[Federal Register Volume 60, Number 48 (Monday, March 13, 1995)]
[Rules and Regulations]
[Pages 13604-13611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5918]
[[Page 13603]]
_______________________________________________________________________
Part XIII
Federal Retirement Thrift Investment Board
_______________________________________________________________________
5 CFR Parts 1650 and 1653
Retirement Benefits Court Order Regulations; Final Rule
Federal Register / Vol. 60, No. 48 / Monday, March 13, 1995 /
Rules and Regulations
[[Page 13604]]
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.
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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 court-approved
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 court-approved 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 Secs. 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 Sec. 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 Sec. 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 Sec. 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. [[Page 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, Sec. 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 Sec. 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 Sec. 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 Sec. 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
[[Page 13606]] 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
Sec. 1653.3(d)(3), such orders will be rejected without review. Court
orders awarding funds in the TSP account only to the participant
(Sec. 1653.3(d)(4)) and court orders failing to make any mention of any
retirement benefits (Sec. 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 Sec. 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 Sec. 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, Sec. 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
Sec. 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. [[Page 13607]]
As discussed in connection with the elimination of the appeal
period, Sec. 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
Sec. 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 Sec. 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
Sec. 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 Sec. 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. [[Page 13608]]
Under Sec. 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
Sec. 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 Sec. 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. [[Page 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
Sec. 1653.1 Purpose.
This subpart contains regulations prescribing the Board's
procedures for processing retirement benefits court orders.
Sec. 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 non-qualifying:
(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 Sec. 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 [[Page 13610]] 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 Sec. 1653.5, and the amount of the entitlement
will be determined in accordance with Sec. 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).
Sec. 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 Sec. 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 [[Page 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.
Sec. 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 month-end 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.
Sec. 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]
BILLING CODE 6760-01-M
