Getting Divorced as a Federal Employee? These TSP, Pension, and Health Benefit Traps Could Haunt You

Key Takeaways

• Divorce can significantly affect your Thrift Savings Plan (TSP), pension benefits, and federal health insurance if not properly addressed in your divorce decree.

• Court orders must be carefully written to avoid errors that could prevent your former spouse from receiving benefits or jeopardize your own retirement eligibility.

The Overlooked Financial Risks in a Federal Divorce

As a federal employee going through a divorce in 2025, you face a web of legal and financial rules that directly impact your retirement. This isn’t a typical private sector split. Your pension, TSP, and even your health benefits can be affected in permanent and often unexpected ways. Understanding what’s at stake—and acting carefully—is vital to protecting your future.

Understanding the Federal Retirement Pieces at Risk

When a divorce involves a federal employee, three major components come under scrutiny:

• Federal Employees Retirement System (FERS) or Civil Service Retirement System (CSRS) pension

• Thrift Savings Plan (TSP)

• Federal Employees Health Benefits (FEHB)

Each of these has unique treatment under federal regulations, and each can be divided—or lost—if your divorce settlement isn’t properly structured.

1. Pension Division and Survivor Benefits

Federal pensions are often subject to division during divorce under a “court order acceptable for processing” (COAP). But unless carefully worded, that COAP can leave you—or your ex—without the protection you both expect.

Basic Annuity Division

The court may award your former spouse a share of your pension, usually a percentage of the annuity you earned during the marriage. This award is paid directly from OPM but only if the COAP meets very specific standards.

What can go wrong:

• No COAP submitted: Without a proper order, your ex gets nothing, and you could face legal action.

• Poor wording: If the COAP is vague or calculates the share improperly, it may be rejected.

• Post-retirement orders: If you are already retired, time is limited to get this processed properly before benefits start.

Survivor Benefits

Your former spouse may also be entitled to survivor benefits. This allows them to receive a portion of your annuity if you pass away. However, this is not automatic.

• You must elect a “former spouse survivor annuity” during retirement paperwork or through a new COAP.

• You must pay for this benefit, typically reducing your annuity.

• If not properly included in the divorce decree, your former spouse may get nothing, even if both parties intended otherwise.

Survivor benefits must be elected within two years of the divorce to be honored.

2. The Hidden TSP Pitfalls

The TSP functions similarly to a 401(k), but divorce handling follows different rules. Division of your TSP account requires a Retirement Benefits Court Order (RBCO). A common misstep is assuming the TSP will act on the divorce decree alone—it won’t.

Common Mistakes with TSP Orders

• Incorrect format: The RBCO must explicitly comply with TSP regulations or it will be rejected.

• Timing matters: If you withdraw or borrow from your TSP before the court order is finalized, the value your ex receives could be lower than expected.

• Frozen accounts: Once TSP is notified of a pending division, your account may be frozen, preventing loans or withdrawals until the RBCO is processed.

A properly structured RBCO can divide the account by:

• Specific dollar amount

• Percentage of the account

• A share of contributions and earnings during the marriage

But it must be clearly detailed, or processing delays can last months.

3. FEHB Coverage: You Can Lose It, Permanently

This is one of the most dangerous traps. As a federal employee or retiree, you’re entitled to continued health coverage through FEHB. But for your former spouse, that entitlement ends on the date of divorce, unless special provisions are made.

Your Coverage

You can continue FEHB coverage under the same terms after divorce, but:

• If your ex was covered under Self Plus One or Family, you must switch to Self Only to avoid overpaying.

• You can make this change immediately or during the next Open Season.

Your Former Spouse’s Options

Your ex-spouse does not retain automatic FEHB coverage post-divorce. Their options are:

• Temporary Continuation of Coverage (TCC): Up to 36 months post-divorce, but at full premium cost plus 2%.

• Spouse Equity Act coverage: Permanent FEHB eligibility only if the divorce decree awards them a portion of your annuity and specifically states they are entitled to FEHB.

Even then, the Office of Personnel Management must approve eligibility. If your former spouse remarries before age 55, they lose eligibility.

4. Court Order Timing and Delays Can Derail Retirement

Many federal employees wait too long to finalize benefit-related court orders, especially when emotions run high during divorce proceedings. But timing is everything.

• Court orders must be submitted and accepted by OPM before retirement processing begins.

• Survivor elections must be made within two years of divorce or are nullified.

• FEHB decisions need to be documented immediately upon divorce to avoid retroactive costs.

Failure to act on time can result in:

• Permanent loss of health coverage for your ex

• Missed pension division or survivor benefits

• Delayed retirement processing

5. TSP Loans, Withdrawals, and Divorce: A Risky Mix

If you have a TSP loan or take a hardship withdrawal during divorce, it can complicate the division of assets.

• The TSP does not adjust your account balance upward to account for outstanding loans.

• If your ex is awarded a percentage of your account, the balance they receive will reflect your actual holdings, not what it would be without the loan.

Additionally, withdrawing funds before the RBCO is accepted can:

• Reduce the amount your ex receives

• Result in a TSP account freeze while compliance is reviewed

6. FERS Annuity Supplement and Divorce

If you retire under FERS before age 62, you may receive the FERS Annuity Supplement. However, it’s important to know:

• The supplement is not divisible under a COAP. It is excluded from marital asset division.

• However, it is subject to garnishment for alimony or child support.

This distinction is critical. While it cannot be split between spouses, it can be reduced by legal obligation.

7. Survivor Benefit Costs After Divorce

If your ex-spouse is awarded a survivor benefit, the cost of this coverage reduces your annuity—often permanently. The cost is typically:

• 10% of your gross annuity for a full benefit

• 5% of your gross annuity for a partial benefit

Even if you remarry and elect a new survivor benefit for your new spouse, the cost for your former spouse continues unless waived by court order or explicitly removed.

These deductions apply throughout your retirement, so it’s vital to understand the long-term financial impact.

8. Your Ex-Spouse May Have TSP Rollover Rights

If awarded a portion of your TSP, your ex may:

• Roll it into their own IRA or qualified retirement plan

• Take a distribution (which may be subject to taxes)

However, these rights only apply once the RBCO is finalized and approved. Until then, the funds remain in your account and may be frozen.

Safeguarding Your Retirement During Divorce

If you’re a federal employee facing divorce, don’t assume your retirement accounts will be handled like private sector assets. Federal systems have their own language, timing rules, and benefit elections.

Take proactive steps:

• Work with an attorney experienced in federal employment law

• Ensure court orders are properly formatted and submitted

• Monitor timelines for FEHB, COAP, RBCO, and survivor elections

Being proactive today could save you years of regret—or worse, irreversible loss of benefits.

Your Next Step: Protect What You’ve Earned

Divorce is difficult enough. Don’t let mistakes with your TSP, pension, or FEHB compound the hardship. Many retirement benefits decisions, once made or missed, cannot be undone.

Get in touch with a licensed professional listed on this website to help you review your divorce settlement, benefits elections, and retirement readiness plan.