Rolling over TSP as spousal beneficiary to IRA

Submitted by Austin Brown on Mon, 2025-03-03 10:07

I have a client who inherited her late husband’s TSP account. The late-husband was beyond his RMD required begin in the year he passed and his wife is of RMD age. Since she is the surviving spouse and was named the 100% primary beneficiary on the account, the TSP rules allow her to keep TSP in place. However, TSP calculates her annual RMD using the single life expectancy table, where as if she rolled the TSP to her IRA she would be able to use the uniform life table. This would mean that her annual RMDs are much lower coming out the IRA in the early years because the divisors corresponding to her age is so different between those two IRS life table.

TSP stated that her RMD for the year must be removed before they will allow a rollover to the IRA. Do you have experience in working with the TSP to get them to only distribute an RMD amount in the year of the rollover that reflects just the amount of the RMD as if it were calculated based on the uniform life table rather than the single life table?

Thank you,

Austin

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Permalink Submitted by Alan - IRA critic on Mon, 2025-03-03 11:23

Sec 327 of Secure 2.0 allows a sole surviving spouse (SS) beneficiary to make an election to be treated as the participant for RMD purposes and use the Uniform Table even though they are otherwise still a beneficiary. The TSP has always been slow to reflect change, and although this is effective for deaths in 2023 or later, the IRS Regs are still in the proposed stage and TSP staff may not even be aware of them.

It is correct that the plan must distribute the beneficiary RMD prior to doing a direct rollover of the balance to an IRA, therefore if the lower Uniform Table RMD is important for the SS, they should attempt to make this election and if not accepted by the TSP perhaps wait until later in the year. If the TSP will still not accept the spousal election at that time, the single life table will be used to distribute the 2025 beneficiary RMD, but at least this will only be for one year.