How to change beneficiary on thrift savings plan?

When you enroll in a thrift savings plan, you may be required to designate beneficiaries who will receive your TSP benefits when you die. Usually, the beneficiary can be a person, your estate, a foundation, a charity, or a trust. If you have designated beneficiaries, you should review the designation as your life situation changes.

You can change the beneficiaries on your thrift savings plan by filling out Form TSP-3. The beneficiary designations you provide on Form TSP-3 will automatically cancel out any previous designation you submitted to the TSP. You should send the complete Form TSP-3 to the TSP address at “Thrift Savings Plan, P.O. Box 385021, Birmingham, AL 35238" or fax it to 1-866-817-5023.

Designating TSP beneficiaries

As you contribute to your thrift savings plan over your working years, you are likely to build a sizable nest egg in your retirement account. One of the important things you should do is to decide who will inherit your money when you die.

You can designate your beneficiaries so that your TSP money is distributed according to your wishes. In the absence of a designated beneficiary, TSP follows a specific order of precedence to determine who gets what, and it does not rely on your will, prenuptial agreement, separation agreement, or court order to distribute death benefits.

You can designate your spouse, child (both biological and adopted), surviving parents, other relatives, corporation, your estate, trust, charity, foundation, etc. as a beneficiary. You can designate up to twenty beneficiaries in your TSP account. For example, if you designate your spouse as a beneficiary, TSP will set up a beneficiary participant account for your spouse when you die.

If you divorce and remarry, and forget to update your beneficiary designations, the former spouse still gets rights to your TSP money. Generally, TSP honors the current beneficiary designation at the time of your death.

How to designate, change, or cancel a beneficiary on TSP

You can designate a beneficiary or beneficiaries by logging into your account at tsp.gov or using one of the ThriftLine Service Center options i.e. phone, fax, or mail. You will need to obtain and fill out Form TSP-3 “Designation of Beneficiary”. TSP will distribute death benefits to the beneficiaries on file at the time of your death.

If you want to change beneficiary designations in your TSP, you will need to submit another Form TSP-3. You must follow the instructions provided to fill out the form and send the original copy to the TSP. This form will automatically cancel all previous designations you submitted.

The complete Form TSP-3 should be mailed to the TSP address at “Thrift Savings Plan, P.O. Box 385021, Birmingham, AL 35238” or sent via fax to 1-866-817-5023. The form must be received by TSP before the date of your death for the new beneficiary designation to take effect. If you have questions about your beneficiary designations, you should call ThriftLine at 1-TSP-YOU-FRST (1-877-968-3778). Once TSP processes your new beneficiary designations, you will receive a confirmation of your new beneficiaries.

If you want to cancel the current beneficiary designations on file, you should obtain Form TSP-3 and check the box in Section II of the form. Sign and date the form, and have it witnessed. Once the form is processed, it will cancel any previous designations and TSP will distribute your account according to the order of precedence.

TSP order of precedence

When you die, and you have a TSP balance, the money will not remain in your account. Typically, the benefits will be distributed to the beneficiaries designated in your account. However, if you did not designate a beneficiary or you canceled all previous designations, the TSP account will be distributed according to the following order of precedence (PDF).

To your spouse (widow or widower)

If none, to your child or children equally. Any share due to a deceased child is divided equally among the child’s descendants.

If none, to your surviving parent, or shared equally to parents (if both parents are alive).

If none, to the appointed executor or administrator of your estate.

If none, to the next of kin who is entitled to your estate based on the laws of the state in which you resided at the time of your death.

The definition of "child" includes both biological and adopted children but does not include a stepchild unless the child is adopted. Also, it does not include a biological child who has been adopted by any other person other than your spouse.

What happens to a TSP account when a participant dies?

When you die, TSP will distribute your TSP balance to your designated beneficiaries. TSP will mail the beneficiaries notice of their beneficiary status, and establish a TSP account for each beneficiary. TSP will also mail a TSP Payments Rights Notice to each beneficiary to explain their tax obligations.

If your spouse is the primary beneficiary, TSP will create a beneficiary participant account in the spouse’s name. The funds in the beneficiary participant account are invested the same way they were invested in your TSP account, except for any funds invested in the mutual fund window. Funds from the mutual fund window will be reinvested based on the investment election on file. Spouse beneficiaries can keep the inherited TSP money in their beneficiary participant account.

If a non-spouse beneficiary such as a child or parent inherits your TSP money, they cannot keep the TSP account. Instead, TSP sets up a temporary TSP account where payments will be made. Non-spouse beneficiaries must take full payments from the temporary TSP account within 90 days. If the beneficiary does not take the full payment by the 90^th day, TSP will automatically send payments on the 90^th day or the next business day.