Page 93 - The Informed Fed--Hearn (edited 10.29.20)

If the estate is larger than that, the Roth IRA will be taxable to
beneficiaries (other than surviving spouses). Non-spouse beneficiaries
are not allowed to make additional contributions to the inherited Roth
IRA or combine it with their own Roth IRA. In addition, the beneficiary
may elect to choose from one of two methods of distribution. The first
option is to receive the entire distribution by December 31 of the fifth
year following the year of the IRA owner’s death. The second option is
to receive portions of the IRA as distributions over the life of the
beneficiary, terminating upon the death of the beneficiary and passing
on to a secondary beneficiary. This lifetime distribution also known as a
“Stretch IRA Provision” was eliminated in 2020 due to the Secure
Retirement Act being place into law. The “Non-Spousal Beneficiary”
also known as a “Designated Beneficiary” will be subject to the new rule
to withdraw an inherited retirement account within 10 years of the date
the original owner dies. For income tax purposes, distributions from
Roth IRAs to beneficiaries are not taxable if the Roth IRA was
established for at least five years before the distribution occurs.
The TSP began accepting Roth TSP contributions on May 7, 2012.
Note that some participants have the ability to make Roth (after-tax)
contributions to their TSP accounts. These contributions have to be held
in a balance separate from traditional TSP contributions. This is because
traditional and Roth contributions have different tax treatments and the
two types of contributions and their gains (or losses) have to be
accounted for separately.

How does the Roth TSP compare to the traditional TSP?

Greg Long, the executive director of the Federal Retirement Thrift
Investment Board, says the one thing he wants all federal employee
investors to understand is that “the Roth IRA and the Roth TSP are two
very, very different things”. He said he wished they had different names,
because they are different in two very important ways.

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