TSP board proposes new rule on death benefit

After you die, your spouse would be able to roll over your Thrift Savings Plan nest egg into a 401k account or into his or her own TSP account, under a proposed rule issued earlier this month.

The rule change would give widows and widowers of federal employees and military personnel an additional option for what to do with their spouses' TSP money. The current rule only allows transfers into individual retirement accounts.

The Federal Retirement Thrift Investment Board, which runs the TSP, proposed the rule change in the May 17 Federal Register.

The proposal is based on a January change to the Internal Revenue Code, which governs transfers among retirement savings plans. The change made transfers of death benefits more flexible. A change in law included in last year's tax cut legislation allowed the IRS to make the tax code change.

In its Federal Register announcement, the TSP board also proposed changes to rules affecting the TSP accounts of federal employees who return to civilian service after military duty. Military personnel-including federal employees with existing TSP accounts-were given the opportunity to open TSP accounts last year.

Under the proposed changes:

• Civilian employees who return to work after a period of military service under the Uniformed Services Employment and Reemployment Rights Act could make up contributions to their civilian TSP accounts, but the contributions would be reduced by the amount the employees contributed to their military TSP accounts while they were called up.
• Agencies will make matching contributions to employees' civilian accounts based on their contributions to their military accounts from their basic pay during military service. This change affects employees under the Federal Employees Retirement System.
• Employees will also receive matching contributions for the makeup contributions to their civilian TSP accounts.

The TSP board is taking comments on the proposed rules until June 17. Comments should be sent to:

Patrick J. Forrest
Federal Retirement Thrift Investment Board
1250 H Street, NW
Washington, DC 20005
Fax: (202) 942-1676