What happens to your Thrift Savings Plan after your demise? The good news is that the TSP website provides guidance for beneficiaries on its website it also offers a pdf entitled, Death Benefits: Information for Participants and Beneficiaries.
You may want to provide those resources for your spouse and others among your guidance for your beneficiaries as you think about getting your affairs in order. The nice thing about the TSP resources that those items may be changed if tax regulations may change, and you can be assured your beneficiaries will have the most updated version by going to the TSP website.
But there is more information you should be familiar with about beneficiaries for planning as well as other topics. I recently came across some interesting information about the TSP in the Code of Federal Regulations website.
You may not be familiar with the Code of Federal Regulations. The Office of the Federal Register of the National and Archives and Records Administration and the U.S. Government Publishing Office jointly administer the Federal Register website. This allows citizens to understand the regulatory process and to participate in Government decision-making.
The Code states several finer points of the TSP and your beneficiaries. Here are three specific aspects you may find interesting. I have highlighted in red several parts you should find useful to think about.
Let’s see what the Code shares in § 1651.3 Designation of beneficiary.
(a) Designation requirements. A participant may designate one or more beneficiaries for his or her TSP account. A valid TSP designation of beneficiary remains in effect until it is properly changed as described in § 1651.4.
(b) Eligible beneficiaries. Any individual, firm, corporation, or legal entity, including the U.S. Government, may be designated as a beneficiary. A participant can name up to 20 total (primary and contingent) beneficiaries to share the death benefit. A beneficiary may be designated without the knowledge or consent of that beneficiary or the knowledge or consent of the participant’s spouse.
(c) Validity requirements. To be valid and accepted by the TSP record keeper, a TSP designation of beneficiary must:
(1) Be received by the TSP record keeper on or before the date of the participant’s death;
(2) Identify the participant in such a manner so that the TSP record keeper can locate his or her TSP account;
(3) Be signed and properly dated by the participant and signed and properly dated by one witness:
(i) The participant must either sign the designation of beneficiary in the presence of the witness or acknowledge his or her signature on the designation of beneficiary to the witness;
(ii) A witness must be age 21 or older; and
(iii) A witness designated as a beneficiary will not be entitled to receive a death benefit payment; if a witness is the only named beneficiary, the designation of the beneficiary is invalid. If more than one beneficiary is named, the share of the witness beneficiary will be allocated among the remaining beneficiaries pro rata;
(4) Designate primary beneficiary shares which when summed equal 100%;
(5) Contain no substantive alterations (e.g., struck-through shares or scratched-out names of beneficiaries);
(6) Designate each primary and each contingent beneficiary in such a manner so that the TSP record keeper can identify the individual or entity;
(7) Not attempt to designate beneficiaries for the participant’s traditional balance and the participant’s Roth balance separately; and
(8) Be received by the TSP record keeper not more than 365 calendar days after the date of the participant’s most recent signature.
(d) Will. A participant cannot use a will to designate a TSP beneficiary.
Changing a beneficiary in § 1651.4 How to change a designation of beneficiary, states:
(a) Change. To change a designation of beneficiary, the participant must submit to the TSP record keeper a new TSP designation of beneficiary meeting the requirements of § 1651.3 to the TSP record keeper. If the TSP record keeper receives more than one valid designation of beneficiary, it will honor the designation with the latest date signed by the participant. A participant may change a TSP beneficiary at any time, without the knowledge or consent of any person, including his or her spouse.
(b) [Reserved]
(c) Will. A participant cannot use a will to change a TSP designation of beneficiary.
But what about beneficiaries that cannot be located? § 1651.16 Missing and unknown beneficiaries, states
(a) Locate and identify beneficiaries.
(1) The TSP record keeper will attempt to identify and locate all potential beneficiaries.
(2) If a beneficiary is not identified and located, and at least one year has passed since the date of the participant’s death, the beneficiary will be treated as having predeceased the participant and the beneficiary’s share will be paid in accordance with § 1651.10
(b) Payment to known beneficiaries. If all potential beneficiaries are known but one or more beneficiaries (and not all) appear to be missing, payment of part of the participant’s account may be made to the known beneficiaries. The lost or unidentified beneficiary’s share may be paid in accordance with paragraph (a) of this section at a later date.
(c) Abandoned account. If no beneficiaries of the account are located, the account will be considered abandoned and the funds will revert to the TSP. If there are multiple beneficiaries and one or more of them refuses to cooperate in the TSP record keeper’s search for the missing beneficiary, the missing beneficiary’s share will be considered abandoned. In such circumstances, the account can be reclaimed if the missing beneficiary is found at a later date. However, earnings will not be credited from the date the account is abandoned. The TSP may require the beneficiary to apply for the death benefit in the form and manner prescribed by the TSP record keeper and submit proof of identity and relationship to the participant.
What happens if beneficiaries should die before the participant or be found not in existence? This is addressed in §1651.10 Deceased and non-existent beneficiaries.
(a) Designated beneficiary dies before participant. The share of any designated beneficiary who predeceases the participant will be paid pro rata to the participant’s other designated beneficiary or beneficiaries. If no designated beneficiary survives the participant, the account will be paid according to the order of precedence set forth in § 1651.2(a).
(b) Trust designated as beneficiary but not in existence. If a participant designated a trust or other entity as a beneficiary and the entity does not exist on the date of the participant’s death, or is not created by will or other document that is effective upon the participant’s death, the amount designated to the entity will be paid in accordance with the rules of paragraph (a) of this section, as if the trust were a beneficiary that predeceased the participant.
(c) Non-designated beneficiary dies before participant. If a beneficiary other than a beneficiary designated on a TSP designation of beneficiary dies before the participant, the beneficiary’s share will be paid equally to other living beneficiaries bearing the same relationship to the participant as the deceased beneficiary. However, if the deceased beneficiary is a child of the participant, payment will be made to the deceased child’s descendants, if any. If there are no other beneficiaries bearing the same relationship or, in the case of children, there are no descendants of deceased children, the deceased beneficiary’s share will be paid to the person(s) next in line according to the order of precedence.
(d) Beneficiary dies after participant but before payment. If a beneficiary dies after the participant, the beneficiary’s share will be paid to the beneficiary’s estate. A copy of a beneficiary’s certified death certificate is required in order to establish that the beneficiary has died, and when.
Reviewing information in the Code of Federal Regulations is a good way to get another government read on specific topics addressed in the Thrift Savings Plan. It provides you a trusted lens other than the Thrift Savings Plan website. For detailed accounting of how the Code defines other aspects of TSP death benefits consider this longer read at eCFR :: 5 CFR Part 1651 — Death Benefits
If you would like to subscribe to be notified of future changes about TSP beneficiaries or other topics as they occur in Code, then go to eCFR :: Reader Aids :: Using the eCFR Point-in-Time System.
