Are the TSP withdrawal options and tax consequences the same whether you remain in CSRS or FERS?

Are the TSP withdrawal options and tax consequences the same whether you remain in CSRS or FERS?

"Yes, they are the same. After you separate from the government, you can: withdraw your account in a single payment, withdraw your account in a series of monthly payments, or have the TSP purchase a life annuity for you.

"If you elect a single payment or certain monthly payments, you can have the TSP transfer all or any part of the payment or payments to an individual retirement arrangement."

"If you have the TSP transfer money to an IRA, the money continues to maintain its tax-deferred status. If you receive money from the TSP or as annuity, this money is treated as ordinary income for purposes of federal income tax the year in which the money is paid to you. Also, depending upon your age when you leave federal service and your withdrawal election, you may be subject to the IRS 10 percent early withdrawal penalty.

"In addition, when you elect to withdraw your account after you separate, if you are a married CSRS employee, your spouse must be notified of the withdrawal unless you elect a joint annuity with your spouse. Again, this is just a notification of the withdrawal with no entitlement to account implied.

"If, however, you transfer to FERS, your spouse is entitled to receive your account in the form of a joint annuity. Consequently, if you elect another withdraw option, your spouse must waive his or her right to the joint annuity, and must sign this waiver as part of the application process.

"While we are talking about the rights of the spouse, I'd also like to make a note about the spousal requirements related to TSP loans and withdrawals. Although CSRS and FERS employees have the same loan and withdrawal options, the rules regarding their spouses' rights are different. Because the TSP is an integral part of FERS and only a supplement to CSRS, the FERS rules are more stringent.

"If you are married and want a TSP loan or in-service withdrawal, as a CSRS employee, your spouse must be notified before the loan or in-service withdrawal can be disbursed. During the application process, you must give us the name and address of your spouse, and we notify your spouse accordingly.

"If, however, you transfer to FERS, your spouse must consent to your loan or in-service withdrawal before we can disburse it, and, as part of the application process, your spouse must sign a consent statement."

-Thrift Savings Plan Liason Specialist Patty Muller

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