This bulletin contains information about Thrift Savings Plan (TSP) death benefits. It consolidates and supersedes several bulletins detailing various death benefits topics, including the statutory order of precedence, Beneficiary Participant Accounts for spousal beneficiaries, payment options for non-spousal beneficiaries, Form TSP-3, Designation of Beneficiary, and Form TSP-17, Information Relating to Deceased Participant. The information on Form TSP-3 reflects changes to TSP regulations made on July 9, 2014, regarding the submission of new forms and what to do when old forms are found in personnel files. A list of superseded bulletins is given at the bottom of this page.
In this bulletin you will find information on:
- The statutory order of precedence;
- Beneficiary participant accounts for spousal beneficiaries;
- Death benefit payment options for non-spousal beneficiaries;
- Form TSP-3, Designation of Beneficiary; and
- Form TSP-17, Information Relating to Deceased Participant.
- If a participant dies before completing a TSP withdrawal election, the TSP account will be paid according to the statutory order of precedence set forth in 5 U.S.C. § 8424(d). That is, the account will be paid:
- To the beneficiary (or beneficiaries) designated by the participant on a properly completed and filed Form TSP-3, Designation of Beneficiary (as described in 5 CFR § 1651.3 through 1651.4);
- If there is no designated beneficiary, to the widow or widower (as described in 5 CFR § 1651.5);
- If none, to the child or children and descendants of deceased children by representation (as described in 5 CFR § 1651.6);
- If none, to the surviving parent or parents (as described in 5 CFR § 1651.7);
- If none, to the duly appointed executor or administrator of the estate (as described in 5 CFR § 1651.8); or
- If none, to the next of kin who is entitled under the laws of the participant’s domicile on the date of the participant’s death (as described in 5 CFR § 1651.9).
- If a participant dies after submitting a valid TSP withdrawal election, the TSP account will be paid according to the conditions specified in 5 CFR § 1651.2(b).
- A will may not be used to designate a beneficiary of a TSP account. (See 5 CFR § 1651.3(d).)
- Because entitlement to a TSP death benefit payment is created at the time of the participant’s death, the following rules apply:
A participant may designate a contingent beneficiary(ies) for each primary beneficiary. The contingent beneficiary(ies) will share a portion of the TSP account designated for a specific primary beneficiary who dies before the participant.
- If a beneficiary designated by a participant on Form TSP-3 dies before the participant, the beneficiary’s share will be paid to any contingent beneficiary(ies) designated by the participant. If there are no contingent beneficiaries, the deceased beneficiary’s share will be paid to the other designated beneficiaries in proportion to the shares designated by the participant. If there are no designated beneficiaries or contingent beneficiaries who survive the participant, the account will be paid according to the statutory order of precedence described in Section A above.
- If a beneficiary dies at the same time as the participant, the beneficiary will be treated as if he or she had died before the participant.
- If a beneficiary dies after the participant but before payment is made, the beneficiary’s share will be paid to the beneficiary’s estate.
- If a trust is designated by a participant on Form TSP-3 and it is not in existence on the date the participant dies or if it is not created upon the participant’s death, the account will be paid to the other designated beneficiaries or their contingents. If there are no other designated beneficiaries, the account will be paid according to the statutory order of precedence described in Section A above.
II. Method of Payment
- Spousal Beneficiaries
A surviving spouse who is entitled to receive all or a part of a deceased participant’s TSP account will have his or her entire death benefit automatically deposited into a Beneficiary Participant Account (BPA).
- When the TSP establishes a BPA, the account balance will be invested solely in the Government Securities Investment (G) Fund. Once the account is established, the beneficiary participant may request interfund transfers to redistribute his or her account balance among any of the Lifecycle (L) or individual funds, just like other participants.
- The beneficiary participant can request a partial withdrawal or a full withdrawal (a single payment, monthly payments, a TSP life annuity, or a combination of any of these three options). All withdrawal options for beneficiary participants (including the partial withdrawal option) must be submitted on Form TSP-90, Withdrawal Request for Beneficiary Participants. All withdrawals will be disbursed pro rata (proportionally) from any traditional (tax-deferred) and Roth balances in the participant’s account. Any money that is disbursed from the traditional balance will be subject to mandatory Federal income tax withholding. If the participant was a uniformed services member with tax-exempt contributions in a traditional balance, those contributions will not be subject to tax, but the earnings on those contributions will be subject to tax. In addition, any Roth contributions that may be part of a withdrawal are not subject to Federal income tax. Earnings on Roth contributions may also be paid tax-free if 5 years have passed since January 1 of the year the deceased participant made his or her first Roth contribution.
- The beneficiary participant may transfer or roll over part or all of his or her BPA into an IRA or eligible employer plan. However, the beneficiary participant may not transfer or roll over funds from IRAs or other retirement plans into his or her BPA. If the beneficiary participant has an existing TSP account based on his or her own employment with the Federal Government or the uniformed services, he or she may transfer the BPA into his or her existing TSP account. However, tax-exempt money in the BPA cannot be transferred into a civilian TSP account.
- The beneficiary participant is required to begin receiving annual distributions from his or her BPA according to the Internal Revenue Code (IRC) required minimum distribution (RMD) rules. The date on which the beneficiary participant must begin receiving RMDs depends on whether the deceased participant died before or on/after his or her “required beginning date.” For more information, see the tax notice, “Tax Information About TSP Withdrawals and Required Minimum Distributions for Beneficiary Participants.”
- In the event of the death of a beneficiary participant, the funds in the BPA cannot remain in the TSP. The account will be distributed directly to the BPA participant’s beneficiary(ies) indicated on Form TSP-3. If no valid Form TSP-3 is on file, the account will be distributed according to the order of precedence as described in Section I above. Death benefit payments made from a BPA must be paid directly to beneficiary(ies). These payments are subject to certain tax restrictions and cannot be transferred or rolled over into an IRA or eligible employer plan. In addition, these payments will be fully taxable in the year the beneficiary(ies) receives them. Any payments from tax-exempt money are not subject to taxes when distributed.
- The TSP has two booklets for BPA participants — Your TSP Account: A Guide for Beneficiary Participants and Managing Your Account for Beneficiary Participants. These booklets and Form TSP-90 are included in the Welcome Letter that is sent to each spouse beneficiary at the time his or her account is established. They are also available on the TSP website, www.tsp.gov.
- Non-Spousal Beneficiaries
Non-spouse beneficiaries have two options for receiving their death benefit, both of which are described below. The TSP has developed Form TSP-81, Death Benefits Election for a Beneficiary Other Than a Spouse, which will be sent to non-spouse beneficiaries prior to the payment of their death benefits.
- Single Payment
If a beneficiary is not the surviving spouse, the beneficiary may receive the death benefit directly as a single payment. Like BPA withdrawals described in Part A3 above, all death benefit payments will be disbursed pro rata from any traditional (tax-deferred) and Roth balances in the participant’s account.
- Inherited IRA
A non-spouse beneficiary can avoid withholding and tax liability by requesting that the TSP transfer all or part of the payment directly into an “inherited” IRA. Inherited IRAs may provide significant tax benefits because their required distributions can generally be spread across the lifetime of the beneficiary.
We strongly recommend that beneficiaries discuss this option with their tax or financial advisors or IRA providers before deciding on it. Inherited IRAs must be specifically titled as such (and established in the name of the deceased TSP participant, not in the beneficiary’s name), and there are specific time frames for beginning distributions. In addition, inherited IRAs may have other restrictions if the deceased participant had reached age 70½ and was already subject to the Internal Revenue Service’s (IRS) required minimum distribution rules. There may be severe tax consequences if the inherited IRA is not set up correctly. Therefore, beneficiaries should ensure that their inherited IRAs are correctly established before the death benefit payments are disbursed.
- More information on death benefit payments, inherited IRAs, and taxes associated with TSP disbursements may be found on the TSP website, the TSP booklet Death Benefits, and the tax notice “Important Tax Information About Thrift Savings Plan Death Benefit Payments.”
- Single Payment
- Purpose of Form TSP-3
Form TSP-3, Designation of Beneficiary, provides active, separated, and beneficiary participants the ability to designate a beneficiary(ies) to receive their TSP accounts after their death. If the TSP has a valid Form TSP-3 on file on or before the date of the participant’s death, the TSP will use the form to identify the participant’s beneficiary(ies) and disburse the death benefit payments from his or her TSP account(s). Form TSP-3 allows participants with both civilian and uniformed services TSP accounts who wish to designate the same beneficiary(ies) for both accounts to submit one form, saving the participant both time and paper (See Section D2 below). Form TSP-3 is also used by beneficiary participants to designate beneficiary(ies).
- Service Responsibilities
- Services must provide Form TSP-3 upon a participant’s request. Services that enclose Form TSP-3 in orientation packets should use the most recent version of the form (see Item 3 below) and caution new members not to submit the form until they receive confirmation that their TSP account has been established. If the TSP recordkeeper receives a Designation of Beneficiary form from a member who does not yet have a TSP account, the form will be returned to the member.
- Although services are required to provide Form TSP-3 upon request, services must not accept the completed form from the participant. Instead, they must direct the participant to mail, or preferably fax, the completed form to the TSP for processing. If a Form TSP-3 is found in personnel or payroll records, the service should make every effort to locate the participant and inform him or her that the Designation of Beneficiary form is invalid, and that he or she should submit a new TSP-3 directly to the TSP.
- Service representatives should refer questions from potential beneficiaries or family members of a deceased participant to the TSP:
(for hearing-impaired individuals)
- Services that provide members with paper copies of Form TSP-3 or post electronic copies for download must establish procedures to ensure that they are providing the most current version of the form and that obsolete editions are destroyed (recycled) or removed from their sites.
- Participant Responsibilities
- Participants are responsible for following the instructions provided with Form TSP-3 to ensure that it is completed correctly and that it accurately reflects their beneficiary designations.
- Participants must submit Form TSP-3 directly to the TSP. On July 9, 2014, the TSP Death Benefit regulations at 5 CFR § 1651.3(c)(8) were changed to state that a Form TSP-3 is valid only if it is received by the TSP recordkeeper not more than 365 calendar days after the date of the participant’s signature on the form. Participants are also responsible for ensuring that the TSP receives their Form TSP-3 no more than 365 calendar days after it is signed. The address and fax number participants may use is provided below:
Thrift Savings Plan
P.O. Box 385021
Birmingham, AL 35238
This information is also provided in the instructions on Form TSP-3.
The TSP will NOT honor a Form TSP-3 received after the participant’s date of death, even if it was on file with the agency/service on or before the participant’s date of death.
- In addition to telling participants that the TSP recordkeeper will not accept any Form TSP-3 received after their date of death, the TSP encourages them to make the appropriate beneficiary changes or to cancel a prior designation if their life situations change. If these forms are not kept up-to-date, the death benefit payments may not be made according to the participant’s current wishes. For example, if a participant is married at the time of his or her death but has a valid Form TSP-3 on file designating someone other than his or her spouse, the TSP will pay the death benefit based on the Form TSP-3 on file. This means that if the beneficiary designated on the Form TSP-3 is a former spouse, the TSP will pay the former spouse even if the former spouse relinquished rights to the participant’s retirement or TSP account in a settlement or divorce decree.
- If a participant has both a civilian and uniformed services account and wants to designate the same beneficiary(ies) for both accounts, he or she must select both the civilian account and uniformed services account boxes in Section I, Participant Information. If the participant wants to designate different beneficiaries for each account, he or she needs to complete a separate Form TSP- 3 for each account and select either the civilian account or the uniformed services account. The designation only applies to the account type selected. If the participant has both a civilian and a uniformed services account and does not select an account type, the Form TSP-3 will be rejected.
- If a participant has a civilian and/or uniformed services account in addition to a BPA, he or she will need to complete a separate Form TSP-3 to designate beneficiaries for the BPA because it has its own unique account number. If a participant has more than one BPA, he or she will need to complete a separate Form TSP-3 for each account, even if designating the same beneficiary for each account, since every BPA has its own account number.
- If a participant has only one account (a civilian, a uniformed services, or a BPA), and he or she either does not select any account box in Section I, Participant Information, or erroneously selects the wrong account box, the Form TSP-3 will still be considered valid and applied to the existing TSP account.
- TSP Responsibilities
- The TSP is the sole recipient and processing point for all Forms TSP-3. When a valid Form TSP-3 is processed, the TSP will mail a notice to the participant confirming that it has been received and processed. The confirmation notice will also list the primary beneficiaries and their share percentages. When an invalid Form TSP-3 is received, the TSP will mail a notice to the participant informing him or her that the form could not be processed. The rejection notice will also list the errors on the form (up to five).
- If a member does not yet have a TSP account when a Form TSP-3 is received for processing, the TSP will return the form to the member with instructions to submit it once the TSP account has been established.
- Upon notification of the death of a participant (generally through the receipt of a Form TSP-17, Information Regarding Deceased Participant (Civilian), or Form TSP-17, Information Regarding Deceased Participant (Uniformed Services), along with the participant’s death certificate), the TSP will examine the copies of all Forms TSP-3 on file to determine which of the Forms TSP-3 received is the most recent valid form on file. This is the form that will be used to identify the beneficiary(ies) to be notified regarding the death benefit payment. If the TSP does not have a valid Form TSP-3 on file, the TSP will disburse the participant’s TSP account according to the statutory order of precedence.
- Obtaining Form TSP-3
Service representatives may obtain the most recent version of Form TSP-3 by downloading it from the TSP website. The Form TSP-3 will also be available to order by designated representatives through the TSP forms and publications process. Form TSP-U-3 was discontinued in July 2010 by consolidating it with Form TSP-3. It will not be accepted by the TSP recordkeeper and any old copies should be destroyed.
- Service Responsibilities
If a TSP participant dies while still an active uniformed services member, the service should provide Form TSP-17, Information Relating to Deceased Participant to a family member, executor, or potential beneficiary and assist with its completion. The Death Benefit Payments tax notice mentioned in Section II may also be provided.
- Responsibilities when Submitting Form TSP-17
- When a TSP participant dies, Form TSP-17 must be completed and submitted to the TSP recordkeeper to initiate the processing of the death benefit.
- Anyone may complete and submit Form TSP-17. The form does not have to be completed by a beneficiary. Completing and submitting this form does not entitle the individual taking these actions to the TSP death benefit.
- Only one Form TSP-17 needs to be submitted on behalf of a deceased participant. This is true even if multiple beneficiaries are involved or when the deceased participant had multiple TSP accounts (e.g. civilian, uniformed services, and/or BPA accounts).
- The individual completing Form TSP-17 should ensure that the information provided is accurate and as complete as possible. The applicant should provide full names, addresses, and Social Security numbers of all individuals who are listed on Form TSP-17. If the beneficiary is an estate or a trust, the Taxpayer Identification Number (TIN) must be provided instead of a Social Security number.
It is important that Form TSP-17 be accurate and as complete as possible because the TSP relies on this form to locate and pay beneficiaries if no Form TSP-3 is on file or if additional information is needed. Incomplete information may delay the payment of the death benefit.
- A copy of the certified death certificate must be attached to Form TSP-17.
- The ThriftLine (1-877-YOU-FRST) is available to answer any questions related to filling out Form TSP-17 or the death benefit payment process.
- TSP Responsibilities
- Upon receipt of a Form TSP-17 and death certificate, the TSP recordkeeper reviews the deceased participant’s account by looking for the most recent, valid TSP-3 on file to determine the beneficiaries of the participant’s TSP account. If there is no valid Form TSP-3 on file, the beneficiaries are determined by the statutory order of precedence.
- The TSP recordkeeper then notifies the beneficiaries of the entitlement to a death benefit payment and of the tax rules that apply to the payment. Surviving spousal beneficiaries will receive information regarding the establishment of their BPA (See section II.A above).
- The TSP recordkeeper will then make the payment to the beneficiaries. Generally, payment will take place two months after notification of the beneficiaries. The entire process (from receipt of Form TSP-17 and the death certificate to payment) generally takes three months. However, payment of a TSP death benefit may be delayed if the TSP is unable to locate a beneficiary or if other information is missing.
- The TSP recordkeeper provides assistance to applicants and beneficiaries throughout the process of making death benefit payments.