13604 Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Rules and Regulations

FEDERAL RETIREMENT THRIFT

INVESTMENT BOARD

5 CFR Parts 1650 and 1653

Retirement Benefits Court Order

Regulations

AGENCY: Federal Retirement Thrift

Investment Board.

ACTION: Final rule.

SUMMARY: The Executive Director of the

Federal Retirement Thrift Investment

Board (Board) is publishing final

regulations governing retirement

benefits court orders. The regulations

contain a number of procedural changes

which reflect the Board’s experience in

processing retirement benefits court

orders, as well as changes in Federal tax

law. The regulations establish a new

Part in the Code of Federal Regulations

replacing existing regulations regarding

court orders.

EFFECTIVE DATE: April 12, 1995.

FOR FURTHER INFORMATION CONTACT:

Michelle C. Malis, (202) 942–1658.

SUPPLEMENTARY INFORMATION: The Board

administers the Thrift Savings Plan

(TSP), which was established by the

Federal Employees’ Retirement System

Act of 1986 (FERSA), Pub. L. 99–335.

The provisions governing the TSP are

codified primarily in subchapters III and

VII of Chapter 84 of Title 5, United

States Code. The TSP is a tax-deferred

retirement savings plan for Federal

employees that is similar to cash or

deferred arrangements established

under section 401(k) of the Internal

Revenue Code. Sums in a TSP

participant’s account are held in trust

for that participant. 5 U.S.C. 8437(g).

Under 5 U.S.C. 8467(a), payments

from the TSP that would otherwise be

made to a TSP participant shall be paid

‘‘to another person if and to the extent

that the terms of a court decree of

divorce, annulment or legal separation,

or the terms of any court order or courtapproved property settlement agreement

incident to any court decree of divorce,

annulment, or legal separation expressly

provide.’’ A related provision, 5 U.S.C.

8435(d), states that an election or

change of election of TSP benefits shall

not be effective to the extent that it

would conflict with ‘‘a court decree of

divorce, annulment or legal separation

* * * or any court order or courtapproved property settlement agreement

incident to such decree * * *.’’ The

TSP need only honor court orders or

decrees meeting the requirements of 5

U.S.C. 8467(a) and 8435(d) if the

Executive Director receives proper

notice of the order before disbursement

of the participant’s account.

These regulations, when effective,

will supersede the interim regulations

presently found at 5 CFR §§ 1650.27 to

1650.43. Proposed regulations governing

alimony and child support orders which

are governed by 5 U.S.C. 8437(e)(3) will

be promulgated in a separate subpart of

Part 1653.

On October 26, 1994, the Board

published a proposed rule in the

Federal Register (59 FR 53874) relating

to the Board’s processing of court orders

and decrees described in 5 U.S.C.

8435(d) and 8467 and referred to as

‘‘retirement benefits court orders.’’ The

Board did not receive any comments on

the proposed regulations.

The Board, however, is making two

changes to § 1653.3 of the regulations.

First, the Board is deleting the

notification provision in paragraph (c).

Due to the increasing volume of court

orders which are being processed by the

Board, providing notification to the

parties that the participant’s account

was frozen upon receipt of a court order

has become administratively

burdensome. Therefore, the Board has

decided that the decision letter

regarding the court order provides

sufficient notice that the participant’s

account has been frozen. Second,

paragraph (k) is being added to provide

that the Board will hold in abeyance the

processing of a court order payment

pursuant to a qualifying court order if

the Board is advised by one of the

parties that the underlying court order

is on appeal in the state court system

and that the effect of the filing of such

an appeal under state law or procedures

is to stay the effect of the order.

Section-By-Section Analysis

Section 1653.1 states the purpose of

the regulations. The procedures set forth

in the regulations will be applied in

determing whether the Board must

honor orders purporting to constitute

retirement benefits court orders

described in 5 U.S.C. 8435(d) and 8467.

The regulations also establish

procedures for calculation and payment

of awards pursuant to qualifying

retirement benefits court orders.

Section 1653.2(a) sets forth the

general rule that only ‘‘qualifying’’

retirement benefits court orders will be

honored. If an order is determined not

to be qualifying, it will not affect the

participant’s account. TSP participants

involved in divorce proceedings, and

their representatives, are encouraged to

read the TSP publication ‘‘Information

About Court Orders’’ to obtain useful

information for drafting and submitting

court orders that will be deemed

qualifying under the regulations.

Section 1653.2(b) sets forth the

requirements for a court order to be

‘‘qualifying.’’ Section 1653.2(b)(1)

describes the type of legal document

that can be a qualifying order. The first

sentence is designed to clarify that the

language ‘‘court decree of divorce,

annulment, or legal separation,’’ as used

in both 5 U.S.C. 8435(d) and 8467 has

been interpreted by the Board to mean

‘‘a court decree of divorce, a court

decree of annulment, or a court decree

of legal separation.’’ In order to have a

qualifying court order, a court must be

involved. A legal separation agreement

that has not been approved by a court,

for example, is not a ‘‘court decree of

legal separation,’’ and therefore cannot

constitute a qualifying court order. Also,

a property settlement agreement must be

court-approved in order to be

qualifying. This means that the court’s

approval must be demonstrated on the

face of the document or in an

accompanying court order.

The second sentence of § 1653.2(b)(1)

is designed to make it clear that a ‘‘court

order or court-approved property

settlement agreement incident to [a

decree of divorce, of annulment or of

legal separation]’’ may occur at any

stage of the proceeding, not just after the

entry of a final decree of divorce, of

annulment or of legal separation. For

example, courts often issue orders

during a divorce proceeding in order to

preserve the status quo in anticipation

of a final decree dividing the property

of the parties. The regulations also allow

for the possibility that an order serving

a function other than preservation of the

status quo could be deemed ‘‘incident

to’’ a decree that has not yet been

entered.

If the Board receives an otherwise

valid order awarding a former spouse a

portion of a TSP account, but prior to

payment receives a valid amended order

changing the earlier award, the

amended order will be honored.

However, under no circumstances will

the Board accept the return to the TSP

of funds that have been properly paid

pursuant to an earlier order, even if a

subsequent order would dictate such a

result. The processing of multiple court

orders is addressed in § 1653.3(1).

Section 1653.2(b)(2) addresses the

requirement in 5 U.S.C. 8435(d)(2)(A)

that a court order must ‘‘expressly

relate’’ to a participant’s TSP account

and the requirement in 5 U.S.C. 8467

that the court order must ‘‘expressly

provide’’ for payment to someone other

than the participant. For an order to be

honored under either provision, the

order must unambiguously address the

TSP account.
Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Rules and Regulations 13605

Section 1653.2(b)(2)(i) requires that an

order must clearly and specifically deal

with a participant’s TSP account. It is

not sufficient to use generic language

that is arguably broad enough to include

the TSP. For example, an order that

states, ‘‘Former Spouse is awarded 50%

of all of Participant’s Federal retirement

benefits’’ would not be language that

expressly relates to the TSP, even

though the TSP is a Federal retirement

benefit. First, the order must describe it

in such a way that there can be no

confusion that the parties are referring

to the TSP, rather than some other plan

or financial assets; parties to divorce

actions are encouraged to attempt to

obtain such specific language in their

orders. However, § 1653.2(b)(2)(ii)

makes it clear that, even if the Thrift

Savings Plan is identified by name, the

order must not contain language that is

inconsistent with the division of a

participant’s interest in a defined

contribution plan, such as the TSP, in

which the participant has an individual

account. References to ‘‘benefit

formulas,’’ ‘‘accrued benefits,’’ or

‘‘eventual benefits’’ may or may not be

acceptable in context, because such

terms may raise the question whether

the order is truly dealing specifically

with the TSP account or is simply

including the TSP among other

retirement benefits to which the

participant may be entitled. Since use of

such terms may lead the Board to reject

an order as not expressly relating to the

TSP account, these terms should be

avoided in favor of references to the

‘‘TSP account’’ or ‘‘TSP account

balance.’’

Section 1653.2(b)(3) further

implements the requirement of 5 U.S.C.

8467 that a payment pursuant to a court

order must be expressly provided for in

the order. If the order requires a

payment from the TSP account, it must

either award a specific dollar amount or

divide the participant’s account balance

by applying a fraction, a percentage, or

a formula that yields a mathematically

possible result. For example, a formula

where the numerator is larger than the

denominator and therefore yields an

amount greater than the entire account

balance is not acceptable. All of the

variables for the formula must also be

set forth in the order or must be

available through reference to

Government employment records. The

dollar amounts, percentages, fractions or

variables used must be clearly

determinable; they cannot be qualified

by terms such as ‘‘approximately.’’ The

order may or may not provide for

interest or earnings to be added to the

amount of the award, but any award of

earnings must also be clearly

determinable. The order may also award

a survivor annuity under 5 U.S.C.

8435(e).

Under § 1653.2(b)(4), an order will

only be deemed qualifying if it calls for

payment to the spouse, former spouse,

attorney for the spouse or former

spouse, dependent children of the

participant, other dependents of the

participant, or the attorney for the

participant’s dependent children or

other dependents. Payment cannot be

made to the participant or to others,

such as credit card companies, mortgage

lenders, or other creditors of the parties

to the divorce. The TSP is a retirement

savings plan, and the occasion of a

divorce should not be a general

opportunity for the participant to obtain

access to his or her account or for the

parties to use retirement savings to

liquidate their general debts. In this

context, payment to the attorney for the

participant is tantamount to a payment

to the participant, since the participant

owes a debt to the attorney. Thus, the

rules would not permit such a payment.

In contrast, it is permissible for the

court to award a payment from the TSP

account to the attorney representing the

spouse/former spouse or dependent

children or other dependents for legal

fees incurred in connection with the

divorce, because direct payments to the

spouse/former spouse or dependent

children or other dependents are also

permissible. The Board will not honor

an order asking for payment to be made

jointly, such as to the former spouse and

his or her children. Rather, the order

should separately specify the award to

be made to each person.

Section 1653.2(c) specifically states

that certain orders are not qualifying.

Section 1653.2(c)(1) provides that an

order relating only to money that is not

vested (under 5 U.S.C. 8432(g)) shall not

be deemed a qualifying order unless the

money will become vested within 90

days of receipt of the order if the

participant were to remain in Federal

employment.

Section 1653.2(c)(2) represents a

significant departure from current rules

for processing court orders. Under

current rules the Board has been paying

court orders as soon as the amount of

the award can be calculated, even where

the order calls for a payment at a later

date. In cases where a dollar amount is

awarded and the order specifies that

payment is to be made upon a date in

the future, that dollar amount has been

paid immediately. On the other hand,

where the amount of the award is based

on a percentage of the account balance

as of a date in the future (such as the

participant’s separation from Federal

Government employment or some other

specified date), or is based on a

percentage determined by a formula

containing variables that cannot be

determined until a date in the future,

the Board’s current procedures have

called for the order to be retained by the

Board so that payment could be made at

the appropriate time in the future.

Under § 1653.2(c)(2)(i), orders

requiring payment at a future specified

date will not be considered qualifying

orders unless two requirements are met.

First, it must be currently possible to

calculate the amount of the entitlement.

Second, the award must provide for

interest or earnings to be paid on the

amount of the award until the date of

payment. If both of these requirements

are met, the order will be considered

qualifying. However, payment will be

made not at the future date specified in

the order, but rather will be made

currently after following the procedures

of § 1653.5. The rationale for this

limited exception to the general rule

that orders requiring future payment

will be rejected is that, where the

amount of the award can currently be

calculated and the order calls for

interest or earnings, a payment of that

amount currently is the economic

equivalent of a payment of the same

amount plus earnings at a future date.

However, under the regulations there

will be no case in which the Board will

hold orders until a future date specified

by a court for payment.

Section 1653.2(c)(2)(ii) is designed to

clarify that it is not necessary for the

exact amount of the award to be

determinable upon receipt of the order

by the Board. An order may be

qualifying if it provides for a current

payment to be calculated as of the date

of payment. The Board recognizes that

the procedures set forth in the

regulations will often require a few

months between the receipt of the order

by the Board and the payment of the

account. Orders will not be deemed

non-qualifying future orders merely

because the amount of the award cannot

be calculated until a payment date that

will invariably be later than the date of

receipt of the order by the Board. For

example, an order that incorporates a

formula using a variable such as the

number of months of the participant’s

Federal employment as of the date of

payment would not be considered a

non-qualifying future order, even

though the length of the participant’s

Federal service will have to be

determined as of the date of payment,

which is likely to be a few months after

the Board’s receipt of the order.

Section 1653.2(d) defines the term

‘‘former spouse’’ as used in the
13606 Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Rules and Regulations

regulations by adopting the definition

contained in 5 U.S.C. 8401(12).

Section 1653.3 sets forth procedures

for reviewing retirement benefits court

orders. Section 1653.3(a) provides that

the Board will process court orders in

accordance with applicable Federal law,

namely FERSA and the Board’s

regulations. The Board’s processing of

court orders is not controlled by the

procedures of the state divorce courts,

nor will the Board take into account any

fact or rule of state or local law that

renders an order invalid which is

otherwise valid on its face.

Section 1653.3(a) also makes it clear

that the Board cannot be made a party

to the underlying divorce action and

thereby be subject to the jurisdiction of

the court handling the divorce

proceeding. The Board is a Federal

agency which, under the doctrine of

sovereign immunity, is not subject to

suit in state court absent specific

statutory authorization. Therefore, legal

process to join the Board as a party to

a divorce proceeding will not be

honored. Parties to a divorce must,

without the Board’s participation in the

proceeding, obtain from the court an

appropriate order and then submit that

order to the Board for a determination

as to whether it is a qualifying order. To

the extent there is any dispute about the

Board’s actions concerning a court

order, the matter must be resolved in

Federal court under 5 U.S.C. 8477, not

in state court.

Section 1653.3(b) provides the

address for the TSP recordkeeper to

which court orders should be sent for

processing. Receipt by the recordkeeper

is deemed receipt by the Board.

Section 1653.3(c) provides the general

rule that the Board will ‘‘freeze’’ the

account of a TSP participant for whom

a document has been received that

purports to be a qualifying retirement

benefits court order. When an account is

frozen, the participant may not

withdraw the account or obtain a loan

from the account. The freeze is intended

to ensure that the participant may not

defeat the purposes of a court order by

removing the funds from the account

while the Board is conducting its review

of what may turn out to be a valid order.

Both 5 U.S.C. 8435(d) and 8467 indicate

that the Executive Director may not

make payments to the participant after

receiving a qualifying court order until

the court order has been complied with.

Section 1653.3(d) lists certain types of

documents that the Board views as not

even purporting to constitute qualifying

retirement benefits court orders.

Therefore, these documents will be

rejected without substantive review and

no freeze will be placed on the account.

Section 1653.3(d)(1) provides that an

order will be rejected if it fails to

indicate on its face that it has been

issued or approved by a court, unless an

accompanying document plainly

establishes that the order was approved

or issued by a court. An unsigned order

will be rejected under this provision.

Section 1653.3(d)(2) provides that an

order will be rejected where the account

has been closed, which may have

occurred either because the participant

withdrew his or her account or because

the entire account was paid pursuant to

an earlier court order. Similarly,

because FERSA was enacted on June 6,

1986, court orders entered before that

date cannot ‘‘expressly relate’’ to a TSP

account, since the court could not have

contemplated the existence of a TSP

account. Accordingly, under

§ 1653.3(d)(3), such orders will be

rejected without review. Court orders

awarding funds in the TSP account only

to the participant (§ 1653.3(d)(4)) and

court orders failing to make any

mention of any retirement benefits

(§ 1653.3(d)(5)) will also be rejected

without substantive review and without

freezing the account.

Sections 1653.3 (e) and (f) require a

court order to be either an original or a

copy of a complete court order. If a

court order is not complete, the parties

will be given 30 days to submit a

complete document. If it is not received

within 30 days, the account will be

unfrozen and the order will not be

reviewed further. However, if the

incomplete order does not include a

signature or other indication that it was

properly issued or approved by a court,

then it will be rejected under

§ 1653.3(d)(1) without a 30-day period

for resubmission.

Sections 1653.3 (g) and (h) require the

Board to determine whether court

orders accepted for review under this

subpart constitute qualifying orders and

to provide an explanation of the

decision. If the order is found to be

qualifying, the decision will state the

effect of the order on the TSP account

of the participant. In many cases, the

effect of a final divorce decree will be

a payment from the participant’s

account to the spouse or former spouse.

In the case of a preliminary order, the

effect is often maintenance of a freeze

on the account until a further court

order is received by the Board.

Under current Board procedures, the

Board’s decisions provide a 30-day

appeal period for the parties to request

an administrative review of the decision

by the Executive Director. Section

1653.3(i) eliminates that appeal period

and makes the Board’s initial decision

the final administrative action. In the

Board’s experience, the appeal period

has been used primarily as a time for

seeking from the divorce court a new

order to supersede the earlier order,

rather than to raise substantive issues

relating to the Board’s decision.

The Board believes that it is

appropriate for the divorce court, rather

than the Board, to clarify any questions

concerning the meaning of the order.

Elimination of the appeal period will

not, however, eliminate any opportunity

for the parties to return to the divorce

court for an amended order, since

§ 1653.5(a) provides that even after a

determination that an order awards a

portion of a TSP account, payment

cannot be made until at least 30 days

after appropriate tax notification has

been provided. Similarly, if the Board

determines that an order is not

qualifying, § 1653.3(j)(4) provides that

the account will remain frozen for 45

days from the date of the Board’s

determination. Thus, the spouse or

former spouse is protected against

disbursement of a loan or withdrawal to

the participant during the 45-day

period, and may seek a new order from

the divorce court during that time.

Section 1653.3(j) describes when a

freeze imposed under § 1653.3(c) will be

removed. Section 1653.3(j)(1) reiterates

the provision in paragraph (f) that if the

Board receives an incomplete order the

parties will be notified that a complete

document must be received within 30

days. If it is not received within that

time, the freeze will be removed.

Section 1653.3(j)(2) provides that,

where a qualifying order precludes

disbursements from the participant’s

account, the freeze will remain on the

account until the order is either

superseded or vacated by a subsequent

order of the court. Of course, if the

subsequent order itself requires freezing

the account, then the account will not

be unfrozen. A common situation

involves a preliminary order entered to

preserve the status quo by precluding

the participant from obtaining a loan or

withdrawal from his or her account

while the divorce proceedings are

pending. The court then enters a final

divorce decree, which dissolves the

preliminary order but also includes an

award of a portion of the TSP account

to the former spouse. Because the final

divorce decree will itself require that

the account be frozen, the freeze will

remain on the account until payment of

the former spouse’s share.

Section 1653.3(j)(3) provides that,

where it is determined that an order

makes an award of a portion of a TSP

account, the freeze will be removed

upon payment.
Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Rules and Regulations 13607

As discussed in connection with the

elimination of the appeal period,

§ 1653.3(j)(4) provides that, where the

Board determines that an order is not

qualifying, the account will remain

frozen for 45 days after that

determination. This enables the parties

to seek and submit to the Board a new,

qualifying order from the divorce court,

without concern that the participant

may withdraw or borrow from his or her

account during the 45-day period.

Alternatively, a party may seek to

challenge the Board’s determination in

Federal court. The freeze may be

removed sooner than the expiration of

the 45-day period only upon written

agreement from both parties to the

divorce proceedings.

Section 1653.3(k) provides that the

Board will hold in abeyance the

processing of a court order payment

pursuant to a qualifying court order if

the Board is advised by one of the

parties that the underlying court order

is on appeal in the state court system

and that the effect of the filing of such

an appeal under state law or procedures

is to stay the effect of the order. The

Board has decided that it should not

make payments under court orders that

are on appeal. However, the Board also

will presume that any court order that

appears valid on its face has not been

appealed and thus remains valid.

Absent notice from one of the parties,

the Board will not be responsible for

following local or state procedural rules

which might otherwise prevent

enforcement of the order.

The party notifying the Board of the

appeal of the court order must provide

proper documentation of the appeal, as

well as citations to legal authority

which address the effect of the filing of

such an appeal. In the absence of proper

documentation and appropriate legal

authority, the Board will proceed with

the payment process. If the Board

receives proper documentation and

citations to legal authority, the Board

will notify all of the parties that it has

held the processing of the account in

abeyance because of the appeal in the

state court system. The account will

remain frozen for loans and

withdrawals. In order for the freeze to

be removed or a payment to be made,

the Board must be notified by one of the

parties of the disposition of the appeal,

provided with a statement regarding the

effect of the disposition on the

provisions of the original order relating

to the TSP, and provided with a copy

of the resulting document from the

court.

Section 1653.3(l) provides the rules

for processing multiple court orders.

Section 1653.3(l)(1) provides that,

where there are conflicting orders

arising from the same divorce

proceeding and involving the same

spouse or former spouse, the order

bearing the latest date will supersede

any earlier orders, regardless of the

dates on which they are received by the

Board. The date will be determined by

using the date the order was entered by

the clerk of the court or the date the

order was filed by the clerk of the court,

if the order does not show a date

entered. If the order does not indicate a

date entered or filed, the date the order

was signed by the judge will be used.

Since 5 U.S.C. 8467(a) provides that

‘‘[a]ny payment under this subsection to

a person bars recovery by any other

person,’’ the general rule set forth in

§ 1643.3(l)(1) obviously cannot be

applied if payment on the first order

received has already been made before

the Board receives a later order that

would have superseded the first order.

Moreover, consistent with the last

sentence of § 1653.2(b)(1), no court

order will be honored to the extent that

doing so would require the Board to

accept the return of money already

properly paid pursuant to another order.

Section 1653.3(l)(2) provides that

where there are conflicting orders

involving different spouses or former

spouses, the order with the earliest date

(determined in the same manner as

under § 1653.3(l)(1)) will be given

priority (again, unless payment on the

first order received has already been

made). Any payments from the account

will be made first based on the order

bearing the earliest date, and proceeding

through any additional orders until the

account is exhausted. It is presumed

that the earliest order established rights

for the spouse or former spouse named

in that order which cannot be affected

by subsequent orders in different cases

in which the first spouse is not a party.

Section 1653.4 sets forth rules for

calculation of the amount of an

entitlement. TSP accounts are valued

once a month as of the last day of the

month. Under § 1653.4(a), if the date or

event specified in the order for

calculating the award falls on any day

except the last day of the month, the

account balance on which the amount of

the entitlement is based is determined

as of the last day of the previous month.

Unless otherwise excluded by the court

order, any outstanding loan balance as

of the end of the month used for

calculating the entitlement will be

included in the account balance for this

calculation. If the date or event

specified in the order falls on the last

day of a month, the account balance is

determined as of that day.

The actual month-end account

balance used to calculate the

entitlement must be adjusted by

transactions which are processed before

the payment is processed but which

relate to the period on or before the

month-end used for the calculation. For

example, assume that in March 1995 the

Board receives a qualifying court order

awarding the former spouse one-half of

the participant’s account balance as of

the end of February 1995. In May 1995,

the Board processes an adjustment

record received from the participant’s

employing agency which removes from

the account $100 that was determined

by the agency to be an excess

contribution erroneously made by the

agency in January 1995. If payment

pursuant to the court order is made in

July 1995, the amount paid would be

computed based on the February 1995

month-end account balance, minus the

$100 which was removed from the

account in May 1995 but which related

to the period prior to the February

month-end computation date. On the

other hand, if the adjustment record was

for an erroneous contribution made in

April 1995, then the February balance

would be used in the calculation of the

former spouse’s award without

reduction for the $100 adjustment.

Section 1653.4(b) provides that,

where the award does not cite a specific

date or event, the entitlement will be

calculated based on the month-end

balance on or immediately preceding

the date the order was entered by the

clerk of the court or the date the order

was filed by the clerk of the court, if the

order does not show a date entered. If

the order does not indicate a date

entered or filed, the date the order was

signed by the judge will be used. Once

the appropriate date is established, the

rules of paragraph (a) are applied as if

that date had been specified in the

order.

Section 1653.4(c) provides that, if the

court awards a specific dollar amount,

but indicates that the amount awarded

must be paid out of the balance that is

in the account on a certain date, the

award will be for the lesser of the

amount awarded or the appropriate

month-end account balance, determined

and adjusted under the same rules as in

paragraph (a). This approach is based on

the notice that the court has no power

to award a sum that is greater than the

amount in the account on the particular

date cited in the order. Also similar to

the rules set forth in paragraph (a), if no

date is specified in the court order, the

award will be assumed to be based on

the date the order was entered, filed, or

signed, as appropriate.
13608 Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Rules and Regulations

Under § 1653.4(d), unless the court

order specifies otherwise, no earnings

will be credited to the amount awarded.

If the court specifies that interest or

earnings are to be credited, but does not

specify a rate or method of calculation,

the Board will use the actual rate of

return on the participant’s account for

the time period involved based on the

funds in which the account is invested.

The participant’s account may be

invested in one or more of the following

funds: The Government Securities

Investment (G) Fund, the Common

Stock Index Investment (C) Fund, the

Fixed Income Index Investment (F)

Fund. Because the earnings may be

based in whole or in part on the

earnings of the C Fund or the F Fund,

and those funds may suffer losses for

any given period of time, the earnings

credited to the award could be either

positive or negative. The earnings

calculation will begin with the month

after the month-end balance used in

calculating the principal amount of the

award, and will end with the month

preceding payment. If the court

specifies a different method for

calculating interest to be credited to the

award, that method will be used.

Section 1653.4(e) makes it clear that

under no circumstances may a

participant’s Agency Automatic (1%)

Contributions be paid pursuant to a

court order if those funds are not vested

under 5 U.S.C. 8432(g) at the time of

payment. While the entitlement may

initially be calculated to include such

nonvested sums for purposes of

advising the parties of the amount

awarded, the amount will be

recalculated excluding those sums if

they have not become vested by the date

of payment.

Section 1653.5 sets forth the

procedures for making payments

pursuant to qualifying retirement

benefits court orders. Under § 1653.5(a),

if a qualifying order is found to require

payment, an appropriate tax notification

will be provided to the payee after

issuance of the Board’s decision.

Payment will not be made less than 30

days after issuance of the tax

notification because, under the Internal

Revenue Code, the payee will often have

the right to elect a transfer to an

Individual Retirement Arrangement

(IRA) or other eligible retirement plan,

or to make a tax withholding election.

As discussed with respect to the

elimination of the period for appeal of

the Board’s decision, this minimum

waiting period of 30 days also provides

the participant an opportunity to seek

an amended order from the state divorce

court or to challenge the Board’s

determination in Federal court under 5

U.S.C. 8477.

Section 1653.5(b) states that payment

must be made directly to the

individual(s) specified in the court

order. However, as required by the

Internal Revenue Code, this paragraph

also provides for a spouse or former

spouse to elect to have all or a part of

the payment transferred directly to an

IRA or other eligible retirement plan.

Section 1653.5(c) provides that no

payment may be made from an account

that exceeds the vested account balance

at the time of payment, excluding any

outstanding loan at the time of payment.

Although outstanding loan balances are

included for purposes of computing the

amount of an award as of the

appropriate computation date as

determined in accordance with § 1653.4,

payment cannot include any amount

that is outstanding as a loan, because

the money is not in the account and

thus is not available to be paid.

Section 1653.5(d) provides that orders

requiring a series of payments will not

be deemed qualifying orders. If an order

requires a payment greater than the

account balance as of the date of the

payment, the full amount of the account

will be paid pursuant to the order. If the

account subsequently receives

additional money, that money will not

be paid pursuant to the court order. A

new court order would be required for

payment of the additional sums. In

essence, a payment pursuant to a court

order extinguishes all entitlement under

that court order; further payment can

only be made pursuant to a subsequent

order.

Section 1653.5(e) provides that joint

payments are not permitted. If more

than one person is awarded a portion of

the account, the amount awarded to

each must be specified in the order.

Although the checks will be made

payable only to the payee(s) named in

the order, the Board will permit each

payee to specify the address to which

the check should be sent, even if that

address is different from an address

listed in the court order. However, only

the payee may designate an address to

which the check should be sent, and

such designation must be done in

writing. The Board will not honor a

change of address submitted, for

example, by the payee’s attorney. A

strict rule against accepting address

changes from anyone other than the

payee is necessary to protect against

forbidden alienation of the benefits to

which the payee, as a beneficiary of the

TSP, has become entitled. Unless the

address is changed by the payee, the

check will be sent to an address

provided in the court order. If an order

provides an address that is ‘‘in care of’’

another individual, the check will be

issued to the payee but sent to the ‘‘in

care of’’ address.

Section 1653.5(f) provides that prior

to payment the TSP recordkeeper must

have the payee’s full name, mailing

address, and Social Security number.

This information may be provided in

the court order or separately by the

parties or their representatives.

However, as discussed in connection

with paragraph (e), only the payee may

change the mailing address for the

check to an address other than his or her

own address. The payee’s representative

may not do so.

Section 1653.5(g) provides that

payment will be made to the payee’s

estate if the payee dies before payment

is made pursuant to a court order. It is

not necessary that the court order be

submitted to the Board prior to the

death of the payee, as long as the order

was issued prior to the payee’s death

and in all other respects constitutes a

qualifying order. The court may, in the

order, provide for an individual or

entity other than the payee’s estate to

receive payment in the event of the

payee’s death.

If the participant dies prior to

payment of the account, a court order

entered prior to the participant’s death

will be honored. It does not matter that

the order may not have been received by

the Board prior to the participant’s

death. However, if the order is not

received by the Board prior to otherwise

proper payment of the account to

someone other than the payee(s)

specified in the court order, then the

court order will not be honored. The

Board will neither seek nor accept a

return of funds properly paid prior to

receipt of a court order.

Section 1653.5(h) provides that

remarriage or termination of a legal

separation does not nullify a court order

that has already been submitted to the

Board. The Board does not believe it can

be presumed that in all cases in which

a domestic relations court divides

property, including a TSP account, the

division should be rendered void

merely because the parties choose to

remarry. If that is the court’s intent, then

the parties must obtain an order to that

effect and submit it to the Board before

payment is made pursuant to the

original court order.

Sectdion 1653.5(i) reflects the last

sentence of 5 U.S.C. 8467(a), which

provides that, ‘‘Any payment under this

subsection to a person bars recovery by

any other person.’’ Once payment

pursuant to a court order has been

properly made, the Board will not

accept return of the money disbursed.
Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Rules and Regulations 13609

Nor will an additional payment be made

to another payee.

Section 1653.5(j) provides that

payments will be made from the TSP

investment funds on a pro rata basis.

For example, if a participant’s $10,000

account balance is invested 50%

($5,000) in the G Fund, 30% ($3,000) in

the C Fund and 20% ($2,000) in the F

Fund, then an award of $1,000 would be

paid $500 from the G Fund, $300 from

the C Fund, and $200 from the F Fund.

The Board will not honor any provision

in a court order that requires the

payment to be made other than pro rata

from the TSP investment funds.

Regulatory Flexibility Act

I certify that these regulations will not

have a significant economic impact on

a substantial number of small entities.

They will affect only internal Board

procedures relating to the processing of

and payment pursuant to retirement

benefits court orders.

Paperwork Reduction Act

I certify that these regulations do not

require additional reporting under the

criteria of the Paperwork Reduction Act

of 1980.

List of Subjects

5 CFR Part 1650

Employment benefit plans,

Government employees, Retirement,

Pensions.

5 CFR Part 1653

Employment benefit plans,

Government employees, Retirement,

Pensions.

Dated: March 6, 1995.

Federal Retirement Thrift Investment Board.

Roger W. Mehle,

Executive Director.

For the reasons set out in the

preamble, 5 CFR Chapter VI is amended

as follows:

PART 1650—METHODS OF

WITHDRAWING FUNDS FROM THRIFT

SAVINGS PLAN

1. The authority citation for part 1650

continues to read as follows:

Authority: 5 U.S.C. 8351, 8433,

8434(a)(2)(E), 8434(b), 8435, 8436, 8467,

8474(b)(5), 8474(c)(1), and sec. 4437, Pub. L.

102–484, 106 Stat. 2724.

2. A new part 1653 is added to read

as follows:

PART 1653—DOMESTIC RELATIONS

ORDERS AFFECTING THRIFT

SAVINGS PLAN ACCOUNTS

Subpart A—Retirement Benefits Court

Orders

Sec.

1653.1 Purpose.

1653.2 Qualifying retirement benefits court

orders.

1653.3 Processing retirement benefits court

orders.

1653.4 Calculating entitlement under a

retirement benefits court order.

1653.5 Procedures for payment pursuant to

retirement benefits court orders.

Subpart B—[Reserved]

Authority: 5 U.S.C. 8435, 8436(b), 8467,

8474(b)(5) and 8474(c)(1).

Subpart A—Retirement Benefits Court

Orders

§ 1653.1 Purpose.

This subpart contains regulations

prescribing the Board’s procedures for

processing retirement benefits court

orders.

§ 1653.2 Qualifying retirement benefits

court orders.

(a) The TSP will only honor the terms

of a retirement benefits court order that

is qualifying under paragraph (b) of this

section.

(b) A retirement benefits court order

must meet each of the following

requirements to be considered

qualifying:

(1) The court order must be a court

decree of divorce, of annulment, or of

legal separation, or any court order or

court-approved property settlement

agreement incident to a decree of

divorce, of annulment, or of legal

separation. Orders may be issued at any

stage of a divorce, annulment, or legal

separation proceeding. Orders issued

prior to a final decree, such as orders for

the purpose of preserving the status quo

pending the final resolution of the

proceeding, are referred to as

‘‘preliminary’’ court orders, and will be

considered ‘‘incident to’’ a final decree,

notwithstanding that a final decree has

not yet been, and may not be, issued.

Orders issued subsequent to a final

decree, such as orders for the purpose

of amending such decree, are referred to

as ‘‘subsequent’’ court orders, and will

also be considered ‘‘incident to’’ such

decree. However, any subsequent court

order that requires the return of money

properly paid pursuant to an earlier

court order will not constitute a

qualifying order.

(2) The court order must ‘‘expressly

relate’’ to the Thrift Savings Plan

account of a current TSP participant.

This means that:

(i) The order must on its face

specifically describe the TSP in such a

way that it cannot be confused with

other Federal Government retirement

benefits or non-Federal retirement

benefits; and

(ii) The order must be written in terms

appropriate to a defined contribution

plan rather than a defined benefit plan.

For example, it should generally refer to

the individual participant’s ‘‘account’’

or ‘‘account balance’’ rather than a

‘‘benefit formula’’ or the participant’s

‘‘eventual benefits.’’

(3) If the court order awards an

amount to be paid from the participant’s

TSP account, the award must be for:

(i) A specific dollar amount;

(ii) A stated percentage or stated

fraction of the account;

(iii) A portion of the account to be

calculated by applying a formula that

yields a mathematically possible result.

Any variables in the formula must have

values that are readily ascertainable

from the face of the order or from

Government employment records; or

(iv) A survivor annuity as provided in

5 U.S.C. 8435(e).

(4) Court orders that make awards

from the TSP may only provide for

payments:

(i) To spouses or former spouses of

the participant;

(ii) As fees for attorneys for spouses

or former spouses of the participant;

(iii) To dependent children or other

dependents of the participant;

(iv) As fees for attorneys for

dependent children or other dependents

of the participant;

(c) The following retirement benefits

court orders will be considered nonqualifying:

(1) Orders relating to a TSP account

that contains only nonvested money,

unless the money will become vested

within 90 days of the date of receipt of

the order if the participant remains in

Federal service;

(2) (i) Orders that award an amount to

be paid at a future specified date or

upon the occurrence of a future

specified event, unless:

(A) The amount of the entitlement can

be currently calculated; and

(B) The award provides for the

payment of interest or earnings from the

date of calculation to the specified date

or event for payment.

(ii) If an order meets the requirements

of paragraphs (c)(2)(i) (A) and (B), a

current payment will be made in

accordance with the procedures set

forth in § 1653.5, rather than a payment

at the future date stated in the order.

(d) For purposes of paragraph (c)(2) of

this section, orders that require only

that the amount of the award be
13610 Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Rules and Regulations

calculated on the date of payment,

without stating a future date or event for

payment, will not be considered as

awarding an amount to be paid at a

future date or upon the occurrence of a

future event. In such cases, the date of

payment will be determined in

accordance with the procedures set

forth in § 1653.5, and the amount of the

entitlement will be determined in

accordance with § 1653.4 using that date

of payment.

(e) Definition. For purposes of this

Part, the term ‘‘former spouse’’ shall

have the same meaning as set forth in

5 U.S.C. 8401(12).

§ 1653.3 Processing retirement benefits

court orders.

(a) Board’s review of retirement

benefits court orders is governed solely

by the Federal Employees’ Retirement

System Act (FERSA), 5 U.S.C. Chapter

84, and by the terms of this part. The

Board will honor retirement benefits

court orders properly issued by a court

of any state, the District of Columbia,

the Commonwealth of Puerto Rico,

Guam, the Northern Mariana Islands, or

the Virgin Islands, and any Indian court

as defined by 25 U.S.C. 1301(3).

However, those courts have no

jurisdiction over the Board and the

Board cannot be made a party to the

underlying domestic relations

proceedings.

(b) Retirement benefits court orders

should be submitted to the Board’s

recordkeeper at the following address:

Thrift Savings Plan Service Office,

National Finance Center, P.O. Box

61500, New Orleans, Louisiana 70161–

1500. Receipt by the recordkeeper will

be considered receipt by the Board.

(c) Upon receipt of a document that

purports to be a qualifying retirement

benefits court order, including

preliminary and subsequent court

orders, the participant’s account will be

frozen. After the account is frozen, no

withdrawals or loans will be allowed

until the account is unfrozen. All other

account activity, including

contributions, adjustments, and

interfund transfers, will be permitted.

(d) The following documents will not

be treated as purporting to be qualifying

retirement benefits court orders.

Therefore accounts of participants to

whom such orders relate will not be

frozen and these documents will not be

reviewed by the Board:

(1) A document that does not indicate

on its face (or accompany a document

that establishes) that it has been issued

or approved by a court;

(2) A court order relating to a TSP

account that has been closed;

(3) A court order dated prior to June

6, 1986;

(4) A court order that fails to award

all or any part of the TSP account to

anyone other than the participant;

(5) A court order that does not

mention retirement benefits.

(e) After the participant’s account is

frozen, the document will be reviewed

initially to determine if it is a complete

original or copy of a retirement benefits

court order.

(f) If it is determined that the

document is not complete, a complete

document will be requested. If it is not

received within 30 days of the date of

such request, the account will be

unfrozen and no further action will be

taken with respect to the document.

(g) Upon receipt of a complete order

that is either an original or a copy of a

retirement benefits court order, the

Board will review the order and will

determine whether it is a qualifying

order as described in § 1653.2 and, if it

awards an amount to be paid from a

participant’s TSP account, the amount

of the entitlement. The Board will

advise all parties in writing of its

decision.

(h) The Board’s decision will contain

the following information:

(1) The Board’s determination

regarding whether the court order is

qualifying;

(2) A statement of the applicable

statute or regulations;

(3) If the order is determined to be

qualifying, a statement regarding the

effect that compliance with the court

order will have on the participant’s TSP

account; and

(4) If the order requires payment, a

description of the method by which the

entitlement under the court order was

calculated and the circumstances under

which payment will be made.

(i) The Board’s decision will be final.

There is no administrative appeal from

the decision.

(j) An account frozen under this

section will be unfrozen as follows:

(1) If a complete document has not

been received within 30 days from the

date of a request described in paragraph

(f) of this section, upon expiration of the

30-day period;

(2) If the order is a preliminary order

or other order precluding payment from

the account, as soon as practicable after

receipt of a certified copy or original

court order vacating or superseding

such order (unless the order vacating or

superseding the preliminary order itself

warrants placing a freeze on the

account);

(3) If the order is valid to award a

payment from the TSP account of a

participant under this part, upon

payment; and

(4) If the Board determines that the

order is not a qualifying order under

this part, 45 days after issuance of the

Board’s decision. The 45-day period

will be terminated if both parties submit

a written request for such a termination

to the Board.

(k) (1) the Board will hold in abeyance

the processing of a court order payment

pursuant to a previously approved

qualifying court order if the Board is

advised by one of the parties that the

underlying court order is on appeal in

the state court system and that the effect

of the filing of such an appeal under

state law or procedures is to stay the

effect of the order.

(i) Proper documentation of the

appeal and citations to legal authority

which address the effect of the filing of

such an appeal must be provided.

(ii) The parties will be notified that

the processing of the court order is

being held in abeyance and the account

will remain frozen for loans and

withdrawal.

(iii) In the absence of proper

documentation and appropriate legal

authority, the Board will presume that

the provisions relating to the TSP in the

court order remain valid and will

proceed with the payment process.

(2) The Board must be notified in

writing by one of the parties of the

disposition of the appeal in order for the

freeze to be removed from the account

or for a payment to be made. The

notification must include a statement

regarding the effect of the disposition on

the provisions of the original order

relating to the TSP and a copy of the

resulting document from the court must

be provided.

(1) Multiple court orders pending

before the Board will be processed in

accordance with the procedures set

forth in this part in the following order:

(1) As between conflicting qualifying

court orders relating to the same spouse

or former spouse, the Board will process

only the court order bearing the latest

date entered by the clerk of the court.

If any order does not have a date

entered, then the date the order was

filed by the clerk shall be used; if there

is no date entered or date filed, then the

date the order was signed by the judge

shall be used.

(2) As between conflicting qualifying

court orders relating to two or more

former spouses, the Board will process

the orders in the order of the dates

entered by the clerk of the court, starting

with the order bearing the earliest date,

and continuing until the account is

exhausted. If any order does not have a

date entered, then the date the order
Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 / Rules and Regulations 13611

was filed by the clerk shall be used; if

there is no date entered or date filed,

then the date the order was signed by

the judge shall be used.

§ 1653.4 Calculating entitlement under a

retirement benefits court order.

(a) If the court order awards a

percentage or fraction of the account as

of a specific date or event, the amount

of the entitlement will be calculated

based upon the balance of the account

as of the end of the month on or

immediately preceding the date or

event, plus any transactions posted after

the date or event, but before payment,

that are effective on or before the

month-end date used for calculating the

entitlement. For purposes of computing

the amount of an entitlement, any loan

amount outstanding as of the month-end

date used for calculating the entitlement

shall be treated as included in the

account balance, unless the court order

provides otherwise.

(b) If the court order awards a

percentage or fraction of an account but

does not contain a specific date as of

which to apply the percentage or

fraction to the account, the amount of

the entitlement will be calculated as

described in paragraph (a) of this

section, using the account balance as of

the end of the month on or immediately

prior to the date the order was entered

by the clerk of the court or, if the order

does not show a date entered, the date

the order was filed by the clerk of the

court or, if the order does not contain

a date entered or a date filed, the date

signed by the judge.

(c) If the court order awards a specific

dollar amount, the amount of the

entitlement will be the lesser of:

(1) The amount the order awards; or

(2) The amount in the account as of

the end of the month on or before the

date specified in the order (or, if no date

is specified, the date the order was

entered by the clerk of the court or, if

the order does not show a date entered,

the date the order was filed by the clerk

of the court, or, if the order does not

contain a date entered or a date filed,

the date signed by the judge) plus any

transactions posted after the date or

event, but before payment, that are

effective on or before the month-end

date used for calculating the

entitlement. For purposes of computing

the amount of entitlement, any loan

amount outstanding as of the month-end

date used for calculating the entitlement

shall be treated as included in the

account balance, unless the court order

provides otherwise.

(d) Unless the court order specifically

provides otherwise, the entitlement

calculated under this section will not be

credited with interest or earnings. If

interest or earnings are awarded, the

Board will use the monthly rates of

return credited to the account unless the

court order specifies a different rate.

The TSP monthly rates of return may be

either positive or negative. Interest or

earnings will be calculated beginning

with the month following the monthend valuation date used for calculating

the entitlement and ending with the

month prior to the month of payment.

(e) All entitlement will be calculated

initially under this section including

both vested and nonvested amounts in

the participant’s account. If at the time

of payment the non-vested portion of

the account has not become vested or

has been forfeited, the entitlement will

be recalculated using only the

participant’s vested account balance.

§ 1653.5 Procedures for payment pursuant

to retirement benefits court orders.

(a) If a qualifying court order creates

an entitlement to a portion of a TSP

account under this part, payment will

be made no sooner than 30 days after

the Board’s decision has been issued

and the appropriate tax withholding

notification has been provided.

(b) A payment made pursuant to a

qualifying court order will be made only

to the person(s) specified in the court

order. If payment is to be made to the

spouse or former spouse of the

participant, he or she may request that

the TSP transfer all or a portion of his

or her payment to an Individual

Retirement Arrangement (IRA) or other

eligible retirement plan. Such a request

must be made by filing the TSP form

‘‘Spouse Election to Transfer to IRA or

Other Eligible Retirement Plan’’, which

must be received before payment.

(c) In no case may a payment made

pursuant to a qualifying court order

exceed the participant’s vested account

balance, excluding any outstanding loan

amount as of the end of the month

preceding the date of payment. If the

entitlement calculated pursuant to this

subpart exceeds the participant’s vested

account balance (excluding any

outstanding loan amount), then only the

vested amount in the account

(excluding the outstanding loan

balance) will be paid.

(d) The entire amount of an

entitlement created by a qualifying court

order must be disbursed at one time. A

series of payments will not be made

even if the court order provides for such

a method of payment. A payment

pursuant to a court order extinguishes

all further rights to any payment under

that order even if the entire amount of

the entitlement could not be paid. Any

further award must be contained in a

separate court order.

(e) Payment cannot be made jointly to

more than one person. If payment is to

be made to more than one person, the

order must separately indicate the

amount to be paid to each.

(f) In order to make a payment

pursuant to a retirement benefits court

order, the Board’s recordkeeper must be

provided with the full name, mailing

address, and Social Security number of

the payee, even if the payment is being

mailed to another address.

(g) If the payee dies before a payment

is made pursuant to a qualifying

retirement benefits court order, payment

will be made to the estate of the payee,

unless otherwise specified by the court

order. If the participant dies before

payment is made pursuant to a

qualifying retirement benefits order

entered before the participant’s death,

the order will be honored as long as it

is submitted to the Board before

payment of the account, regardless of

whether the order was received by the

Board before the participant’s death.

(h) If the parties to a divorce or

annulment are remarried, or a legal

separation is terminated, a new court

order will be required to prevent

payment pursuant to a previously

submitted qualifying retirement benefits

court order.

(i) Payment to a person (including the

estate of the payee) pursuant to a

qualifying retirement benefits court

order made in accordance with this

subpart bars recovery by any other

person pursuant to that order.

(j) Payments pursuant to qualifying

court orders will be paid pro rata from

the TSP investment funds, based on the

balance in each fund on the date as of

which the payment is made. The Board

will not honor provisions of court

orders that require payment to be made

from specific investment funds.

Subpart B—[Reserved]

[FR Doc. 95–5918 Filed 3–10–95; 8:45 am]

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