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TSPs: Measuring some ingredients in military divorce

Mary Poppins said a spoonful of sugar helps the medicine go down. But where divorce is concerned, things aren't quite so simple. Divorce can be upsetting and frustratingly complicated. If you happen to be a spouse married to someone in the military, the process of dissolving the marriage can become even more complex.

One of the most challenging facets in every case is dividing retirement benefits, and with the start of 2018, it is possible that things may become a frequent matter of dispute for those in the military. The trigger for this will be the new Blended Retirement System and the role of the legacy Thrift Savings Plan (TSP) in that system.

How things have been

The TSP is the current method through which federal employees, including members of the military, can sock money away for their eventual retirement. Currently, participation in these 401(k)-like accounts is optional. The government doesn't contribute anything. However, after Jan. 1, the blended system begins.

Those who are already in the service can opt into the program. Those who enlist in the new year and later will be automatically enrolled. They and anyone who opts to sign up will start to see funds accumulate because of matching contributions from the government.

This is important in the context of military personnel because the funds that flow into the TSP accounts could be subject to division as a marital asset. Further, because the funds are owned by the holder of the account, distribution of the money to someone other than that person will likely need to be done through what is effectively a court-approved qualified domestic relations order or QDRO, something we've written about previously. This could mean an additional legal step in the divorce process.

Change is inevitable in life. However, it sometimes can create discomfort and confusion. To be sure you aren't caught off guard by a change and your interests remain protected, know the law and how it might affect you.

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