[Federal Register Volume 62, Number 114 (Friday, June 13, 1997)]
[Rules and Regulations]
[Pages 32426-32432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-15463]



[[Page 32425]]

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Part IV





Federal Retirement Thrift Investment Board





_______________________________________________________________________



5 CFR Part 1651



Death Benefits; Final Rule

  Federal Register / Vol. 62, No. 114 / Friday, June 13, 1997 / Rules 
and Regulations  

[[Page 32426]]


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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1651


Death Benefits

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Final rule.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) is publishing final regulations governing 
death benefit payments from the Thrift Savings Plan (TSP). These 
regulations set forth the Board's policies and procedures for 
processing death benefit claims and death benefit payments under 5 
U.S.C. 8433(e) and 8424(d).

DATES: This final rule is effective June 13, 1997.

FOR FURTHER INFORMATION CONTACT: John J. O'Meara (202) 942-1660.

SUPPLEMENTARY INFORMATION: The Board administers the TSP which was 
established by the Federal Employees' Retirement System Act of 1986 
(FERSA), Pub. L. 99-335, 100 Stat. 514. The provisions governing the 
TSP are codified primarily in subchapters III and VII of Chapter 84 of 
Title 5, United States Code (1994). The TSP is a tax-deferred 
retirement savings plan for Federal employees that is similar to cash 
or deferred arrangements established under section 401(k) of the 
Internal Revenue Code. Sums in a participant's TSP account are held in 
trust for that participant. 5 U.S.C. 8437(g).
    The disbursement of death benefits from the TSP is governed by the 
provisions of 5 U.S.C. 8433(e) and 8424(d). Under section 8433(e), if a 
TSP participant dies before he or she has completed a withdrawal 
election, the account is to be disbursed in accordance with the order 
of precedence set forth at section 8424(d).
    These regulations set forth the Board's policies and procedures for 
processing death benefit claims and death benefit payments under 5 
U.S.C. 8433(e) and 8424(d).
    These regulations were published in proposed form on March 27, 1997 
(62 FR 14653). No comments were received.

Section by Section Analysis

    Section 1651.1 contains definitions of terms throughout these 
regulations. A participant's domicile is important for a determination 
of beneficiary under Sec. 1651.5 and Sec. 1651.9. Normally, the Board 
would look to the participant's address at the time of death to 
identify the participant's domicile; however, this practice presents 
problems in the case of participants who are living overseas. In order 
to permit the Board to look to the law of the United States in all 
cases, the Board will use the state in which the participant is liable 
for state income taxes. This information should be generally available 
from the participant's agency.
    Section 1651.2(a) sets forth the order of precedence as found in 5 
U.S.C. 8424(d). Under the statutory order of precedence, payment is 
made first to the beneficiary or beneficiaries designated by the 
participant on a properly completed and filed designation of 
beneficiary form. Form TSP-3, Designation of Beneficiary, has been 
developed by the Board for that purpose. If the participant has elected 
to withdraw his or her account in the form of certain types of 
annuities (discussed below), the designation of beneficiary or 
beneficiaries made on Form TSP-11-B, Beneficiary Designation for a TSP 
Annuity, will supersede the statutory order of precedence. If the 
participant does not designate a beneficiary, payment will be made as 
provided by the remainder of 5 U.S.C. 8424(d). Each statutory category 
of potential beneficiaries is addressed in a separate section of these 
regulations.
    Section 1651.2(b) addresses the payment of a death benefit after 
the participant has completed a withdrawal election. Different rules 
apply depending on the type of withdrawal election and, if applicable, 
the type of annuity chosen. Paragraph (b)(1) addresses the situation in 
which the participant dies after having completed an election to 
withdraw his or her account in the form of a single payment or monthly 
payments but before payment has been made. The account will be paid in 
accordance with the statutory order of precedence, because the election 
made by the participant provides no indication of his or her intended 
beneficiaries.
    Paragraphs (b)(2) through (b)(6) address situations in which the 
participant dies after having completed an election to withdraw his or 
her account in the form of certain types of annuities but before the 
annuity has been purchased. Under paragraph (b)(2), if the participant 
dies after having completed an election to withdraw his or her account 
in the form of a joint life annuity but before the annuity has been 
purchased, the account will be paid as a single payment to the joint 
life annuitant. In this situation, the participant's election makes it 
clear that the joint annuitant should be the beneficiary upon the 
participant's death.
    Under paragraph (b)(3), if both the participant and the joint 
annuitant die after the participant has completed an election to 
withdraw his or her account in the form of a joint life annuity but 
before the annuity has been purchased, and the annuity election 
included a cash refund, the account will be paid proportionally to the 
beneficiary or beneficiaries designated on Form TSP-11-B, Beneficiary 
Designation for a TSP Annuity. This result gives effect to the 
participant's wishes as reflected by his or her annuity election. If 
the annuity election did not include a cash refund, under paragraph 
(b)(4), the account will be paid in accordance with the statutory order 
of precedence.
    Similarly, under paragraph (b)(5), if a participant dies after 
having completed an election to withdraw his or her account in the form 
of a single life annuity that includes either a cash refund or 10-year 
certain feature, but before the annuity has been purchased, the account 
will be paid proportionally to the beneficiary or beneficiaries 
designated on Form TSP-11-B. If the annuity does not include either a 
cash refund or 10-year certain feature, under paragraph (b)(6), the 
account will be paid in accordance with the statutory order of 
precedence.
    Paragraph (b)(7) addresses the situation in which the participant 
dies after the annuity has been purchased. In that situation, the 
account will be paid in accordance with the annuity method selected. 
Once the Board purchases the annuity elected by the participant, 
responsibility for payment of the benefits shifts to the annuity 
provider.
    Section 1651.3 sets forth the requirements for a valid designation 
of beneficiary on a Form TSP-3. In order to designate a beneficiary of 
a TSP account, a participant must complete and send to the TSP record 
keeper a Form TSP-3, Designation of Beneficiary, or Form TSP-11-B, 
Beneficiary Designation for a TSP Annuity. Form TSP-11-B must be used 
to designate a beneficiary when a participant elects to withdraw his or 
her account in the form of a joint annuity with a cash refund feature 
or a single life annuity with a cash refund feature or a 10 year 
certain feature.
    A will may not be used to designate a beneficiary of a TSP account. 
The Board will also not honor a designation of beneficiary that is set 
forth in a court decree of divorce, annulment, or legal separation or 
in any court order or court-approved property settlement agreement 
incident to such a decree that is issued under section 8435(c)(2) of 
title 5 of the United States Code. Such designation is considered to be 
an

[[Page 32427]]

award of a future interest and, to the extent that a court order awards 
an amount to be paid upon the occurrence of a future specified event, 
the order is not a qualifying retirement benefits court order pursuant 
to 5 CFR 1653.2(c).
    All Forms TSP-3 signed on or after January 1, 1995, must be 
received by the TSP record keeper on or before the participant's date 
of death. This is a change in the procedures for processing Forms TSP-
3. Before January 1, 1995, active employees were required to submit 
Forms TSP-3 to their employing agency, which, in turn, forwarded the 
forms to the TSP record keeper when a participant died in service or 
separated from service. Because of the change in the processing of 
Forms TSP-3, the Board has instructed all agencies to send to the TSP 
record keeper all Forms TSP-3 that are in employees' personnel files. 
Any forms signed before January 1, 1995, which were received by the 
agencies before the participant's death will be evaluated by the record 
keeper to determine whether they are valid, despite the fact that they 
were received by the agencies. Forms that the record keeper finds 
invalid will be returned to the participant. A valid Form TSP-3 will 
remain in effect until it is canceled or changed as described in 
Sec. 1651.4.
    In addition to being properly filed, a Form TSP-3 must be properly 
completed in order to be valid. This means that the form must be signed 
by the participant and two witnesses. The individuals signing as 
witnesses must actually observe the participant signing the form, or 
they must observe the participant acknowledge his or her signature on 
the Form TSP-3. Witnesses should not be named as beneficiaries. A form 
that contains a signature for a witness who is also a named beneficiary 
is valid; however, the witness beneficiary will not be entitled to 
receive his or her designated share of the account.
    Section 1651.4 sets forth the requirements for changing or 
canceling a designation of beneficiary. In order to change a 
designation, the participant must complete and file another Form TSP-3. 
The Form TSP-3 containing the changes must be valid and must be 
received by the TSP record keeper on or before the date of death of the 
participant. In order to cancel a prior designation, the participant 
may complete and send another Form TSP-3 with a notation that all prior 
designations are canceled. Alternatively, the participant may send a 
letter, signed and dated by the participant and witnessed in the same 
manner as a Form TSP-3, stating that prior designations are canceled. A 
letter canceling a prior designation must also be received by the TSP 
record keeper on or before the participant's date of death.
    A participant may make, change, or cancel a designation of 
beneficiary at any time and without the knowledge or consent of the 
participant's spouse or any current or prior designated beneficiaries. 
An intervening legal separation, divorce, or annulment of the marriage 
of the participant does not automatically cancel a Form TSP-3 naming 
the spouse or former spouse or anyone else as a beneficiary.
    Sections 1651.5 through 1651.9 further describe the potential 
beneficiaries under the statutory order of precedence. Section 1651.5 
sets forth the rules for payment to the participant's spouse. It 
explains that the widow or widower of the participant is the person to 
whom the participant is married on the date of death. Whether the 
participant was married will be determined in accordance with 
applicable state laws, based upon the participant's domicile at the 
time of death. A person is considered to be married even if the parties 
are separated. The Board will make a payment to an individual who 
claims to be the common law spouse of a participant only if the 
requirements for a common law marriage under the applicable state law 
have been met.
    Section 1651.6 sets forth the rules for the death benefit payment 
of a participant's TSP account to the participant's children or the 
descendants of deceased children. A child includes a natural or adopted 
child. Whether a child is the natural child of the participant will be 
determined in accordance with applicable state law. State law will not 
apply, however, in cases involving a natural child of a TSP participant 
who was adopted by someone other than the spouse of the participant 
during the lifetime of the participant. In those cases, these 
regulations establish the general rule that the child will not be 
treated as a child of the participant under this section.
    Section 1651.7 sets forth the rules for the death benefit payment 
of a participant's TSP account to the participant's parents. A step-
parent is not considered a parent unless the step-parent adopted the 
participant.
    Payment to the duly appointed executor or administrator of the 
participant's estate is addressed in Sec. 1651.8. A duly appointed 
executor or administrator of a participant's estate includes any person 
appointed by a court to act in that capacity. Some states have 
established statutory procedures for transferring the assets of estates 
below a specified value. The Board will accept a person authorized 
under those procedures to handle the affairs of the deceased 
participant's estate as the ``duly appointed executor or 
administrator'' of the participant's estate. This policy recognizes 
that many states do not require, and may not even permit, estates below 
a certain value to be probated formally through the state court system. 
However, documentation establishing that the applicant is qualified 
under the relevant state's small estate procedures must be submitted to 
the TSP record keeper.
    If the participant is not survived by a spouse, child, or parent, 
and an executor or administrator is not appointed under state court or 
statutory procedures, Sec. 1651.9 provides that payment will be made to 
the participant's next of kin as determined under the state law of the 
participant's domicile at the time of death.
    Under 5 U.S.C. 8424(d), benefits will be paid to the individual or 
individuals ``surviving the employee or Member and alive at the date 
title to the payment arises.'' The Board interprets this phrase to mean 
that the entitlement to a death benefit payment arises at the time of 
the participant's death and, therefore, a beneficiary must be alive at 
the time of the participant's death in order to receive a death 
benefit. Accordingly, under Sec. 1651.10(a), if a beneficiary 
designated on a Form TSP-3 or Form TSP-11-B dies before the 
participant, the beneficiary's share will be paid to the other living 
designated beneficiary(ies), if any, proportionally. For example, if 
the deceased beneficiary was designated to receive 50% of the account 
and the first living beneficiary was to receive 20% of the account and 
the second remaining beneficiary was to receive 30% of the account, the 
first living beneficiary would receive 40% of the deceased 
beneficiary's share of the account (20% + (20/50  x  50%)) and the 
second remaining beneficiary would receive 60% of the deceased 
beneficiary's share of the account (30% + (30/50  x  50%)). If there 
are no living designated beneficiaries, the account will be paid to the 
person(s) determined to be the beneficiary(ies) under the statutory 
order of precedence.
    Under Sec. 1651.10(b), if a trust or other entity that has been 
designated as the beneficiary of the participant's account does not 
exist on the date of death of the participant or if it is not created 
by will or other document to take effect upon the participant's death, 
the account will be paid under the statutory order of precedence.
    Under Sec. 1651.10(c), if a beneficiary by virtue of the order of 
precedence dies

[[Page 32428]]

before the participant, the beneficiary's share will be paid equally to 
other living beneficiary(ies) bearing the same relationship to the 
participant as the deceased beneficiary, unless the deceased 
beneficiary is a child of the beneficiary. In that case, the 
descendants of the deceased child would receive the deceased child's 
share of the account. If there are no other beneficiaries bearing the 
same relationship or there are no descendants of a deceased child, the 
deceased beneficiary's share will be paid to the person(s) next in 
line, according to the order of precedence.
    Because a beneficiary's interest in the death benefit is created 
upon the death of the participant, Sec. 1651.10(d) provides that if the 
beneficiary dies after the participant but before payment is made, the 
beneficiary's share will be paid to the beneficiary's estate.
    Consistent with the requirement that the beneficiary survive the 
participant, Sec. 1651.11 provides that if the participant and the 
beneficiary die simultaneously, the Board considers the beneficiary to 
have predeceased the participant and the account will be paid in the 
manner set forth in Sec. 1651.10. Death is considered to be 
simultaneous if the death certificate lists the same hour and minute 
for the time of death. In common disaster situations, such as an 
automobile or airplane crash, where a precise time of death cannot be 
established, it will be presumed that the beneficiary(ies) and the 
participant died simultaneously, unless the death certificate otherwise 
indicates.
    Section 1651.12 reflects the Board's policy of not paying the 
beneficiary of a TSP participant if the beneficiary is convicted of a 
crime in connection with the participant's death which would preclude 
the beneficiary from inheriting under state law. In this regard, the 
Board follows strong public policy which prohibits a person from 
profiting from his or her wrongdoing. The Board will follow the law of 
the state in which the participant was domiciled at the time of death 
as that law is set forth in a civil court judgment or, in the absence 
of such a judgment, will apply state law to the facts of the case after 
all criminal appeals have been exhausted. The civil court judgment must 
be one that, under the law of the state, would protect the Board from 
double liability or payment. The Board will treat that beneficiary as 
if he or she had predeceased the TSP participant and will determine the 
beneficiary(ies) of the account according to the procedures described 
in Sec. 1651.10. A plea of guilty to such a crime constitutes a 
conviction for purposes of these regulations.
    Section 1651.13 sets forth the procedure for applying for a death 
benefit payment. In order for a death benefit payment to be processed, 
the TSP record keeper must receive Form TSP-17, Application for Account 
Balance of Deceased Participant, with a certified copy of the 
participant's death certificate. A copy of a certified death 
certificate contains a copy of the stamp or seal of the state agency 
that is responsible for issuing death certificates. Form TSP-17 may be 
submitted by any potential beneficiary or any interested party; 
however, submission of an application does not entitle the applicant to 
benefits.
    Section 1651.14 explains how death benefit payments are made. 
Before a payment can be made, each beneficiary will be sent a notice of 
pending payment. That notice will contain information regarding the 
portion of the account that will be paid to the beneficiary and will 
provide information regarding the Federal tax consequences of the 
payment. Payment is made by separate check to each beneficiary. If 
payment is to the widow or widower of the participant, she or he may 
transfer all or a portion of the payment to an Individual Retirement 
Arrangement (IRA). The TSP record keeper will provide the widow or 
widower with a Form TSP-13-S, Spouse Election to Transfer to IRA or 
Other Eligible Retirement Plan, to request such a transfer. For 
purposes of transferring the account, the TSP record keeper will not 
accept forms from other institutions. If payment is to a minor child, 
the check will be made payable directly to the child. If payment is to 
the executor or administrator of an estate, the check will be made 
payable to the estate of the deceased participant. A taxpayer 
identification number (TIN) must be provided for any estate, regardless 
of whether the estate is required to pay taxes. This is necessary to 
allow the Board to fulfill its statutory reporting obligation to the 
Internal Revenue Service. If payment is to a trust, the check will be 
made payable to the trustee. A taxpayer identification number (TIN) 
must be provided for the trust.
    Certain types of issues relating to the processing of death cases 
will be decided by the Board as set forth in Sec. 1651.15. Those cases 
may involve conflicting claims to a participant's account, such as when 
one applicant claims that the participant was married at the time of 
death and another applicant claims that the participant was not married 
at the time of death. Other cases may involve the accuracy of the Form 
TSP-17 or the validity of Forms TSP-3, TSP-17, TSP-11-B, or a letter 
canceling a designation. The Board will also review challenges made to 
the legal status of a purported beneficiary. The Board may require that 
issues regarding paternity, the validity of a participant's marriage on 
the date of death, or other matters that traditionally fall under state 
law, be resolved by a state court before the Board issues payment.
    In some cases, the beneficiary of the account cannot be readily 
located, such as when the Board does not have a correct address for an 
estranged spouse or parent. These cases include both situations in 
which the name of the beneficiary is known, but his or her whereabouts 
are not, and situations in which the name of the beneficiary is not 
known. Section 1651.16 sets forth the process that will be followed 
when it appears that a beneficiary is missing.
    The TSP record keeper will make reasonable efforts to locate the 
missing beneficiary or to learn the name and location of a missing 
beneficiary. If the beneficiary has not been located and at least one 
year has passed since the date of death of the participant, that 
beneficiary will be treated as having predeceased the participant. 
However, if a potential beneficiary does not cooperate in the TSP 
record keeper's efforts to locate a missing beneficiary(ies), the 
missing beneficiary's share of the account will be treated as having 
been abandoned and it will revert to the TSP. In such circumstances, 
the missing beneficiary(ies) may reclaim the abandoned share of the 
account at a later date by submitting a Form TSP-17 and providing 
sufficient proof to establish his or her relationship to the 
participant. However, earnings will not be credited to any funds that 
have been abandoned.
    If the total number of beneficiaries and their identities are known 
and one or more, but not all, appear to be missing, payment of part of 
the participant's account may be made to the beneficiary(ies) whose 
location is known. If the Board is unable to locate any beneficiaries 
of the account, the account will be abandoned and the funds will be 
forfeited to the TSP. If a beneficiary is located at any time after the 
funds are forfeited to the TSP, the beneficiary may claim the entire 
account by submitting a Form TSP-17 and providing sufficient proof to 
establish his or her identity and relationship to the participant. 
However, earnings will not be credited to any funds that have been 
abandoned.

[[Page 32429]]

    The beneficiary of a TSP account may disclaim his or her right to 
receive the benefit in accordance with Sec. 1651.17. A disclaimer is 
irrevocable. The disclaimant cannot direct to whom the disclaimant's 
portion of the participant's account should be paid. The disclaimant 
must disclaim the entire benefit, not a portion. The disclaimant will 
be treated as having predeceased the participant for purposes of 
determining to whom the disclaimant's portion of the account is to be 
paid.
    Section 1651.18 provides that payment to a beneficiary made in 
accordance with these regulations bars any claim by another person.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities.

Paperwork Reduction Act

    I certify that these regulations do not require additional 
reporting under the criteria of the Paperwork Reduction Act of 1980.

Submission to Congress and the General Accounting Office

    Under section 801(a)(1)(A) of the Administration Procedure Act 
(APA), as amended by the Regulatory Enforcement Fairness Act of 1996, 
Pub. L. 104-121, title II, 110 Stat. 847, 857-875 (5 U.S.C. 
801(a)(1)(A)), the Board submitted a report containing this rule and 
other required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States 
before the publication of this rule in today's Federal Register. This 
rule is not a major rule as defined in section 804(2) of the APA as 
amended (5 U.S.C. 804(2)).

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, section 201, 
Pub. L. 104-4, 109 Stat. 48, 64, the effect of this regulation on 
State, local, and tribal governments and on the private sector has been 
assessed. This regulation will not compel the expenditure in any one 
year of $100 million or more by any State, local, and tribal 
governments in the aggregate or by the private sector. Therefore, a 
statement under section 202, 109 Stat. 48, 64-65, is not required.

List of Subjects in 5 CFR Part 1651

    Employee benefit plans, Government employees, Pensions, Retirement.
Roger W. Mehle,
Executive Director, Federal Retirement Thrift Investment Board.

    For the reasons set out in the preamble, the Federal Retirement 
Thrift Investment Board amends Chapter VI of title 5 of the Code of 
Federal Regulations by adding a new Part 1651 to read as follows:

PART 1651--DEATH BENEFITS

Sec.
1651.1  Definitions.
1651.2  Entitlement to benefits.
1651.3  Designation of beneficiary.
1651.4  Change or cancellation of a designation of beneficiary.
1651.5  Widow or widower.
1651.6  Child or children.
1651.7  Parent or parents.
1651.8  Participant's estate.
1651.9  Participant's next of kin.
1651.10  Deceased and non-existent beneficiaries.
1651.11  Simultaneous death.
1651.12  Homicide.
1651.13  How to apply for a death benefit.
1651.14  How payment is made.
1651.15  Claims referred to the Board.
1651.16  Missing and unknown beneficiaries.
1651.17  Disclaimer of benefits.
1651.18  Payment to one bars payment to another.

    Authority: 5 U.S.C. 8424(d), 8433(e), 8435(c)(2), 8474(b)(5) and 
8474(c)(1).


Sec. 1651.1  Definitions.

    Terms used in this part shall have the following meanings:
    Beneficiary means the person or legal entity who is entitled to 
receive a death benefit from a deceased participant's TSP account;
    Board means the Federal Retirement Thrift Investment Board;
    Death benefit means all or a share of the deceased participant's 
TSP account at the time of payment;
    Domicile means the participant's place of residence for purposes of 
state income tax liability;
    Order of precedence means the order in which a death benefit will 
be paid, as specified in 5 U.S.C. 8424(d);
    Participant means any person with an account in the Thrift Savings 
Fund;
    Thrift Savings Fund means the Fund described in 5 U.S.C. 8437;
    Thrift Savings Plan or TSP means the Federal Retirement Thrift 
Savings Plan established by the Federal Employees' Retirement System 
Act of 1986, codified in pertinent part at 5 U.S.C. 8431 et seq.;
    TSP record keeper means the entity that is engaged by the Board to 
perform record keeping service for the Thrift Savings Plan. As of June 
13, 1997, the TSP record keeper is the National Finance Center, United 
States Department of Agriculture, whose mailing address is National 
Finance Center, TSP Service Office, P.O. Box 61135, New Orleans, 
Louisiana 70161-1135;
    Withdrawal election means a request for the payment of a 
participant's vested account balance filed under 5 CFR 1650, subpart B.


Sec. 1651.2  Entitlement to benefits.

    (a) Death benefit payments made before the participant has 
completed a withdrawal election. If a participant dies before 
completing a withdrawal election, the account will be paid to the 
individual or individuals surviving the participant in the following 
order of precedence:
    (1) To the beneficiary or beneficiaries designated by the 
participant on a properly completed and filed Form TSP-3, Designation 
of Beneficiary, in accordance with Sec. 1651.3;
    (2) If there is no designated beneficiary, to the widow or widower 
of the participant in accordance with Sec. 1651.5;
    (3) If none of the above in paragraphs (a)(1) and (a)(2) of this 
section, to the child or children of the participant and descendants of 
deceased children by representation in accordance with Sec. 1651.6;
    (4) If none of the above in paragraphs (a)(1) through (a)(3) of 
this section, to the parents of the participant or the surviving one of 
them in accordance with Sec. 1651.7;
    (5) If none of the above in paragraphs (a)(1) through(a)(4) of this 
section, to the duly appointed executor or administrator of the estate 
of the participant in accordance with Sec. 1651.8;
    (6) If none of the above in paragraphs (a)(1) through (a)(5) of 
this section, to the next of kin of the participant who are entitled 
under the laws of the state of the participant's domicile at the date 
of the participant's death in accordance with Sec. 1651.9.
    (b) Death benefit payments made after the participant has completed 
a withdrawal election. (1) The death benefit will be paid in accordance 
with the order of precedence as set forth in paragraph (a) of this 
section if the Board learns that the participant has died after having 
completed an election to withdraw his or her TSP account balance in the 
form of a single payment or monthly payments (whether or not the 
participant has requested that all or part of such payments be 
transferred to an eligible retirement plan), but the

[[Page 32430]]

account balance has not yet been paid out in accordance with such 
election.
    (2) The death benefit will be paid as a single payment to the joint 
life annuitant if the Board learns that the participant has died after 
having completed an election to withdraw his or her TSP account balance 
in the form of a joint life annuity, but the annuity has not yet been 
purchased.
    (3) The death benefit will be paid pro rata as a single payment to 
the beneficiary(ies) designated on Form TSP-11-B, Beneficiary 
Designation for a TSP Annuity, if both the participant and the joint 
annuitant die after the par ticipant has completed an election to 
withdraw his or her TSP account balance in the form of a joint life 
annuity that includes a cash refund, but before the annuity has been 
purchased.
    (4) The death benefit will be paid in accordance with the order of 
precedence as set forth in paragraph (a) of this section, if the Board 
learns that--
    (i) Both the participant and the joint annuitant have died after 
the participant has completed an election to withdraw his or her TSP 
account balance in the form of a joint life annuity that does not 
include a cash refund, but the annuity has not yet been purchased; or
    (ii) Both the beneficiary(ies) named under a cash refund election 
and the joint annuitant have died after the participant has completed 
an election to withdraw, but the annuity has not yet been purchased.
    (5) The death benefit will be paid pro rata to the beneficiary(ies) 
designated on the Form TSP-11-B if the Board learns that the 
participant has died after having completed an election to withdraw his 
or her TSP account balance in the form of a single life annuity that 
includes either a cash refund or 10-year certain feature, but the 
annuity has not yet been purchased.
    (6) The death benefit will be paid in accordance with the order of 
precedence set forth in paragraph (a) of this section if the Board 
learns that the participant and all beneficiaries designated on a Form 
TSP-11-B have died after the participant has completed an election to 
withdraw his or her TSP account balance in the form of a single life 
annuity that includes either a cash refund or a 10-year certain 
feature, but the annuity has not yet been purchased.
    (7) The death benefit will be paid in accordance with the order of 
precedence as set forth in paragraph (a) of this section if a 
participant dies after having completed an election to withdraw his or 
her TSP account balance in the form of a single life annuity that does 
not include either a cash refund or 10-year certain feature, but before 
the annuity has been purchased.
    (8) If a participant dies after the annuity purchase has been 
completed, benefit payments will be provided in accordance with the 
annuity method selected.


Sec. 1651.3  Designation of beneficiary.

    (a) Filing requirements. In order to designate a beneficiary of a 
TSP account, the participant must complete and file Form TSP-3, 
Designation of Beneficiary, unless Form TSP-11-B is used for this 
purpose. All Forms TSP-3 and TSP-11-B signed on or after January 1, 
1995, must be received by the TSP record keeper on or before the 
participant's date of death. If the Form TSP-3 was received and 
accepted by the participant's employing agency before January 1, 1995, 
the TSP record keeper will process it and determine its validity when 
it is received from the employing agency. A valid Form TSP-3 remains in 
effect until it is properly canceled or changed as described in 
Sec. 1651.4.
    (b) Eligible beneficiaries. Any individual, firm, cor poration, or 
legal entity, including the U.S. Government, may be designated as a 
beneficiary. Any number of beneficiaries can be named to share the 
death benefit. A beneficiary may be designated without the knowledge or 
consent of the beneficiary or the knowledge or consent of the 
participant's spouse.
    (c) Validity requirements. In order to be valid, a Form TSP-3 must 
be signed by the participant in the presence of two witnesses, or the 
participant must acknowledge his or her signature on the Form TSP-3 in 
the presence of two wit nesses. A witness must be age 21 or older, and 
a witness designated as a beneficiary on the Form TSP-3 will not be 
entitled to receive a death benefit payment. If a witness is the only 
named beneficiary, the Form TSP-3 is invalid. If more than one 
beneficiary is named, the share of the witness beneficiary will be 
allocated among the remaining beneficiaries pro rata.
    (d) Will. A will, or any document other than Form
    TSP-3 or Form TSP-11-B, may not be used to designate a 
beneficiary(ies) of a TSP account.


Sec. 1651.4  Change or cancellation of a designation of beneficiary.

    (a) Change. In order to change a designation of beneficiary, the 
participant must properly complete a new Form TSP-3, which must be 
received by the TSP record keeper on or before the date of death of the 
participant under the same rules as set forth in Sec. 1651.3(a). The 
TSP record keeper will honor the Form TSP-3 with the latest date signed 
by the participant which is otherwise valid under the rules set forth 
in Sec. 1651.3. A change of beneficiary may be made at any time and 
without the knowledge or consent of the participant's spouse or any 
current or prior designated beneficiaries.
    (b) Cancellation. A participant may cancel all prior designations 
of beneficiaries by sending the TSP record keeper either a new valid 
Form TSP-3 or a letter, signed and dated by the participant and 
witnessed in the same manner as a Form TSP-3, stating that all prior 
designations are can celed. In order to be effective, either of these 
documents must be received by the TSP record keeper on or before the 
date of death of the participant in accordance with the rules set forth 
in Sec. 1651.3(a). The filing of either of these documents will cancel 
all earlier designations.
    (c) Will. A will, or any document other than Form TSP-3 or Form 
TSP-11-B, may not be used to change or cancel a beneficiary(ies) of a 
TSP account.


Sec. 1651.5  Widow or widower.

    For purposes of payment under Sec. 1651.2(a)(2), the widow or 
widower of the participant is the person to whom the participant is 
married on the date of death. A person is considered to be married even 
if the parties are separated, unless a court decree of divorce or 
annulment has been entered. State law of the participant's domicile 
will be used to determine whether the participant was married at the 
time of death.


Sec. 1651.6  Child or children.

    If the account is to be paid to the child or children, or to 
descendants of deceased children by representation, as provided in 
Sec. 1651.2(a)(3), the following rules apply:
    (a) Child. A child includes a natural or adopted child of the 
deceased participant.
    (b) Descendants of deceased children. ``By representation'' means 
that, if a child of the participant dies before the participant, all 
descendants of the deceased child at the same level will equally divide 
the deceased child's share of the participant's account.
    (c) Adoption by another. A natural child of a TSP participant who 
has been adopted by someone other than the participant during the 
participant's lifetime will not be considered the child of the 
participant, unless the adopting parent is the spouse of the TSP 
participant.

[[Page 32431]]

Sec. 1651.7  Parent or parents.

    If the account is to be paid to the participant's parent or parents 
under Sec. 1651.2(a)(4), the following rules apply:
    (a) Amount. If both parents are alive at the time of the 
participant's death, each parent will be separately paid fifty percent 
of the account. If only one parent is alive at the time of the 
participant's death, he or she will receive the entire account balance.
    (b) Step-parent. A step-parent is not considered a parent unless 
the step-parent adopted the participant.


Sec. 1651.8  Participant's estate.

    If the account is to be paid to the duly appointed executor or 
administrator of the participant's estate under Sec. 1651.2(a)(5), the 
following rules apply:
    (a) Appointment by court. The executor or administrator must 
provide documentation of court appointment.
    (b) Appointment by operation of law. If state law provides 
procedures for handling small estates, the Board will accept the person 
authorized to dispose of the assets of the deceased participant under 
those procedures as a duly appointed executor or administrator. 
Documentation which demonstrates that the person is properly authorized 
under state law must be submitted to the TSP record keeper.


Sec. 1651.9  Participant's next of kin.

    If the account is to be paid to the participant's next of kin under 
Sec. 1651.2(a)(6), the next of kin of the participant will be 
determined in accordance with the state law of the participant's 
domicile at the time of death.


Sec. 1651.10  Deceased and non-existent beneficiaries.

    (a) Designated beneficiary dies before participant. The share of 
any beneficiary designated on a Form TSP-3 or Form TSP-11-B who 
predeceases the participant will be paid pro rata to other designated 
beneficiary(ies). If there are no designated beneficiaries who survive 
the participant, the account will be paid to the person(s) determined 
to be the beneficiary(ies) under the order of precedence set forth in 
Sec. 1651.2(a).
    (b) Trust designated as beneficiary but not in existence. If a 
trust or other entity that has been designated as a beneficiary does 
not exist on the date of death of the participant, or if it is not 
created by will or other document that is effective upon the 
participant's death, the amount will be paid in accordance with the 
rules of paragraph (a) of this section, as if the trust were a 
beneficiary that predeceased the participant.
    (c) Non-designated beneficiary dies before participant. If a 
beneficiary other than a beneficiary designated on a Form TSP-3 or a 
Form TSP-11-B (i.e., a beneficiary by virtue of the order of 
precedence) dies before the participant, the beneficiary's share will 
be paid equally to other living beneficiary(ies) bearing the same 
relationship to the participant as the deceased beneficiary. However, 
if the deceased beneficiary is a child of the participant, payment will 
be made to the deceased child's descendants, if any. If there are no 
other beneficiaries bearing the same relationship or, in the case of 
children, there are no descendants of deceased children, the deceased 
beneficiary's share will be paid to the person(s) next in line 
according to the order of precedence.
    (d) Beneficiary dies after participant but before payment. If a 
beneficiary dies after the participant, the beneficiary's share will be 
paid to the beneficiary's estate.
    (e) Death certificate. A copy of a beneficiary's certified death 
certificate is required in order to establish that the beneficiary has 
died.


Sec. 1651.11  Simultaneous death.

    If a beneficiary dies at the same time as the participant, the 
beneficiary will be treated as if he or she predeceased the participant 
and the account will be paid in accordance with Sec. 1651.10. The same 
time is considered to be the same hour and minute as indicated on a 
death certificate. If the participant and beneficiary are killed in the 
same event, death is presumed to be simultaneous, unless evidence is 
presented to the contrary.


Sec. 1651.12  Homicide.

    If the participant's death is the result of a homicide, a 
beneficiary will not be paid as long as the beneficiary is under 
investigation by local, state or Federal law enforcement authorities as 
a suspect. If the beneficiary is convicted of, or pleads guilty to, a 
crime in connection with the participant's death which would preclude 
the beneficiary from inheriting under state law, the beneficiary will 
not be entitled to receive any portion of the participant's account. 
The Board will follow the state law of the participant's domicile as 
that law is set forth in a civil court judgment (that, under the law of 
the state, would protect the Board from double liability or payment) 
or, in the absence of such a judgment, will apply state law to the 
facts after all criminal appeals are exhausted. The Board will treat 
the beneficiary as if he or she predeceased the participant and the 
account will be paid in accordance with Sec. 1651.10.


Sec. 1651.13  How to apply for a death benefit.

    In order for a deceased participant's account to be disbursed, the 
TSP record keeper must receive Form TSP-17, Application for Account 
Balance of Deceased Participant. Any potential beneficiary or other 
individual can file Form TSP-17 with the TSP record keeper. The 
individual submitting Form TSP-17 must attach a copy of a certified 
death certificate of the participant to the application. The acceptance 
of an application by the TSP record keeper does not entitle the 
applicant to benefits.


Sec. 1651.14  How payment is made.

    (a) Notice. The TSP record keeper will send notice of pending 
payment to each beneficiary.
    (b) Payment. Payment is made separately to each entitled 
beneficiary. It will be sent to the address that is provided on Form 
TSP-3, unless a more recent address is provided on Form TSP-17, or is 
otherwise provided to the TSP record keeper in writing by the 
beneficiary. All beneficiaries must provide the TSP record keeper with 
a taxpayer identification number; i.e., Social Security number (SSN), 
employee identification number (EIN), or individual taxpayer 
identification number (ITIN), as appropriate.
    (c) Payment to widow or widower. The widow or widower of the 
participant may request that the TSP transfer all or a portion of the 
payment to an Individual Retirement Arrangement (IRA). In order to 
request such a transfer, a spouse must file with the TSP record keeper 
Form TSP-13-S, Spouse Election to Transfer to IRA and Other Eligible 
Retirement Plan.
    (d) Payment to minor child or incompetent beneficiary. Payment will 
be made in the name of a minor child or incompetent beneficiary. A 
parent or other guardian may direct where the payment should be sent 
and may make any permitted tax withholding election. A guardian of a 
minor child or incompetent beneficiary must submit court documen tation 
showing his or her appointment as guardian.
    (e) Payment to executor or administrator. If payment is to the 
executor or administrator of an estate, the check will be made payable 
to the estate of the deceased participant, not to the executor or 
administrator. A TIN must be provided for all estates.
    (f) Payment to trust. If payment is to a trust, the check will be 
made payable to the trustee. A TIN must be provided for the trust.

[[Page 32432]]

Sec. 1651.15  Claims referred to the Board.

    (a) Contested claims. Any challenge to a proposed death benefit 
payment must be filed in writing with the TSP record keeper before 
payment. All contested claims will be referred to the Board. The Board 
may also consider issues on its own.
    (b) Payment deferred. No payment will be made until the Board has 
resolved the claim.


Sec. 1651.16  Missing and unknown beneficiaries.

    (a) Locate and identify beneficiaries. (1) The TSP record keeper 
will attempt to identify and locate all potential beneficiaries.
    (2) If a beneficiary is not identified and located, and at least 
one year has passed since the date of the participant's death, the 
beneficiary will be treated as having predeceased the participant and 
the beneficiary's share will be paid in accordance with Sec. 1651.10
    (b) Payment to known beneficiaries. If all potential beneficiaries 
are known but one or more beneficiaries (and not all) appear to be 
missing, payment of part of the participant's account may be made to 
the known beneficiaries. The lost or unidentified beneficiary's share 
may be paid in accordance with paragraph (a) of this section at a later 
date.
    (c) Abandoned account. If no beneficiaries of the account are 
located, the account will be considered abandoned and the funds will 
revert to the TSP. If there are multiple beneficiaries and one or more 
of them refuses to cooperate in the Board's search for the missing 
beneficiary, the missing beneficiary's share will be considered 
abandoned. In such circumstances, the account can be reclaimed if the 
missing beneficiary is found at a later date. However, earnings will 
not be credited from the date the fund is abandoned. The beneficiary 
will be required to submit Form TSP-17 and may be required to submit 
proof of his or her identity and relationship to the participant.


Sec. 1651.17  Disclaimer of benefits.

    (a) Disclaimer criteria. The beneficiary of a TSP account may 
disclaim his or her right to receive the account. In order to be 
effective, the following criteria must be met:
    (1) The disclaimer must be in writing. The writing must state 
specifically that the beneficiary is disclaiming his or her right to 
receive a death benefit payment from the TSP account of the 
participant.
    (2) The disclaimer must be irrevocable.
    (3) The disclaimer must be received by the TSP record keeper before 
payment is made.
    (4) The disclaimant cannot direct to whom the disclaimant's portion 
of the participant's account should be paid.
    (5) The disclaimant must disclaim the entire benefit, not a 
portion.
    (b) Treatment of disclaimed share. The disclaimant will be treated 
as having predeceased the participant and his or her share will be paid 
in accordance with Sec. 1651.10.


Sec. 1651.18  Payment to one bars payment to another.

    Payment made to a beneficiary(ies) in accordance with this part, 
based upon information received before payment, bars any claim by any 
other person.

[FR Doc. 97-15463 Filed 6-12-97; 8:45 am]
BILLING CODE 6760-01-P