TSP Required Minimum Distributions (RMDs)

Retired TSP participants – including those participants who retired from federal service either as a CSRS/CSRS Offset-covered employee or as a FERS-covered employee – must begin receiving TSP “required minimum distributions” (RMDs) upon reaching their “required beginning date” (RBD).

The RBD depends on when the federal annuitant was born and is summarized in Table 1 below.

SEE ALSO —  TSP Withdrawal Options Series (Parts 1-6)

• TSP Fixed Payment Option (Part 1)
• TSP Withdrawal Payments Based on Life Expectancy (Part 2)
• TSP Annuity (Part 3)
• Understanding TSP Rollover Rules (Part 4)
• Using the TSP to Fund a Roth IRA  (Part 5)
• Special Considerations for TSP Distributions  (Part 6)

Table 1. RMD Applicable Age and Required Beginning Date (RBD) for a Retired TSP Participant*

Under current rules, a TSP participant’s entire TSP account (consisting of both the traditional TSP account and the Roth TSP account) is used in the calculation of the annual TSP RMD. But as a result of the SECURE Act 2.0 passage, effective January 1,2024 only the traditional TSP account will be used in the calculation of the annual TSP RMD.

Roth TSP account funds will not be distributed as part of the annual TSP RMD, nor will they be used to calculate a TSP participant’s annual RMD. The TSP calculates the amount each year that a TSP participant is required to receive using the TSP participant’s age, prior year account balance and the IRS Uniform Lifetime table, found in Appendix B of IRS Publication 590-B (Distributions from Individual Retirement Arrangements). A portion of the Uniform Lifetime table is shown below.

The first year in which a TSP participant is separated and has reached his or her RBD is called the TSP participant’s first distribution year.

Note that if a TSP participant continues in federal service past his or her RBD, then the RBD becomes April 1 following the year he or she retires from federal service. The following two examples illustrate:

Example 1. Jason was born September 15,1949 and retired from federal service in 2012. His RBD was April 1st following the year he became age 72, which was 2021. Jason’s first distribution year was therefore 2021.

Example 2. Helen was born October 30,1947 and continued in federal service past her RBD of April 1st following the year she reached her RBD (which was April 1,2019). She retired from federal service on December 31, 2022. Her RBD is April 1,2023, which is her first distribution year.

The deadline for receiving the TSP RMD for the second and subsequent distribution year is not April 1 of the following calendar year. The deadline of April 1st of the following calendar year is only for the first distribution year. After the first distribution year, the deadline for receiving TSP RMDs is December 31s of the same (calendar) year.

The TSP will make sure that a TSP participant who has reached his or her RBD will meet the annual RMD requirement. In particular, if a TSP participant does not withdraw a sufficient amount of money from his or her TSP account during the first distribution year, then the TSP will automatically disburse money from the TSP participant’s account to meet the first year RMD usually no later than March 15th of the following year.

Starting in the second distribution year, the deadline for meeting the annual TSP RMD is December 31st of that year. If a TSP participant subject to RMD has not withdrawn a sufficient amount of TSP money by December 1st, then the TSP will automatically disburse money from the TSP participant’s account usually no later than December 15th in order to meet that year’s RMD requirement.

How the Different TSP Withdrawal Options Meet the First Distribution Year RMD Requirement

As discussed in previous columns, there are three methods by which a TSP participant can make withdrawals from his or her TSP account. Each withdrawal method is reviewed here together with how the method meets the first distribution year RMD requirement, together with what the TSP does in case the withdrawal method results in an insufficient of TSP RMD during the first distribution year.

Installment payments. A TSP participant’s installment payments will count towards satisfying his or her first year RMD. If the amount of the installments (combined with any distributions that the TSP may make during the first distribution year) do not meet the first distribution year TSP RMD amount, then the TSP will automatically make a disbursement from the participant’s TSP account(s) in March of the following year in order to satisfy the TSP participant’s first year RMD requirement before the April 1 deadline.

READ: TSP Withdrawals Fixed Payment Option

The following example illustrates:

Angela retired from federal service in 2021. She was born on October 25, 1950. Angela’s RBD is April 1 following the year she becomes age 72 (2022), or April 1, 2023. Her TSP account consisted only of the traditional TSP. Her TSP account balance as 12/31/2021 was $783,900. Since Angela became age 72 during 2022, her first year TSP RMD for year 2022 is due by April 1, 2023. The TSP calculated Angela’s 2022 TSP RMD as follows:

$783,900 (account balance as 12/31/2021)/27.4 (life expectancy factor for a 72-year-old) = $28,610

Angela had requested from the TSP that starting July 1,2022, she receive a fixed monthly payment of $4,500 from her TSP account. From July 1,2022 through December 31, 2022, Angela received a total of 6 months times $4,500 per month, or $27,000. Angela notified the TSP in early December 2022 to cease the monthly installment payments as of January 1, 2023.

Because Angela was $28,610 less $27,000 or $1,610 short in her first distribution year TSP RMD requirement, the TSP on March 12,2023 withdrew $1,610 from Angela’s TSP account and sent her a check. The TSP did this in order to make sure that Angela satisfy her first distribution year (2022) TSP RMD by the April 1,2023 deadline.

Partial distribution. A TSP participant’s partial distribution will satisfy his or her first TSP RMD if the distribution is at least the amount of the TSP participant’s first distribution year RMD.. If the partial distribution, combined with any subsequent distributions the TSP participant may make during the first distribution year do not meet the first distribution year TSP RMD, then the TSP will automatically send in March of the following year a supplemental payment to satisfy the TSP participant’s first distribution year TSP RMD before the April 1 deadline.

READ: TSP Withdrawal Payments Based on Life Expectancy

The following example illustrates:

Allan retired from federal service in 2021. He was born February 10, 1950. Allan’s RBD is April 1 following the year he became age 72 (2022), or April 1, 2023. His TSP account consisted of both the traditional TSP ($669,700 balance as of 12/31/2021) and the Roth TSP ($284,342 balance as of 12/31/2021). Alan’s first year (2022) TSP RMD is calculated as follows:

$669,700 + $284,342 (combined TSP balances of as 12/31/2021)/27.4 (life expectancy factor for a 72-year-old) =$34,819

During 2022, Allan requested two partial distributions from his TSP accounts. One partial distribution, on March 15,2022, was for $20,000, and one partial distribution on September 15,2022, was for $12,000. The two partial distributions totaled $20,000 plus $12,000 or $32,000. That is all that Allan withdrew from his TSP account during 2022.

Since Allan was $34,819 less $32,000 or $2,819 short on his first year TSP RMD, the TSP on March 12,2023 withdrew $2,819 from Allan’s TSP account and sent the $2,819 payment to Allan. They did this to make sure that Allan fulfilled his first year TSP RMD by the April 1,2023 deadline.

Annuity purchase. If a TSP participant purchases a TSP annuity during his or her first distribution year, then the TSP will send the TSP participant a separate check for the TSP participant’s full first year TSP RMD amount before processing the annuity purchase.

READ: Using a TSP Life Annuity

The following example illustrates:

Catherine retired from federal service in 2021. She was born April 17, 1950. Catherine’s RBD is April 1 following the year she became age 72 (2022) or April 1, 2023. Her TSP account balance, consisting only of the traditional TSP, as of 12/31/2021 was $932,465. Catherine’s first year (2022) TSP RMD is calculated as follows:

$932,465 (account balance as of 12/31/2021)/27.4 (life expectancy factor for a 72-year-old) = $34,014

In November 2022, Catherine requested that the TSP purchase a $100,000 TSP annuity. Before the TSP processed Catherine’s TSP annuity request, the TSP withdrew $34,014 from Catherine’s TSP account and sent her a check, thus fulfilling Catherine’s first distribution year TSP RMD.

What Happens During the Second and Subsequent Distribution Calendar Years

Since the deadline for a TSP participant’s first distribution year is April 1 of the second distribution year, the TSP will continue to follow the rules explained above for the first two months of the second distribution year until the first year TSP RMD requirement has been met.

A TSP participant’s second year distribution will not count toward the second year’s TSP RMD until the first year’s RMD is satisfied. If that first year TSP RMD requirement is not met by mid-March of the second year, then the TSP will automatically send the TSP participant what remains of the first year TSP RMD.

After the first year TSP RMD requirement has been met, the TSP participant’s distributions will count towards the second TSP RMD requirement using the same rules described above for the first distribution calendar year with two exceptions:

• December 31 deadline. After the first distribution year, the deadline for a given year’s RMD is December 31 of that same year. That is, if a TSP participant subject to RMD has not satisfied his or her RMD by December 1, then the TSP will send the TSP participant that year’s TSP RMD during early December of that year.

• Treatment of annuity purchases. The rule about sending a TSP participant an RMD check before processing any withdrawal request (including a TSP annuity purchase) no longer applies after a TSP participant has satisfied the first year’s RMD. IF a TSP participant subject to RMD purchases a TSP annuity after the first distribution year annuity purchase will satisfy a portion of the RMD for that year in the following way: The percentage of the TSP participant’s account that is used to purchase the annuity is the same percentage of the TSP participant’s RMD that the TSP annuity purchase will satisfy.

The following example illustrates:

Harold, age 75 during 2023, is a retired TSP participant. His TSP account consists of traditional TSP funds. His TSP account balance as of 12/31/2022 was $832,740. In January 2023, Harold received a notice from the TSP that his 2023 TSP RMD is equal to:

$832,740 (account balance as 12/31/2022)/24.6 (life expectancy factor for a 75-year-old) = $33,851

On April 5, 2023, Harold goes online to his TSP account and requests that the TSP use $100,000 of Harold’s TSP account to purchase a TSP annuity. Harold is therefore using $100,000/$832,740, or 12 percent of his TSP account to purchase his annuity. This means that of the $33,857 TSP RMD for 2023,

12 percent of $33,851, or $4,065, has been satisfied by the annuity purchase.

Harold will need to withdraw the remaining $33,851 less $4,065, or $29,786, during the rest of 2023 in order to satisfy his 2023 TSP RMD.

RMDs from Beneficiary TSP Participant Accounts

Beneficiary TSP participant accounts are also required to take RMDs. A beneficiary TSP participant is a TSP account in which a spouse beneficiary of a deceased civilian or a Uniformed Services TSP participant has a TSP account established in his or her name. As with civilian and Uniformed Services accounts, RMDs from beneficiary TSP accounts currently apply to both traditional and Roth TSP accounts. Effective January 1, 2024, RMDs for all TSP participant accounts will apply only to a traditional TSP account.

For beneficiary TSP participant accounts, the TSP calculates any RMDs to be paid in the yar of the TSP participant’s death using the deceased TSP participant’s prior year-end TSP account balance, and the IRS’ Uniform Lifetime life expectancy table (see above). In the years following the deceased participant’s death, the TSP calculates the amount of the RMD using the beneficiary TSP participant’s age, prior year-end TSP account balance, and the IRS’ Single Life Expectancy table, found in IRS Publication 590-B (Distributions from Individual Retirement Arrangements https://www.irs.gov/pub/irs-pdf/p590b.pdf).

The date in which a beneficiary TSP participant must begin receiving RMDs depends on whether the beneficiary TSP participant’s spouse died; namely – before, or on/after his or her RBD. See Table 1 above which shows the RBD for individuals depending on when they were born. Note that Table 1 shows the “applicable age” which a beneficiary TSP participant will need to know if his or her spouse died before the RBD.

TSP Participant’s Date of Death is Before RBD

Table 2 below shows three possible scenarios in which a TSP participant (the “spouse”) died before his or her RBD and the deadline at which the beneficiary TSP participant must begin receiving RMDs:

Table 2. Beneficiary TSP Participant’s RMD Deadlines When Spouse Dies before His or Her RBD

Note that in the three scenarios presented in Table 2, the beneficiary TSP participant must continue to receive distributions by December 31 of each subsequent year. The TSP will base all of the beneficiary TSP participant’s RMDs on his or her age and not on the age of the deceased spouse.

TSP Participant’s Date of Death is On or After RBD

If a spouse dies after his or her RBD, the deadline for the beneficiary participant’s RMD depends on whether the spouse (the TSP participant) satisfied the RMD for the year of death.

• If the RMD for the year of death had been met, then the beneficiary TSP participant’s first RMD is due December 31 of the year following the year of the spouse’s death, and it is calculated based on the beneficiary TSP participant’s age, not the spouse’s age.

• If the RMD for the year of death had not been met, then the beneficiary TSP participant still needs to receive that RMD by December 31 of the year of death. In this case, the RMD is calculated based on the spouse’s age.

In both situations, the beneficiary TSP participant will need to make an RMD based on his or her age, (not the spouse’s age) by December 31 of each subsequent year.