While the basic federal retirement program offers only a few choices regarding providing survivor benefits, the Thrift Savings Plan offers the opportunity for much more tailoring of its benefit. An annuity is just one of the available TSP withdrawal elections—payments also may be made as lump sums or in monthly amounts or the types may be combined.
The TSP offers three basic types of annuities:
• Single life—an annuity paid only to you only during your lifetime.
• Joint life with spouse—an annuity paid to you while you and your spouse are alive. When either of you dies, an annuity will be paid to the survivor for his or her life.
• Joint life with someone other than your spouse—an annuity paid to you while you and a person chosen by you (but other than your spouse) are alive. This person must have an insurable interest in you. When either of you dies, an annuity will be paid to the survivor for his or her life. The following persons are presumed to have an insurable interest in you: a former spouse, blood relatives or adopted relatives who are closer than first cousins, and a person with whom you are living in a relationship that would constitute a common-law marriage in those jurisdictions that recognize common-law marriages.
Joint life annuities may provide either a 100 percent or 50 percent survivor benefit. This means that monthly payments will continue in the same amount (100 percent) or be reduced by half (50 percent) to you or to your joint annuitant when either one of you dies.
Several annuity features can be combined with the basic annuity types. These are increasing payments, cash refund, and 10-year certain payout.
With increasing payments, the amount of the monthly payment may increase up to 3 percent each year, depending on the change in the consumer price index.
With a cash refund, if you (and your joint annuitant) die before receiving payments equal to the amount of the account balance used to purchase the annuity, your designated beneficiary will receive a cash refund of the difference between the sum of the payments and the annuity purchase balance.
With a 10-year certain payout, you receive annuity payments for as long as you live. However, if you die within 10 years of the start of your annuity, your beneficiary receives the payments for the remaining portion of the 10-year period.
Not every feature can be combined with every basic annuity type. Also note that once an annuity is purchased, that money is turned over to a private company (currently Metropolitan Life) and that company, not the TSP, provides the benefit.
If you are a married participant with an account balance of more than $3,500, spouses’ rights requirements will apply to your withdrawal choice. If you are a married FERS participant, your spouse has the right to a joint and survivor annuity with 50 percent survivor benefit, level payments, and no cash refund feature, unless your spouse waives his or her right to that annuity. If you are a married CSRS participant, the TSP must notify your spouse of your withdrawal election.