[Federal Register Volume 61, Number 155 (Friday, August 9, 1996)]
[Rules and Regulations]
[Pages 41485-41488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20129]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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Federal Register / Vol. 61, No. 155 / Friday, August 9, 1996 / Rules
and Regulations
[[Page 41485]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1620
Nonappropriated Fund Employees
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Interim rule with request for comments.
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SUMMARY: The Executive Director of the Federal Retirement Thrift
Investment Board (Board) is publishing interim regulations governing
Thrift Savings Plan (TSP) participation by certain persons who move
between Federal civil service positions and positions with
Nonappropriated Fund (NAF) instrumentalities of the Department of
Defense (DOD) and U.S. Coast Guard (Coast Guard). These interim
regulations implement sections 10, 11, 13 and 14 of the Portability of
Benefits for Nonappropriated Fund Employees Act of 1990 (1990
Portability Act), as amended by section 1043 of the National Defense
Authorization Act for Fiscal Year 1996 (Defense Authorization Act).
DATES: These interim rules are effective on August 10, 1996. Comments
must be received on or before October 10, 1996.
ADDRESSES: Comments may be submitted to the Federal Retirement Thrift
Investment Board, 1250 H Street, NW., Washington, DC 20005.
FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest, Federal Retirement
Thrift Investment Board, 1250 H Street, N.W., Washington, D.C. 20005.
Telephone: (202) 942-1662. Telefacsimile: (202) 942-1676.
SUPPLEMENTARY INFORMATION: The Board administers the TSP, which was
established by the Federal Employees' Retirement System Act of 1986
(FERSA), Pub. L. 99-335, 101 Stat. 514 (1986), which has been codified,
as amended, largely at 5 U.S.C. 8401-8479 (1994). The TSP is a tax-
deferred retirement savings plan for Federal employees that is similar
to cash or deferred arrangements established under section 401(k) of
the Internal Revenue Code.
The 1990 Portability Act, Pub. L. 101-508, 104 Stat. 1388, 1388-335
to 1388-341 (codified largely at 5 U.S.C. 8347(p)(1) and 8461(n)(1)),
as amended by section 1043 of the Defense Authorization Act, Pub. L.
104-106, 110 Stat. 186, 434-439, provides that certain employees who
move from Federal service to NAF instrumentalities are eligible to
participate in the TSP by virtue of their election to be covered by the
Civil Service Retirement System (CSRS) or the Federal Employees'
Retirement System (FERS). These regulations set forth the rules and
procedures which the NAF instrumentality must follow for its employees
who are eligible to participate in the TSP pursuant to the 1990
Portability Act, as amended. Different rules apply depending on whether
the employee moved on or after August 10, 1996, and whether he or she
elects to be covered by CSRS or FERS. The regulations also address an
employee's eligibility to participate in the TSP if the employee moves
from a NAF instrumentality to a Federal Government agency.
The 1990 Portability Act permitted CSRS and FERS employees of the
Department of Defense and the U.S. Coast Guard who moved on or after
January 1, 1987, to a NAF instrumentality to elect to maintain their
CSRS or FERS retirement coverage after the move. On June 10, 1991, the
Board published an interim rule with request for comments in the
Federal Register (56 FR 26,722) implementing the 1990 Portability Act
as it pertained to the TSP. The Board received no comments on the
interim rule.
Section 1043 of the 1996 Defense Authorization Act amended the 1990
Portability Act by expanding the eligibility requirement for employees
of NAF instrumentalities in two ways. First, all Federal employees
moving to a NAF instrumentality, not just those from the Department of
Defense and U.S. Coast Guard, are eligible to continue their CSRS or
FERS retirement coverage after their move. Second, the amendment
changed the threshold for being eligible for CSRS or FERS retirement
coverage from employees who moved to a NAF instrumentality after
December 31, 1986, to employees who made the move after December 31,
1965. The Board's NAF regulations are being revised to implement this
amendment to the 1990 Portability Act. The revised regulations do not
change the procedures for retroactive participation in the TSP by
affected employees of NAF instrumentalities.
Sections 1620.93 (a)(2) and (a)(3) pertain to ``an employee who
moved to a NAF instrumentality on or after August 10, 1996, but after
December 31, 1965, elects to be covered by FERS * * *.'' The 1990
Portability Act, as amended, does not change the current Federal law
which provides that FERS coverage can only begin on or after January 1,
1987. However, under Office of Personnel Management regulations,
eligible employees who transferred to a NAF instrumentality prior to
January 1, 1987, may elect FERS coverage to be retroactively effective
on or after January 1, 1987.
Section 1620.93(c) provides that employees who are covered by a NAF
retirement plan are not eligible to participate in the TSP. Under
section 1620.93, some employees who are covered under CSRS or FERS can
elect retroactive NAF retirement coverage. If a TSP participant elects
retroactive NAF retirement coverage, there could be contributions in
his or her account which relate to a period during which he or she was
ineligible to participate in the TSP. The 1990 Portability Act, as
amended, does not provide for the transfer of funds between the TSP and
a NAF defined contribution plan. Therefore, these contributions must be
removed from the TSP under the Board's error correction regulations at
5 CFR part 1605.
Section 1620.93(d) pertains to employees who elected CSRS or FERS
coverage under the 1990 Portability Act before the effective date of
these regulations. Their TSP elections are valid if they were properly
implemented by the NAF instrumentality under then-effective
regulations. In all other respects, these regulations apply to those
employees. The Board is also making several changes to the interim
regulations which are unrelated to the Defense Authorization Act
amendments. The Board has received questions from employees moving from
NAF
[[Page 41486]]
instrumentalities to Federal civil service positions regarding when
they are eligible to participate in the TSP. The 1990 Portability Act,
as amended, does not change the eligibility requirements set forth in
FERSA. Section 1620.94 is being revised to explain those requirements.
In addition, since this subpart was first published on June 10, 1991,
the Board has changed the manner by which an employing agency is
required to transmit employee separation data to the TSP recordkeeper.
See TSP Bulletin 94-29, Elimination of Form TSP-18, Validation of
Retirement Information, and New Procedures for Submitting Form TSP-3,
Designation of Beneficiary. Section 1620.97 is being amended to reflect
this change.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because they
will apply only to Federal agencies and employees.
Paperwork Reduction Act
I certify that these regulations do not require additional
reporting under the criteria of the Paperwork Reduction Act of 1980.
Waiver of Notice of Proposed Rulemaking and 30-Day Delay of Effective
Date
Under 5 U.S.C. 553 (b)(3)(B) and (d)(3), I find that good cause
exists for waiving the general notice of proposed rulemaking and for
making these regulations effective in less than 30 days because section
1043 of the Defense Authorization Act, 110 Stat. at 434-435, requires
these regulations to be effective on or before August 10, 1996.
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.
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,
Pub. L. 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 1620
Employee benefit plan, Government employees, Pensions, Retirement.
Federal Retirement Thrift Investment Board
Roger W. Mehle,
Executive Director.
For the reasons set out in the preamble, Part 1620 of chapter VI,
Title 5 of the Code of Federal Regulations is amended as follows:
PART 1620--CONTINUATION OF ELIGIBILITY
1. The authority citation for Part 1620 is revised to read as
follows:
Authority: 5 U.S.C. 8474 and 8432b; Pub. L. 99-591, 100 Stat.
3341; Pub. L. 100-238, 101 Stat. 1744; Pub. L. 100-659, 102 Stat.
3910; Pub. L. 101-508, 104 Stat. 1388; Pub. L. 104-106, 110 Stat.
186.
2. Subpart G of part 1620 is revised to read as follows:
Subpart G--Nonappropriated Fund Employees
Sec.
1620.90 Scope.
1620.91 Definitions.
1620.92 Employees who move to a NAF instrumentality on or after
August 10, 1996.
1620.93 Employees who moved to a NAF instrumentality prior to
August 10, 1996, but after December 31, 1965.
1620.94 Employees who move from a NAF Instrumentality to a Federal
Government agency.
1620.95 Payment of TSP contributions.
1620.96 Loan payments.
1620.97 Transmission of information.
1620.98 Notices.
1620.99 Other regulations.
Subpart G--Nonappropriated Fund Employees
Sec. 1620.90 Scope.
This subpart applies to any employee of a Nonappropriated Fund
(NAF) instrumentality of the Department of Defense (DOD) or the U.S.
Coast Guard who elects to be covered by the Civil Service Retirement
System (CSRS) or the Federal Employees' Retirement System (FERS) and to
any employee in a CSRS or FERS covered position who elects to be
covered by a retirement plan established for employees of a NAF
instrumentality pursuant to the Portability of Benefits for
Nonappropriated Fund Employees Act of 1990, Pub. L. 101-508, 104 Stat.
1388, 1388-335 to 1388-341 (codified largely at 5 U.S.C. 8347(p)(1) and
8461(n)(1) (1994)), as amended by section 1043 of the National Defense
Authorization Act for Fiscal Year 1996, Pub. L. 104-106, 110 Stat. 186,
434-439.
Sec. 1620.91 Definitions.
As used in this subpart, the terms--
Basic pay means the pay from the NAF instrumentality used to
compute the amount the individual is required to contribute to the
Civil Service Retirement and Disability Fund as a condition for
participating in CSRS or FERS, as the case may be.
Covered by means paying contributions to the Civil Service
Retirement and Disability Fund under either CSRS or FERS.
Move means moving from a position covered by CSRS or FERS to a NAF
instrumentality of the DOD or Coast Guard, or vice versa, without a
break in service of more than 1 year.
Thrift Savings Plan (TSP) election means a request by an employee
to start contributing to the TSP, to terminate contributions to the
TSP, to change the amount of contributions made to the TSP each pay
period, or to change the allocation of future TSP contributions among
the investment funds and made effective pursuant to 5 CFR part 1600.
Sec. 1620.92 Employees who move to a NAF instrumentality on or after
August 10, 1996.
(a) Any Thrift Savings Plan (TSP) elections:
(1) Made during a previous employment by an employee who moves to a
NAF instrumentality on or after August 10, 1996, and who elects to
continue to be covered by CSRS or FERS; and
(2) Which is still in effect as of the date of the move shall be
implemented by the NAF instrumentality and shall begin with the date of
the move.
(b) If an employee who moves to a NAF instrumentality on or after
August 10, 1996, does not have a current election to contribute to the
TSP, he or she shall be permitted to make such an election during the
first TSP Open Season, as described in 5 CFR 1600.2, during which he or
she is eligible to do so under 5 U.S.C. 8432.
(c) An employee who moves to a NAF instrumentality on or after
August 10, 1996, and who elects to continue to be covered by CSRS or
FERS must be permitted during the appropriate Open Seasons to elect
under 5 U.S.C. 8351(b)(2) or 8432(a), as applicable, to make future
contributions to the Thrift Savings Fund from his or her basic pay.
[[Page 41487]]
(d) For an employee who moves to a NAF instrumentality on or after
August 10, 1996, and who elects to continue to be covered by FERS, the
NAF instrumentality must also contribute each pay period to the Thrift
Savings Fund in accordance with Board procedures on behalf of such
employee any amounts which the employee is eligible to receive under 5
U.S.C. 8432(c).
(e) In the case of an employee who moves to a NAF instrumentality
on or after August 10, 1996, and who elects to continue to be covered
by CSRS or FERS, any TSP contributions described in 5 U.S.C. 8351(b)(2)
or 8432(a), as applicable, for which such employee is eligible and
which are not made in accordance with this section because the employee
moves to the NAF instrumentality but does not make an immediate
election to be covered by CSRS or FERS, shall be made up according to
the error correction procedures contained in 5 CFR part 1605.
Sec. 1620.93 Employees who moved to a NAF instrumentality prior to
August 10, 1996, but after December 31, 1965.
(a) Future TSP contributions. (1) Employee Contributions. An
employee who moved to a NAF instrumentality prior to August 10, 1996,
but after December 31, 1965, and who elects to be covered by CSRS or
FERS as of the date of such move may elect to make any future
contributions to the TSP in accordance with 5 U.S.C. 8351(b)(2) or
8432(a), as applicable, within 30 days of the date of his or her
election to be covered by CSRS or FERS. Such contributions shall begin
being deducted from the employee's pay no later than the pay period
following the election to contribute to the TSP. Any TSP election which
may have been in effect at the time of the employee's move will not be
effective for any future contributions.
(2) Agency Automatic (1%) Contributions. If an employee who moved
to a NAF instrumentality prior to August 10, 1996, but after December
31, 1965, elects to be covered by FERS, the NAF instrumentality must
also contribute each pay period to the Thrift Savings Fund on behalf of
such employee any amounts which the employee is eligible to receive
under 5 U.S.C. 8432(c)(1), beginning no later than the pay period
following the employee's election to be covered by FERS.
(3) Agency Matching Contributions. If an employee who moved to a
NAF instrumentality prior to August 10, 1996, but after December 31,
1965, elects to be covered by FERS and also elects to make
contributions to the TSP pursuant to paragraph (a)(1) of this section,
the NAF instrumentality must also contribute each pay period to the
Thrift Savings Fund on behalf of such employee any amounts which the
employee is eligible to receive under 5 U.S.C. 8432(c)(2), beginning at
the same time as the employee's contributions are made pursuant to
paragraph (a)(l) of this section.
(b) Retroactive TSP Contributions. (1) Without regard to any
election to contribute to the TSP under paragraph (a)(l) of this
section, the NAF instrumentality shall take the following actions with
respect to an employee who moved to a NAF instrumentality prior to
August 10, 1996, but after December 31, 1965, and who elects to be
covered by CSRS or FERS as of the date of the move:
(i) Agency Automatic (1%) Make-up Contributions. The NAF
instrumentality shall, within 30 days of the date of the employee's
election to be covered by FERS, contribute to the Thrift Savings Fund
an amount representing the Agency Automatic (1%) Contribution for all
pay periods during which the employee would have been eligible to
receive the Agency Automatic (1%) Contribution under 5 U.S.C. 8432,
beginning with the date of the move and ending with the date that
Agency Automatic (1%) Contributions begin under paragraph (a)(2) of
this section. Lost earnings will not be paid on these contributions
unless they are not made by the NAF instrumentality within the time
frames required by these regulations.
(ii) Employee Make-up Contributions. (A) Within 60 days of the
election to be covered by FERS, an employee who moved to a NAF
instrumentality prior to August 10, 1996, but after December 31, 1965,
and who elects to be covered by FERS, may make an election regarding
Employee Make-up Contributions. The employee may elect to contribute
all or a percentage of the amount of Employee Contributions which the
employee would have been eligible to make under 5 U.S.C. 8432 between
the date of the move and the date Employee Contributions begin under
paragraph (a)(1) of this section or, if no such election is made under
paragraph (a)(1) of this section, the date that Agency Automatic (1%)
Contributions begin under paragraph (a)(2) of this section.
(B) Within 60 days of the election to be covered under CSRS, an
employee who moved to an NAF instrumentality prior to August 10, 1996,
but after December 31, 1965, and who elects to be covered by CSRS, may
make an election regarding make-up contributions. The employee may
elect to contribute all or a percentage of the amount of Employee
Contributions which the employee would have been eligible to make under
5 U.S.C. 8351 between the date of the move and the date Employee
Contributions begin under paragraph (a)(1) of this section or, if no
such election is made under paragraph (a)(1) of this section, the pay
period following the date the election to be covered by CSRS is made.
(C) Deductions made from the employee's pay pursuant to an
employee's election under paragraph (b)(1)(ii) (A) or (B) of this
section, as appropriate, shall be made according to a schedule that
meets the requirements of paragraphs (b) (2) and (3) of this section.
(iii) Agency Matching Make-up Contributions. The NAF
instrumentality must pay to the Thrift Savings Fund any Matching
Contributions attributable to Employee Contributions made under
paragraph (b)(1)(ii)(A) of this section that the NAF instrumentality
would have been required to make under 5 U.S.C. 8432(c), at the same
time that such Employee Contributions are contributed to the Fund.
(2) The NAF instrumentality may set a ceiling on the number of pay
periods over which the contributions referred to in paragraph
(b)(1)(ii) of this section may be made; however, this ceiling may not
be less than two times the number of pay periods in which the payments
could have been made. The payment schedule must begin no later than the
pay period following the date the employee elects such schedule and it
may not contain more than four times the number of pay periods in which
the payment could have been made. When setting the number of payments,
the employee's remaining period of employment with the Federal
Government should be considered to ensure that the employee will have
sufficient time to make up these contributions.
(3) If the agreed-upon payment schedule cannot be met because the
employee has insufficient net pay or because the employee has reached
an annual ceiling for tax-deferred contributions under 26 U.S.C. 402(g)
or 415, the payment schedule will be suspended until the employee is
again able to make full payments through payroll deductions. Pay
periods for which an employee is unable to make payments because of
insufficient net pay or a ceiling on tax-deferred contributions, will
not be counted against the maximum number of pay periods applicable to
the schedule and
[[Page 41488]]
the maximum number of applicable pay periods must be extended
accordingly.
(4) If an employee chooses to contribute the make-up amount, he or
she may subsequently terminate that decision at any time and that
termination shall be irrevocable. If an employee separates from Federal
or covered NAF employment, the employee may accelerate the contribution
by lump sum payment from the final salary payment. If the employee
dies, the retroactive contributions of the deceased employee will be
terminated as of the final salary payment.
(5) The make-up payment amount is not subject to the maximum pay
period contribution limitations; however, these amounts must be
included when determining amounts subject to annual ceilings on
contributions under 26 U.S.C. 402(g) or 415.
(6) In the event an employee does not have sufficient net pay to
make all of the TSP deductions, the employee's regular TSP deduction
shall take precedence over the employee's payment schedule
contribution.
(7) Make-up contributions shall be reported for investment by the
NAF instrumentality when contributed, according to the employee's
election for current TSP contributions. If the employee is not making
current contributions, the retroactive contributions shall be invested
according to an election form (TSP-1-NAF) filed specifically for that
purpose.
(c) An employee who is covered by a NAF retirement plan is not
eligible to participate in the TSP. Any TSP contributions relating to a
period for which an employee elects retroactive NAF retirement coverage
shall be removed from the TSP as required by the regulations at 5 CFR
part 1605.
(d) A TSP election made by an employee of a NAF instrumentality who
elected to be covered by CSRS or FERS prior to August 10, 1996, which
was properly implemented by the NAF instrumentality because it was
valid under then-effective regulations, is effective under the
regulations in this subpart.
Sec. 1620.94 Employees who move from a NAF instrumentality to a
Federal Government agency.
(a) An employee of a NAF instrumentality who moves from a NAF
instrumentality to a Federal Government agency and who elects to be
covered by a NAF retirement system is not eligible to participate in
the TSP. Any TSP contributions relating to a period for which an
employee elects retroactive NAF retirement coverage shall be removed
from the TSP as required by the regulations at 5 CFR part 1605.
(b) An employee of a NAF instrumentality who moves from a NAF
instrumentality to a Federal Government agency and who elects to be
covered by CSRS or FERS will become eligible to participate in the TSP
as follows:
(1) If the employee was previously eligible to participate in the
TSP under a prior period of Federal Government service, the employee
will be eligible to participate in the TSP the first Open Season (as
determined in accordance with 5 CFR 1600.3(d)) beginning after the
effective date of the CSRS and FERS coverage.
(2) If the employee was not previously eligible to participate in
the TSP, the employee will be eligible to contribute to the TSP in the
second Open Season (as determined in accordance with 5 CFR 1600.3(d))
beginning after the effective date of the CSRS or FERS coverage.
Sec. 1620.95 Payment of TSP contributions.
The NAF instrumentality shall deduct any Employee Contributions
authorized under this section from the pay of the employee each pay
period and shall remit such amounts to the Thrift Savings Fund in
accordance with this subpart and Board procedures. The NAF
instrumentality shall contribute any future Agency Automatic (1%)
Contributions and Agency Matching Contributions to the Thrift Savings
Fund each pay period in accordance with this subpart and Board
procedures. The NAF instrumentality shall contribute make-up
contributions to the Thrift Savings Fund in accordance with this
subpart and Board procedures.
Sec. 1620.96 Loan payments.
NAF instrumentalities shall deduct and transmit TSP loan payments
for employees who elect to be covered by CSRS or FERS to the
recordkeeper in accordance with 5 CFR part 1655 and Board procedures.
Loan payments may not be deducted and transmitted for employees who
elect to be covered by the NAF retirement system. Such employees will
be considered to have separated from Government service and must prepay
their loans or a taxable distribution will be declared.
Sec. 1620.97 Transmission of information.
Any employee who moves to a NAF instrumentality shall be reported
by the losing Federal Government employing agency to the TSP
recordkeeper as having transferred to a NAF instrumentality of the DOD
or Coast Guard rather than as having separated from Government service.
If the employee subsequently elects not to be covered by CSRS or FERS,
the NAF instrumentality must submit an Employee Data Record to report
the employee as having separated from Federal Government service as of
the date of the move.
Sec. 1620.98 Notices.
All NAF instrumentalities employing any individuals covered by
Sec. 1620.90 must notify affected employees of the application of the
regulations in this subpart as soon as practicable.
Sec. 1620.99 Other regulations.
NAF instrumentalities and individuals covered by Sec. 1620.90 are
governed by the regulations in this chapter, to the extent that the
regulations in this chapter are not inconsistent with this subpart.
[FR Doc. 96-20129 Filed 8-8-96; 8:45 am]
BILLING CODE 6760-01-P
