Let’s start with an important question: do you recall who you listed as your Thrift Savings Plan (TSP) beneficiary should you pass away? If not, it’s a good idea to fill out Designation of Beneficiary form TSP 3. Of course, you could try to track down the form you originally filed but it’s faster to fill out and submit a new form which will automatically replace any previous form.
Let Them Know They’ve Been Named As Your Beneficiary
Set up a time and place to meet in order to explain the process and be prepared to be asked questions. Make sure to provide them with your TSP account number and the TSP phone number they need to contact when you pass away (877-968-3778).
Explain the differences between a traditional TSP and a Roth TSP balance if you have both. Let them know that all death benefit payments will be disbursed proportionally from both types of balances in your account. They cannot choose whether the payments come from your Traditional TSP or Roth TSP.
Advise Your Beneficiaries To Meet With A Tax Professional
Inheriting a retirement account like the TSP or a 401(k) can have tax ramifications for beneficiaries who make withdrawal decisions without the guidance of a tax professional. Add to this, they need to understand how Required Minimum Distributions (RMDs) work when they take distributions especially in regard to beneficiary TSP accounts.
“Keep in mind that you’re not required to designate beneficiaries for your benefits.”
What Happens When There’s No Beneficiary On File?
Your beneficiary designation must be on file with the TSP at the time of your death. Under federal law, the TSP cannot honor a last will and testament or any other type of document. Keep in mind that you’re not required to designate beneficiaries for your benefits. If there’s no form on file for your TSP or other federal benefits with a death benefit, it’s distributed according to the standard order of precedence:
- Your widow or widower.
- If none, to your child or children in equal shares, or the share of any deceased child distributed among that child’s descendants.
- If none, to your parents in equal shares or the entire amount to your surviving parent.
- If none, to the executor or administrator of your estate
- If none, to your next of kin under the laws of the State where you lived at the time of your death.
To provide complete information for your beneficiary, download: Your TSP Account: A Guide For TSP Beneficiaries at https://www.tsp.gov/publications/tspbk33.p
