Q. Can a deceased spouse’s TSP account be rolled into the survivors existing TSP account?
A. From the brochure “Your TSP Account”:
If you have an existing TSP account from your own employment with the federal government or the uniformed services, you can move your beneficiary participant account into your existing TSP account. The money that you move will be treated as an employee contribution, but it will not be subject to the Internal Revenue Code (IRC) annual elective deferral limit, which limits the amount of regular tax-deferred and Roth contributions you can make to the TSP in a calendar year.
In general, once you combine your beneficiary participant account with your existing TSP account, your beneficiary participant account money will be subject to the rules that govern the account to which it was moved. An important exception is the application of a “Roth Initiation Date” — the date of the first Roth contribution — which is used to calculate whether earnings on Roth contributions qualify to be paid out tax-free. If Roth contributions were made to both accounts, the Roth Initiation Date that will apply to your combined account is the earlier of the two, even if the earlier date was associated with the beneficiary participant account. If only one of the accounts contains Roth money, the Roth Initiation Date associated with that account becomes the date for your combined account. In addition, when you transfer your beneficiary participant account into your own TSP account, distributions of Roth earnings are qualified (paid tax-free) if 5 years have passed since January 1 of the calendar year when the first Roth contribution was made. However, once the money is moved out of the beneficiary participant account, the following additional rule applies for the earnings to be qualified: You must be at least age 59½, permanently disabled, or deceased.
If your beneficiary participant account resulted from a uniformed services account, you may have tax-exempt money in it as a result of contributions from combat pay. If you are combining your beneficiary participant account with a civilian TSP account, tax-exempt contributions in your traditional balance will not be transferred over. In this case, the tax-exempt funds will be distributed directly to you. Check your quarterly or annual statement to determine whether you have tax-exempt money in your account.
Important: If you are under age 59½, you may want to wait before combining accounts. With some exceptions, withdrawals from a civilian or uniformed services account taken before the age of 59½ are subject to a 10% penalty tax. There is no early withdrawal penalty tax for withdrawals from a beneficiary participant account. Once you transfer your beneficiary participant account into your other TSP account, the early withdrawal penalty will apply to all of the money in the account, including the money that came from your beneficiary participant account, if you later make an early withdrawal.
To make the request to combine accounts, call the ThriftLine and speak to a Participant Service Representative. You cannot move an existing TSP account into your beneficiary participant account. And if you have more than one beneficiary participant account, you cannot combine them with each other, but you can move multiple beneficiary participant accounts into your own TSP account. Also, if you have an IRA or other retirement plan, you will not be able to transfer or roll over those funds into your beneficiary participant account.
