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28 Fam. Advoc. 40 (2005-2006)
The Thrift Savings Plan

handle is hein.journals/famadv28 and id is 94 raw text is: The Thrft Savin gs PlanBY MARSHAL S. WILLICK ~As of October 8, 2001, military members were authorized to begin participating in the same Thrift Savings Plan (TSP) that has been in effect for civil service employees since 1987. Pub. L. No. 106- 398 (Oct. 30, 2000); 5 C.ER. § 1600-1690. The TSP is a defined contribution-type plan for federal employees, similar to a private employer's 401(k) plan. It is a mecha- nism for diverting pretax funds into retirement savings. Military members, therefore, now have both a defined ben- efit and a defined contribution-type retirement program, both of which should be addressed upon divorce. At the outset, the military chose to call its plan TSP- UNISERV, but it is increasingly referred to simply as TSP, similar to its civil service equivalent. If a person has simultaneous or consecutive military and civil service employment, the interplay between the two plans can be complex. It is usually possible to combine the accounts, but it takes a specific application to do so, and tax-exempt mil- itary contributions (i.e., those made as a result of a combat zone tax exclusion) in a military TSP account may not be transferred to a civilian TSP account. The military plan was phased in by allowing ever-greater percentages of basic pay to be contributed through 2005, when it reached 10 percent, after which only IRS regula- tions govern contribution limits. If contributions are made to the TSP from basic pay, they also may be made from any incentive or special pay (including bonus pay) received, again subject to IRS limits. The military service secretaries are permitted, but not required, to designate critical specialties. Members within those specialties serving on active duty for a minimum of six years would receive government contributions, matching some of the sums contributed from basic pay. Contributions may be invested in a variety of funds: the Government Securities Investment or G fund, the Common Stock Index Investment or C fund, the Fixed Income Index Investment or F fund, the Small 40 FAMILY ADVOCATE www.abanet.org/family/advocate/home.htm Capitalization Stock Index Investment or S fund, and the International Stock Index Investment or I fund. The TSP is expressly excluded from regulations governing civil service defined benefit plans. 5 C.F.R. § 838.101(d). It is administered by a board (the Federal Retirement Thrift Investment Board), which is entirely separate from the Office of Personnel Management (OPM), and has its own governing statutory sections and regulations. 5 U.S.C. § 8435(d)(1)-(2), 8467; 5 C.ER. Part 1653, Subpart A. The TSP Board has its own finance center (Thrift Savings Plan Service Office, National Finance Center, O. Box 61500, New Orleans, LA 70161-1500), which is the primary contact for participants who have left federal ser- vice. It also handles questions about loans, contribution allocations, interfund transfers, designations of beneficia- ries, and withdrawals for all participants. (TSP Service Office, 1-877/968-3778, fax: 504/255-5199.) Withdrawal and borrowing It is important to find out whether a military member is or has been a participant in the Thrift Savings Plan. If so, the next step is to determine whether any funds have been withdrawn or borrowed from the plan. Withdrawal of TSP funds by a participant is normally limited to those separating from service, but in-service withdrawals may be made in two categories: age-based withdrawals for participants 59'/2 or older, and special financial hardship withdrawals. Notably, one of the four categories for such financial hardship withdrawals is legal expenses for separation or divorce. The other three condi- tions that can cause a permissible financial hardship with- drawal are negative monthly cash flow, medical expens- es (including household improvements needed for medical care), or personal casualty losses. Counterintuitively, however, if a member is married, the spouse must normally consent to an in-service withdrawal, whether or not the parties are separated. The criteria for a claim of exceptional circumstances, under which no spousal consent is requited, are very strict. Having a separa- tion agreement, a prenuptial agreement, a protective or restraining order, or a divorce petition does not, in itself,

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