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What divorcing federal employees, spouses should know about RBCOs

On Behalf of | Dec 13, 2023 | Divorce |

If you’ve been a federal employee for some time, you may have built up a healthy balance in your Thrift Savings Plan (TSP). If you’re contemplating or proceeding toward divorce, you’re likely concerned about how those assets will be divided with your spouse. That’s where a Retirement Benefits Court Order (RBCO) comes in.

When TSP administrators receive an RBCO pursuant to a divorce or a court-approved property settlement that’s part of a divorce, they’re required to freeze the assets so that the “participant” (the person whose plan it is) can’t make unauthorized withdrawals from it. This can be issued at any point during the divorce.

Do you still need a QDRO if your spouse isn’t a federal employee?

An RBCO is often compared to a Qualified Domestic Relations Order (QDRO), which is used to divide assets in employer-sponsored plans in the private sector, like 401(k)s. However, the two orders operate under different laws.

An RBCO is governed by Title V of the U.S. Code. A QDRO falls under the Employee Retirement Income Security Act of 1974 (ERISA). If one spouse works in the private sector and the other is a federal employee, it may be possible to use a QDRO for both of their retirement plans. However, the QDRO must comply with Title V. If it doesn’t, the TSP will not recognize it.

Considerations for those divorcing a federal employee

If you’re divorcing a spouse who’s a federal employee and you aren’t, there are other unique considerations besides RBCOs. For example, you need to find out whether you can continue to receive Federal Employee Health Benefits (FEHB) coverage as a former spouse under the terms of the Spouse Equity Act. This applies to spouses of current and retired federal employees. 

Whether you’re the federal employee in the marriage, your spouse is or you both are, you must understand the regulations that govern your assets and benefits as you divorce. Having experienced legal guidance is critical to protecting your rights and your financial future.

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