[Code of Federal Regulations] [Title 5, Volume 3] [Revised as of January 1, 2008] From the U.S. Government Printing Office via GPO Access [CITE: 5CFR1653.5] [Page 290-292] TITLE 5--ADMINISTRATIVE PERSONNEL CHAPTER VI--FEDERAL RETIREMENT THRIFT INVESTMENT BOARD PART 1653_COURT ORDERS AND LEGAL PROCESSES AFFECTING THRIFT SAVINGS PLAN Subpart A_Retirement Benefits Court Orders Sec. 1653.5 Payment. (a) Payment pursuant to a qualifying retirement benefits court order ordinarily will be made 60 days after the date of the TSP decision letter. This is intended to permit the payee sufficient [[Page 291]] time to consider decisions about tax withholding, payment by EFT, and transfer options. An earlier distribution may be made as follows: (1) If the payee is the current or former spouse of the participant, the payee can request to receive the payment sooner than 60 days by making a tax withholding election, by requesting a payment by EFT, or by requesting a transfer of all or a portion of the payment to a traditional IRA or eligible employer plan. The TSP decision letter will provide the forms a payee must use to choose one of these payment options. (2) If the payee is someone other than the current or former spouse of the participant, the participant can request a disbursement sooner than 60 days by making a tax withholding election on forms provided to the participant with the TSP decision letter. (3) If the court order makes an award to multiple payees, a disbursement may be made earlier than 60 days only if requests for expedited payment are received from all of the payees. (4) In no event will payment be made earlier than 31 days after the date of the TSP decision letter. (b) In no case will payment exceed the participant's vested account balance, minus any outstanding loan balance. (c) The entire amount of a court order payee's entitlement 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 rights to any further payment under that order, even if the entire amount of the entitlement cannot be paid. Any further award must be contained in a separate court order. (d) Payment will be made pro rata from all TSP Funds in which the account is invested, based on the balance in each fund on the date payment is made, and from both tax-deferred and tax-exempt balances, if any. The TSP will not honor provisions of a court order that require payment to be made from specific TSP Funds or contribution sources. A court order may, however, specify a particular payment from the tax- exempt balance of a uniformed services TSP account. (e) Payment will be made only to the person or persons specified in the court order. (1) If payment is made to the current or former spouse of the participant, the distribution will be reported to the Internal Revenue Service (IRS) as income to the payee. If the court order specifies a third-party mailing address for the payment, the TSP will mail to the address specified any portion of the payment that is not transferred to a traditional IRA or eligible employer plan. (2) If the payment is made to anyone other than the current or former spouse of the participant, the payment is taxable to the participant and is subject to Federal income tax withholding by the participant. The participant can elect the amount to be withheld by filing with the TSP the forms provided to the participant with the decision letter. The tax withholding will be taken from the payee's entitlement and the gross amount of the payment (i.e., the net payment distributed to the payee plus the amount withheld from the payment for taxes) will be reported to the IRS as income to the participant. (f) Payment will not be made jointly to two or more persons. If the court order requires payments to more than one person, the order must separately indicate the amount to be paid to each. (g) If there are insufficient funds to pay each court order payee, payment will be made as follows: (1) If the order specifies an order of precedence for the payments, the TSP will honor it. (2) If the order does not specify an order of precedence for the payments, the TSP will pay a current or former spouse first, a dependent second, and an attorney third. (h) If the payee dies before a payment is disbursed, payment will be made to the estate of the payee, unless otherwise specified by the court order. A distribution to the estate of a deceased court order payee will be reported as income to the decedent's estate. If the participant dies before payment is made, the order will be honored so long as it is submitted to the TSP before the TSP account has been closed. [[Page 292]] (i) If the parties to a divorce or annulment have remarried each other, 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. (j) 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 claiming entitlement to the payment. (k) If a court ordered payment is returned as undeliverable, the TSP record keeper will attempt to locate the payee by writing to his or her TSP database address. If the payee does not respond within 60 days, the TSP will forfeit the funds to the Plan. The payee can claim the forfeited funds, although they will not be credited with TSP investment fund returns. (l) A properly paid court order payment cannot be returned to the TSP. [68 FR 35510, June 13, 2003, as amended at 68 FR 74451, Dec. 23, 2003; 70 FR 32217, June 1, 2005]