Spousal Rights to Your TSP Explained

Like all 401(k) type plans, the TSP provides spousal rights for spouses of employees and retirees.  Interestingly, the rights granted to the spouse are different depending on whether the employee/retiree is covered under CSRS or FERS.

Under FERS, unless the spouse waives his or her right, they are entitled to receive a specific type of TSP annuity (i.e., joint-life with a 50% survivor benefit and no additional features).  There are many different options offered in the current TSP annuity (which is offered by MetLife) and, in my opinion, this spousal default choice is one of the least appealing. By saying this, I do not mean to imply that any of the TSP annuity choices are at all appealing, especially in this period of extremely low interest rates.  In fact, the TSP’s annuity interest rate index hit an all-time low of 1.5% in August of 2016.  It turns out that TSP annuities are far and away the least popular choice among TSP withdrawals, so it appears that most spouses are waiving their right to an annuity.

However, if you are a FERS employee, you will want to fully discuss the TSP withdrawal options with your spouse in order to get his/her informed consent.  Once your spouse is aware of the alternatives, it is very likely that they will give their consent for another method of withdrawal.  As a reminder, for all federal benefits, the definition of spouse includes a legally married same-sex spouse.

The spouses of CSRS employees/retirees have significantly less in the way of rights.  All that is required is that the TSP notify the spouse of the choice made by the employee or retiree.  The notification letter that the spouse will receive after the CSRS employee or retiree begins withdrawals specifically states that they have no right to the TSP account.

Why is there such a difference in the way spouses are treated?  There are a couple of possibilities and the one you are most likely to believe will be colored by your view of our elected representatives.

At the time the rules were set, all federal employees, including those who serve us in Congress, were under the CSRS system.  They didn’t want their spouses telling them what to do with their TSP accounts, so they only gave spousal protection to the spouses of future hires under the FERS system.
After seriously considering the matter and carefully weighing the alternatives, our representatives realized that the TSP was a much larger part of the retirement of a FERS person and, therefore, a much greater part of a survivor’s income.  In addition, many CSRS employees would be retiring in the near future with small TSP balances.  Therefore, they offered protection only to the spouses of FERS employees and retirees.