Why divorcing federal employees need an RBCO

If you’re like most federal employees, you have a retirement plan called a Thrift Savings Plan (TSP). Just as private employer retirement plans have to be divided in a divorce, so do TSPs. However, they have their own unique type of court order. It’s called a retirement benefits court order (RBCO). 

An RBCO is similar to a qualified domestic relations order (QDRO), which is used for private-sector retirement plans. However, the QDRO must comply with Title V of the U.S. Code, which governs federal retirement plans. Private employer retirement plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA).

You may be able to use a QDRO to divide both of your retirement plans if one of you works for a private employer. However, your QDRO must comply with Title V or it won’t be accepted. 

The four requirements of an RBCO

Basically, an RBCO has to meet four requirements to be valid:

1. It must be issued by a court in a state, the District of Columbia or other U.S. jurisdiction.
2. It must specifically state that it is for the “Thrift Savings Plan.”
3. It can only designate payments to a current or former spouse or a dependent.
4. Payments must be detailed in specific percentages or dollar amounts and designate a specific date for payment(s).

Likely, you and your spouse have each designated the other as beneficiaries on your retirement plans (whether federal or private). You should consider changing your beneficiary on the portion of your plan that you retain after the divorce. Neither your divorce decree nor any changes you make to your estate plan will automatically change those. As such, it is important that the terms of the RBCO or the terms of the marital settlement agreement authorize you to do that and require the prior spouse to sign any documents that may be necessary for you to do so. 

If you are a federal employee or you are married to a federal employee,  you need sound legal guidance by someone who understands RBCOs (and QDROs, if one is used) to help ensure that you get a fair division of these crucial retirement assets.