The TSP beneficiary of a deceased federal employee (who was a TSP participant) may find the account investments have been moved into a TSP Beneficiary Participant Account (BPA). It’s possible to operate it much like you would any other TSP account, but without the contributions.

It’s also possible to choose any of the TSP withdrawal options that are available to people who have separated from federal service.

Spousal beneficiary rights with a BPA who also happens to be a federal employee with your own account, then you have another option.  In this case, you can move your BPA into your TSP, effectively combining the two into a single Thrift Savings Plan account. The BPA funds should then be treated in the same manner as the existing funds in your account. Note that you cannot do it the other way around by moving a TSP account into a BPA.

For non-federal employee spouses, it is always best to seek out TSP advice prior to electing to take a TSP withdrawal. The reason for this is that there are a substantial number of options available, and making bad decisions can have significant negative outcomes.

Rules for Moving a BPA Into a TSP

What you are doing here is withdrawing the entire balance in the BPA and transferring it into your TSP, same as your regular employee contributions to the account. It will be treated as such, with the exception that it will not be subject to the Internal Revenue Code (IRC) annual elective deferral limit.

If both accounts have Roth TSP contributions, then the initiation date for the combined account will the one that is the earlier of the two. If only one of the accounts had Roth contributions, then that date will be taken as the initiation date for the combined account.

If your BPA was created out of a uniformed services TSP account, then it may hold tax-exempt funds arising out of combat pay contributions. These funds cannot be moved into civilian federal employee TSP Beneficiary accounts, so that part of the BPA must be withdrawn by you.


Rules for Rolling a Decedent’s TSP into a beneficiary IRA

If you are NOT a federal employee, the two primary options are to:

  • leave the TSP funds in the TSP BPA and work with the available TSP investment and future withdrawal options
  • Or roll the funds into an IRA in your name.

The case for leaving the funds in the TSP:

The TSP is attractive due to the fact that it has very low-cost mutual funds and has the TSP G-Fund which is a government-guaranteed, liquid fund.  Although low costs are attractive, the limited investment options and the lack of any TSP advice can make this selection rather daunting.

The case for rolling the retirement funds into an IRA:

The very limited investment choices within the TSP presents an opportunity for federal employees and spouses to consider non-government options for their retirement funds.  A good comparison is to run the TSP calculator and then compare the TSP Lifetime annuity to other options available through non-governmental options.  Our experience suggests that the TSP lifetime annuity may not always be the most attractive option when compared to non-TSP alternatives, especially in terms of retirement income and the accessibility of funds.  Always seek TSP Advice from a professional who understands both non-TSP investments as well as TSP Annuity options to ensure you receive a complete picture of what is available for you.