Spousal Rights and Your TSP

What rights does your spouse have regarding your TSP account while he/she is still alive? What are their rights to the TSP after your death?

What rights does your spouse have regarding your TSP account while he/she is still alive?  What are their rights to the TSP after your death?  This article will look at both situations.

Spousal rights to the TSP while you and your spouse are both alive vary significantly based on whether you are covered under CSRS or FERS.

The spouse of a CSRS employee/retiree will be notified of the employee/retiree’s withdrawal choice.  That’s it; the spouse has no further rights.  A CSRS retiree could empty out their TSP account and spend it foolishly and their spouse would have no legal say-so.

The spouse of a FERS employee/retiree has veto power over the employee/retiree’s withdrawal choice.  The spouse must give his/her written and notarized consent for any loan or withdrawal choice other than a specific type of TSP annuity.

Why the big difference?  There are two schools of thought as to why, and I suspect that the truth is somewhere between the two.

The first school of thought is that Congress assumed that the value of the TSP to a FERS retiree would be far greater than it would be to a CSRS retiree.  That was a fair assumption back in the late 80’s when TSP rules were being developed.  For a CSRS employee retiring in 1990, why give a spouse veto power over an account of just a few thousand dollars?  Of course, a CSRS employee retiring today might have well over $100,000 in their account.

The second school of thought is that representatives in Congress, which was composed exclusively of CSRS representatives at the time TSP rules were developed, were looking after their own interests.  They didn’t want their spouses telling them what to do with their future TSP accounts.

What happens after you die?  Following are beneficiary rules for the Thrift Savings Plan.

First and foremost, the TSP will not honor wishes expressed in a will or a trust.  They will only honor wishes expressed in form TSP-3, Designation of Beneficiary (available under “forms and publications” at http://www.tsp.gov).  If there is not a valid TSP-3 on file (i.e., no form was filed, or those named on the form pre-deceased the federal employee/retiree), the Thrift Board will follow the standard order of precedence for federal benefits.  The standard order of precedence for the TSP is:

  1. Surviving spouse;
  2. Child or children in equal shares;
  3. Parents;
  4. Executor or administrator of the estate;
  5. Next of kin based on the law of intestacy in the state that was your legal residence on the date of your death.

The information in the above paragraph and list does not mean that you cannot make your trust (or your estate) your beneficiary on your TSP-3 form.

Let’s assume that you have a valid TSP-3 on file.  How your beneficiary receives the money from the TSP depends on their relationship to you.  If your beneficiary is:

  • Your federally employed or retired spouse, he/she may roll your TSP account into his/hers, elect an inherited IRA or take the money out.
  • Your non-federally employed or retired spouse, he/she may take ownership of your TSP account, elect an inherited IRA or take the money out.
  • A non-spouse, he/she may elect an inherited IRA or take the money out.

Now that we’ve finished discussing beneficiaries, I have one question for you.  Do you know who your named beneficiary is for your federal benefits? For more information, see Should You Designate Beneficiaries For Your Federal Benefits?.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at johnfgrobe@comcast.net to discuss schedules and costs.

About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.