How is the death benefit in a TSA taxed to the employee's beneficiary?

The death benefit in a TSA is taxed as a death benefit under a qualified pension or profit sharing plan, except there is no special treatment for a lump-sum payment. If the death benefit is a single-sum payment without life insurance proceeds, all amounts are taxed as ordinary income but the beneficiary may exclude the following from his or her gross income: Up to $5000 as a death benefit exclusion (if all is received in one taxable year) The employee's recovered cost basis (if any) Recovered cost basis is generally all of the employee's nondeductible contributions to the TSA. If the death benefit consists of life insurance, the proceeds in excess of the cash surrender value of the policy are excludable from the beneficiary's gross income. The cash surrender value is ordinary income to the extent it exceeds: The portion of the premiums taxed to the employee as being the cost of insurance protection (PS-58 costs) Any unrecovered cost basis of the employee Up to $5000 as a death benefit exclusion Since they are both retirement plans, what advantages does a TSA have over an IRA? TSAs resemble IRAs in many ways. However, several features make TSAs more attractive. First, the ceiling for contribution is 20 percent of includable compensation. Additional makeup provisions allow older employees to "make up" the years when they did not contribute their maximum. Also, many TSA plans allow participants to borrow from their plans.