The end of a marriage is more than just two people parting for good. It is also about splitting their property. Property division is an integral part of divorce in every state, including Minnesota. As part of that, retirement benefits may be divided by court order. These benefits can include federal Thrift Savings Plans.
Thrift Savings Plans are defined contribution savings and investment plans intended for the retirement of federal employees and active duty uniformed service members, including those in Ready Reserve units. The TSPs were established in 1986 by Congress with the same types of tax benefits and savings used in the 401(k) plans established by many private corporations.
A portion of TSP funds can be awarded to former spouses or dependents. The TSP account will be frozen until such payments are complete. If there are any disputes, the court orders can be reviewed. Freezes do not prevent an account holder from making investment choices or further contributions. If an account holder has any loans, then he or she must continue to make payments.
Individual TSP holders need to ensure that their accounts will go to their beneficiaries of choice to prevent any dispute once they have died. Each TSP holder should submit a designation of beneficiary form (TSP-3). If beneficiaries are not designated, a TSP will be distributed following the standard order of precedence, which typically includes spouse, children and parents.
If an individual has submitted a TSP-3 and designated a spouse as the main beneficiary, the amount will be paid to him or her even if the couple divorced. There will be no change in designated beneficiary even if the TSP account holder's former spouse has remarried. No will, division of property order, separation agreement or other court order can change this distribution order. A new TSP-3 form must be filed in order to change beneficiaries.
Source: Thrift Savings Plan, "Changes in Your Family Status: Divorce, Annulment, and Legal Separation," Accessed Feb. 23, 2015