You may know who is on the latest form TSP-3 that you filed, but the TSP might not. My instructors and I have heard from some participants in our pre-retirement classes that the TSP no longer has their TSP-3 on file. Others have said that the beneficiary information on the website is correct for their primary beneficiary, but not for contingent beneficiaries.
In fact, the Thrift Savings Plan has admitted that 266,000 beneficiary designations were intentionally not transferred to the new system because of “data quality issues”. Then they cryptically say that those beneficiary forms remain on file.
Don’t assume that your beneficiary information is correct. Here are some things you can do:
· If you have not yet set up your new TSP account, do so at once;
· Check to see if your beneficiary designations are correctly recorded in the account;
· Take steps to update your TSP-3 if your designations are not correct.
If you do not have a beneficiary form on file, if your account needs updating, or if your designated beneficiary has pre-deceased you, you can submit a new TSP-3. The TSP-3 can be found at Forms | The Thrift Savings Plan (TSP), though you might have to be patient with the website. The Thrift Board still does not have everything on the website up and running the way it should. Once you get to the link for the TSP-3, you will be given a choice of downloading the form or using a “wizard”. TSP form wizards are an easy way to fill out any TSP form; they ask you pertinent questions and, based on your answer, they take you to the next part that needs completing. With a wizard, there’s no more wondering exactly which parts of the form you should complete and which you leave blank. If you need to have the form notarized (a common occurrence with TSP forms), you will be able to print out a completed form that you can then take to a notary.
What happens if you don’t have a TSP-3 on file, or if it has been “lost” in the transition to the new system. If that’s the case the Thrift Savings Plan will follow the standard order of precedence in determining who will receive your TSP monies after your death. The TSP will pay no attention to any wishes you have expressed in a will or in a trust. It is a rule in estate planning that beneficiary forms (or the standard order of precedence) will supersede any other stated wishes. After your designated beneficiary, the standard order of precedence for federal benefits is:
· Surviving spouse;
· Children (per stirpes) (stepchildren not included unless formally adopted);
· Parents (step-parents not included unless they formally adopted you);
· Court appointed executor or administrator of the estate;
· Next of kin (based on state law).
On the TSP-3, as on most beneficiary forms, you have the ability to name contingent beneficiaries who will receive the monies if the designated beneficiary has pre-deceased you. You also have the ability to name multiple beneficiaries. If this is your choice, make sure that the total adds up to 100%.
If your beneficiary is:
· Your federally employed or retired spouse, he/she may roll your TSP account into his/hers, elect an inherited IRA or take the money out.
· Your non-federally employed or retired spouse, he/she may take ownership of your TSP account, elect an inherited IRA or take the money out. If they elect to take ownership of your account, the TSP will create a beneficiary participant account for them. The initial allocation in a beneficiary participant account is in the age appropriate L fund.
– A non-spouse, he/she may elect an inherited IRA or take the money out. The SECURE Act has limited the “stretch IRA” for almost all non-spouse beneficiaries who now must totally deplete the account within ten years.
You’ve saved throughout your whole career for retirement. You want to be sure that, if you don’t live long enough to spend down your TSP, that a person, or persons, of your choice get what is left over.