Beneficiary Rules Likely Changing for TSP

Other than the mobile app and the mutual fund window, a lot of changes coming to the TSP are flying under the radar. Read about proposed changes from the FRTIB about TSP (Thrift Savings Plan) beneficiaries.

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Posted to the federal register, the Federal Retirement Thrift Investment Board (FRTIB) proposed several rules they plan to implement while the TSP transitions to a more modern platform. Many are aware of the online upgrades that the TSP is experiencing this month, and this includes a mobile app that is long overdue. Likewise, there has been significant attention paid to the upcoming mutual fund window that will be accessible in the next few months – perhaps as soon as June. However, the FRTIB is giving the federal retirement savings plan a major facelift. Several other changes have been proposed, and are set to become codified, before the end of the year. In this article, we’re reviewing some of the changes that the FRTIB is planning to make regarding beneficiaries.

Reducing Paper Forms

The current process for designating TSP beneficiaries involves filling out a long paper form and then either mailing it to the TSP, faxing it, or scanning the document to submit online. If the proposed rules are approved, TSP beneficiaries can be designated totally online. However, deleting a beneficiary without adding a new one will no longer be an option. On top of that, you’ll be allowed to add up to 20 beneficiaries. The rules regarding primary versus contingent beneficiaries are also set to be simplified. While you’ll still be able to designate minors as your TSP beneficiary, you will not be allowed to designate a custodian for that minor (as a TSP beneficiary).

Death claims will also be initiated by a beneficiary calling the Thriftline for instructions. The current rules require potential beneficiaries to mail a paper form along with a copy of the death certificate.

Investments Post-Mortem

The current procedure upon a TSP account owner’s death is move their balance to the G-fund until more information is attained from the beneficiary, at which point the money is automatically moved to the most age-appropriate L-Fund. If the new rules become law, then this will no longer be the case. The money will stay invested in the same allocation that the original TSP account owner had in place at the time of death.

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Until Next Time,

The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers  and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **

Beneficiary Rules for TSP