Lawmakers want defense officials to look into whether allowing military spouses to contribute to their service members’ Thrift Savings Plan could help improve more troops’ family finances.

But outside advocates warn the proposal could instead cause major headaches for those couples, especially in cases of divorce.

At issue is a proposal included in the House Armed Services Committee’s latest draft of the annual defense authorization bill. Committee members have included language calling for a study into the potential effects of “allowing military spouses to contribute or make eligible retirement account transfers to the military Thrift Savings Plan.”

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Committee staff said the language was included in an effort to see if the potential benefit would encourage more families to stay in the military as they make long-term career and financial plans.

The Thrift Savings Plan is the military’s version of private-sector 401(k) savings plans. Troops can set aside a portion of their monthly paychecks for the retirement program, assigning money to a selection of different investment packages.

The program is open to Defense Department civilian employees as well as military personnel. However, the language in the authorization bill only applies to military families.

Under the plan, no changes would be made to the current program, but Pentagon officials would have to report back to Congress in mid-2021 on the impact of such a change, to include questions of how many families may take advantage of the program, what the costs will be, and whether spouse will be allowed to transfer of money from other private-sector retirement accounts. 

Advocates warned that any such move should be carefully researched before major changes are enacted.

“Military families concerned about their financial futures are wise to make use of all smart saving options, including the TSP,” said Kelly Hruska, government relations director for the National Military Family Association. “And while we are not opposed to reexamining how we use TSP, we are cautious about any proposal that would encourage spouses to make contributions directly to it.

“How would this be handled in a divorce? What protections would exist for military spouses who do contribute?”

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Hruska noted that military spouses do have similar private-sector options to TSP investment plans, including individual retirement accounts. In many cases, those options may match or excel the potential benefits of having spouses linked into the federal savings program.

As of 2019, the Thrift Savings Plan program had more than 5.6 million participants with nearly $600 billion invested in various accounts.

The authorization bill draft, which includes hundreds of defense budget policy provisions, is expected to be debated by the committee next week and voted on by the full chamber before August. Lawmakers hope to send a final version of the measure to the president sometime this fall.

Leo covers Congress, Veterans Affairs and the White House for Military Times. He has covered Washington, D.C. since 2004, focusing on military personnel and veterans policies. His work has earned numerous honors, including a 2009 Polk award, a 2010 National Headliner Award, the IAVA Leadership in Journalism award and the VFW News Media award.

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