Feds set exact math for TSP court-ordered payout earnings
Published Date: 3/24/2025
Rule
Summary
If you’re a federal employee or service member with a Thrift Savings Plan (TSP), this new rule explains how earnings on court-ordered payments to your spouse, ex, kids, or dependents will be calculated. Starting March 24, 2025, the Federal Retirement Thrift Investment Board will use a clear, official method to figure out gains or losses on these payments—making sure everyone gets their fair share. This update keeps things fair and straightforward for families during tough times.
Analyzed Economic Effects
5 provisions identified: 1 benefits, 2 costs, 2 mixed.
New method to calculate court-ordered earnings
Starting March 24, 2025, the FRTIB will calculate earnings on court-ordered payments using a money-weighted return (the internal rate of return). The record keeper will identify the beginning balance, ending balance, and cash flows between the entitlement date and payment date, compute the rate of return for that period, and multiply the payee's award by that rate.
Payments pro rata across Roth/traditional and funds
Court-ordered payments will be made pro rata from a participant's traditional and Roth balances and pro rata across all TSP core funds based on balances on the payment date. The TSP record keeper will not honor court order provisions that require payment from a specific TSP core fund, source of contributions, or balance.
Courts cannot set an earnings rate
The rule says a payee's entitlement will not be credited with TSP investment earnings unless the court order specifically provides for earnings, and the court order may not specify a rate for those earnings. If earnings are awarded, the record keeper will calculate them using the money-weighted return method.
Loan balances included in entitlement calculation
For computing a payee's entitlement, a participant's TSP account balance will include any loan balance outstanding as of the entitlement date unless the court order provides otherwise.
What happens if payee or participant dies before payment
If a payee dies before a TSP court-ordered payment is disbursed, payment will be made to the payee's estate and reported as income to the decedent's estate. If the participant dies before the payment date, the order will be honored as long as it is submitted to the TSP record keeper before the TSP account has been closed.
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Key Dates
Department and Agencies
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