Death benefit payments made from your beneficiary participant account must be paid directly to your 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, the payment will be fully taxable in the year your beneficiary(ies) receive it.
Your beneficiaries will not owe taxes on Roth contributions, qualified earnings on Roth contributions, and tax-exempt contributions in the account.
For more detailed information about the rules associated with death benefit payments, read the TSP tax notice “Important Tax Information About Thrift Savings Plan Death Benefit Payments.” You may also want to consult a tax advisor.
In order for your beneficiaries to receive your account balance after your death, they (or their representatives) must complete the Form TSP-17, Information Relating to Deceased Participant and send it to the TSP along with a copy of the certified death certificate. Once the TSP processes this information and determines the beneficiaries for your account, we will contact them with additional information and instructions.