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CSRS vs. FERS: Spousal Rights and the TSP

Employees, spouses, and retirees are eligible for spousal rights under the Thrift Savings Plan (TSP), just like all other 401(k) plans. However, it’s interesting to note that the rights accorded to the spouse change depending on whether the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS) covers the employee or retiree.

Under the FERS, a spouse has the right to receive a particular form of TSP annuity (the communal life with a 50% survivor benefit and no other features), unless the spouse voluntarily gives up this right. 

Therefore, the survivor benefit will be reduced by 50%. In the current TSP annuity, various alternatives are available; nevertheless, the spousal default choice is one with the least appeal.

However, TSP annuity choices appeal in many ways, shapes, or forms because they need flexibility and offer few additional benefits. By a significant margin, TSP annuities are the least desired option for TSP withdrawals; consequently, most couples are forgoing their right to an annuity.

Assuming you are a FERS employee, you will want to have an in-depth conversation with your spouse about the TSP withdrawal alternatives to acquire their informed agreement before making any decisions. When presented with the available options, your partner is highly likely to grant their approval for one of the other withdrawal methods after they have had the chance to do so. 

Wives of CSRS workers and retirees have much fewer protections. The requirement is for the TSP to inform the employee’s or retiree’s spouse about the decision made by the employee or retiree. 

It will be made clear to the spouse in the notification letter that they will receive once the CSRS employee or retiree takes withdrawals from the TSP account that they have no legal claim to the money in the account.

Why is there such a significant gap in how marriage partners are dealt with? 

1. The Civil Service Retirement System (CSRS) applied to all federal employees when the rules were established, including those who serve as our representatives in Congress.

Because they didn’t want their partners directing them on what to do with their tax-deferred savings plans, they decided to limit spousal protection to those who would be married to newly hired FERS employees in the future. This is the reason that a cynic would probably believe to be the most important one.

2. After giving the topic significant thought and careful consideration to the alternatives, the TSP was a considerably more substantial portion of the retirement of a FERS individual and, as a result, a much more significant component of a survivor’s income.

In addition, many CSRS personnel would be retiring in the not-too-distant future with insufficient funds in their TSP accounts. Because of this, they limited the protection they provided to only the partners of FERS workers and retirees. 

Contact Information:
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Mark Zimmerman

Mark Zimmerman, Sr currently is the Managing Member of Aurifex Financial Group, LLC. Aurifex Financials mission is to help clients realize their vision of living life on their own terms by providing credit repair, financial counseling, insurance solutions, and money lending services. This is accomplished by using a holistic approach. After hanging up his uniform after 22 years of service in the military, Mark still had a desire to help others, so he created Aurifex Financial. As part of Accredited Financial Counselor (AFC) credentials, Mark had to obtain and document over 1000 hours of helping others which was accomplished by helping hundreds through a local non-profit. As an independent Insurance Agency, Mark is licensed in property and casualty, home, business, health, Medicare, life, and annuity products.

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