What Happens to Your TSP Balance If You Die?

You worked hard to build up your Thrift Savings Plan (TSP) throughout your federal employment but what happens to the balance if you die unexpectedly? Federal Educators knows these types of scenarios can be hard to ascertain but it’s important to ensure your family is covered should tragedy strike. Our team explains the process and how you can best plan for it below.

 

A Thrift Savings Plan is an important benefit designed to build your financial savings. Comparable to a 401(k) plan, any federal employee that is covered by FERS, CSRS or a CSRS offset can participate. If you were to die before retirement or there was still a balance in your TSP account, it’s important to have someone designated as a beneficiary beforehand so there is no confusion or delay on fund payout. Only a TSP-3 form can be used to designate death benefit payments, so it is critical to complete the form as soon as possible. In it, you can designate one or more individuals, a trust, corporation, estate or another legal entity that will be named a primary beneficiary to your account as well as contingent beneficiaries. Should there be a life event like a divorce, remarriage, adoption of a child, etc. and you want to update your TSP-3 form, you must file a new form or the original beneficiary will remain attached.

 

There are a couple of options for beneficiaries to take note of. If your spouse is also a federal employee, they may choose to merge your TSP account with theirs. Spouses may also choose to leave the money in your TSP account until it’s needed or they may transfer it to an IRA account.

 

According to the Office of Personnel Management, if a TSP-3 form is not filled out for your account, the hierarchy is as follows:

 

• Widow or widower.
• If none of the above, child or children and descendants of deceased children by representation.
• If none of the above, retiree’s parents or to the surviving parent.
• If none of the above, the executor or administrator of the retiree’s estate.
• If none of the above, to any other of the retiree’s next of kin who is entitled under the laws of the state in which the retiree resided at death.

 

Feeling overwhelmed with your federal benefits? Federal Educators is here to help. Give our St. Petersburg office a call at (813) 544-2908 to get started today on a customized benefits plan that will work for your family.