Notifying the TSP when someone dies

Form TSP-3 (Designation of Beneficiary) is the only valid way to designate who receives a TSP account at death. Participants can complete Form TSP-3 using the TSP-3 wizard in the "My Account" online portal under Personal Information > Beneficiaries, or submit the form by mail or fax. A will, trust, prenuptial agreement, separation agreement, property settlement, or court order does not override a Form TSP-3 designation. Only the most recent valid Form TSP-3 on file with the TSP on or before the date of death controls.

When a surviving spouse inherits TSP funds and their share is $200 or more, the TSP automatically creates a Beneficiary Participant Account (BPA) in the spouse's name. If the share is less than $200, it is paid out directly. The transfer into a BPA is not taxable. The spouse can take single payments, monthly payments, or purchase a TSP life annuity from the BPA. Eligible distributions from a BPA can be rolled over to the spouse's own IRA or eligible employer plan. However, if the BPA holder later dies, death benefit payments from the BPA to secondary beneficiaries cannot be rolled over.

No. Non-spouse beneficiaries receive a temporary TSP account and have 90 days to request payment. If no action is taken within 90 days, the TSP automatically distributes the full balance as a lump sum. Non-spouse beneficiaries can roll the distribution over to an inherited IRA via direct rollover.

TSP distributions to beneficiaries are subject to federal income tax. The TSP withholds 20% of the taxable portion. Direct rollovers to a traditional IRA are not taxed in the year paid. Direct rollovers to a Roth IRA are taxable income. Distributions are reported on IRS Form 1099-R.

Under the SECURE Act, for participants who died after December 31, 2019, most non-spouse beneficiaries must distribute the entire inherited balance within 10 years. Exceptions apply for spouses, minor children, disabled individuals, and beneficiaries not more than 10 years younger than the participant.

Yes. Spouse beneficiary participants must take RMDs based on the date the deceased participant would have reached their applicable RMD age (73 for those born 1951-1958, 75 for those born after 1958). Under SECURE 2.0, Roth balances are no longer subject to RMDs prior to the participant's death, so the RMD calculation includes only the traditional balance and only traditional-balance distributions count toward satisfying the requirement. SECURE 2.0 reduced the excise tax for missed RMDs from 50% to 25%, and further to 10% if corrected within two years.