TSP Board Issues New Rules Related to Court Orders

December 3, 2009 (PLANSPONSOR.com) – The Federal Retirement Thrift Investment Board, which oversees the Thrift Savings Plan for federal employees, has issued final rules regarding court orders for payments from accounts of uniformed service members, documentation of child beneficiaries of TSP members, and freezing TSP accounts.

The board amended its regulations regarding the division of a uniformed services account pursuant to a court order or legal process to remove a provision suggesting that courts could direct the plan to make a court-ordered payment other than one that is pro rata from both taxable and tax-exempt contributions. The board explained that uniformed services accounts are unique in that some or all of a uniformed services member’s contributions may derive from tax-exempt income as a result of the combat-zone tax exclusion.

Regarding death benefit payment to a participant’s child or children, the final rules clarify the documentation children should submit in the event that the identity of their father or mother is in dispute or unclear. The rules provide that affected children submit a court order or administrative finding or documentation which would establish parentage in the state in which the participant resided prior to his death.

The board also amended its calculation method for court-awarded payments if a court order specifies that earnings are to be awarded, but no specific rate is provided. The method accounts for investment gains as well as losses and the requirement that payments are to be made pro-rata from participant accounts.

Finally, the final rules say the TSP may freeze (place on administrative hold) a participant’s account for any of the following reasons:

  • Pursuant to a qualifying retirement benefits court order;
  • Pursuant to a request from the Department of Justice under the Mandatory Victims Restitution Act;
  • Upon the death of a participant;
  • Upon suspicion or knowledge of fraudulent account activity or identity theft;
  • In response to litigation pertaining to an account;
  • For operational reasons, such as to correct a processing error or to stop payment on a check when account funds are insufficient;
  • Pursuant to a written request from a participant; and
  • For any other reason the TSP deems prudent.

 All of the new rules are effective December 2, 2009.

The final rules are here.