Federal employees have access to excellent retirement and insurance benefits, but these benefits come with a planning challenge that many employees overlook: each benefit has its own beneficiary designation system, and none of them are controlled by your will. The Thrift Savings Plan, Federal Employees Retirement System survivor benefits, and Federal Employees’ Group Life Insurance all require separate paperwork filed with different offices. If these designations are outdated, incomplete, or inconsistent with your estate plan, your benefits may go to unintended recipients—regardless of what your will says.
Why Beneficiary Designations Override Your Will
Your TSP account, FEGLI life insurance, and FERS survivor benefits all pass by beneficiary designation, not through probate. This means the person or people named on your designation forms will receive these benefits—even if your will says something completely different. The TSP website states this explicitly: “We cannot honor a will or any other document.” The same principle applies to FEGLI. If you named your ex-spouse as your TSP beneficiary twenty years ago and never updated the form, your ex-spouse receives those funds, even if you remarried and your current spouse is named in your will. This happens more often than you might expect, and it creates painful situations for surviving families.
The Five Key Beneficiary Forms Federal Employees Should Know
Federal employees have several different beneficiary forms that control different benefits. Understanding which form controls which benefit is the first step toward coordinated planning. The TSP-3 designates beneficiaries for your Thrift Savings Plan account. SF-2823 controls your Federal Employees’ Group Life Insurance death benefits. SF-3102 (for FERS employees) or SF-2808 (for CSRS employees) designates beneficiaries for any lump sum retirement contributions that might become payable. SF-1152 determines who receives any unpaid compensation and unused annual leave if you die while employed. Each of these forms must be filed with the appropriate office and kept current. Your personnel office can help you obtain and submit these forms, but the responsibility for keeping them updated rests with you.
TSP Beneficiary Designations: Special Considerations
Your Thrift Savings Plan account may be one of your largest assets by the time you retire, making proper beneficiary designation essential. Under 5 CFR § 1651.3, you can designate up to twenty beneficiaries, including individuals, trusts, your estate, or other legal entities. If you designate your spouse as a beneficiary, TSP will set up a Beneficiary Participant Account for them after your death, allowing them to retain the investment advantages of the TSP rather than taking an immediate distribution. However, non-spouse beneficiaries generally cannot maintain a TSP account and must take distributions within specified timeframes.
One common mistake federal employees make is naming a revocable living trust as the TSP beneficiary without ensuring the trust has proper language for handling retirement account distributions. When a trust that lacks this language receives TSP funds and retains the income rather than distributing it to beneficiaries, that income is taxed at trust tax rates—which reach the highest marginal bracket at roughly $15,000 of taxable income, compared to over $600,000 for individuals filing jointly. This can result in significantly higher income taxes on distributions than if the funds had passed directly to individual beneficiaries. If you want to use a trust as your TSP beneficiary, work with an estate planning attorney to ensure your trust documents address retirement account distributions appropriately.
If you do not file a TSP-3 beneficiary designation, your account will be distributed according to a statutory order of precedence: first to your surviving spouse, then to your children equally (with the share of any deceased child going to that child’s descendants), then to your parents, then to the executor of your estate, and finally to your next of kin under state law. Note that “child” under TSP rules means a biological or adopted child—it does not include stepchildren unless you have legally adopted them.
FERS Survivor Benefits: The Decision That Affects Health Insurance
The Federal Employees Retirement System offers survivor annuity options that federal employees must elect at retirement. You can choose a full survivor annuity (50% of your unreduced annuity to your spouse, which reduces your retirement by 10%), a partial survivor annuity (25% to your spouse, reducing your retirement by 5%), or no survivor annuity. If you are married at retirement and want to elect anything other than the maximum survivor benefit, your spouse must consent in writing.
The survivor annuity decision has implications beyond income. If your surviving spouse does not receive a survivor annuity, they will not be eligible to continue Federal Employees Health Benefits coverage after your death—even if they were covered under your FEHB plan throughout your retirement. This makes the survivor annuity election critical for couples who rely on FEHB for health insurance coverage. Even if you do not think your spouse needs the income from a survivor annuity, electing at least a partial benefit may be necessary to preserve their access to health insurance. This is especially important if your spouse would not qualify for Medicare or would face coverage gaps without FEHB continuation.
For employees who die while still in federal service with at least 18 months of creditable service, a surviving spouse may be eligible for a Basic Employee Death Benefit. As of August 2025, this benefit equals 50% of the employee’s final salary (or average salary if higher) plus $42,607.52. The surviving spouse may also be entitled to a monthly survivor annuity if the employee had at least 10 years of creditable service.
FEGLI: Federal Life Insurance and the Order of Precedence
Federal Employees’ Group Life Insurance provides term life insurance coverage to eligible federal employees. Unlike private life insurance policies, FEGLI is governed entirely by federal law, which means state laws about insurance beneficiaries do not apply. If you want to designate specific beneficiaries for your FEGLI benefits, you must file SF-2823 with your human resources office (or with OPM if you are a retiree). The form requires two witnesses, and a witness cannot be a beneficiary. You can include a common disaster clause specifying that a beneficiary must survive you by up to 30 days to receive benefits, and you can name contingent beneficiaries who would receive benefits if your primary beneficiaries predecease you.
If you do not file a beneficiary designation (or if your designation is invalid), FEGLI benefits are paid according to a statutory order of precedence: first to your designated beneficiaries if valid, then to your surviving spouse, then to your children equally (with descendants of deceased children taking their share), then to your parents equally, then to the executor of your estate, and finally to your next of kin under state law. Note that “child” under FEGLI’s order of precedence means a biological or adopted child—stepchildren are not included unless they have been legally adopted.
A divorce does not automatically remove a former spouse from your FEGLI beneficiary designation. If you designated your spouse as your FEGLI beneficiary before your divorce and never updated the form, your former spouse will receive your FEGLI death benefits. This is true even if your divorce decree says your former spouse has no claim to your life insurance—FEGLI follows the beneficiary designation on file, not state court orders (unless a valid court order was filed with your employing agency before your death).
Coordinating Your Federal Benefits with Your Estate Plan
Estate planning for federal employees requires coordination between your beneficiary designations and your other estate planning documents. Start by gathering your current beneficiary designations for TSP, FEGLI, and retirement contributions. Review these designations alongside your will or trust to identify any inconsistencies. Consider whether the statutory order of precedence matches your wishes—if it does, you may not need to file separate designations, but filing them anyway ensures clarity and can speed up distribution to your beneficiaries.
If you have minor children, naming them directly as beneficiaries creates complications. Financial institutions cannot pay benefits directly to minors, so a court would need to appoint someone to manage the inheritance until the child reaches age 18 or 21. A better approach is to name a trust as the beneficiary or to name an adult custodian under the Uniform Transfers to Minors Act. For TSP accounts specifically, you should work with an estate planning attorney to ensure any trust beneficiary has appropriate provisions for receiving retirement account distributions without triggering unnecessary taxes.
Review your beneficiary designations whenever you experience a major life event: marriage, divorce, birth of a child, death of a beneficiary, or significant changes in your relationships. Also review them periodically even without a life change—beneficiary designations filed decades ago may no longer reflect your current wishes or circumstances. Your personnel office can help you verify what designations are currently on file and provide the forms needed to make updates.
Frequently Asked Questions
Can my will override my TSP or FEGLI beneficiary designation?
No. Beneficiary designations for TSP and FEGLI are controlled entirely by the designation forms on file with those programs. Your will cannot change who receives these benefits. The only way to change your beneficiaries is to file a new designation form with the appropriate office.
What happens to my spouse’s health insurance if I die without electing a survivor annuity?
If your spouse is not entitled to a survivor annuity, they will lose eligibility for Federal Employees Health Benefits coverage after your death. They may have a one-time opportunity to convert to private coverage with the same insurance provider, but this coverage is typically more expensive and may offer fewer benefits. Electing at least a partial survivor annuity preserves your spouse’s access to FEHB.
Does a divorce automatically remove my ex-spouse from my beneficiary designations?
No. A divorce does not change your TSP or FEGLI beneficiary designations. If your former spouse is still named as your beneficiary, they will receive those benefits upon your death unless you file new designation forms. This is true even if your divorce decree purports to waive your former spouse’s rights to these benefits.
Are my stepchildren automatically included as beneficiaries under the order of precedence?
No. Under both TSP and FEGLI rules, “child” means a biological child or a child you have legally adopted. Stepchildren are not included in the order of precedence unless you have adopted them. If you want stepchildren to receive your benefits, you must name them specifically on your beneficiary designation forms.
Where should I keep copies of my beneficiary designation forms?
Keep copies of all beneficiary designation forms in a secure location where your family can find them after your death. Your personnel office maintains the official records for active employees, and OPM maintains records for retirees, but having copies helps your family understand what benefits to expect and who should receive them. Consider keeping copies with your other estate planning documents and letting your family know where to find them.
About the Author: Kevin C. Martin is an experienced estate planning attorney who focuses on families with complex planning needs, including blended families, international clients, and clients relocating between jurisdictions. He serves clients in the D.C. metro area, Georgia, and Florida. To discuss your estate plan, schedule a consultation at kevinmartinlaw.com.