and to the descendants of your deceased children.(This may include natural children or adopted children but cannot include stepchildren)
• If none, your parents equally or on the basis of a parent that is alive.( Doesn’t include step-parents unless they adopted you)
• If none, the executor or administrator of your estate that was appointed by you.
• If none, your next of kin who is entitled to your assets under the laws of the state where you resided at the time of your death.
Hence, if your life situation changes or if there are any specific precedence you would like to set to your beneficiaries – you must actively fill out and review form TSP3.