[Federal Register Volume 61, Number 250 (Friday, December 27, 1996)]
[Rules and Regulations]
[Pages 68464-68478]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32497]
[[Page 68463]]
_______________________________________________________________________
Part VII
Federal Retirement Thrift Investment Board
_______________________________________________________________________
5 CFR Part 1605
Correction of Administrative Errors; Final Rule
Federal Register / Vol. 61, No. 250 / Friday, December 27, 1996 /
Rules and Regulations
[[Page 68464]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1605
Correction of Administrative Errors
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Executive Director of the Federal Retirement Thrift
Investment Board (Board) is publishing a final rule revising the
Board's existing Error Correction Regulations. The rule reorganizes the
regulations to make them more concise and easier to read, reflects
changes in Board policy and procedures adopted since publication of the
regulations in 1987, and eliminates provisions that no longer apply.
EFFECTIVE DATE: These final rules are effective December 27, 1996.
FOR FURTHER INFORMATION CONTACT: Elizabeth S. Woodruff, Federal
Retirement Thrift Investment Board, 1250 H Street, N.W., Washington,
D.C. 20005. Telephone: (202) 942-1661.
SUPPLEMENTARY INFORMATION: Interim regulations governing error
correction relating to the Thrift Savings Plan (TSP) were first
published in the Federal Register on May 13, 1987 (52 FR 17919) and
July 22, 1987 (52 FR 27527). The final regulations, found at 5 CFR Part
1605, were published in the Federal Register on December 4, 1987 (52 FR
46314). This rule revises these regulations. It includes several
substantive changes in the procedures by which administrative errors
are corrected, as well as non-substantive editorial changes in style
and organization.
The final rule is divided into four subparts. Subpart A contains
definitions of terms used in this part. The definition section has been
expanded to encompass a wider range of terms than was included in the
existing regulation. The expanded definition section is consistent with
the definitions contained in 5 CFR Part 1606, and should eliminate
potential confusion or conflict between the provisions of the two
parts. In addition, the revision refers to Part 1606 where such
references clarify the relationship between the two parts.
Subpart B applies to employing agency errors. The revision has been
reorganized for clarity into separate subparts for employing agency
errors and for Board or TSP recordkeeper errors. Board and TSP
recordkeeper errors are addressed in Subpart C.
The existing regulations contain two largely duplicative sections:
Sec. 1605.2. Failure to participate or delay in participation, and
Sec. 1605.3, Insufficient contribution. The revision combines these
sections in Sec. 1605.2, makeup of missed or insufficient
contributions, without substantive change in the essential rules of the
existing regulation. Employing agencies are responsible for promptly
making up employer contributions (agency automatic (1%) contributions
and agency matching contributions) that they are obligated to make but
have not made. If employee contributions have not been made due to an
employing agency error, the participant may establish a schedule of
makeup contributions to be deducted from current pay in addition to any
regular TSP contributions the participant may be making. The employing
agency is also responsible for contributing any applicable agency
matching contributions on the missed employee contributions, but only
when the participant makes up the employee contributions.
Section 1605.4 of the existing regulations, titled ``Excess
deduction or contribution,'' addresses removal by employing agencies of
contributions from participants' accounts. The revision deals with that
subject in Sec. 1605.3, which incorporates more detailed rules for
removal of contributions than were included in Sec. 1605.4 of the
existing regulations. In particular, Sec. 1605.3 describes information
employing agencies must submit on negative adjustment records, the
processing of negative adjustment records (including calculation of
investment gains and losses on the money that is removed), and the
manner in which the money will be removed from the participants'
accounts. Different rules apply to investment gains or losses for
employee contributions and employer contributions.
Sections 1605.9 and 1605.10 of the existing regulations address TSP
contributions related to back pay awards or other retroactive pay
adjustments. Those issues are addressed in Sec. 1605.4 of the revision,
which contains more detail about the types of elections a participant
is entitled to make when he or she is reinstated without a break in
service after reversal of a wrongful separation. The revision clarifies
that, for purposes of computing lost earnings on makeup contributions
that relate to the period of wrongful separation, the participant may
not choose investment funds with the benefit of hindsight concerning
the performance of the TSP investment funds. Earnings will be
calculated at the G Fund rate of return up to the date of any interfund
transfer that was made by the participant during the period of
separation. From the date of the interfund transfer forward, the lost
earnings will be calculated as if the money had been invested in
accordance with the percentages elected for the interfund transfer.
This approach is consistent with, and reiterates, the rules
established in Part 1606 (which addresses the payment of lost earnings
attributable to employing agency errors), particularly Sec. 1606.11(c).
As in the existing regulations, the revision sets forth different rules
for back pay awards or other retroactive pay adjustments for periods
during which the participant remained employed by the Federal
Government.
Section 1605.5 governs situations where employing agencies have
erroneously classified participants' retirement coverage (e.g., FERS or
CSRS). This issue was previously addressed in Sec. 1605.11. The
revision provides more detailed rules than the existing regulation.
Under the revision, different rules apply for a FERS participant who
has been misclassified as CSRS and a CSRS participant who has been
misclassified as FERS.
Section 1605.6 of the revision provides for the employing agencies
to establish procedures for processing claims for correction of agency
errors. This section also provides time limits for filing such claims.
The revision retains without substantive change the rules that apply to
claims filed with employing agencies under existing Sec. 1605.8.
Subpart C applies to errors committed by the Board or the TSP
recordkeeper, not errors committed by employing agencies. Some Board or
recordkeeper errors, as addressed in Sec. 1605.7, must be corrected by
crediting earnings (positive or negative) to a participant's account in
order to make the participant whole with respect to earnings the
account would have received had the error not occurred. Such payments
of lost earnings are, in effect, paid by the rest of the TSP
participants, as if they were administrative expenses of the Plan. Such
lost earnings should not be confused with those payable under Part
1606, which are paid not by the Plan but by employing agencies that
make errors relating to TSP accounts. Section 1605.7 also covers other
errors that can be corrected by the TSP, such as reversal of taxable
loan distributions caused by Board or TSP recordkeeper errors or
erroneous processing of court orders.
Section 1605.8 of the revision contains rules for processing claims
for correction made by Plan participants to the TSP recordkeeper or the
Board. The rules adopt the informal claims process
[[Page 68465]]
that has evolved over the course of the Board's operations. Claims may
be made in writing to the TSP recordkeeper or to the Board. There is no
required format for presenting a claim; a letter setting forth the
nature of the claim and the correction sought is sufficient. A
participant may request review by the Board of a denial issued by the
TSP recordkeeper. All decisions by the Board are final administrative
decisions. Section 1605.8 also contains time limits for filing claims
or requesting reconsideration of the denial of a claim by the TSP
recordkeeper.
Subpart D contains miscellaneous provisions not addressed by other
subparts of the revision.
On November 5, 1996, the Board published a proposed rule with a
request for comments in the Federal Register (61 FR 56904). The Board
received no comments on the proposed rule. Therefore, we are adopting
the provisions of the proposed rule as a final rule with one change.
The proposed rule contained, in the definition of basic pay
(Sec. 1605.1), an incorrect reference to 5 U.S.C. 8431(3); the
reference in the final rule has been corrected to 5 U.S.C. 8331(3).
Section-by-Section Analysis
Subpart A--Definitions
Section 1605.1 contains definitions of terms used in this part.
Important additions to this section are the definitions of ``employing
agency error,'' ``Board error,'' and ``recordkeeper error.'' These
terms warrant definition because they describe the errors that give
rise to corrections under this part.
The definitions are intentionally broad so that participants will
be encouraged to seek correction whenever they are denied rights given
in applicable statutes or regulations. When the Board, the TSP
recordkeeper, or an employing agency fails to follow procedures
provided in bulletins or other communication materials provided to
participants or employing agencies, participants should be able to
expect that those procedures will be followed, and to obtain correction
under this part when they are not. However, other forms of relief, such
as punitive damages or consequential damages, are not statutorily
authorized.
Subpart B--Employing Agency Errors
Section 1605.2 applies whenever an employing agency error causes a
participant's TSP account not to receive all of the contributions it
should receive, whether employee contributions, employer contributions,
or both.
Section 1605.2(b) applies to missed employer contributions. An
employing agency's obligation to make agency automatic (1%)
contributions is unrelated to any decision by the participant whether
to make employee contributions. Under 5 U.S.C. 8432(c)(1)(A), if a FERS
employee receives basic pay, he or she is entitled to receive agency
automatic (1%) contributions. When an employing agency discovers that
it has failed to provide them, it should promptly contribute the
correct amount, in a lump sum, to the affected participant's account.
The revision eliminates the requirement in the existing regulations
that the contributions be made within 30 days of the agency's discovery
of the error, in favor of a requirement that the contributions be
submitted ``promptly.'' Although this requirement provides greater
flexibility than the previous standard, experience shows that prompt
action will rarely require more than 30 days; it is anticipated that in
most cases much fewer than 30 days will be sufficient. The employing
agency may also be required to submit lost earnings records under Part
1606.
Similarly, if an employing agency has made proper employee
contributions on behalf of a FERS participant, but has failed to make
all or any part of the agency matching contributions to which the
participant is entitled, it must promptly make those contributions in a
lump sum upon discovery of the error. Such contributions may also be
subject to lost earnings under Part 1606.
Under no circumstances may an employing agency submit agency
matching contributions associated with employee contributions that have
not yet been made. For instance, if a participant makes up missed
employee contributions under Sec. 1605.2(c), then under
Sec. 1605.2(c)(7) any associated agency matching contributions must be
made throughout the schedule of makeup contributions. In that
situation, no lump sum deposit of agency matching contributions is
permitted. If the schedule of makeup contributions is suspended or
terminated, then the associated agency matching contributions will
similarly be suspended or terminated.
Under Secs. 1605.2(c)(1) and (2), in order to facilitate submission
of any related lost earnings records by the employing agency, the Board
has determined that the agency should have the flexibility to establish
the schedule in a manner other than equal contributions. In some cases,
this will enable the employing agency to avoid having to submit two or
more lost earnings records (for agency matching contributions) having
the same beginning date but different ending dates. Except to the
extent necessary to accomplish that purpose, however, employing
agencies are encouraged to work with participants to establish
schedules providing for relatively equal makeup contributions.
The Board has established a ceiling on the number of pay periods
over which the makeup contributions may extend. This was done to allow
participants sufficient time to make up missed contributions without
undue financial burden and, at the same time, avoid an undue
administrative burden on the employing agencies resulting from extended
schedules of makeup contributions. The limit is four times the number
of pay periods over which the error(s) occurred. The agency may,
however, shorten that maximum period to no less than twice the number
of pay periods over which the error(s) occurred. It is expected that
employing agencies will exercise their discretion to shorten the
maximum schedule of makeup contributions only if there are compelling
administrative reasons to do so.
Under Sec. 1605.2(c)(4), the makeup employee contributions are not
counted against the percentage limit on TSP contributions per pay
period. Because the makeup contributions merely allow the participant
to make contributions that should have been made in earlier pay
periods, the additional contributions are statutorily authorized.
However, the Internal Revenue Code annual limits on contributions found
at 26 U.S.C. 402(g)(1) and 26 U.S.C. 415 contain no exceptions for
contributions that should have been made in prior years. The Board has
no authority to waive the Internal Revenue Code annual limits. Section
1605.2(c)(5) permits any makeup contributions that cannot be made in
any year because of the Internal Revenue Code annual limits to be
carried forward into subsequent years.
If application of the Internal Revenue Code annual limits is
anticipated when the schedule of makeup contributions is established,
the schedule can be designed to suspend contributions upon reaching the
limit for any calendar year. Even if a schedule is not designed in this
manner, the schedule may be suspended at the participant's request if
necessary to avoid losing the opportunity to make regular TSP
contributions. A similar suspension of the schedule is permitted when
the participant does not have sufficient net pay to make the
contribution called for by the schedule. A period of suspension does
not count against the ceiling on the number of pay periods over which
the schedule may extend.
[[Page 68466]]
Under Sec. 1605.2(c)(6), a participant may elect to terminate a
schedule of makeup contributions at will, but if he or she does so,
that termination (as opposed to a suspension due to the Internal
Revenue Code annual limits or insufficient net pay) is irrevocable.
Also, once a schedule of payments begins, a participant may not make
partial contributions under the schedule as an alternative to
terminating the schedule.
If a participant separates from Federal service before completing
the schedule of makeup contributions, the participant may elect to have
the remaining makeup contributions contributed from his or her final
paycheck, without regard to the percentage limits (5% or 10%) contained
in FERSA (but still subject to the Internal Revenue Code annual
limits). Contributions may only be deducted from pay that constitutes
basic pay. For example, no contributions may be deducted from a lump-
sum payment of annual leave, which is not basic pay.
If there are further makeup contributions remaining on the schedule
after the final paycheck, they may not be made up through any other
method of contribution to the TSP. The participant's only remedy in
that situation would be a direct action against the employing agency
under 5 U.S.C. 8477 for lost benefits caused by the employing agency
error (this may include, for example, lost opportunity to receive
matching contributions and lost tax advantages). The Board anticipates
that, in most cases, the participant and employing agency will be able
to reach an administrative settlement of the participant's claim
without involving the TSP and without the need to resort to the Federal
courts.
Under Sec. 1605.2(c)(8), any makeup employee contributions and
makeup employer contributions must be reported by the employing agency
for investment among the TSP investment funds using the participant's
investment fund allocation election, if any, that is in effect at the
time the makeup contributions are made. If no such allocation election
is in effect at that time, the makeup contributions must be reported by
the employing agency for investment in the G Fund. The money will not,
in other words, be reported by the employing agency for investment in
the investment fund(s) to which it would have been contributed had the
error not occurred.
The investment of the makeup contributions pursuant to the
participant's current investment allocation does not, however, control
any calculation of lost earnings on the makeup contributions. That
calculation will be performed under the rules set forth in Part 1606,
based on tracking by the TSP recordkeeper of the investment fund(s) in
which the money would have been invested from the date it should have
been contributed to the date the makeup contribution was actually made.
In addition, under Part 1606, the processing of lost earnings records
may cause money to be moved among the investment funds, in order to
place the account in the position it would have attained had the error
not occurred.
Section 1605.2(c)(10) provides that makeup employee contributions
may only be made by payroll deduction. Moreover, those payroll
deductions may only be made from pay that constitutes basic pay. Makeup
contributions may not be deducted from a final lump-sum payment of
annual leave or from any other pay that does not constitute basic pay,
such as the pay of a temporary employee.
Section 1605.2(c)(11) serves as a reminder to employing agencies
that correction under Part 1605 may not be sufficient to meet their
obligation to correct agency contribution errors. It may also be
necessary to submit lost earnings records under Part 1606.
Section 1605.3 governs removal of erroneous contributions. This can
arise in a multitude of circumstances, such as where a participant
elects to contribute 1% of basic pay and the agency erroneously
contributes 10% because of a data entry error, where an agency
erroneously contributes matching contributions to the account of a CSRS
participant who was temporarily (and incorrectly) classified as FERS,
or when a participant erroneously classified as FERS chooses, upon
learning of the proper retirement classification, to obtain a refund of
contributions made to his or her account.
Under Sec. 1605.3(b)(1), the employing agency must submit a
separate negative adjustment record for each pay period involved. Each
record must indicate the pay date for which the contribution was made,
the amount of the contribution, the source(s) of the contribution, and
the investment fund(s) to which the contribution was reported for
investment by the employing agency. This information allows the TSP
recordkeeper to verify that the contribution was in fact made and to
calculate the investment gains or losses on the money for the period it
was erroneously invested in the TSP. The calculation is done by
tracking the monthly earnings of the investment fund(s) in which the
erroneous contribution was invested, including consideration of how
such contributions were reallocated among the investment funds as a
result of any interfund transfer processed for the account during the
relevant period of time.
As referred to in Sec. 1605.3(b)(2), the Board has distributed to
employing agencies detailed instructions concerning the submission of
negative adjustment records. The Board may, from time to time, issue
additional guidance or may change guidance that has been issued. When
this occurs, the new information will be circulated to employing
agencies with sufficient time for them to implement any changes to
their payroll or other administrative systems that may be required by
the new information. Employing agencies are required to comply with all
such instructions, including providing any additional information those
instructions may require.
Section 1605.3(c) provides rules for processing negative adjustment
records. Most of the processing responsibility is placed upon the TSP
recordkeeper. Upon receipt of negative adjustment records, the TSP
recordkeeper must edit them to ensure compliance with established
conventions and to ensure that the records can be successfully
processed. As soon as the edit process is completed, all acceptable
adjustment records are placed in approved status for processing. If
that occurs by the second-to last business day of a month, the records
will be processed as of the end of that month. If they are not accepted
until the last business day of a month, they will be processed as of
the end of the following month. The TSP recordkeeper cannot guarantee
how long the edit process will take, although it frequently takes only
one to two days if there are no problems with the data. In order to
ensure prompt processing, employing agencies are advised to submit
negative adjustment records as early as possible during a month.
Under Sec. 1605.3(c)(2), the TSP recordkeeper will separately
compute the earnings attributable to the contributions for each pay
date and source of contributions. The TSP recordkeeper will also
determine the investment fund(s) in which the money being removed is
invested. This requires applying the monthly earnings allocation
factors for the relevant investment fund(s), as well as tracking the
location of the money through any interfund transfers that occur after
the erroneous contributions. Subject to the rules set forth in
Sec. 1605.3(c)(3), money will be removed from the investment fund to
which it has been traced.
In determining investment gains and losses for erroneous
contributions submitted on a given pay date, each source of
contributions is treated separately. That is, investment gains
[[Page 68467]]
and losses for the different TSP investment funds within a source of
contributions will be netted against each other, but net gains or
losses for different sources of contributions will not be netted
against each other. Any other treatment would be inconsistent with the
different character of the funds attributable to the three sources of
contributions. For example, employee contributions are eligible to be
borrowed, whereas agency matching contributions are not. Thus, if gains
on employee contributions were offset against losses on employer
contributions, the participant would not have as much money available
to be borrowed as without such netting. Similarly, because only agency
automatic (1%) contributions (and attributable earnings) are subject to
the vesting requirements of 5 U.S.C. 8432(g), netting gains or losses
on those contributions against the other two sources would improperly
state the amount of money subject to the vesting requirement.
For similar reasons, Sec. 1605.3(c)(3)(ii) prohibits using money in
one source of contributions to return funds to an agency in connection
with a negative adjustment submitted for another source of
contributions. For example, if a negative adjustment to employee
contributions requires returning $300 to the employing agency, and the
participant only has $200 of employee contributions in his or her
account (e.g., because of a loan that reduced the balance of employee
contributions to $200), the additional $100 will not be returned to the
employing agency from employer contributions. Rather, the negative
adjustment to employee contributions will be deleted (i.e., not
processed) and the employing agency may resubmit the negative
adjustment record at a later time when the participant has sufficient
employee contributions to cover it (e.g., due to loan repayments or new
contributions).
In contrast to netting across sources of contributions,
Sec. 1605.3(c)(3)(iii) provides that within a source of contributions,
gains and losses will be netted across the TSP investment funds. This
is appropriate because such netting does not involve monies that are of
a different character. The legal requirements applicable to all agency
automatic (1%) contributions, for example, are the same regardless of
the investment fund in which those monies are invested. If a negative
adjustment to one source of contributions is tracked by the TSP
recordkeeper to one investment fund, but there is not sufficient money
in that investment fund to cover the entire adjustment, the money will
be taken pro rata from the other investment funds. All of the money
from the same source of contributions is considered to be of the same
character.
Sections 1605.3(d) and (e) explain, separately for employee
contributions and employer contributions, the rules for determining how
much money is returned to the employing agency in connection with a
negative adjustment record. Under Sec. 1605.3(d)(1), if there is a net
investment gain on an employee contribution, the employing agency
receives the full face value of the negative adjustment. With one
exception described in Sec. 1605.9(a) (relating to employees ineligible
to have an account in the TSP), the earnings on the employee
contributions remain in the participant's account. Leaving the earnings
in the account compensates the participant for the fact that he or she
did not otherwise have use of the money that the employing agency
erroneously contributed. The earnings cannot be paid out of the Plan to
the participant at the time the negative adjustment record is
processed, however. This is because such a payment, as opposed to the
refund of the erroneous contributions themselves, would be a taxable
distribution from the TSP that is not permitted under FERSA prior to
the participant's separation from Federal service. When the participant
separates, he or she may withdraw the earnings, along with any other
sums in the account, under the normal rules for withdrawal from the
TSP.
Section 1605.3(d)(2) addresses investment losses on employee
contributions. The employing agency receives only the amount of the
erroneous contribution minus the amount of the investment loss.
However, the investment loss does not change the agency's
responsibility to refund to the participant the full face amount of the
erroneous contribution, where appropriate. The net effect is that the
employing agency is required to absorb the investment loss on money
that was only contributed to the TSP on account of the agency's error.
It would be inequitable to require the participant to absorb the risk
of loss on the money. The revised rule, which comports with current
practice, effectively prevents the employing agency from putting a
participant's money at risk without proper authorization.
Section 1605.3(d)(3) makes it clear that if an employing agency
removes erroneous employee contributions, it must also submit negative
adjustment records for any associated agency matching contributions.
This is an extension of the general principle that no agency matching
contributions may be made unless and until associated employee
contributions are actually made. This principle cannot be circumvented
by an employing agency's removing the employee contributions after
agency matching contributions are made, and leaving the agency matching
contributions in the TSP.
Section 1605.3(e) addresses removal of erroneous employer
contributions from participants' accounts. Section 1605.3(e)(1)
provides that erroneous employer contributions may only be returned to
the employing agency if the negative adjustment record is processed
within one year of the processing of the contribution. This rule, which
is contained in the existing regulations, is based on guidance issued
by the Internal Revenue Service. If more than one year elapses, the
employing agency must still submit any appropriate negative adjustment
records to remove erroneous contributions from the participant's
account. However, in this case, instead of the employing agency's
receiving a refund of the erroneous contributions, the amount of the
erroneous employer contribution (plus or minus investment gains or
losses) is removed from the account and used to offset TSP
administrative expenses, thereby benefitting the rest of the TSP
participants. In order to avoid this result, employing agencies must
identify and remove erroneous employer contributions within one year of
their submission.
Section 1605.3(e)(2) provides that if there is an investment gain
on erroneous employer contributions that are to be returned to the
employing agency, the agency receives a refund of only the face value
of the negative adjustment. The agency may not receive the benefit of
the investment gain on the money. At the same time, the individual
participant should not receive an earnings windfall due to the fortuity
of an employing agency error. Thus, the earnings on erroneous employer
contributions are removed from the account and used to offset TSP
administrative expenses.
Under Sec. 1605.3(e)(3), if there is an investment loss on the
erroneous employer contributions that are either returned to the
employing agency or removed from the account and used to offset TSP
administrative expenses, the amount removed from the account will be
the amount of the contribution less the investment loss. If the
employing agency received the full amount of the erroneous
contribution, then the amount of the loss would have to be made up out
of the participant's money. The participant should not have to absorb
an investment loss on employer money that
[[Page 68468]]
was erroneously placed in his or her account.
The TSP recordkeeper has issued three TSP bulletins containing
detailed procedures and information concerning the submission,
processing, and accounting for negative adjustment records. Those
bulletins, Nos. 90-22, 90-23, and 90-28, can be obtained from the Board
or TSP recordkeeper upon request.
Section 1605.4 contains the rules for making up TSP contributions
related to back pay awards or other retroactive pay adjustments.
Section 1605.4(a) governs situations in which the participant was
separated and subsequently reinstated with back pay. Under those
circumstances, the participant could not have had a TSP contribution
election in effect during the period of separation. Accordingly, under
Sec. 1605.4(a)(1), immediately upon reinstatement the employing agency
must give the participant an opportunity to make a current TSP
contribution election on Form TSP-1, regardless of whether the
reinstatement occurs during a TSP open season or TSP election period.
Under Sec. 1605.4(a)(1), the effective date of the current Form
TSP-1 will be the first day of the first full pay period in the most
recent TSP election period. If the participant is reinstated during a
TSP open season but before the election period, he or she may also
submit a Form TSP-1 that will become effective the first day of the
first full pay period in the following election period. For example, if
these rules had been in effect in 1995 and a participant was reinstated
on January 2, 1995, the effec tive date of the current Form TSP-1 would
have been January 15, 1995 (the first day of the first full pay period
in the most recent election period). If the participant had been
reinstated on March 22, 1995, the effective date of the current Form
TSP-1 would have been January 15, 1995. If a participant had been
reinstated on May 20, 1995, the effective date of the current Form TSP-
1 would have been January 15, 1995. In addition, this participant could
have submitted another Form TSP-1 to become effective on July 3, 1995
(the first day of the first full pay period in the following election
period).
Under Sec. 1605.4(a)(2), the participant has several choices
concerning makeup contributions for the period of erroneous separation.
If he or she had a contribution election on file at the time of
separation, the contribution election will be reinstated for the period
of separation unless the participant affirmatively elects not to have
those contributions made up. Alternatively, the participant may also
affirmatively elect not to make up those contributions that would have
been made from the date of separation through the end of the next TSP
open season after separation. Finally, the participant may, for any
open season after the one during which the separation occurred, elect
any amount of makeup contributions that he or she would have been
eligible to make had the separation not occurred.
As provided in Sec. 1605.4(a)(3), the decisions made by the
participant after returning do not include decisions concerning the
investment funds in which the money would have been invested had the
separation not occurred, nor can the participant choose to receive lost
earnings for the period of separation based on the investment funds
elected on a Form TSP-1 that was in effect at the time of separation.
The effectiveness of that election came to an end when the participant
separated, even though the separation was involuntary and ultimately
found to have been erroneous. Any decisions made after the participant
was reinstated concerning the investment funds to use in the lost
earnings calculation would be in direct violation of the principles set
forth in Part 1606 (which applies to back pay awards and other
retroactive pay adjustments, 5 CFR 1606.4(b)), in particular 5 CFR
Sec. 1606.11(c).
Thus, Sec. 1605.4(a)(3) provides that all lost earnings will be
calculated at the G Fund rate of return up to the date of any interfund
transfer processed during the period of separation. From the effective
date of the interfund transfer forward, the amount of the earnings will
be calculated based on the allocations elected on the interfund
transfer request. The earnings (and related contri butions) will also
be moved among the investment funds to reflect the funds in which they
would have been invested had the interfund transfer election been
applied to them.
Under Sec. 1605.4(b), if the participant remained employed by the
Federal Government for the period covered by the back pay award or
other retroactive pay adjustment, the participant is bound by the
contribution election that was in effect during that period. Thus, if
the participant received less pay as a result of the action that led to
the back pay award or other retroactive pay adjustment, or was
otherwise limited in his or her ability to make the contributions that
had been previously elected, the participant must make up the missed
contributions. In this situation, because any investment elections made
by the participant would have remained in effect, the lost earnings are
calculated based on the investment elections made by the participant
for the applicable period. The employing agency is also responsible for
making any agency matching contributions and agency automatic (1%)
contributions that would have been required had the action that led to
the payment of back pay or of another type of retroactive pay
adjustment not occurred.
Section 1605.4(c)(1) provides that under both Sec. 1605.4(a) and
Sec. 1605.4(b), any makeup employee contributions associated with the
back pay award or other retroactive pay adjustment must be withheld
from the award or adjustment and contributed to the participant's TSP
account by the employing agency. It is not permissible for the
employing agency to pay the back pay award or other retroactive pay
adjustment to the participant and then accept a check or other form of
payment from the participant for contribution to the TSP account. If
the additional contributions associated with the back pay award or
other retroactive pay adjustment would cause, or are anticipated to
cause, a participant to exceed the Internal Revenue Code annual
contribution limits, they may be carried forward (along with associated
agency matching contributions) as makeup contributions to be deducted
from pay in subsequent years.
Section 1605.4(c)(2)(i) requires employing agencies to submit
agency matching contributions and agency automatic (1%) contributions
associated with a back pay award or other retroactive pay adjustment.
Section 1605.4(c)(2)(ii) provides rules concerning the submission
and processing of contributions associated with back pay awards and
other retroactive pay adjustments. Although lost earnings on
contributions associated with a back pay award or other retroactive pay
adjustment are calculated based on the investment election in effect
during the relevant period, the contributions must be reported by the
employing agency for investment based upon the participant's investment
allocation election in effect at the time of payment of the back pay
award or other retroactive pay adjustment, rather than to the
investment fund(s) previously elected. If there is no current election,
the contributions must be reported by the employing agency for
investment in the G Fund.
Section 1605.4(e) provides an opportunity for participants to
restore funds to their TSP accounts if the separation upon which the
withdrawal of the funds was based is reversed. This opportunity cannot
be exercised by
[[Page 68469]]
participants who have elected to receive annuities. If a participant
wishes to restore his or her account, he or she must so notify the
Board within 90 days of reinstatement or lose that right.
Section 1605.5 governs employing agency misclassifications of
retirement coverage. CSRS participants are not permitted to make
contributions in excess of 5%. Under Sec. 1605.5(a)(1), if a CSRS
participant is erroneously classified as FERS, the employing agency
must remove any employee contributions in excess of 5% of basic pay
from the participant's account by submitting negative adjustment
records in accordance with Sec. 1605.3. In addition, it is recognized
that for FERS employees the prospect of receiving agency matching
contributions is often a significant inducement to make contributions
to the TSP. A CSRS participant erroneously classified as FERS would
have made any decision to contribute to the TSP with the expectation of
receiving agency matching contributions on the first 5% of basic pay.
When those agency contributions are removed from the account, it would
be inequitable to deny the participant the option of removing all of
the employee contributions. Accordingly, Sec. 1605.5(a) provides that
option.
Section 1605.5(a)(2) describes a routine procedure pursuant to
which the TSP recordkeeper will remove employer contributions from a
previously misclassified participant's account once the account no
longer has employer contributions that have been in the account for
less than one year. The employing agency may continue to submit
negative adjustment records as long as there are contributions that can
be returned to the employing agency under the one-year rule contained
in Sec. 1605.3(e)(1). Once all of the employer contributions have been
in the account for one year or more, the employing agency cannot
receive a refund of any of those contributions; submission of a
negative adjustment record would cause the employer contributions (and
associated earnings) to be removed from the account and be used to
offset TSP administrative expenses. The TSP recordkeeper will, on its
own initiative, remove the remaining employer contributions and
associated earnings from the account.
In contrast to a CSRS participant misclassified as FERS, when a
FERS participant is erroneously classified as CSRS, any election to
contribute would have been made by the participant with the knowledge
that he or she will receive no agency contributions. If the participant
wished to contribute without receiving agency contributions, it follows
that the participant would also have contributed at least the same
amount if the added inducement of agency contributions were present.
Thus, Sec. 1605.5(b) does not allow such participants to elect to
remove contributions made while misclassified as CSRS. However, because
the participant has learned for the first time that the added
inducement of agency contributions is available, the participant must
be provided, as set forth in Sec. 1605.5(b), an opportunity to elect
makeup employee contributions in addition to those, if any, that were
elected while misclassified as CSRS. Thus, for example, if the
participant contributed 2% of basic pay while misclassified as CSRS, he
or she must be provided the opportunity to make up an additional 8%
that he or she would have been able to contribute if properly
classified as FERS. If the participant did not contribute at all while
misclassified, he or she may make up the full 10% contribution. The
employing agency must promptly make, in a lump sum, all agency matching
contributions attributable to any employee contributions that were made
during the period of misclassification. In addition, the employing
agency must, in accordance with Sec. 1605.2(c)(7), make any applicable
agency matching contributions attributable to the participant's makeup
contributions, if any. Regardless of whether any employee contributions
are made up, the employing agency must also contribute, in a lump sum,
the appropriate agency automatic (1%) contributions.
Section 1605.6 adopts, without significant substantive change, the
provisions of existing Sec. 1605.8 concerning participants' claims for
correction filed against their employing agencies. The rules for filing
claims against the Board or the TSP recordkeeper are in a separate
section of the revision, Sec. 1605.8.
One change contained in the revision is elimination of existing
Sec. 1605.8(a)(1) relating to employing agencies' referral of
participants' claims to the Board. Experience has proven this provision
to be unnecessary. As a practical matter, participants are able to
discern whether a claim is properly filed with the employing agency or
the Board. In those rare cases in which the participant is not sure, he
or she may wish to file a claim with both the employing agency and the
Board. It does not appear that in such cases there is a substantial
risk of inconsistent rulings that would leave the participant without
relief, because the Board and the employing agency should consult to
determine which, if either, is responsible for any error that may have
occurred. Moreover, any inconsistent rulings would ultimately be
subject to judicial review under 5 U.S.C. 8477.
Another change to the claim procedures is the provision in
Sec. 1605.6(a)(1) that the 30-day period for the employing agency to
issue an initial decision on the participant's claim may be extended if
the employing agency provides the participant with good cause for
needing more time. Experience has shown that a full investigation of
potential errors may legitimately take longer than 30 days.
Similarly, experience has shown that review of an employing
agency's denial of a participant's claim can legitimately take longer
than the 30 days provided in the regulations. Accordingly,
Sec. 1605.6(a)(3) also adopts a good cause provision for extending the
time period for a decision.
As under the existing regulations, the burden to correct
administrative errors lies, in the first instance, with the employing
agency. If correction is not forthcoming, the participant may, within
the time limits set forth under Sec. 1605.6(b) of the revision, file a
claim with his or her employing agency. If the participant fails to do
so, he or she has not exhausted his or her administrative remedy and,
therefore, is not eligible to file suit to compel the employing agency
to correct the alleged error. However, regardless of whether the
participant files a timely claim for correction, the employing agency
may, within its discretion and otherwise in accordance with this part,
correct any administrative errors it determines to have occurred.
Experience has shown that most employing agencies, in a good faith
effort to ensure that their employees receive all of the retirement
benefits to which they are entitled, are willing to correct their
errors, even after the time for filing a claim has passed. Although
employing agencies are encouraged to continue to do so, participants
are urged to be diligent in reviewing their earnings and leave
statements and their semiannual TSP Participant Statements to promptly
identify any errors, and to protect their rights by filing timely
claims when necessary.
Section 1605.6(b)(1)(i)(B) clarifies when the one-year period for
submitting a claim commences with respect to retirement code
classifications. In particular, the revision states explicitly that
mere notice to a participant of his or her retirement code
classification is not sufficient to trigger the one-year claim period
if that classification turns
[[Page 68470]]
out to be erroneous. For many partic ipants, the determination of
proper retirement classification requires application of a complex set
of rules. The Board has determined that it would be unjust to presume
that all employees are capable of making this determination and
therefore to hold them responsible for failing to immediately identify
an erroneous classification. Similarly the Board is concerned that all
participants may not appreciate the potential impact of a retirement
classification change on their TSP accounts.
The rule adopted requires some other information that would
indicate to the participant that he or she has been erroneously
classified. In appropriate circumstances, the employing agency may
determine that notice of a change in retirement classification
constitutes sufficient notice that the earlier classification was
erroneous. In addition, the rule requires that in order to trigger the
one-year time limit the employing agency must provide the participant
with a written notice that specifically mentions the TSP and that the
retirement code classification could have implications for the
participant's TSP account. Of greatest concern is that the employing
agency should advise a FERS employee who was misclassified as CSRS that
the employee should consider making makeup contributions for the period
of misclassification. Unless and until the appropriate notice is
provided, the one-year time limit will not commence.
Subpart C--Board or TSP Recordkeeper Errors
Under Sec. 1605.5 of the existing regulations, the only Board or
TSP recordkeeper error addressed is erroneous posting of contributions.
Section 1605.7 of the revision addresses a broader range of potential
Board or TSP recordkeeper error. The provisions of this section are
derived from the experience of the Board in administering the TSP.
Section 1605.7(a) addresses situations in which a Board or TSP
recordkeeper error causes a participant's account to receive credit for
less earnings than it would have received had the error not occurred.
Such lost earnings should not be confused with agency-paid lost
earnings under Part 1606. Paragraph (a)(1) sets forth the general rule
that the account should be made whole by crediting to it the difference
between the credit the account received and that which it would have
received had the error not occurred. Paragraph (a)(1) also describes
the most common situations giving rise to lost earnings. As stated in
the text, however, the situations described in paragraphs (a)(1)(i)-
(iii) do not constitute an exhaustive list of the circumstances
warranting payment of lost earnings attributable to Board or TSP
recordkeeper error.
Section 1605.7(a)(1)(i) requires the TSP to calculate and post lost
earnings (positive or negative, as the case may be) when Board or TSP
recordkeeper error causes a delay in crediting money to a participant's
account. Although such errors are relatively rare, given the large
volume of transactions processed by the Plan, some situations have
occurred more frequently than others. One is where there is a delay in
crediting contributions to a participant's account. Most often this
occurs because of a delay in processing an employing agency's payroll
submission. Where the delay does not prevent the payroll tape from
being processed in the month during which it should be processed, no
lost earnings correction is required because, under the Board's
earnings allocation algorithm, participants receive the same credit for
the month of contribution regardless of when, during the month, the
contributions are credited. Where the error does cause a delay that
continues into one or more months after the one during which the
contributions should have been credited, the participants should be
made whole. Most of these cases affect more than one participant; all
participants whose contributions are on a tape that was delayed must be
credited (charged) with additional investment earnings (losses),
depending on the investment experience of the funds involved. If the
earnings are calculated to be positive (due to investment gains), then
the additional amounts posted to the accounts of the affected
participants are, in effect, charged to the rest of the TSP
participants through the earnings allocation process. Conversely, if
there are investment losses, the amounts deducted from the affected
participants' accounts are, in effect, credited to the rest of the TSP
participants through the earnings allocation process.
Other possible scenarios covered by Sec. 1605.7(a)(1)(i) are delays
in crediting loan payments or loan prepayments, or delays in
reinvesting returned checks.
Section 1605.7(a)(1)(ii) covers situations in which loan or
withdrawal checks are improperly issued. The error can take several
forms, such as issuance to an address different from that provided to
the TSP recordkeeper, issuance of a payment from the wrong account, or
premature payment of a withdrawal. In all such cases, the partic ipant
ceases to receive credit for earnings as of the end of the month for
which the withdrawal is made effective. The participant does not again
receive full credit for earnings on the improperly disbursed funds
until the month after the money is redeposited in his or her account.
Thus, the Plan must make up all earnings for the period of
disinvestment.
Errors addressed under paragraph (a)(1)(ii) are, however, subject
to the limitation contained in paragraph (a)(2). That is, if a
participant receives funds that should not have been disbursed from his
or her TSP account, he or she must promptly call the error to the
Board's attention and return the funds for redeposit to the account. If
the participant needlessly delays in returning the funds, or invests
the funds before returning them to the TSP, then the participant may be
deemed to have had the use of the funds during this period. If that
occurs, the participant's account will not receive lost earnings for
the period that he or she had use of the money. In general,
determinations concerning whether a participant has had the use of
money under paragraph (a)(2) must be made on a case-by-case basis,
after an evaluation of all of the specific facts and circumstances. A
standard of reasonableness will be applied by the Board.
Section 1605.7(a)(1)(iii) provides for payment of lost earnings in
cases where a Board or TSP recordkeeper error causes a participant's
account to receive earnings based on an incorrect investment fund
allocation. This infrequent occurrence can take place when the TSP
recordkeeper fails to process an interfund transfer request or
processes it incorrectly. As described in paragraph (a)(3), par
ticipants affected by this type of error will be given a choice whether
they wish to have it corrected. If so, the correction will involve
calculating and crediting lost earnings as well as reallocating the
account balance as it would have been had the error not occurred. A
participant cannot choose the former without the latter, or vice versa.
Section 1605.7(a)(4) establishes the investment funds for which the
lost earnings calculations should be made. If the participant continued
to have a TSP account during the period of the error, or would have had
an account if the error had not occurred, then the rates of return the
account would have earned during the relevant period will be used. For
example, assume that separated Participant A requests a withdrawal, but
the recordkeeper erroneously disburses Participant B's account as a
result of a data entry error. Participant B promptly returns the
erroneous disbursement, but his account loses earnings for a month.
[[Page 68471]]
If Participant B had his entire account invested in the C Fund just
prior to the erroneous disbursement, then he will receive lost earnings
based on the C Fund rates of return. The same would be true if the
erroneous disbursement from Participant B's account was a loan.
In contrast, assume that separated Participant X requests a
withdrawal of his entire account balance as of the end of November
1996. The entire account is properly disbursed as of the end of
November 1996, but the TSP recordkeeper erroneously causes the check to
be mailed to an outdated address which had been properly changed by the
participant. The check is lost and the funds are uninvested for three
months, at which time the account is recredited with the amount that
was disbursed in November 1996. Because the account would properly have
been closed as of the end of November 1996, the lost earnings will be
calculated at the G Fund rate of return.
Finally, assume Participant L has an outstanding loan of $5,000 and
decides to prepay it. The certified prepayment check is received in
early October 1996 but due to TSP recordkeeper error is not credited to
the account until December 1996. Since Participant L continued to have
a TSP account during the period of the erroneous disinvestment, the
lost earnings will be credited based on the investment funds in which
the money would have been invested had the prepayment been properly
credited in October. These rules are designed to approximate the
earnings that the participant would have received if the error had not
occurred. For periods when the TSP account would have been closed even
if the error had not occurred, applying the G Fund rate provides the
(former) participant with a reasonable positive rate of interest. It is
not practicable for the Board to speculate on the earnings which the
participant would have received on the money outside the Plan.
Section 1605.7(b) provides for reversal of erroneous declarations
of taxable loan distributions.
Section 1605.7(c) makes explicit that the Executive Director has
the discretion to make other corrections not specifically addressed
elsewhere in Sec. 1605.7. The specific types of corrections listed in
Sec. 1605.7 are not exclusive, and Board or TSP recordkeeper errors
other than those addressed may properly give rise to lost earnings or
other forms of corrective relief. Moreover, even if no Board or TSP
recordkeeper error is involved, the Executive Director may determine
that payment of lost earnings or other corrective relief is warranted
under the circumstances. Such determinations must be made by the
Executive Director on a case-by-case basis. In making these
determinations, the Executive Director must comply with his fiduciary
responsibilities under FERSA to all of the participants of the TSP.
Thus, the Executive Director will consider factors such as the
administrative cost of implementing the correction, the cost to the TSP
as a whole of paying any lost earnings, and the harm to the affected
participant if no correction is made.
Section 1605.8 contains the provisions for filing claims with
respect to Board or TSP recordkeeper error. The primary change from the
existing regulations is to adopt a more informal process than that
originally contemplated. This decision is based on the Board's
experience in handling claims for correction. It has been determined
that a more informal, flexible process is beneficial to all parties
concerned.
Under Sec. 1605.8, claims may be made either to the TSP
recordkeeper or to the Board. The revision provide flexibility
regarding which of those parties will process the claim. If the claim
is submitted to the TSP recordkeeper, it may either be processed by the
record-keeper or sent to the Board to be processed. If the latter, or
if the claim is initially submitted to the Board, the decision of the
Board is final. If an initial decision is issued by the TSP
recordkeeper, the participant may request review by the Board of any
denial of all or any part of the claim. The decision by the Board on
review is final.
Subpart D--Miscellaneous Provisions
Section 1605.9 contains miscellaneous provisions. Paragraph (a)
addresses residual earnings. If all employee contributions to a
participant's account are removed, but earnings on those contributions
remain in the account under the rules of this part, the earnings will
not necessarily be removed from the account merely because there are no
longer any employee contributions. This will usually occur when an
agency erroneously contributes money to the account of a CSRS
participant who is eligible to contribute to the TSP but has not
elected to do so. When the contributions are removed, the earnings on
the employee contributions will remain in the account. Such a
participant will, like all other TSP participants, be entitled to
withdraw his or her account balance in full upon separating from the
Federal Government under the same rules that apply to withdrawal of
other money in a participant's account. In contrast, an employee who
was never eligible to contribute to the TSP is not, by law, entitled to
have a TSP account or to receive benefits from the TSP. If residual
earnings remain in the account of such an employee after all
contributions have been removed, they will be removed from the account
and applied against TSP administrative expenses. Any remedy the
employee may wish to pursue would be against his or her employing
agency and would not involve the Board, which is not in a position to
provide any relief to the employee.
Paragraph (b) provides for belated elections to contribute to the
TSP because of circumstances beyond the participant's control (but not
attributable to employing agency error). This belated election is
currently found at 5 CFR 1605.2(b)(1) of the existing regulations. The
revision adopts the rule of that provision without substantive change.
No makeup contributions are permitted under the circumstances addressed
in this provision.
Paragraph (c) contains a cross-reference to Part 1606 for
correcting investment in an incorrect investment fund(s). Some
employing agencies might be inclined to correct such an error by
submitting a negative adjustment record to remove the money from the
erroneous investment fund and then recontributing the money to the
correct investment fund. However, the only permissible correction is
through Part 1606.
Paragraph (d) provides addresses for the Board and TSP
recordkeeper.
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.
Unfunded Mandates Reform Act of 1995
Pursuant to the Unfunded Mandates Reform Act of 1995, sec. 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, or tribal governments
in the aggregate or by the private sector. Therefore, a statement under
section 202, 109 Stat. 48, 64-65, is not required.
[[Page 68472]]
Submission to Congress and the General Accounting Office
Under section 801(a)(1)(A) of the Administrative Procedure Act
(APA), as amended by the Regulatory Enforcement Fairness Act of 1996,
Public Law 104-121, tit. 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 General Accounting
Office prior to 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)).
List of Subjects in 5 CFR Part 1605
Administrative practice and procedure, Employee benefit plan,
Government employees, Pensions, Retirement.
Roger W. Mehle,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons set out in the preamble, Part 1605 of chapter VI,
Title 5 of the Code of Federal Regulations is revised to read as
follows:
PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS
Subpart A--Definitions
Sec.
1605.1 Definitions.
Subpart B--Employing Agency Errors
1605.2 Makeup of missed or insufficient contributions.
1605.3 Removal of erroneous contributions.
1605.4 Back pay awards and other retroactive pay adjustments.
1605.5 Misclassification of retirement coverage.
1605.6 Procedures for claims against employing agencies; time
limitations.
Subpart C--Board or TSP Recordkeeper Errors
1605.7 Plan-paid lost earnings and other corrections.
1605.8 Claims for correction of Board or TSP Recordkeeper errors;
time limitations.
Subpart D--Miscellaneous Provisions
1605.9 Miscellaneous provisions.
Authority: 5 U.S.C. 8351 and 8474.
Subpart A--Definitions
Sec. 1605.1 Definitions.
The following definitions apply for purposes of this part:
Account or TSP account means a participant's account in the Thrift
Savings Plan;
Agency automatic (1%) contributions means any contributions made
under 5 U.S.C. 8432 (c)(1) or (c)(3);
Agency contributions means agency automatic (1%) contributions and
agency matching contributions;
Agency matching contributions means any contributions made under 5
U.S.C. 8432(c)(2);
Basic pay means basic pay as defined in 5 U.S.C. 8331(3), and it is
the rate of pay used in computing any amount the individual is required
to contribute to the Civil Service Retirement and Disability Fund as a
condition for participating in the CSRS or the FERS, as the case may
be;
Board means the Federal Retirement Thrift Investment Board;
Board error means any act or omission by the Board that is not in
accordance with applicable statutes, regulations, or administrative
procedures made available to employing agencies and/or TSP participants
(including, but not limited to, TSP communications materials and other
publications);
C Fund means the Common Stock Index Investment Fund established
under 5 U.S.C. 8438(b)(1)(C);
CSRS means the Civil Service Retirement System established by
Subchapter III of chapter 83 of title 5, U.S.C., and any equivalent
Federal Government retirement plan;
CSRS employee or CSRS participant means any employee, member, or
participant covered by CSRS, including employees authorized to
contribute to the Thrift Savings Plan under 5 U.S.C. 8351, or 5 U.S.C.
8440a through 8440d;
Employee contributions means any contributions to the Thrift
Savings Plan made under 5 U.S.C. 8432(a), 5 U.S.C. 8351 or 5 U.S.C.
8440a through 8440d;
Employer contributions means agency automatic (1%) contributions
and agency matching contributions;
Employing agency means any entity that provides or has provided pay
to an individual, thereby incurring responsibility for submitting to
the Thrift Savings Fund contributions made by or on behalf of that
individual; any entity responsible for submitting TSP loan payments on
behalf of an individual; or any other entity that has employed an
individual and has provided information that affects or has affected
that individual's TSP account;
Employing agency error means any act or omission by an employing
agency that is not in accordance with all applicable statutes,
regulations, or administrative procedures, including internal
procedures promulgated by the employing agency and TSP procedures
provided to employing agencies by the Board or TSP recordkeeper;
Executive Director means the Executive Director of the Board under
5 U.S.C. 8474;
F Fund means the Fixed Income Investment Fund established under 5
U.S.C. 8438(b)(1)(B);
FERS means the Federal Employees' Retirement System established by
chapter 84 of title 5, U.S.C., and any equivalent Federal Government
retirement plans;
FERS employee or FERS participant means any employee, member, or
participant covered by FERS;
G Fund means the Government Securities Investment Fund established
under 5 U.S.C. 8438(b)(1)(A);
Interfund transfer means the movement of all or a portion of a
participant's existing account balance among the TSP investment funds;
Investment fund means the C Fund, the F Fund, the G Fund, and any
other TSP investment funds created subsequent to December 27, 1996.
Investment fund election means a choice by a participant concerning
how TSP contributions shall be allocated among the TSP investment
funds;
Lost earnings record means a data record containing information
enabling the TSP system to compute lost earnings and to determine the
investment fund in which money would have been invested had an error
not occurred;
Makeup contributions means employee or employer contributions that
are made for an earlier period during which they would have been made
but for an employing agency error;
Negative adjustment record means a data record submitted by an
employing agency to remove money from a participant's account;
Open season means the period during which participants may choose
to begin making contributions to the TSP, to change or discontinue the
amount currently being contributed to the TSP (without losing the right
to recommence contributions the next open season), or to allocate
prospective contributions to the TSP among the investment funds;
Participant means any person with an account in the TSP, or who
would have an account in the TSP but for an employing agency error;
Recordkeeper error means any act or omission by the TSP
recordkeeper that is not in accordance with applicable statutes,
regulations, or administrative procedures made available to employing
agencies and/or TSP participants (including, but not limited to, TSP
communications materials and other publications);
[[Page 68473]]
Source of contributions means either employee contributions, agency
automatic (1%) contributions, or agency matching contributions;
Thrift Savings Plan, TSP, or Plan means the Federal Retirement
Thrift Savings Plan established by the Federal Employees' Retirement
System Act of 1986 (FERSA), Pub. L. 99-335, 100 Stat. 514, which has
been codified, as amended, primarily at 5 U.S.C. 8401-8479; and
TSP Recordkeeper means the entity that is engaged by the Board to
perform recordkeeping services for the TSP. As of the effective date of
these regulations, the TSP recordkeeper is the National Finance Center,
Office of the Chief Financial Officer, United States Department of
Agriculture, located in New Orleans, Louisiana.
Subpart B--Employing Agency Errors
Sec. 1605.2 Makeup of missed or insufficient contributions.
(a) Applicability. This section applies whenever, as the result of
an employing agency error, a participant does not receive all of the
contributions to his or her account to which the participant is
entitled. This includes, but is not limited to, situations in which an
employing agency error prevents a participant from making an election
to contribute to the TSP, the employing agency erroneously fails to
implement a contribution election properly submitted by a participant,
the employing agency fails to make agency automatic (1%) contributions
or agency matching contributions that it is required to make, or the
employing agency erroneously contributes less to the TSP than it would
have contributed had the error not occurred. The corrections required
by this section must be made in accordance with this part and
procedures provided to employing agencies, from time to time, by the
Board or the TSP recordkeeper in bulletins or other guidance. It is the
responsibility of the employing agency to determine whether it has made
an error that entitles a participant to correction under this section.
(b) Missed employer contributions. If an employing agency has
failed to make agency automatic (1%) contributions that are required to
be made under 5 U.S.C. 8432(c)(1)(A), agency matching contributions
that are required to be made under 5 U.S.C. 8432(c)(2) based on
employee contributions that have been made, or contributions required
to be made under 5 U.S.C. 8432(c)(3), then:
(1) The employing agency must promptly submit, in a lump sum, all
such missed contributions to the TSP record keeper on behalf of the
affected participant. Makeup contributions must be allocated by the
employing agency among the TSP investment fund(s) using the
participant's current investment fund election at the time the makeup
contributions are made. If no such election is on file, the
contributions will be reported by the employing agency for investment
in the G Fund.
(2) If applicable, the employing agency must also submit any lost
earnings records required under 5 CFR Part 1606.
(c) Missed employee contributions. Within 30 days of receiving
information from his or her employing agency that indicates that the
employing agency acknowledges that an error has occurred that has
caused less employee contributions to be made to the participant's
account than would have been made had the error not occurred, a
participant may elect to establish a schedule of makeup contributions
to replace the missed contributions through future payroll deductions,
in addition to any regular TSP contributions that the participant is
entitled to make. The following rules apply to makeup contributions:
(1) The schedule of makeup contributions elected by the participant
must establish the amount of contributions to be made each pay period
over the duration of the schedule. The contribution amount per pay
period may vary during the course of the schedule, but the amounts to
be contributed should be established when the schedule is created. The
schedule may not exceed four times the number of pay periods over which
the errors occurred.
(2) The employing agency may, but need not, set a ceiling on the
length of the schedule of makeup contributions which is less than four
times the number of pay periods over which the errors being corrected
occurred. The ceiling may not, however, be less than twice the number
of pay periods over which the errors being corrected occurred.
(3) The employing agency must implement the schedule of makeup
contributions as soon as practicable after the participant has made an
election to implement a makeup schedule.
(4) Makeup contributions will not be considered in applying the
maximum amount per pay period that a participant is permitted to
contribute to the TSP (e.g., 5% of basic pay for CSRS participants, 10%
of basic pay for FERS participants), but will be included for purposes
of applying the annual limits contained in 26 U.S.C. 402(g)(1) and 26
U.S.C. 415.
(5) A participant's regular TSP contributions will always take
precedence over makeup contributions. Thus, when establishing a
schedule of makeup contributions, the employing agency must review any
schedule proposed by the affected participant as well as the
participant's current TSP contribution election, to determine whether
the makeup contributions, when combined with regular TSP contributions,
are expected to exceed the annual limits contained in 26 U.S.C.
402(g)(1) and 415. If so, the participant may elect to have the
schedule of makeup contributions established in such a manner that the
payments will, at an appropriate time, be suspended until the makeup
contributions can be made within the annual limits. In any event, a
schedule of makeup contributions may be suspended at any time in order
to avoid a situation in which the participant is unable to make regular
TSP contributions because of the annual limits. Similarly, a schedule
of makeup contributions may be suspended if a participant has
insufficient net pay to permit the makeup contributions. If a schedule
of makeup contributions is suspended because of the annual limits or
because of insufficient net pay, the period of suspension will not be
counted against the maximum number of pay periods the participant has
to complete the schedule of makeup contributions.
(6) A participant may elect to terminate a schedule of makeup
contributions at any time, but may not elect to make partial payments
under the schedule. Any such termination is irrevocable. If a
participant separates from employment that makes the participant
eligible to contribute to the TSP, the participant may elect to
accelerate the payment schedule by a lump sum contribution from his or
her final paycheck. No contributions may be made other than by payroll
deduction from pay that constitutes basic pay.
(7) To the extent a participant makes up missed employee
contributions, the employing agency must contribute any agency matching
contributions that would have been made had the employing agency error
that caused the missed employee contributions not been made. The agency
matching contributions must be made in installments over the course of
the schedule of makeup contributions. The participant may not receive
matching contributions associated with any employee contributions that
are not made up. If the makeup contributions are suspended in
accordance with
[[Page 68474]]
paragraph (c)(5) of this section, the payment of agency matching
contributions must also be suspended.
(8) Makeup contributions must be reported by the employing agency
for investment among the TSP investment fund(s) using the participant's
current investment fund election at the time the makeup contributions
are made. If no such election is on file, the contributions must be
reported by the employing agency for investment in the G Fund.
(9) Where a participant has transferred to a different employing
agency from the one at which the participant was employed at the time
of the missed contributions, it remains the responsibility of the
former employing agency to determine whether an employing agency error
is responsible for the missed contributions. If it is determined that
such an error has occurred, the current agency must take any necessary
steps to correct the error. The current agency may seek reimbursement
from the former agency of any amount that would have been paid by the
former agency had the error not occurred.
(10) Makeup employee contributions may be made only by payroll
deduction from pay that constitutes basic pay. Contributions by check,
money order, cash, or other form of payment, directly from the
participant to the TSP, or from the participant to the employing agency
for deposit to the TSP, are not permitted.
(11) If applicable, the employing agency must submit any lost
earnings records required under 5 CFR Part 1606.
Sec. 1605.3 Removal of erroneous contributions.
(a) Applicability. This section applies whenever, as a result of an
employing agency error, a TSP account contains money that should not
have been contributed to the account and which, therefore, must be
removed from the account. This includes, but is not limited to,
situations in which, because of an employing agency error, employee
contributions in excess of those elected by a participant are
contributed to the participant's account, employee contributions (and
any associated agency matching contributions) are made on behalf of a
participant who did not elect to have any contributions made, excess
employer contributions are made to a participant's account, or employee
contributions are made in excess of the amount permissible because of
an improper retirement classification that is subsequently corrected
(e.g., a CSRS employee is permitted to make contributions in excess of
5% of basic pay during a temporary misclassification as FERS).
(b) Negative adjustment records. (1) In order to remove money from
a participant's account, the employing agency must submit, for each pay
date involved, a negative adjustment record indicating the amount of
the contribution being removed, the pay date for which it was made, the
source(s) of the contributions involved (i.e., employee contributions,
agency automatic (1%) contributions or agency matching contributions),
and the investment fund or funds to which the erroneous contribution
was made. A negative adjustment record may be for all or a part of the
contributions made for the applicable pay date, investment fund and
source of contributions, but for each investment fund and source of
contributions the negative adjustment may not exceed the amount of
contributions made for that pay date.
(2) Negative adjustment records must be submitted in accordance
with this part and with procedures provided to employing agencies from
time to time by the Board or the TSP recordkeeper in bulletins or other
guidance. Negative adjustment records must also include any additional
information required in any such bulletins or other guidance.
(c) Processing negative adjustment records. Negative adjustment
records will be processed in accordance with the following rules:
(1) Negative adjustment records received and accepted by the TSP
recordkeeper by the second-to-last business day of a month will be
processed effective as of the end of that month. Negative adjustment
records accepted by the TSP recordkeeper on the last business day of a
month will be processed effective as of the end of the following month.
(2) When negative adjustment records are processed, the TSP
recordkeeper will determine separately, for each pay date and source of
contributions involved, the amount of any investment gains or losses on
the money the agency seeks to remove from the account and the
investment fund or funds in which that money is currently invested. In
making these determinations, investment gains and losses from the
different TSP investment funds will be netted against each other.
Investment gains and losses for different sources of contributions will
be treated separately; gains and losses for different sources of
contributions will not be netted against each other. The TSP
recordkeeper will take into consideration any interfund transfers made
effective on or after the date on which the erroneous contribution was
processed.
(3)(i) Multiple negative adjustment records in the same processing
cycle will be processed in the order of the applicable pay dates,
starting with the earliest pay date.
(ii) If the participant's account does not have sufficient funds in
the applicable source of contributions to pay the amount of a negative
adjustment, the adjustment to that source of contributions will not be
processed. Funds may not be taken from another source of contributions
to cover the negative adjustment. The employing agency may, at a later
date, resubmit the record that was not processed. It will be processed
if, at that time, there are sufficient funds for the applicable source
of contributions.
(iii) If there are sufficient funds in the applicable source of
contributions to pay the amount required by a negative adjustment
record, but any of the investment funds does not have sufficient money
to pay the portion that is attributable to that investment fund (e.g.,
because of a loan), then the amount required will be removed from the
other investment fund(s), pro rata, based on the participant's total
account balance in each investment fund for that source of
contributions.
(d) Employee contributions. The following rules apply to removal of
employee contributions from a participant's account:
(1) If there is a net investment gain on the erroneous employee
contribution made for a pay date, then the full amount of the erroneous
contribution will be returned to the employing agency. Subject to
Sec. 1605.9(a), the investment earnings on the erroneous contribution
will remain in the participant's account.
(2) If there is a net investment loss on the erroneous employee
contribution made for a pay date, then the employing agency will
receive only the amount of the erroneous contribution reduced by the
investment loss. However, the investment loss does not affect the
employing agency's obligation to refund to the participant the full
amount of the erroneous contribution.
(3) If an employing agency removes erroneous employee contributions
from a participant's account, it must also remove, under paragraph (e)
of this section, any associated agency matching contributions.
(e) Employer contributions. The following rules apply to removal of
employer contributions from a participant's account:
(1) Employer contributions will only be returned to the employing
agency if the negative adjustment record submitted to remove the
contributions is
[[Page 68475]]
processed within one year of the date the contribution was processed.
If more than one year has elapsed when the negative adjustment record
is processed, the amount of the employer contribution plus (or minus)
any investment gains (or losses) will be removed from the participant's
account and used to offset TSP administrative expenses rather than
returned to the employing agency. The employing agency's obligation to
submit negative adjustment records to remove erroneous contributions
from a participant's account is not affected by whether the
contribution has been in the account for more or less than one year at
the time the negative adjustment record is to be processed.
(2) Subject to paragraph (e)(1) of this section, if there is a net
investment gain within a source of contributions for an erroneous
employer contribution, then the employing agency will receive the full
amount of the negative adjustment submitted. The earnings attributable
to the erroneous contributions in the applicable source of
contributions will be removed from the participant's account and used
to offset TSP administrative expenses.
(3) Subject to paragraph (e)(1) of this section, if there is a net
investment loss within a source of contributions for an erroneous
employer contribution, then the employing agency will receive only the
amount of the erroneous contribution reduced by the investment loss.
Sec. 1605.4 Back pay awards and other retroactive pay adjustments.
(a) Participant not employed. The following rules apply to
participants who receive a back pay award or other retroactive pay
adjustment for a period during which the participant was separated from
Government employment:
(1) If the participant is reinstated to Government employment, then
immediately upon reinstatement the employing agency must give the
participant the opportunity to submit a contribution election form
(Form TSP-1) to make current contributions. The effective date of the
form will be the first day of the first full pay period in the most
recent TSP election period. If the participant is reinstated during a
TSP open season but before the election period, he or she can also
submit an election form that will become effective the first day of the
first full pay period in the following election period.
(2) The participant must be given the following options for
electing makeup contributions:
(i) If the participant had a valid contribution election form (Form
TSP-1) on file when he or she separated, upon the participant's
reinstatement to Government employment that election form will be
reinstated for purposes of makeup contributions, unless a new contri
bution election form is submitted to terminate all makeup contributions
or those contributions that would have been made from the date of
separation through the end of the open season that occurred immediately
after the separation.
(ii) Instead of making contributions for the period of separation
under the reinstated contribution election form, the participant may
submit a new election form for any open season that occurred during the
period of separation. However, the investment allocation on each Form
TSP-1 for the period of separation must be the same as the investment
allocation on the current Form TSP-1.
(3) Lost earnings will be calculated and credited to the
participant's account, in accordance with 5 CFR Part 1606, using the
rates of return for the G Fund, unless the participant submitted one or
more interfund transfer requests during the period of separation. In
the case of interfund transfer requests, the earnings will be
calculated using the G Fund rates of return until the first interfund
transfer was processed. The contribution that is subject to lost
earnings will be moved to the investment fund(s) the participant
requested and lost earnings will be calculated based on the earnings
for that fund(s). The amount of lost earnings calculated will be posted
to the investment fund(s) to which the contribution was moved by the
interfund transfer. If there were no interfund transfers processed
during the lost earnings calculation period, the amount of lost
earnings calculated will be posted to the employee's G Fund account.
(b) Participant employed. The following rules apply to participants
who receive a back pay award or other retroactive pay adjustment for a
period during which the participant was not separated from Government
employment:
(1) The participant will only be entitled to makeup contributions
for the period covered by the back pay award or retroactive pay
adjustment if, for that period, the participant had designated a
percentage of basic pay to be contributed to the TSP or had designated
a dollar amount of contributions each pay period which had to be
reduced (because of an applicable 5% or 10% limit on contributions per
pay period) as a result of the reduction in pay that is made up by the
back pay award or other retroactive pay adjustment.
(2) The employing agency must compute the amount of additional
employee contributions that would have been contributed to the
participant's account had the action leading to the back pay award or
other retroactive pay adjustment not occurred. The employing agency
must also compute the amount of agency matching contributions and
agency automatic (1%) contributions that would have been payable had
that action not occurred.
(c)(1) Makeup employee contributions required under paragraphs (a)
and (b) of this section must be computed prior to payment of the award
of back pay or other retroactive pay adjustment. The makeup employee
contributions must be deducted from the payment of the back pay award
or other retroactive pay adjustment and contributed to the TSP, unless
the payment of such contributions will cause the participant to exceed
the annual contribution limits contained in 26 U.S.C. 402(g)(1) or 26
U.S.C. 415 (taking into consideration the expected regular TSP
contributions the participant will make during the year in which the
back pay award or other retroactive pay adjustment is paid). To the
extent TSP contributions from the back pay award or other retroactive
pay adjustment would cause the participant to exceed the elective
deferral limits contained in 26 U.S.C. 402(g) or 415, such
contributions may be carried forward into subsequent years and made
(along with attributable agency matching contributions) pursuant to a
schedule of makeup contributions established under the rules set forth
in Sec. 1605.3(c).
(2)(i) If employee contributions are deducted from a back pay award
or other retroactive pay adjustment, the employing agency will be
responsible for contributing the associated agency matching
contributions at the same time the employee contributions are made.
Regardless of whether a participant elects makeup employee
contributions, the employing agency must make, in a lump sum payment,
all appropriate agency automatic (1%) contributions associated with the
back pay award or other retroactive pay adjustment.
(ii) Any makeup contributions (both employee and employer)
associated with a back pay award or other retroactive pay adjustment
must be reported by the employing agency for investment among the TSP
investment fund(s) using the participant's investment fund election in
effect at the
[[Page 68476]]
time the makeup contributions are made. If no such election is on file,
the contributions must be reported by the employing agency for
investment in the G Fund.
(d) The employing agency must pay any lost earnings on TSP
contributions derived from back pay awards or other retroactive pay
adjustments that are required to be paid under 5 CFR Part 1606.
(e) If a participant has withdrawn his or her TSP account other
than by purchasing an annuity, and the separation from Government
employment upon which the withdrawal was based is reversed, resulting
in reinstatement of the participant without a break in service, then
the participant will have the option, which must be exercised by notice
to the Board within 90 days of reinstatement, to restore to his or her
TSP account the amount withdrawn. The right to restore the withdrawn
funds will expire if the notice is not provided to the Board within 90
days of reinstatement. No earnings will be paid on any restored funds.
Sec. 1605.5 Misclassification of retirement coverage.
(a) If a CSRS participant is misclassified by an employing agency
as a FERS participant, when the mis-classification is corrected--
(1) The employing agency must, under Sec. 1605.3, remove all
employee contributions that exceeded 5% of basic pay for the pay
period(s) involved, and refund to the participant the amount
contributed. In addition, the employing agency must submit negative
adjustment records to remove all employer contributions made to the
participant's account during the period of misclassification that have
been in the account for less than one year. The participant may choose
whether or not he or she wishes to have the remainder of the employee
contributions made during the period of misclassification removed from
his or her account and refunded to the participant; and
(2) If the participant's account at any time contains no employer
contributions that have been in the account for less than one year, the
TSP recordkeeper will remove from the account any employer
contributions that have been in the account for one year or more (and
associated earnings), and will use such amounts to offset TSP
administrative expenses.
(b) If a FERS participant is misclassified as a CSRS participant,
when the misclassification is corrected he or she may not elect to have
the contributions made while classified as CSRS removed from his or her
account. The employing agency must make in a lump sum payment, pursuant
to Sec. 1605.2(b)(1), the appropriate agency automatic (1%)
contributions and agency matching contributions on the employee
contributions that were made while the participant was misclassified as
CSRS. The participant may also elect to make, under Sec. 1605.2(c),
additional contributions that he or she would have been eligible to
make as a FERS participant during the period of misclassification. If
such contributions are made, the employing agency must also submit any
associated agency matching contributions and any lost earnings records
required under 5 CFR Part 1606.
Sec. 1605.6 Procedures for claims against employing agencies; time
limitations.
(a) Agency procedures. Each employing agency must establish
procedures for participants to submit claims for correction under this
subpart. Each employing agency's procedures must include the following:
(1) The employing agency will provide the participant with a
decision on any claim within 30 days of receipt of the claim unless the
employing agency provides the participant with good cause for requiring
a longer period to decide the claim. Any decision to deny a claim in
whole or in part must be in writing and must include the reasons for
the denial (including citations to any applicable statutes, regulations
or procedures), a description of any additional material that would
enable the participant to perfect his or her claim, and a statement of
the steps to be taken to appeal the denial.
(2) The employing agency must permit a participant at least 30 days
to appeal the employing agency's denial of all or any part of his or
her claim for correction under this subpart. The appeal must be in
writing and addressed to the agency official designated in the initial
denial decision or in procedures promulgated by the agency. The
participant may include with his or her appeal any documentation or
comments that the participant deems relevant to the claim.
(3) The employing agency must issue a written decision on a timely
filed appeal within 30 days of receipt of the appeal unless the
employing agency provides the participant with good cause for taking a
longer period to decide the appeal. The employing agency decision must
include the reasons for the decision, as well as citations to any
applicable statutes, regulations, or procedures.
(4) If the agency decision on the appeal is not issued in a timely
manner, or if the appeal is denied in whole or in part, the participant
will be deemed to have exhausted his or her administrative remedy and
will be eligible to file suit against the employing agency under 5
U.S.C. 8477. There is no administrative appeal to the Board of a final
agency decision.
(b) Time limit for filing claims. (1)(i) Upon discovery of
administrative errors, employing agencies are required to promptly
correct those errors under this subpart, regardless of whether a claim
for correction is received from the affected participant. If an error
has not been corrected by the employing agency, the affected
participant may file a claim for correction with his or her employing
agency. The claim must be filed within one year of the earlier of:
(A) Receipt of a pay stub, earnings and leave statement, or other
document reflecting the error; or
(B) The close of the first TSP election period following the
participant's receipt of a TSP Participant Statement reflecting the
error.
(ii) For purposes of paragraphs (b)(1)(i)(A) and (b)(1)(i)(B) of
this section, in the case of a participant who has been improperly
classified as to retirement coverage, the receipt of a document
indicating the participant's retirement code classification is not, in
and of itself, sufficient to notify the participant that his or her
retirement classification is incorrect. However, receipt of a document
indicating a change in retirement code classification, in addition to a
written notice to the participant that the change may have implications
for his or her TSP account, may be deemed by an employing agency to be
sufficient to advise the participant that his or her retirement
classification had been incorrect prior to the change. The one-year
time limit will not commence with respect to retirement coverage
misclassification errors unless and until the participant receives a
written notice of the error that specifically mentions the TSP.
(2) If a participant fails to file a claim for correction of an
administrative error in a timely manner (or fails to appeal a denial of
a claim in a timely manner) under paragraph (b)(1) of this section, the
agency may still correct any administrative error that is brought to or
comes to its attention.
[[Page 68477]]
Subpart C--Board or TSP Recordkeeper Errors
Sec. 1605.7 Plan-paid lost earnings and other corrections.
(a) Plan-paid lost earnings. (1) Subject to paragraph (a)(2) of
this section, if, because of an error committed by the Board or the TSP
recordkeeper, a participant's account does not receive credit for
earnings (which may be positive or negative) that it would have
received had the error not occurred, the account will be credited with
the difference between the earnings (if any) it actually received and
the earnings it would have received had the error not occurred. The
errors that warrant crediting of lost earnings under this paragraph (a)
include, but are not limited to:
(i) Board or TSP recordkeeper 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 TSP investment fund(s) (e.g., improper processing or failure to
process an interfund transfer request).
(2) A participant's TSP account will not be credited with earnings
under paragraph (a)(1) of this section if, during the period the
participant's account received credit for less earnings than it would
have received but for the Board or recordkeeper error, the participant
had the use of the money on which the earnings would have accrued.
(3) In the case of an error described in paragraph (a)(1)(iii) of
this section, the affected participant will, upon discovery of the
error, be given a choice whether or not to have the error corrected. If
the participant chooses correction, the account will be placed in the
position it would have attained had the error not occurred, including
crediting of earnings (positive or negative as the case may be) that
would have accrued had the error not occurred and reallocation of the
account balance among the investment funds in the proportions that
would have existed had the error not occurred.
(4) Where the participant continued to have a TSP account, or would
have continued to have a TSP account but for the Board or TSP
recordkeeper error, earnings under paragraph (a)(1) of this section
will be computed for the relevant period based upon the investment
funds in which the affected monies would have been invested had the
error not occurred. If the period for which lost earnings are paid is a
period for which the participant did not, and should not, have had an
account in the TSP, then the earnings will be computed using the G Fund
rate of return for the relevant period.
(b) Reversal of loan distributions. If, because of Board or TSP
recordkeeper error, a TSP loan is declared a taxable distribution under
circumstances that make such declaration inconsistent with FERSA, 5 CFR
Part 1655, with the provisions of the documents (including
instructions) signed by or provided to the participant in connection
with the application for or issuance of the loan, or with other
procedures established by the Board or TSP recordkeeper in connection
with the TSP loan program, the taxable distribution will be reversed.
The participant will be provided an opportunity to reinstate or repay
in full the outstanding balance on the loan.
(c) Other corrections. The Executive Director may, in his
discretion and consistent with the requirements of applicable law,
correct any other errors not specifically addressed in this section or
provide any other relief to a participant, including payment of lost
earnings from the TSP, if the Executive Director determines that the
correction or relief would serve the interests of justice, fairness,
and equity among the participants of the TSP.
Sec. 1605.8 Claims for correction of Board or TSP Recordkeeper errors;
time limitations.
(a) Filing claims. Claims for correction under this subpart may be
submitted initially either to the TSP recordkeeper or the Board. The
claim must be in writing and may be from the affected participant or
beneficiary or from a representative of the participant or beneficiary.
The written claim must state the basis for the claim.
(b) Processing claims. (1) If the initial claim is submitted to the
TSP recordkeeper, the TSP recordkeeper may either respond directly to
the participant or the person making the claim on behalf of the
participant, or may forward the letter to the Board for response. The
decision whether the TSP recordkeeper should respond directly or
forward the claim to the Board will be made in accordance with guidance
and procedures established by the Board or, if no such specific
guidance is available, in consultation with the Board's staff. If the
TSP recordkeeper responds to a participant's claim, and all or any part
of the participant's claim is denied, the participant may request
review by the Board within 90 days of the date of the recordkeeper's
response.
(2) If the Board denies all or any part of a participant's claim
(whether upon review of a TSP recordkeeper denial or upon an initial
review by the Board), the participant will be deemed to have exhausted
his or her administrative remedy and may file suit under 5 U.S.C. 8477.
If the participant does not submit to the Board a request for review of
a claim denial by the TSP Recordkeeper within the 90 days permitted
under paragraph (b)(1) of this section, the participant shall not be
deemed to have exhausted his or her administrative remedy.
(c) Time limits for filing claims. (1)(i) Upon discovery of errors
subject to correction under this subpart, the Board or TSP recordkeeper
will promptly correct such errors in accordance with this subpart,
regardless of whether a claim for correction is received from the
affected participant. If an error has not been corrected by the Board
or TSP recordkeeper, the affected participant must file a claim for
correction within one year of the earlier of:
(A) His or her receipt of a pay stub, earnings and leave statement,
or other document reflecting the error; or
(B) The close of the first TSP election period following the
participant's receipt of a TSP Participant Statement reflecting the
error.
(ii) For purposes of paragraphs (c)(1)(i)(A) and (c)(1)(i)(B) of
this section, in the case of a participant whose retirement coverage
has been improperly classified, the receipt of a document indicating
the participant's retirement code classification is not, in and of
itself, sufficient to notify the participant that his or her retirement
code classification is incorrect.
(2) If a participant fails in a timely manner to file a claim for
correction (or fails in a timely manner to request reconsideration of a
claim) under paragraph (c)(1) of this section, the Board or TSP
recordkeeper may still correct any administrative error that is brought
to or comes to its attention.
Subpart D--Miscellaneous Provisions
Sec. 1605.9 Miscellaneous provisions.
(a)(1) If all employee contributions are removed from a
participant's account under the rules set forth in this part, but
earnings on any of those employee contributions or other residual
amounts are left in the account, the earnings will remain in the
account unless the participant was ineligible to have an account in the
TSP at the time the earnings were credited to the account and remains
ineligible. In that case, the earnings will be removed from the account
and used to offset TSP administrative expenses. If earnings remain in
the account under this
[[Page 68478]]
paragraph (a), they will be subject to withdrawal from the
participant's account upon separation from Federal employment under the
same withdrawal rules as apply to any other money in a participant's
account.
(2) If any residual earnings on employer contributions remain in a
participant's account after all employer have been removed from the
account, those residual earnings will be removed from the account and
used to offset TSP administrative expenses.
(b) If a participant fails to participate in the TSP due to
circumstances beyond his or her control but not due to circumstances
attributable to employing agency, Board, or TSP recordkeeper error, the
participant will be entitled to elect to participate effective not
later than the first pay period after the participant submits a
contribution election form (Form TSP-1), regardless of whether the form
is submitted during an election period. Such belated elections will be
permitted on a prospective basis only; no makeup contributions will be
permitted under this part.
(c) If TSP contributions are invested in the wrong investment
fund(s) because of employing agency error, that error may be corrected
only in accordance with 5 CFR 1606.7. Such errors may not be corrected
under this part.
(d)(1) The address for the TSP recordkeeper is: National Finance
Center, TSP Service Office, Post Office Box 61500, New Orleans, LA
70161-1500.
(2) The address for the Board is: Federal Retirement Thrift
Investment Board, 1250 H Street, N.W., Washington, DC 20005.
[FR Doc. 96-32497 Filed 12-26-96; 8:45 am]
BILLING CODE 6760-01-P
