Thrift Savings Plan Questions & Answers For OCSS
Thrift Savings Plan (TSP), the 401(k) account holder for many federal employees, updated its withholding form and issued these clarifying Q&As (PDF). This information will greatly facilitate child support actions against these accounts.
Glossary of Terms
Glossary of Terms
| Term | Definition |
|---|---|
| BPAC Account | Beneficiary Participant Account — Uniformed Services |
| BPAU Account | Beneficiary Participant Account — Uniformed Services |
| C Account | Civilian Account (only for legal processes from state agencies) |
| CFR | Code of Federal Regulations |
| FIDM | Financial Institution Data Match |
| FRTIB | Federal Retirement Thrift Investment Board |
| IWO | Income Withholding Order |
| NCP | Noncustodial Parent |
| OCSE | Office of Child Support Enforcement |
| Order to Deliver | General term used by the TSP for legal process that requires payment |
| Order to Withhold | General term used by the TSP for legal process that requires a freeze be placed on the account in anticipation of legal process requiring payment |
| TSP | Thrift Savings Plan |
| TSP-CS-1 Form | Form created by the TSP for administrative ease of state agencies. Meets all federal regulatory requirements when completed correctly |
| U Account | Uniformed Services Account (only for legal processes from state agencies) |
General
Will the Thrift Savings Plan honor a child support lien and levy for arrears?
Yes, the TSP will honor a child support lien or levy for arrears if it meets all of the regulatory requirements found at 5 CFR § 1653 Subpart B.
What will happen if a state submits an order that does not meet the requirements found at 5 CFR § 1653 Subpart B?
The TSP will review the order. If it is incomplete or not qualifying, a denial letter will be issued.
What must be included to make an order complete?
To be complete, a legal process must include the following:
- The last four digits of the TSP participant’s Social Security number
- All pages of the order
- Express mention of the TSP, the Thrift Savings Plan, the Federal Retirement Thrift Investment Board, or the FRTIB
What types of legal processes are qualifying?
To be qualifying, a legal process must (a) order the TSP to freeze an account in anticipation of an order to pay from the account; or (b) require payment. A legal process requiring payment must do the following to be qualifying:
- Order payment of a fixed dollar amount
- Order a one-time payment for support arrears (not a series of payments)
- When a TSP participant has more than one account, specify the account from which funds are to be drawn
− Note: the account must be specified if the participant has more than one account, regardless of whether one or more of the accounts currently has a zero balance. Accounts with a zero balance may not appear on the OCSE quarterly data match. To avoid denials, it is advisable to always include within the order the account type from which you are requesting funds. - If it requires payment from more than one account, specify the particular payment amount from each account, the total of which does not exceed the total arrears
- If the award includes attorney fees, court costs, and/or interest, expressly make those amounts recoverable
What happens if I receive a denial letter?
The TSP will unfreeze the participant’s account as soon as practicable after issuing a denial letter.
Does the TSP meet the definition of financial institution?
No, the TSP cannot be described as a financial institution.
Can states consolidate all arrears owed by an NCP for multiple cases onto one order?
Yes, if an NCP has multiple arrears, the states can consolidate all arrears into a single order for more efficient processing. The TSP would prefer to process a single order versus multiple orders on the same account.
Since the TSP requires us to identify whether the award applies to the civilian, uniformed services, beneficiary participant civilian, or beneficiary participant uniformed services accounts, can we use “C,” “U,” “BPAC,” or “BPAU” to describe the account t
Yes, you can use the letters to denote the proper account type. You do not have to spell out the words “civilian” or “uniformed services.” However, for a beneficiary participant account, you must use the terms “BPAC” or “BPAU.” A “C” or “U” does not adequately describe those accounts. Also, a separate award must be described for each account type from which the state is requesting funds. You cannot, for example request a $5,000 award to be drawn from the “U” and “C” accounts. Instead, you must indicate the exact amount to come from each account. For example, $3,000 from the civilian (or “C”) account and $2,000 from the uniformed services (or “U”) account.
Do states have to send separate orders for each account type (for example, C and U) or can they combine more than one case in one order?
States may combine liens/levies for both account types in one order as long as they are clearly defined and the amount sought is clearly associated with its respective account type.
Does all of the necessary information have to be in the legal process or can it be in the cover letter?
The necessary information must be in the legal process or garnishment notice itself. A cover letter is only used for administrative purposes by the Court Order Center.
Is there a preferred TSP form or format that states should use?
Yes. The TSP-CS-1 form is available on the OCSE website for state use. It is a one-page form that, if properly filled out, contains all the information that the TSP needs to process an order. It provides options to: a) freeze an account; b) order funds to be disbursed; c) amend a case; or d) vacate a case. This form is not mandatory, but its use is strongly encouraged as it decreases processing times significantly.
Can states use the standard Income Withholding Order (IWO)?
Yes, as long as it meets all of the regulatory requirements and meets the criteria listed in Q3 and Q4. However, the TSP-CS-1, described in Q11, is strongly preferred.
Is there additional documentation required when sending an IWO?
No. Additional documentation is not needed, but all of the information required by the TSP must be included in the IWO.
Must the states fulfill state requirements for issuing a lien, levy, or legal process?
Yes. All state requirements should be met. The TSP will only review a legal process for federal requirements.
Does the legal process need to be signed?
No. It does not need to be signed, but it must be issued or certified by a competent authority. The child support agency in this context is considered a competent authority.
Can a TSP participant take a TSP loan and use the proceeds to get an order vacated, thereby avoiding taxes and penalties?
No. Once the TSP receives an order from a state, the entire amount in the account is frozen and the NCP/participant may not take out a loan until the levy action is completed or unless the state agency issues an order to vacate. If the agency vacates the order, the TSP still cannot guarantee what the NCP/participant will do with the funds if they take out a loan or withdrawal.
Will the TSP collect receipt and disbursement fees on the agency's behalf?
No. The TSP will only issue a disbursement for child support arrears. The entire amount of the arrearage should be included in the fixed dollar amount the agency is attempting to garnish. The TSP will not issue subsequent payments or make additional garnishments to collect administrative fees on behalf of an agency.
Timing
How will the TSP prioritize multiple legal process orders to pay?
If multiple orders are received on a single participant's account, the TSP will prioritize them by order of receipt (first-in, first-processed).
What if State X, a two-step state, submits an order to withhold and later, State Y, a onestep state, submits an order to pay. Will the TSP hold the payment to State Y until State X can submit an order to deliver or will State Y get first access to the fun
The TSP processes payments on a first-in, first-processed basis. If State X submits an order to withhold first, the TSP will wait to process the subsequent order to deliver from State X, even if State Y submits an order to deliver in the interim.
We submitted our order to deliver and received a decision letter with a scheduled payment date. Before receiving payment, we sent in an order to amend the arrears owed. The scheduled payment date has passed and we have not received payment. Why not?
Federal regulations mandate that any new order received on an existing case is a superseding order. If we receive a superseding order, we have to close the prior case and stop any scheduled payment. We then process the new order in the order received. You will receive a decision letter in response to the new order as it is now the controlling case. This scenario will require a new tax notice period starting on the date the new decision
letter is issued. See also "If the participant’s total arrearage has changed since the legal process was submitted to the TSP, how should the state agency notify the TSP?" in the Discrepancies, Modifications, and Vacates section.
What is the current time frame for processing an order?
The TSP normally issues its decision letters 20 business days from the date of receipt of an order. Depending on the volume of orders received, the time frame may vary slightly up or down.
What is the time frame for payment?
Funds are disbursed within 30 calendar days from the date of the decision letter for an order to deliver. (Allow up to 10 additional business days for U.S. Treasury processing and mail delivery.)
Does an order to withhold start the clock running on the disbursement date or is it the actual order to deliver?
The issuance of the TSP’s decision letter pursuant to a qualifying order to disburse funds starts the clock for the disbursement date.
Are frozen accounts still invested?
Yes. The TSP does not segregate funds pending the disbursement of a child support or retirement benefits payout. The money remains invested according to the participant’s investment election and is subject to market fluctuations. The account is only frozen so that the participant cannot take out loans or withdrawals. The participant still controls how the money is invested and can make investment elections (if still on a federal
payroll), fund transfers, and reallocations.
How is a case processed?
The TSP processes all cases in the following manner:
- Cases are logged in to the system, placing a freeze on the account.
- Cases are processed by an analyst at the Court Order Center in the order in which they have been received.
- Once a case has been initially processed, it is verified by a different analyst.
- After each case has been verified as accurate, it moves to final approval. Upon approval, the decision letter is generated and, if the order is seeking payment, a payment date is scheduled within 30 days from the date of the decision letter.
Payment and Taxes
How can states expect to receive payment?
Currently payment will be issued by the U.S. Treasury as a paper check. Due to processing times by the U.S. Treasury and delivery by U.S. Postal Service, actual receipt of the check by an agency may take up to 7 — 10 additional business days beyond the scheduled pay date.
Can payments from the TSP be reversed?
Funds properly paid out by the TSP cannot be returned to the participant’s account. An error made by the state agency in calculating the arrearage, or a failure to notify the TSP prior to payment that a participant is no longer in arrears, are not qualifying reasons to reverse payment. Please note that TSP cannot guarantee that it can stop a payment if vacate orders or amending orders are received less than 5 business days prior to a scheduled disbursement.
When is a legal process or court order “properly paid”?
“Properly paid” means no error in the payment by the TSP.
How is the tax penalty handled when funds are levied from a TSP account? Is the penalty subtracted from the amount specified by the state in the order?
The TSP subtracts a mandatory 10% federal tax withholding from the amount disbursed. The TSP will issue the required tax form 1099-R to the participant. The TSP participant must address the issue of tax penalties, if any, directly with the IRS. For example, if the participant owes $10,000 in past-due support, the state will receive $9,000. (See also "What happens if the account balance at the time of payment is less than the award
amount?" below.)
What happens if the account balance at the time of payment is less than the award amount?
If the participant's vested TSP account balance at the time of payment is less than the award amount, the TSP will pay out the entire vested account balance. Upon payment, the order is considered to be satisfied. The freeze will be lifted and no subsequent payments will be made on that order. If a state wants the freeze to remain on the account or wants an additional payment in the future, the state will have to submit a new legal process document.
How does the TSP treat orders adding earnings or interest to an award?
Under the current federal regulations governing the TSP, an agency may request earnings to be applied to an award amount. The agency has the option to identify in the legal process order an annual percentage rate (for example, 1% per annum) or a per diem dollar amount (for example, $1.00 per day) that the TSP will use to calculate any additional earnings owed. If an order includes an award with earnings, but no percentage or per diem rate is specified within the body of the order, the TSP will, by default, apply an earnings and losses calculation to the award amount. The result of this earnings and losses calculation could result in a higher or lower disbursement depending on market performance. If no reference to earnings or interest is included within the order, the TSP will not perform any additional calculations.
Discrepancies, Modifications, and Vacates
If the participant’s total arrearage has changed since the legal process was submitted to the TSP, how should the state agency notify the TSP?
If the TSP has received a legal process that is no longer accurate, the agency must notify the Court Order Center in writing, asking us to stop processing the legal process (see Q35 for information on how to submit an amending order or a vacate order). An award amount cannot be adjusted after the decision letter is issued. If a modification is submitted after the decision letter is issued but before payment, the TSP will stop the payment and close the pending case. The modification order will be processed based on its date of receipt. This will trigger a new decision letter and restart the tax notice period. Please note that TSP cannot guarantee that it can stop a payment if vacate orders or amending orders are received less than 5 business days prior to a scheduled disbursement. Agencies should ensure the TSP is a source of last resort. Once funds have been properly paid by the TSP, regulations governing the FRTIB do not allow for a return of those funds.
If our state has any issues with account balance discrepancies or other file issues and/or errors, who should we contact?
Email SCollections@acf.hhs.gov regarding any TSP file issues.
My state has a 2-step process for freezing/seizing assets. We send an initial request to the TSP to freeze a specific dollar amount. However, when we’re ready to send the seize request the arrearage balance is more (or less) than the amount contained in t
The TSP freezes the entire account based on the freeze notice. If the state sends a seize request that has a different dollar amount, the TSP will send the amount contained in the seize notice up to the participant's vested account balance.
What should a state do when they need to send an amended order or a vacate notice to the TSP?
The TSP-CS-1 form can be used to amend or to vacate an existing order by checking the appropriate box. Alternatively, the TSP requests that states indicate in large letters on top of the amended order or the vacate notice what action the state is requesting. For example, if the state requests that the TSP vacate an order, the state should clearly print “VACATE” on the top of the form in large print and should ensure the order clearly identifies both the NCP/participant and the case to which the order relates. In other words, it should provide the case number or other case identifier submitted with the
original order. An order to amend or to vacate must be submitted for each individual case the state wishes to amend or to vacate.
FIDM and Procedures
What Account Type will be used in reporting?
It will be coded as “Other” (18).
Will the OCSE quarterly data match include active military?
Yes, matches will include active military accounts. If the TSP receives a valid order or legal process to garnish a participant's account, active military deployment will not bar processing of the order.
Will this be part of the Administrative Offset?
No, this is not considered part of the Administrative Offset.
How will the files be returned to states?
The files will be returned to the states electronically.
Where should we direct further questions about the process?
Please direct these questions to OCSE.
Decision Letters, Notifications, and Correspondence
Will states be able to obtain a courtesy copy of the decision letter for the court?
The participant and the state agency are sent a copy of the correspondence. If the agency would like the court to receive a copy of the letter, the court's address must also be provided.
Why is our state receiving decision letters at the addresses for both the child support enforcement unit and the state disbursement unit?
The letter is sent to both addresses if both were provided by the state.
Will the TSP be notifying participants that it is cooperating with the OCSE to facilitate child support enforcement through the TSP?
No special announcement was made since the federal regulations allowing the TSP to process child support garnishments are not new.
Are there additional contacts in the Court Order Center that states can use when they have questions?
Yes. The TSP provided a list of contacts that OCSE has available. Questions by an NCP should be directed to the TSP's Thriftline (877-968-3778). The Court Order Center contact information shared by OCSE should not be shared with NCPs.
Where should our state send the order?
The order may be uploaded, faxed, mailed, or overnighted.
Upload: https://qoc.rk.tsp.gov/qoc/b/CsHome010Home.htm
Fax Number: (773) 915-6006
US Mail:
Court Order Center
C/O Broadridge Processing
PO Box 120
Newark, NJ 07101-0120
Overnight:
Court Order Center
C/O Broadridge Processing
2 Gateway Center
283-299 Market Street 17th Fl
Newark, NJ 07102