What divorcing federal employees need to know about RBCOs

On Behalf of | Feb 9, 2023 | Divorce

If you’re a federal employee, you likely have a tidy sum building up in your Thrift Savings Plan (TSP), even if you don’t think about it much. That’s the federal government’s version of the 401(k) retirement plan that private employers offer.

If you’re divorcing, you’ll likely be dividing this plan along with your spouse’s retirement plan. If you and/or your spouse have a TSP, you should know what a retirement benefits court order (RBCO) is.  

An RBCO is similar to a qualified domestic relations order (QDRO), which is used to divide divorcing spouses’ private retirement plans. However, RBCOs and QDROs fall under different laws. RBCOs are governed by Title V of the U.S. Code, while QDROs fall under the Employee Retirement Income Security Act of 1974 (ERISA).

If you have a “mixed” marriage, can you use a QDRO?

If only one spouse has a TSP and the other has an ERISA plan, you may be able to use a QDRO to divide both. However, it must be drawn up in compliance with Title V requirements. If you’re both federal employees, you would use an RBCO.

Both of these orders are important for a variety of reasons. Among them is that they prevent a spouse from withdrawing the funds (even though that would likely come with significant penalties) to keep their soon-to-be-ex from getting any of it.

You need to change your beneficiary designation separately

It’s important to note that neither an RBCO or QDRO changes the beneficiaries you’ve designated on the account. That means if you designated your spouse to be the beneficiary of your TSP on your TSP-3 Designation of Beneficiary form, you’ll need to change that directly. Getting an RBCO or even making that change in your will or other estate plan document won’t do it.

All of this may seem complicated and overwhelming – and we’ve just scratched the surface of dividing retirement plans in divorce. However, with experienced legal guidance, you can help ensure that you achieve a fair division of the money you’ve worked hard to save and count on to retire comfortably.