Federal Retirement Thrift Investment Board.
Proposed rule with request for comments.
The Executive Director of the Federal Retirement Thrift Investment Board (Board) proposes to amend the Thrift Savings Plan (TSP) regulations to accommodate new TSP lifecycle investment allocation funds, eliminate references to open seasons (which Congress repealed), and to require participants to file all death benefit beneficiary designation forms with the TSP record keeper. The Executive Director also proposes to remove obsolete and unhelpful provisions from the regulations, eliminate references to TSP form numbers, notify TSP participants of a new mailing address for loan payments, and otherwise make the regulations easier to understand.
Comments must be received on or before May 25, 2005.
Comments may be sent to Patrick J. Forrest, Federal Retirement Thrift Investment Board, 1250 H Street, NW., Washington, DC 20005. The Board's Fax number is (202) 942–1676.
Patrick J. Forrest on (202) 942–1661.
The Board administers the Thrift Savings Plan (TSP), which was established by the Federal Employees' Retirement System Act of 1986 (FERSA), Public Law 99–335, 100 Stat. 514. The TSP provisions of FERSA are codified, as amended, largely at 5 U.S.C. 8351 and 8401–79. The TSP is a tax-deferred retirement savings plan for Federal civilian employees and members of the uniformed services. The TSP is similar to cash or deferred arrangements established for private-sector employees under section 401(k) of the Internal Revenue Code (26 U.S.C. 401(k)).
The Executive Director proposes to amend TSP regulations to include references to the TSP “lifecycle funds,” which the TSP will offer to participants in mid-2005. In general, lifecycle funds are “target asset allocation portfolios” which hold a variety of investments including stable value, bond, and stock funds. The mix of these funds is chosen based on the date the investor expects to need the money in his or her account for retirement.
The assumption underlying lifecycle funds is that people with longer time horizons for investment are both willing and able to tolerate risk while seeking higher rates of return. A further assumption is that as people approach the time when they will begin to withdraw their assets from the Plan, their portfolios should be adjusted to reflect a lower tolerance for risk. Thus, a young person who is many years from retirement would have more of his or her account invested in a lifecycle fund containing investments with higher risk and higher potential returns (such as stocks), and less in low-risk, lower-return investments (such as Government securities). The investments in a lifecycle fund would be adjusted gradually and automatically to lower risk portfolios as the need for withdrawal approaches. This process is referred to as rebalancing.
Our analysis of TSP data shows that some TSP participants appear either to be “chasing” the latest returns or to be leaving their accounts unattended altogether, never rebalancing their portfolios. Some participants leave their entire account in the most conservative fund, the G Fund, when they may need the higher potential returns of the other funds to give them the retirement income they want. The evidence therefore suggests that many TSP participants could benefit from automatic professional asset allocation offered by a lifecycle fund.
The TSP lifecycle funds will invest only in the five funds currently offered by the TSP. We will not be adding new funds or asset classes. Thus, the lifecycle funds will be composed of various percentages of the G, F, C, S, and I Fund assets. The C, S, and I Funds will provide exposure to domestic and international equities, while the G and F Funds will provide fixed income and stable value investments.
Participation in the TSP lifecycle funds is voluntary, although the TSP strongly encourages every participant to consider the option. The TSP will make information available to participants that explain lifecycle funds in detail. Participants should read these materials closely before investing in one of the TSP lifecycle funds.
On December 21, 2004, the President signed into law the Thrift Savings Plan Open Seasons Act of 2004 (Pub. L. No. 108–469). That new law eliminates open seasons for the TSP and the restrictions on contribution elections that are tied to open seasons. The TSP will implement that law on July 1, 2005, and the Executive Director proposes to amend TSP regulations to explain the new rules under which participants can make TSP contribution elections after open seasons are eliminated.
The last TSP open season will run from April 15 through June 30, 2005. This means that participants may file contribution elections with their agencies or uniformed services at any time beginning April 15. Through June 30, these elections will be processed under the current rules. Beginning July 1, contribution elections will be processed under the new rules ú that is, an election will be effective the first full pay period after it is filed.
Participants will continue to file contribution elections with their agencies or services, and the agencies and services will continue to implement the elections by deducting contributions from participants' pay and reporting these amounts to the TSP each pay period.
The Open Season Act does not affect the waiting period that new employees covered by the Federal Employees' Retirement System must serve before they become eligible for agency contributions to their accounts. The Act also does not affect contribution allocations or interfund transfers, which can be made at any time by using the TSP Web site or the ThriftLine or by submitting an investment allocation form to the TSP.
Federal law requires the TSP to pay a deceased participant's account to the beneficiary or beneficiaries identified in a statutory order of precedence codified at 5 U.S.C. 8242(d).
Before 1995, a participant who was still employed by the Federal government was required to submit Form TSP–3 to his or her employing agency. Beginning on January 1, 1995, all TSP participants were required to submit Forms TSP–3 to the TSP record keeper; to be valid, the form must be received by the record keeper on or before the date of the participant's death. 5 CFR 1651.3(a). In addition to requiring all participants to submit the forms to the TSP record keeper, the new policy also required employing agencies
The TSP codified the new policy in TSP regulations at 5 CFR 1651.3 on June 13, 1997 (62 FR 32429), after proposing the regulation on March 27, 1997, and seeking public comment (61 FR 14653). The TSP also directly announced the new policy to employing agencies and participants. Specifically, the TSP mailed two “Thrift Savings Plan Bulletins” (Bulletins) to the TSP representatives of every employing agency and three editions of “Highlights for Thrift Savings Plan Participants” (Highlights) to every participant.
The Bulletins, dated November 22, 1994, and November 16, 1995, instructed employing agencies to search their files for Forms TSP–3 and to forward them to the TSP record keeper.
The Highlights, dated November 1994, November 1995, and May 1996, notified each participant of the policy change, including the requirement that employing agencies forward their Forms TSP–3 to the TSP record keeper. The Highlights also advised participants to review their participant statements to learn if their employing agencies had forwarded their forms to the record keeper. (Beginning in November 1995, every TSP participant statement states, on page 1, whether the TSP has received a Form TSP–3 for the participant, and if so, the date it was signed.) The Highlights also advised participants that they could file a new Form TSP–3 and that the TSP would honor the valid form with the latest date.
TSP regulations currently provide that the TSP will honor a Form TSP–3 if the participant's employing agency received it before 1995, as long as the TSP receives it before paying a death benefit. The TSP continued to accept the agency-filed forms to allow employing agencies sufficient opportunity to send them to the TSP. Employing agencies have had sufficient time to accomplish this task. In addition, in any case where an employing agency has not forwarded a participant's Form TSP–3 to the TSP, the TSP has informed the participant at least twice a year for 10 years on participant statements that it does not possess a beneficiary form for the participant. A reasonable participant who received that information and wished to designate a beneficiary would have filed a new Form TSP–3. Therefore, the Executive Director proposes to amend 5 CFR 1651.3(a) to provide that all TSP beneficiary designations must be made with a valid Form TSP–3 received by the TSP record keeper on or before the date of the participant's death.
The Executive Director proposes to remove obsolete provisions from the regulations, such as 5 CFR part 1606, which was no longer effective after August 31, 2003, and 5 CFR 1620.33, which regulated retirement plan decisions pertaining to employment changes made before August 10, 1996. The Executive Director also proposes to remove references to TSP form numbers from the regulations because they do not aid the reader and because the references require the TSP to amend its regulations whenever it changes form numbers. In addition, the Executive Director proposes to remove discussions of Federal income tax code provisions from the regulations because the TSP provides comprehensive tax information to participants and beneficiaries elsewhere, and because the references require the TSP to amends its regulations whenever TSP-related provisions of the tax laws are amended.
The Executive Director also proposes to simplify the regulations and make them more easily understood. For example, this proposed rule would simplify several provisions in Part 1605 of the TSP regulations to more clearly explain how the TSP and the employing agencies correct errors.
The TSP has established a new mailing address for use by participants to mail loan repayment checks to the TSP. The proposed regulations inform participants that they should use this address only for loan repayments and not mail correspondence to that address. The proposed regulations also inform participants that the TSP does not agree to accept less than the total amount due on the loan by negotiating an instrument such as a check, share draft or money order with a restrictive legend on it (such as “payment in full” or “submitted in full satisfaction of claims”), or by negotiating an instrument that is conditionally tendered to the TSP with an offer of compromise.
Finally, the Executive Director proposes to remove from the TSP regulations the references in section 1655.18(d) to the TSP's investigation of fraud and forgery allegations by spouses of participants. The TSP will continue to investigate these allegations, and may refer them to the United States Department of Justice for criminal prosecution and to an appropriate administrative agency for administrative action. However, it is not necessary to explain this process in the TSP regulations. This is because the TSP regulations explain to participants and beneficiaries their rights and obligations. The TSP investigates allegations of fraud or forgery only to preserve the integrity of the TSP loan and withdrawal programs, not to recover benefits for the individual who makes the allegation.
I certify that these regulations will not have a significant economic impact on a substantial number of small entities. They will affect only employees and former employees of the Federal Government.
I certify that these regulations do not require additional reporting under the criteria of the Paperwork Reduction Act of 1980.
Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532, the Agency has considered the effects of this regulation on state, local, and tribal governments and the private sector have been assessed. This regulation will not compel the expenditure in any one year of $100 million or more by state, local, and tribal governments, in the aggregate, or by the private sector. Therefore, the Agency is not required to prepare a written statement regarding these regulations under 2 U.S.C. 1532.
Employment benefit plans, Government employees, Pensions, Retirement.
Employment benefit plans, Government employees, Military personnel, Pensions, Retirement.
Administrative practice and procedure, Employment benefit plans, Government employees, Pensions, Retirement.
Employment benefit plans, Government employees, Pensions, Reporting and recordkeeping requirements, Retirement.
For the reasons set forth in the preamble, the Board proposes to amend 5 CFR chapter VI as follows:
1. The authority citation for part 1600 continues to read as follows:
5 U.S.C. 8351, 8432(a), 8432(b), 8432(j), 8474(b)(5) and (c)(1).
2. Amend § 1600.11 by removing “TSP's investment funds” from paragraph (b) and adding in its place “TSP Funds”.
3. Revise § 1600.12 to read as follows:
(a) An employee may make a contribution election at any time.
(b) A participant must submit a contribution election to his or her employing agency. To make an election, employees may use either the paper election form provided by the TSP, or, if available from their employing agency, electronic media. If an electronic medium is used, all relevant elements contained on the paper form must be included in the electronic medium.
(c) A contribution election must:
(1) Be completed in accordance with the instructions on the form, if a paper form is used;
(2) Be made in accordance with the employing agency's instructions, if the submission is made electronically; and
(3) Not exceed the maximum contribution limitations described in § 1600.22.
(d) A contribution election will become effective no later than the first full pay period after it is received by the employing agency.
4. Remove §§ 1600.13 through 1600.18.
5. Add a new § 1600.13 to read as follows:
(a)
(1) If the effective date of the appointment is any day during the period June 1 through November 30, the agency contributions must begin the first full pay period of the following June; and
(2) If the effective date of the appointment is any day during the period December 1 through May 31, the agency contributions must begin the first full pay period of the following December.
(b)
6. Add a new § 1600.14 to read as follows:
(a) If an employee appointed to a position covered by CSRS elects to transfer to FERS, the employee may make a contribution election at any time.
(b) Eligibility to make employee contributions, and therefore to have agency matching contributions made on the employee's behalf, is subject to the restrictions on making employee contributions after receipt of a financial hardship in-service withdrawal described at 5 CFR part 1650.
(c) If the employee had elected to make TSP contributions while covered by CSRS, the election continues to be valid until the employee makes a new valid election.
(d) Agency automatic (1%) contributions for all employees covered under this section and, if applicable, agency matching contributions attributable to employee contributions must begin the same pay period that the transfer to FERS becomes effective.
7. Revise § 1600.22 to read as follows:
(a)
(1)
(2)
(b)
(i) Is at least age 50 by the end of the calendar year;
(ii) Is making regular TSP contributions at a rate that will result in the participant making the maximum regular contributions permitted under paragraph (a) of this section; and
(iii) Does not exceed the annual limit on catch-up contributions contained in the Internal Revenue Code.
(2) Elections to make catch-up contributions shall be separate from the participant's regular contribution election.
(3) A participant who has both a civilian and a uniformed services account can make catch-up contributions to both accounts, but the total amount of the catch-up contributions to both accounts cannot exceed the Internal Revenue Code catch-up contribution limit for the year.
(4) Catch-up contributions are not eligible for matching contributions.
8. Remove § 1600.23.
9. Revise the part 1601 Part Heading to read as follows:
10. The Authority citation for part 1601 is revised to read as follows:
5 U.S.C. 8351, 8438, 8474(b)(5) and (c)(1).
11. Amend § 1601.1 by removing “the F Fund, C Fund, S Fund or I” from paragraph (b) and by inserting in its place “a TSP Fund other than the G”.
12. Amend § 1601.11 by removing “investment funds” wherever it appears and adding in its place “TSP Funds”.
13. Revise § 1601.12 to read as follows:
(a)
(b)
14. Amend § 1601.13 by revising paragraphs (a) and (b) to read as follows:
(a)
(1) Contribution allocations must be made in one percent increments. The sum of the percentages elected for all of the TSP Funds must equal 100 percent;
(2) The percentage elected by a participant for investment of future deposits in a TSP Fund will be applied to all sources of contributions and transfers (or rollovers) from traditional IRAs and eligible employer plans. A participant may not make different percentage elections for different sources of contributions;
(3) A participant who elects for the first time to invest in a TSP Fund other than the G Fund must execute an acknowledgment of risk in accordance with § 1601.33;
(4) All deposits made on behalf of a participant who does not have a contribution allocation in effect will be invested in the G Fund; and
(5) Once a contribution allocation becomes effective, it remains in effect until it is superseded by a subsequent contribution allocation. If a separated participant is rehired and had not withdrawn his or her entire TSP account, the participant's last contribution allocation before separation from service will be effective until a new allocation is made.
(b)
15. Amend § 1601.21 by removing “TSP's investment funds” and adding in its place “TSP Funds”.
16. Revise § 1601.22 to read as follows:
(a) Participants may make an interfund transfer using the TSP Web site or the ThriftLine, or by completing and filing the appropriate paper TSP form with the TSP record keeper in accordance with the form's instructions. The following rules apply to an interfund transfer request:
(1) Interfund transfer requests must be made in whole percentages (one percent increments). The sum of the percentages elected for all of the TSP Funds must equal 100 percent.
(2) The percentages elected by the participant will be applied to the balances in each source of contributions and to both tax-deferred and tax-exempt balances on the effective date of the interfund transfer.
(3) Any participant who elects to invest in a TSP Fund other than the G Fund for the first time must execute an acknowledgement of risk in accordance with § 1601.33.
(b) An interfund transfer request has no effect on deposits made after the effective date of the interfund transfer request; subsequent deposits will continue to be allocated among the investment funds in accordance with the participant's contribution allocation made under subpart B of this part.
(c) If an interfund transfer is found to be invalid pursuant to § 1601.34, the purported transfer will not be made. The TSP will provide the participant with a written statement of the reason the transaction was rejected.
17. Revise § 1601.32 to read as follows:
(a)
(1) A transaction request entered into the TSP record keeping system by a participant who uses the TSP Web site or the ThriftLine, or by a TSP Service Office participant service representative at the participant's request, at or before 12 noon eastern time of any business day, will ordinarily be posted that business day. A transaction request entered into the system after 12 noon eastern time of any business day will ordinarily be posted on the next business day.
(2) A transaction request made on the TSP Web site or the ThriftLine on a non-business day will ordinarily be posted on the next business day.
(3) A transaction request made on a paper TSP form will ordinarily be posted under the rules in paragraph (a)(1) of this section, based on when the TSP record keeper enters the form into the TSP system. The TSP record keeper ordinarily enters such forms into the system within 24 hours of their receipt.
(4) In most cases, the share price(s) applied to an interfund transfer request is the value of the shares on the date the relevant transaction is posted. In some circumstances, such as error correction, the share price(s) for an earlier date will be used.
(b)
(c)
(1) A transaction request submitted through the TSP Web site or the ThriftLine will take precedence over one that is submitted on a paper form.
(2) If one or more transaction requests are made through the TSP Web site or the ThriftLine, only the request entered by the participant at the latest time will be posted. The date and time of a transaction request made through the TSP Web site or the ThriftLine is the date and time (in Eastern time) that the participant confirms the percentages.
(3) If the transaction requests are submitted using paper TSP forms, the forms will be posted in the order the TSP record keeper receives them.
(d)
(1) A transaction cancellation request may be made on the TSP Web site or the ThriftLine only up to the deadline, described in paragraph (a) of this section, which applies to the original request. If the cancellation request is not received until after the deadline, the original transaction request will be processed as scheduled.
(2) A participant may also make a transaction cancellation request by submitting a letter to the TSP record keeper. To be effective, the TSP must receive and process the letter before the cutoff for the day the relevant transaction is submitted for processing. The letter must contain the following information to be processed:
(i) It must be signed, dated, contain the participant's name, Social Security number, and date of birth; and
(ii) It should state unambiguously the specific transaction the participant seeks to cancel.
(A) If the letter does not identify the specific transaction the participant seeks to cancel, the cancellation request will apply to any pending contribution allocation or interfund transfer request with a date (as determined under this paragraph (d)(2)) before the date of the cancellation letter.
(B) If the date of a cancellation letter is the same as the date of a pending transaction that was made on a paper TSP form, the form will be cancelled.
(C) A letter will be effective to cancel a Web site or ThriftLine transaction request only if the cancellation request specifies the date of the TSP Web site or ThriftLine transaction request.
(D) If there is no contribution allocation or interfund transfer pending when the written cancellation is processed by the TSP record keeper, the cancellation will have no effect. Cancellation letters will not be held until a contribution allocation or interfund transfer request is received.
18. Revise § 1601.33 to read as follows:
(a) A participant who wants to invest in a TSP Fund other than the G Fund must execute an acknowledgment of risk for that fund. If a required acknowledgment of risk has not been executed, no transactions involving the fund(s) for which the acknowledgment is required will be accepted.
(b) The acknowledgment of risk may be executed in association with a contribution allocation or an interfund transfer using the TSP Web site, the ThriftLine, or a paper TSP form.
19. Remove §§ 1601.34 and 1601.35 and redesignate § 1601.36 as § 1601.34.
20. Add a new subpart E to read as follows:
The Executive Director will establish TSP Lifecycle Funds, which are target date asset allocation portfolios. The TSP Lifecycle Funds will invest solely in the funds established by the TSP pursuant to 5 U.S.C. 8438.
21. The authority citation for part 1604 continues to read as follows:
5 U.S.C. 8440e, 8474(b)(5) and (c)(1).
22. Amend § 1604.2 by removing the definitions of “eligible retirement plan” and “TSP record keeper”.
23. Revise § 1604.3 to read as follows:
A service member may make contribution elections as described in 5 CFR part 1600. A service member may elect to contribute sums to the TSP from basic pay, incentive pay, and special pay (including bonuses). However, the service member must elect to contribute to the TSP from basic pay in order to contribute to the TSP from incentive pay and special pay (including bonuses). A service member may elect to contribute from special pay or incentive pay (including bonuses) in anticipation of receiving such pay (that is, he or she does not have to be receiving the special pay or incentive pay when the contribution election is made); those elections will take effect when the service member receives the special or incentive pay.
24. Amend § 1604.4 by revising paragraphs (a) and (b) to read as follows:
(a)
(b)
25. Amend § 1604.5 by revising paragraphs (a)(1) and (b)(3) to read as follows:
(a) * * *
(1) If a participant contributes to a service member account and a civilian account, the contributions to both accounts together cannot exceed the Internal Revenue Code (26 U.S.C.) contribution limits.
(b) * * *
(3) Transferred funds will be allocated among the TSP Funds according to the contribution allocation in effect for the account into which the funds are transferred.
26. Amend § 1604.7 by revising paragraph (c) to read as follows:
(c)
27. Amend § 1604.8 by revising paragraph (c) to read as follows:
(c)
28. Amend § 1604.9 by revising paragraph (c) to read as follows:
(c)
29. Amend § 1604.10 by removing paragraph (a)(4).
30. The authority citation for Part 1605 continues to read as follows:
5 U.S.C. 8351, 8432a, and 8474(b)(5) and (c)(1).
31. Amend paragraph (b) of § 1605.1 by removing the definitions of “Board error”, “Employing agency error”, and “Record keeper error”, and by adding a new definition of “Error” to read as follows:
(b) * * *
32. Revise § 1605.2 to read as follows:
(a) The TSP will calculate breakage on late contributions, makeup agency contributions, and loan payments as described by § 1605.15(b). This breakage calculation is subject to the following rules:
(1) The TSP will not calculate breakage if contributions or loan payments are posted within 30 days of the “as of” date, or if the total amount on a late payment record or the total agency contributions on a current payment record is less than $1.00; and
(2) The TSP will not take the participant's interfund transfers into account when determining breakage.
(b)
(1) For contributions or loan payments with “as of” dates on or after January 1, 2000, the TSP will:
(i) Use the participant's contribution allocation on file for the “as of” date to determine how the funds would have been invested. If there is no contribution allocation on file, or one cannot be derived based on the investment of contributions, the TSP will consider the finds to have been invested in the G Fund;
(ii) Determine the number of shares of the applicable investment funds the participant would have received had the contributions or loan payments been made on time. If the “as of” date is before TSP account balances were converted to shares, this determination will be the number of shares the participant would have received on the conversion date, and will include the monthly earnings the participant would have received had the contributions or loan payments been made on the “as of” date; and
(iii) Determine the dollar value on the posting date of the number of shares the participant would have received had the contributions or loan payments been made on time. The difference between the dollar value of the contribution or loan payment on the posting date and the dollar value of the contribution or loan payment on the “as of” date is the breakage.
(2) For contributions and loan payments with an “as of” date before January 1, 2000, the TSP will:
(i) Value the contributions and loan payments from the “as of” date through the date TSP accounts were converted to shares, by using the greater of either the G Fund monthly rate of return or the average monthly rate of return for all TSP Funds;
(ii) Determine the number of shares the participant would have received at conversion; and
(iii) Determine the dollar value of those shares on the posting date by using the greater of either the G Fund share price or the average share price for all of the TSP Funds. The difference between the dollar value of the contribution or loan payment on the posting date and the dollar value of the contribution or loan payment on the “as of” date is the breakage.
(c)
(d)
(e)
33. Amend § 1605.11 by revising paragraphs (c)(5), (c)(6) and (c)(8) to read as follows:
(c) * * *
(5) Employee makeup contributions will be invested in accordance with the participant's current contribution allocation. The number of shares of each TSP Fund that will be purchased will be determined by dividing the amount of the makeup contributions by the share price of the applicable fund(s) on the posting date.
(6) Employee makeup contributions will be included for purposes of applying the annual limit contained in Internal Revenue Code (I.R.C.) section 402(g) (26 U.S.C. 402(g)(1)). For purposes of applying that limit, employee makeup contributions will be applied against the limit for the year of the “as of” date.
(i) Before establishing a schedule of employee makeup contributions, the employing agency must review any schedule proposed by the affected participant, as well as the participant's prior TSP contributions, if any, to determine whether the makeup contributions, when combined with prior contributions for the same year, would exceed the annual contribution limit(s) contained in I.R.C. section 402(g) for the year(s) with respect to which the contributions are being made.
(ii) The employing agency must not permit contributions that, when combined with prior contributions, would exceed the applicable annual contribution limit contained in I.R.C. section 402(g).
(8) A participant may elect to terminate a schedule of employee makeup contributions at any time, but a
34. Revise § 1605.12 to read as follows:
(a)
(b)
(1) To remove money from a participant's account, the employing agency must submit, for each attributable pay date involved, a negative adjustment record stating the attributable pay date and the amount, by source, of the erroneous contribution.
(2) A negative adjustment record may be for any part of the contributions made for the attributable pay date. However, for each source of contributions, the negative adjustment may not exceed the amount of contributions made for that date, less any prior negative adjustments for the same date.
(c)
(1) If the attributable pay date for the erroneous contribution is on or before the date TSP accounts were converted to shares (and on or after January 1, 2000), the TSP will, for each source of contributions and investment fund:
(i) Determine the dollar value of the amount to be removed by using the monthly returns for the applicable TSP Fund;
(ii) Determine the number of shares the dollar value determined in paragraph (c)(1)(i) of this section would have purchased on the conversion date; and
(iii) Multiply the price per share for the date the adjustment is posted by the number of shares calculated in paragraph (c)(1)(ii) of this section.
(2) If the attributable pay date of the negative adjustment is after the date TSP accounts were converted to shares, the TSP will, for each source of contributions and TSP Fund:
(i) Determine the number of shares that represent the amount of the contribution to be removed using the share price on the attributable pay date; and
(ii) Multiply the price per share on the date the adjustment is posted by the number of shares calculated in paragraph (c)(2)(i) of this section.
(d)
(1) If, on the posting date, the amount calculated under paragraph (c) of this section is equal to or greater than the amount of the proposed negative adjustment, the full amount of the adjustment will be removed from the participant's account and returned to the employing agency. Earnings on the erroneous contribution will remain in the participant's account;
(2) If, on the posting date, the amount calculated under paragraph (c) of this section is less than the amount of the proposed negative adjustment, the amount of the adjustment, reduced by the investment loss, will be removed from the participants account and returned to the employing agency. However, the employing agency must refund to the participant the full amount of the erroneous contribution;
(3) If an employing agency requests the removal of erroneous employee contributions from a participant's account, it must also request the removal, under paragraph (e) of this section, of any attributable agency matching contributions; and
(4) If all employee contributions are removed from a participant's account under the rules set forth in this section, the earnings attributable to those contributions will remain in the account until the participant removes them with an in-service or a post-employment withdrawal. If the participant is not eligible to maintain a TSP account, the employing agency must submit an employee data record to the TSP indicating that the participant has separated from Federal service (this will allow the TSP-ineligible participant to make a post-employment withdrawal election).
(e)
(1) The amount calculated under paragraph (c) of this section will be removed from the participant's account.
(2) Erroneous employer contributions will be returned to the employing agency only if the negative adjustment record is posted by the TSP record keeper within one year of the date the erroneous contribution was posted. If one year or more has elapsed when the negative adjustment record is posted, the amount computed under paragraph (c) of this section will be removed from the participant's account and used to offset TSP administrative expenses;
(3) If the erroneous contribution has been in the participant's account for less than one year when the negative adjustment record is posted and the amount computed under paragraph (c) of this section is equal to or greater than the amount of the adjustment, the employing agency will receive the full amount of the erroneous contribution. Any earnings attributable to the erroneous contribution will be removed from the participant's account and used to offset TSP administrative expenses;
(4) If the erroneous contribution has been in the participant's account for less than one year when the negative adjustment record is posted and the amount computed under paragraph (c) of this section is less than the amount of the adjustment, the employing agency will receive the amount of the erroneous contribution reduced by the investment loss; and
(5) An employing agency's obligation to submit negative adjustment records to remove erroneous contributions from a participant's account is not affected by the length of time the contributions have been in the account.
(f)(1) If multiple negative adjustments for the same attributable pay date for a participant are posted on the same business day, the amount removed from the participant's account and used to offset TSP administrative expenses or returned to the employing agency will be determined separately for each adjustment. Earnings and losses for erroneous contributions made on different dates will not be netted against each other. In addition, for a negative adjustment for any attributable pay date, gains and losses from different sources of contributions or different TSP Funds will not be netted against each other. Instead, for each attributable pay date each source of contributions and each TSP Fund will be treated separately for purposes of these calculations. The amount computed by application of the
(2) If there is insufficient money in the same source of contributions to cover the amount to be removed or the amount of the requested adjustment, the negative adjustment record will be rejected.
35. Amend § 1605.13 by revising paragraphs (a)(2)(ii), (a)(3), (b)(3), and (d) to read as follows:
(a) * * *
(2) * * *
(ii) Instead of making contributions for the period of separation in accordance with the reinstated contribution election, the participant may submit a new contribution election if he or she would have been eligible to make such an election but for the erroneous separation.
(3) All contributions made under this paragraph (a) and associated breakage will be invested according to the participant's contribution allocation on the posting date. Breakage will be calculated using the G Fund share prices in accordance with § 1605.2 unless otherwise required by the employing agency or the court or other tribunal with jurisdiction over the back pay case.
(b) * * *
(3) All contributions under this paragraph (b) and associated breakage will be posted to the participant's account based on the participant's contribution allocation on the posting date. Breakage will be calculated in accordance with § 1605.2.
(d)
36. Amend § 1605.14 by removing the word “excess” from the last sentence of paragraph (a)(1) and by revising paragraphs (b)(4), (b)(5), and (c)(3) to read as follows:
(b) * * *
(4) If the retirement coverage correction is a FERCCA correction, the employing agency must submit makeup employee contributions on late payment records. The participant is entitled to breakage on contributions from all three sources. Breakage will be calculated pursuant to § 1605.2. If the retirement coverage correction is not a FERCCA correction, the employing agency must submit makeup employee contributions on current payment records; in such cases, the employee is not entitled to breakage. Agency makeup contributions may be submitted on either current or late payment records; and
(5) If employee contributions were made up before [the date Office of Personnel Management (OPM) implemented its regulations on FERCCA correction], and the correction is considered to be a FERCCA correction, OPM may calculate pursuant to its regulations a dollar amount to replicate breakage, and transmit the dollar amount to the employing agency for transmission to the TSP record keeper.
(c) * * *
(3) The TSP will deem a participant to be separated from Federal service for all TSP purposes and the employing agency must submit an employee data record to reflect separation from Federal service. If the participant has an outstanding loan, it will be subject to the provisions of 5 CFR 1655.13. The participant may make a TSP post-employment withdrawal election pursuant to 5 CFR part 1650, subpart B, and the withdrawal will be subject to the provisions of 5 CFR 1650.60(b).
37. Amend § 1605.16 by revising paragraphs (a) and (b) to read as follows:
(a)
(b)
38. Revise § 1605.21 to read as follows:
(a)
(2) Errors warranting the crediting of breakage under paragraph (a)(1) of this section include, but are not limited to:
(i) Delay in crediting contributions or other monies to a participant's account;
(ii) Improper issuance of a loan or withdrawal payment to a participant or beneficiary which requires the money to be restored to the participant's account; and
(iii) Investment of all or part of a participant's account in the wrong investment fund(s).
(3) A participant will not be entitled to breakage under paragraph (a)(1) of this section if the participant had the use of the money on which the investment gains would have accrued.
(4) If the participant continued to have a TSP account, or would have continued to have a TSP account but for the Board or TSP record keeper error, the TSP will compute gains or losses under paragraph (a)(1) of this section for the relevant period based upon the
(b)
39. Amend § 1605.22 by revising paragraph (c)(2) to read as follows:
(c) * * *
(2) For errors involving contribution allocations or interfund transfers of which a participant or beneficiary has knowledge, he or she may file a claim for correction with the Board or TSP record keeper no later than 30 days after the TSP provides the participant with a transaction confirmation reflecting the error or makes available on its Web site a participant statement detailing the error. The Board or TSP record keeper must promptly correct such errors.
40. Amend § 1605.31 by revising paragraphs (b), (c)(1) and (d) to read as follows:
(a) * * *
(b)
(c) * * *
(1) The employee is entitled to receive the agency automatic (1%) contributions that he or she would have received had the employee remained in civilian service or pay status. Within 60 days of the employee's reemployment or restoration to pay status, the employing agency must calculate the agency automatic (1%) makeup contributions and report those contributions to the record keeper.
(d)
41. Remove and reserve part 1606.
42. The authority citation for part 1620 is revised to read as follows:
5 U.S.C. 8474(b)(5) and (c)(1).
Subpart C also issued under 5 U.S.C. 8440a(b)(7), 8440b(b)(8), and 8440c(b)(8).
Subpart D also issued under sec. 1043(b) of Pub. L. 104–106, 110 Stat. 186, and sec. 7202(m)(2) of Pub. L. 101–508, 104 Stat. 1388.
Subpart E also issued under 5 U.S.C. 8432b(1) and 8440e.
43. Amend § 1620.1 by removing “, waives open season rules,” from the third sentence.
44. Revise § 1620.2 to read as follows:
The definitions generally applicable to the Thrift Savings Plan are set forth at 5 CFR 1690.1.
45. Amend § 1620.12 by revising the third sentence to read as follows:
* * * The employing authority can commence or terminate employer contributions at any time after providing all affected employees with notice of a decision to commence or terminate such contributions at least 45 days before the beginning of the applicable election period. * * *
46. Revise the Subpart C heading to read as follows:
47. Amend § 1620.20 by adding the word “judge” to paragraphs (a)(2) and (b) after the word “magistrate”.
48. Amend § 1620.21 by adding the word “judge” to paragraph (b)(2) after the word “magistrate”, and by revising paragraph (a) to read as follows:
(a) An individual covered under this subpart can make contributions to the TSP from basic pay in the amount described at 5 CFR 1600.22(a)(1). Unless stated otherwise in this subpart, he or she is covered by the same rules that apply to a CSRS participant in the TSP.
49. Amend § 1620.22 by adding the word “judge” to paragraph (a)(2)(ii) after the word “magistrate”.
50. Amend § 1620.23 by revising paragraph (b) to read as follows:
(b) A current or former spouse of a bankruptcy judge, a United States magistrate judge, or a judge of the United States Court of Federal Claims, possesses the rights described at 5 U.S.C. 8435 and 8467 if the judge is covered under this subpart.
51. Remove and reserve § 1620.33.
52. Revise § 1620.42 to read as follows:
(a)
(b)
(c)
(1) If the employee had a valid contribution election on file when he or she separated or entered nonpay status to perform military service, that election form will be reinstated for purposes of determining the makeup contributions, unless the employee submits a new contribution election which he or she otherwise could have made but for the performance of military service.
(2) An employee who terminated contributions within two months of entering military service also will be eligible to make a retroactive contribution election to be effective on the date the contributions were terminated.
53. Revise § 1620.43 to read as follows:
(a)
(b)
(c)
54. Amend § 1620.45 by revising paragraphs (a)(1), (a)(2), (c)(2) and (d) to read as follows:
(a) * * *
(1) Interest will accrue on the loan balance during the period of suspension. When the employee returns to civilian pay status, the employing agency will resume the deduction of loan payments from the participant's basic pay and the TSP will reamortize the loan (which will include interest accrued during the period of military service). The maximum loan repayment term will be extended by the employee's period of military service. Consequently, when the employee returns to pay status, the TSP record keeper must receive documentation to show the beginning and ending dates of military service.
(2) The TSP may close the loan account and declare it to be a taxable distribution if the TSP does not receive documentation that the employee entered into nonpay status. However, the taxable distribution can be reversed in accordance with paragraph (c) of this section.
(c) * * *
(2) A taxable loan distribution can be reversed either by reinstating the loan or by repaying it in full. The TSP loan can be reinstated only if the employee agrees to repay the loan within the maximum loan repayment term plus the length of military service, and if, after reinstatement of the loan, the employee will have no more than two outstanding loans, only one of which is a residential loan; and
(d)
55. Amend § 1620.46 by revising paragraphs (b), (d) and (e) to read as follows:
(b)
(d)
(e)
56. The authority citation for part 1640 continues to read as follows:
5 U.S.C. 8439(c)(1) and (c)(2), 5 U.S.C. 8474(b)(5) and (c)(1).
57. Amend § 1640.3 by revising paragraph (f)(3) to read as follows:
(f) * * *
(3) The account balance and activity in each TSP Fund, including the dollar amount of the transaction, the share price, and the number of shares; and
58. Amend § 1640.4 by revising paragraphs (a)(5) and (b)(2) to read as follows:
(a) * * *
(5) Transfers among TSP Funds;
(b) * * *
(2) TSP Funds affected;
59. Amend § 1640.5 by revising the section heading and the first sentence of the introductory language to read as follows:
The Board will provide to each participant four (4) times each calendar year a statement concerning each of the TSP Funds. * * *
60. The authority citation for part 1645 continues to read as follows:
5 U.S.C. 8439(a)(3) and 8474.
61. Revise § 1645.2 to read as follows:
Contributions, loan payments, loan disbursements, withdrawals, interfund transfers, and other transactions will be posted in dollars and in shares by source and by TSP Fund to the appropriate individual account by the TSP record keeper, using the share price for the date the transaction is posted.
62. Revise § 1645.3 to read as follows:
(a) Each business day, net earnings will be calculated separately for each TSP Fund.
(b) Net earnings for each fund will equal:
(1) The sum of the following items, if any, accrued since the last business day:
(i) Interest on money of that fund which is invested in the Government Securities Investment Fund;
(ii) Interest on other short-term investments of the fund;
(iii) Other income (such as dividends, interest, or securities lending income) on investments of the fund; and
(iv) Capital gains or losses on investments of the fund, net of transaction costs.
(2) Minus the accrued administrative expenses of the fund, determined in accordance with § 1645.4.
(c) The net earnings for each TSP fund determined in accordance with paragraph (b) of this section will be added to the residual net earnings for that fund from the previous business day, as described in § 1645.5(b), to produce the total net earnings. The total net earnings will be used to calculate the share price for that business day.
63. Revise § 1645.4 to read as follows:
A portion of the administrative expenses accrued during each business day will be charged to each TSP Fund. A fund's respective portion of administrative expenses will be determined as follows:
(a) Accrued administrative expenses (other than those described in paragraph (b) of this section) will be reduced by accrued forfeitures and accrued earnings on forfeitures, abandoned accounts, and unapplied deposits;
(b) Investment management fees and other accrued administrative expenses attributable only to a particular fund will be charged solely to that fund.
(c) The amount of accrued administrative expenses not covered by forfeitures under paragraph (a) of this section, and not described in paragraph (b) of this section, will be charged on a pro rata basis to all TSP Funds, based on the respective fund balances on the last business day of the prior month end.
64. Revise § 1645.5 to read as follows:
(a)
(b)
65. Revise § 1645.6 to read as follows:
The total fund basis for a TSP Fund will be the sum of the number of shares in all individual accounts from all sources of contributions in that fund as of the opening of business on each business day.
66. The authority citation for part 1650 continues to read as follows:
5 U.S.C. 8531, 8433, 8434, 8435, 8474(b)(5) and 8474(c)(1).
67. Amend § 1650.1 by removing from paragraph (b) the definitions of “Eligible employer plan” and Traditional IRA”.
68. Revise § 1650.4 to read as follows:
By signing a TSP withdrawal form, electronically or on paper, the participant certifies, under penalty of perjury, that all information provided to the TSP during the withdrawal process is true and complete, including statements concerning the participant's marital status and, where applicable, the spouse's address at the time the application is filed or the current spouse's consent to the withdrawal.
69. Add a new § 1650.6 to read as follows:
(a) The TSP will cancel a pending withdrawal request if it processes a written notice that a participant is deceased. The TSP will also cancel an annuity purchase made on or after the participant's date of death but before annuity payments have begun, and the annuity vendor will return the funds to the TSP.
(b) If the TSP processes a withdrawal request before being notified that a participant is deceased, the funds cannot be returned to the TSP.
70. Amend § 1650.11 by adding a new paragraph (c) to read as follow:
(c) If a participant's vested account balance is less than $200 when he or she separates from Federal service, the TSP will automatically pay the balance to the participant at his or her TSP address of record. The participant will not be eligible for any other payment option or be allowed to remain in the TSP.
71. Amend § 1650.17 by revising paragraph (a) to read as follows and by removing the word “final” from the last sentence of paragraph (c) and adding in its place the word “fixed”:
(a)
72. Amend § 1650.24 by revising the first sentence to read as follows:
To request a post-employment withdrawal, a participant must submit to the TSP record keeper a properly completed paper TSP post-employment
73. Remove and reserve § 1650.25.
74. Amend § 1650.41 by revising the first sentence to read as follows:
To request an age-based withdrawal, a participant must submit to the TSP record keeper a properly completed paper TSP age-based withdrawal request form or use the TSP Web site to initiate a request. * * *
75. Amend § 1650.42(a) by revising the first sentence to read as follows:
(a) To request a financial hardship withdrawal, a participant must submit to the TSP record keeper a properly completed paper TSP hardship withdrawal request form or use the TSP Web site to initiate a request. * * *
76. Remove and reserve § 1650.43.
77. Amend § 1650.63 by revising paragraph (a) introductory text to read as follows:
(a) Whenever this subpart requires the Executive Director to give notice of an action to the spouse of a CSRS participant, an exception to this requirement may be granted if the participant establishes to the satisfaction of the Executive Director that the spouse's whereabouts cannot be determined. A request for such an exception must be submitted to the TSP record keeper on the appropriate TSP paper form, accompanied by the following:
78. The authority citation for part 1651 continues to read as follows:
5 U.S.C. 8424(d), 8432(j), 8433(e), 8435(c), 8474(b)(5) and 8474(c)(1).
79. Amend § 1651.2 by revising paragraphs (b) and (d) to read as follows:
(b)
(1) If the participant requested a single life annuity with no cash refund or 10-year certain feature, the TSP will pay the funds as a death benefit in accordance with paragraph (a) of this section.
(2) If the participant requested a single life annuity with a cash refund or 10-year certain feature, the TSP will pay the funds as a death benefit to the beneficiary or beneficiaries designated by the participant on the annuity portion of the TSP withdrawal request form, or as a death benefit in accordance with paragraph (a) of this section if no beneficiary designated on the withdrawal request survives the participant.
(3) If the participant requested a joint life annuity without additional features, the TSP will pay the funds as a death benefit to the joint life annuitant if he or she survives the participant, or as a death benefit in accordance with paragraph (a) of this section if the joint life annuitant does not survive the participant.
(4) If the participant requested a joint life annuity with a cash refund or 10-year certain feature, the TSP will pay the funds as a death benefit to the joint life annuitant if he or she survives the participant, or as a death benefit to the beneficiary or beneficiaries designated by the participant on the annuity portion of the TSP withdrawal request form, if the joint life annuitant does not survive the participant, or as a death benefit in accordance with paragraph (a) of this section if neither the joint life annuitant nor any designated beneficiary survives the participant.
(5) If a participant dies after annuity payments have begun, the annuity vendor will make or stop the payments in accordance with the annuity method selected.
(d)
80. Revise § 1651.3 to read as follows:
(a)
(b)
(c)
(1) Received by the TSP record keeper on or before the date of the participant's death; and
(2) Signed by the participant and two witnesses. The participant must either sign the form in the presence of the witnesses or acknowledge his signature on the form to the witnesses. If the participant attaches an additional page or pages to the designation of beneficiary form, each additional page must be signed and witnessed in the same manner (by the same witnesses) as the form itself, and must follow the format of the TSP designation of beneficiary form. A witness must be age 21 or older. A witness designated as a beneficiary will not be entitled to receive a death benefit payment; if a witness is the only named beneficiary, the designation of beneficiary 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)
81. Revise § 1651.4 to read as follows:
(a)
(b)
(c)
82. Revise § 1651.10 to read as follows:
(a)
(b)
(c)
(d)
83. Revise § 1651.13 to read as follows:
The TSP has created a paper form that a potential beneficiary must use to apply for a TSP death benefit. The TSP must receive this form before a death benefit can be paid. Any individual can file this form with the TSP record keeper. The individual submitting the form must attach a copy of a certified death certificate of the participant to the form. The TSP record keeper's acceptance of this form does not entitle the applicant to benefits.
84. Amend § 1651.14 by revising paragraphs (b), (c) and (g) to read as follows:
(b)
(c)
(g) If a death benefit payment is returned as undeliverable, the TSP record keeper will attempt to locate the beneficiary by writing to his or her TSP database address. If the beneficiary does not respond within 60 days, the TSP will forfeit the death benefit payment to the Plan. The beneficiary can claim the forfeited funds, although they will not be credited with TSP investment returns.
85. Amend § 1651.16 by revising the last sentence of paragraph (c) to read as follows:
(c) * * * The TSP may require the beneficiary to apply for the death benefit with a TSP form and submit proof of identity and relationship to the participant.
86. The authority citation for part 1653 continues to read as follows:
5 U.S.C. 8435, 8436(b), 8437(e)(3), 8467, 8474(b)(5) and 8474(c)(1).
87. Amend § 1653.5 by revising paragraphs (a), (d) and (e) to read as follows:
(a) Payment pursuant to a qualifying retirement benefits court order ordinarily will be made 60 days after the date of the TSP decision letter. This is intended to permit the payee sufficient time to consider decisions about tax withholding, payment by EFT, and transfer options. An earlier distribution may be made as follows:
(1) If the payee is the current or former spouse of the participant, the payee can request to receive the payment sooner than 60 days by making a tax withholding election, by requesting a payment by EFT, or by requesting a transfer of all or a portion of the payment to a traditional IRA or eligible employer plan. The TSP decision letter will provide the forms a payee must use to choose one of these payment options.
(2) If the payee is someone other than the current or former spouse of the participant, the participant can request a disbursement sooner than 60 days by making a tax withholding election on forms provided to the participant with the TSP decision letter.
(3) If the court order makes an award to multiple payees, a disbursement may be made earlier than 60 days only if requests for expedited payment are received from all of the payees.
(4) In no event will payment be made earlier than 31 days after the date of the TSP decision letter.
(d) Payment will be made
(e) Payment will be made only to the person or persons specified in the court order.
(1) If payment is made to the current or former spouse of the participant, the distribution will be reported to the Internal Revenue Service (IRS) as income to the payee. If the court order specifies a third-party mailing address for the payment, the TSP will mail to the address specified any portion of the payment that is not transferred to a traditional IRA or eligible employer plan.
(2) If the payment is made to anyone other than the current or former spouse of the participant, the payment is taxable to the participant and is subject to Federal income tax withholding by the participant. The participant can elect the amount to be withheld by filing with the TSP the forms provided to the participant with the decision letter. The tax withholding will be taken from the payee's entitlement and the gross amount of the payment (
88. The authority citation for part 1655 continues to read as follows:
5 U.S.C. 8433(g) and 8474.
89. Amend § 1655.1 by revising the definition of “Date of application” in paragraph (b) to read as follows:
(b) * * *
90. Amend § 1655.2 by revising paragraph (c) to read as follows:
(c) The participant is eligible to contribute to the TSP (or would be eligible to contribute but for the suspension of the participant's contributions because he or she obtained a financial hardship in-service withdrawal);
91. Amend § 1655.9 by revising paragraphs (b) and (c) to read as follows:
(b) The loan principal will be disbursed from that portion of the account represented by employee contributions and attributable earnings, pro rata from each TSP Fund in which the account is invested and pro rata from tax-deferred and tax-exempt balances.
(c) Loan payments, including both principal and interest, will be credited to the participant's individual account. Loan payments will be credited to the appropriate TSP Fund in accordance with the participant's most recent contribution allocation.
92. Amend § 1655.10 by revising paragraph (a) to read as follows:
(a) Any participant may apply for a loan by submitting a completed TSP loan application form to the TSP record keeper.
93. Amend § 1655.12 by revising paragraph (a)(1) to read as follows:
(a) * * *
(1) If the participant submits a paper loan application, the TSP record keeper will mail the loan agreement, and other information as appropriate, to the participant.
94. The authority citation for part 1690 continues to read as follows:
5 U.S.C. 8474.
95. Amend § 1690.1:
a. By removing the definitions of “Open season” and “Investment fund”;
b. By adding a new definition of “TSP Fund” to read as follows; and
c. By revising the definitions of “Account balance”, “Contribution allocation”, “Share”, “Share price”, and “TSP record keeper” to read as follows:
96. Add a new § 1690.14 to read as follows:
(a)
(b)