[Federal Register Volume 64, Number 110 (Wednesday, June 9, 1999)]
[Rules and Regulations]
[Pages 31052-31063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14398]
[[Page 31051]]
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Part III
Federal Retirement Thrift Investment Board
_______________________________________________________________________
5 CFR Parts 1620, 1650, 1651, and 1690
Expansion and Continuation of Thrift Savings Plan Eligibility; Methods
of Withdrawing Funds From the Thrift Savings Plan; Death Benefits; and
Miscellaneous Regulations; Final Rule
Federal Register / Vol. 64, No. 110 / Wednesday, June 9, 1999 / Rules
and Regulations
[[Page 31052]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Parts 1620, 1650, 1651, and 1690
Expansion and Continuation of Thrift Savings Plan Eligibility;
Methods of Withdrawing Funds From the Thrift Savings Plan; Death
Benefits; and Miscellaneous Regulations
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Final rule.
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SUMMARY: The Executive Director of the Federal Retirement Thrift
Investment Board (Board) is publishing a final rule to reorganize and
amend the regulations on continuation of Thrift Savings Plan (TSP)
eligibility; to amend the regulations concerning TSP death benefits and
withdrawal options; and to create a new rule pertaining to power-of-
attorney documents.
The reorganization of the continuation of eligibility regulations
eliminates obsolete and redundant provisions. The amendments to those
regulations codify a new TSP loan policy for employees returning to
civilian service pursuant to the Uniformed Services Employment and
Reemployment Rights Act, codify current TSP procedures governing
participation by judges of the Courts of Federal Claims and Veterans
Appeals, and otherwise update the terms used in those regulations to
correspond with the terms used throughout the Board's other
regulations.
The amendment to the withdrawal regulations provides that a
participant's TSP account will be forfeited if the participant does not
withdraw his or her account in a timely manner. The account will be
restored if the participant complies with the withdrawal requirements.
The amendment to the death benefit regulations explains that a
deceased participant's TSP account will be transferred into the
Government Securities Investment (G) Fund after the TSP receives notice
of the participant's death.
The new power-of-attorney regulation explains how a participant or
beneficiary can authorize an individual to act on his or her behalf
with respect to transactions with the TSP.
DATES: This final rule is effective July 9, 1999.
FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest, (202) 942-1662,
Federal Retirement Thrift Investment Board, 1250 H Street, N.W.,
Washington, D.C. 20005.
SUPPLEMENTARY INFORMATION: The Federal Retirement Thrift Investment
Board administers the TSP, which was established by the Federal
Employees' Retirement System Act of 1986 (FERSA), Public Law 99-335,
100 Stat. 514, which has been codified, as amended, largely at 5 U.S.C.
8351 and 8401-8479. 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. Sums in
a TSP participant's account are held in trust for that participant.
Analysis of Part 1620
FERSA created the Federal Employees' Retirement System (FERS), and
required the establishment of TSP accounts for ``employees and
Members'' covered by FERS. See FERSA section 101(a), 100 Stat. at 541-
44, codified as amended at 5 U.S.C. 8432. For purposes of FERS
participation, ``employee'' and ``Member'' were defined at FERSA
section 101(a), 100 Stat. at 517-20, codified as amended at 5 U.S.C.
8401(11) and (20). Voluntary TSP participation was also authorized for
``employees and Members'' covered under the Civil Service Retirement
System (CSRS). See FERSA section 206(a)(1), 100 Stat. at 593-4,
codified as amended at 5 U.S.C. 8351. FERSA also permitted TSP
participation by various other specifically named groups, such as
employees covered under the Foreign Service retirement plan. However,
only individuals so authorized by FERSA could participate in the TSP.
From time to time since the passage of FERSA, Congress has expanded
FERS participation and TSP eligibility to other groups of employees.
Congress has also permitted certain groups of employees to maintain
CSRS and FERS coverage after leaving Federal employment, and permitted
them to retain their TSP eligibility. In addition, Congress has
extended TSP participation to Supreme Court justices, Federal District
Court judges, bankruptcy judges, and United States magistrates even
though they are not covered by CSRS or FERS.
The Board created 5 CFR part 1620 to describe the rules for TSP
participation by these individuals. Because part 1620 was written
incrementally, it contained duplication, such as numerous definition
sections, restated general TSP principles found elsewhere in the
Board's regulations, and described deadlines for actions which have
passed. This final rule eliminates those obsolete and redundant
provisions.
Removed Interim Subparts A, D, and I
The Continuing Appropriations for Fiscal Year 1987, Public Law 99-
591, 100 Stat. 3341, permitted food service employees of the House of
Representatives who transferred from Federal employment to employment
with a private contractor to retain Federal retirement system coverage
and their TSP eligibility. On July 14, 1987, the Board published an
interim rule with request for comment in the Federal Register (52 FR
28293) to implement that provision. The Board received no comment on
the interim rule, which was codified at 5 CFR part 1620, subpart A.
The Federal Employees' Retirement System, Technical Corrections
[Act of 1988], Public Law 100-238, title I, 101 Stat. 1744, 1744-67,
permitted TSP participation by individuals covered by CSRS as a result
of the provision of law described in 5 U.S.C. 8347(o). Under section
8347(o), individuals who were employed by an international organization
before October 1, 1988, while not employed by the Federal Government,
are nevertheless covered by CSRS. On March 28, 1988, the Board
published an interim rule with request for comment in the Federal
Register (53 FR 10038) to implement the above-mentioned provision. The
Board received no comment on this interim rule, which was codified at 5
CFR part 1620, subpart D.
Section 101 of the District of Columbia Financial Responsibility
and Management Assistance Act of 1995 (Control Board Act), Public Law
104-8, 109 Stat. 97, 100, established the District of Columbia
Financial Responsibility and Management Assistance Authority (Control
Board) as an entity within the Government of the District of Columbia.
Under the Control Board Act, certain persons who separated from Federal
employment and who became employed by the Control Board could maintain
their Federal retirement system coverage and TSP eligibility. On
January 29, 1996, the Board published an interim rule with request for
comment in the Federal Register (61 FR 2872), governing TSP
participation by CSRS and FERS employees of the Control Board. That
interim rule was codified at subpart I. On April 26, 1996, the Control
Board Act was amended by section 153 of the Omnibus Consolidated
Rescissions and Appropriations Act of 1996, Public Law 104-134, 110
Stat. 1321, to permit a broader group of Control Board employees to
elect CSRS or FERS coverage and thereby TSP eligibility. On October 25,
1996, the Board published
[[Page 31053]]
in the Federal Register (61 FR 55201) an interim rule with request for
comment, amending interim subpart I to reflect the 1996 amendments. The
Board received no comment on either rule.
Interim subparts A, D, and I are removed by this rule because they
are now unnecessary. The deadline for food service employees to elect
Federal retirement coverage passed in 1987 and Board regulations no
longer need to address the requirements of that election. The remaining
provisions of interim subpart A, which describe the rules for making
TSP contributions, are unnecessary because food service employees
participate in the TSP under the same rules that apply to all Federal
employees.
With respect to interim subpart D, Secs. 1620.52 and 1620.53
describe the initial election period for employees covered by the
subpart and are no longer needed because the election period has
passed. The remainder of interim subpart D is unnecessary because it
restates general TSP rules found elsewhere in the TSP regulations.
Finally, with respect to interim subpart I, CSRS and FERS employees
of the D.C. Control Board also participate in the TSP under
conventional rules. Although certain employees of the D.C. Control
Board are eligible for CSRS or FERS coverage while others are not, this
is a matter within the jurisdiction of the United States Office of
Personnel Management, and Board regulations need not address the
particulars of that eligibility.
New Subpart A
This final rule creates a new subpart A to explain the rules that
generally apply to all TSP participants covered by part 1620. New
Sec. 1620.1 describes who is covered by part 1620 and explains that
part 1620 must be read in conjunction with the Board's other
regulations at 5 CFR chapter VI. Currently, each subpart of part 1620
contains its own definition section, which results in unnecessary
duplication. New Sec. 1620.2 consolidates the definitions, to the
extent possible, and conforms the terms used in this part to those used
throughout the remainder of 5 CFR chapter VI. New Sec. 1620.3 states
the general rule, currently repeated throughout part 1620, that an
employing agency must timely notify an employee of his or her TSP
eligibility and the applicability of part 1620.
New Subpart B
The Federal Employees' Retirement System, Technical Corrections
[Act of 1988], Public Law 100-238, tit. I, 101 Stat. 1744, 1744-67,
permitted the continuation of CSRS and FERS retirement coverage, and
resulting TSP eligibility, for three separate groups of Federal
employees: (1) those transferred or otherwise assigned to a cooperative
extension service (CES), as defined at 7 U.S.C. 3103(5); (2) those who
enter on approved leave-without-pay status to serve as full-time
officers or employees of an organization composed primarily of
``employees'' as defined at 5 U.S.C. 8331(1) or 8401(11); and (3) those
in an approved leave-without-pay status assigned to a State or local
government under the Intergovernmental Personnel Act (IPA), 5 U.S.C.
chapter 33, subchapter VI.
On March 28, 1988, the Board published an interim rule with request
for comment in the Federal Register (53 FR 10038) to implement these
provisions of the 1988 Act, which was codified at 5 CFR part 1620,
subparts B and C. Interim subpart B addresses CES employees, while
interim subpart C addresses union and IPA employees. On May 18, 1988,
the Board published in the Federal Register (53 FR 17685) an amendment
to the March 28, 1988, interim rule which extended the period during
which union employees could elect TSP participation. The Board received
no comment on either rule.
This rule condenses interim subparts B and C into a new subpart B
because, with few exceptions, the same rules apply to TSP participation
by union, IPA, and CES employees. Some provisions of the interim
regulations have been moved to the new subpart A, i.e., the definitions
(Secs. 1620.11 and 1620.31), the employee notice provisions
(Secs. 1620.18(b) and 1620.39), and the reference to other TSP
regulations (Secs. 1620.19 and 1620.40). Others have been eliminated
because they only restated general TSP principles found elsewhere in
TSP regulations, i.e., the deadline for making employee contributions
(Secs. 1620.14 and 1620.33) and the computation of basic pay
(Secs. 1620.16 and 1620.35). Interim rule Secs. 1620.17, 1620.36, and
1620.37, which describe retroactive TSP contributions, are combined and
rewritten in new section 1620.13 to omit material discussed in the
error correction regulations at 5 CFR part 1605.
New Subpart C
Section 401(a) of the Federal Employees Health Benefits Amendments
Act of 1988, 5 U.S.C. 8440a, permits justices and judges of the United
States, as defined at 28 U.S.C. 451, to participate in the TSP.
Similarly, section 7(a) of the Retirement and Survivors' Annuities for
Bankruptcy Judges and Magistrates Act of 1988, 5 U.S.C. 8440b, permits
bankruptcy judges and United States magistrates to participate in the
TSP. On August 10, 1989, the Board published an interim rule with
request for comment in the Federal Register (54 FR 32785) to implement
sections 8440a and 8440b. The August 10 interim rule was codified at
subparts E and F of part 1620. On January 13, 1994, the Board published
an interim rule with request for comment in the Federal Register (59 FR
1889) to implement an amendment made to 5 U.S.C. 8440a and 8440b by the
Thrift Savings Plan Technical Amendments Act of 1990, Public Law 101-
335, section 3(b), 104 Stat. 319, 320-21. The 1990 amendment lifted
investment restrictions that had required participants to invest their
TSP accounts solely in the Government Securities Investment (G) Fund.
On November 18, 1996, the Board published an interim rule with request
for comment in the Federal Register which, inter alia, conformed the
definitions of basic pay found at Secs. 1620.72 and 1620.83 to the
definition of that term contained in the Thrift Savings Plan Act of
1996, 5 U.S.C. 8401(4). The Board received no comment on the foregoing
publications.
To the extent it is not repeated elsewhere in Board regulations,
the information in interim subparts E and F is retained because
justices and judges of the United States, United States magistrates,
and bankruptcy judges participate with special rules for contributions,
withdrawals, and spousal rights. Therefore, this rule condenses interim
subparts E and F into a new subpart C.
The new subpart C also contains a discussion of two groups of TSP
participants not mentioned in interim subparts E and F. Section
306(d)(1) of the Judicial Improvements Act of 1990, 5 U.S.C. 8440c,
permits judges of the United States Court of Federal Claims to
participate in the TSP. Section 5(a)(1) of the United States Court of
Veterans Appeals, Amendments [Act of 1991], 5 U.S.C. 8440d, permits
judges of the Court of Veterans Appeals to participate in the TSP. The
Board did not publish regulations in part 1620 to implement sections
8440c and 8440d. However, because these judges participate in the TSP
under rules similar to those affecting other judges, the Board decided
to discuss them also in the new subpart C.
New subpart C also contains a new statement of law. Interim rule
[[Page 31054]]
Sec. Sec. 1620.73 and 1620.84, which deal with TSP withdrawals, are
condensed into a new Sec. 1620.22. However, after the interim
regulations were written, legis-lation was passed that authorized in-
service withdrawals. Therefore, new Sec. 1620.22 explains in-service as
well as post-employment withdrawal eligibility. New Sec. 1620.22 does
not discuss the withdrawals themselves, or the procedures for obtaining
them, because those matters are discussed at length in the Board's
withdrawal regulations at 5 CFR part 1650.
The new subpart C also condenses several provisions of the Board's
interim regulations to eliminate redundant and obsolete statements. New
Sec. 1620.21 explains the TSP contribution rules currently found in
interim rule Secs. 1620.72 and 1620.83, while new Sec. 1620.23 explains
the spousal rights currently discussed in interim rule Secs. 1620.74
and 1620.85.
The remaining provisions of interim subparts E and F are
eliminated. The new subpart C also omits the defini-tions currently
found at interim Secs. 1620.71 and 1620.81. If the meaning of any word
is not apparent from the text of the regulation, it is defined in the
new subpart A. The new subpart C also does not describe the
circumstances under which a judge's annuity will be offset, presently
set forth in interim rule Secs. 1620.72(c) and 1620.75, because judges'
annuities are administered by the Administrative Office of the United
States Courts, not the TSP. Finally, interim rule Sec. 1620.82 is
eliminated. The initial election period established under 5 U.S.C.
8440a has passed; therefore interim rule Sec. 1620.82(a) is obsolete.
Elections occurring outside the initial election period must follow the
rules found at 5 CFR part 1600; therefore, interim rule Sec. 1620.82(b)
is also unnecessary.
New Subpart D
The Portability of Benefits for Nonappropriated Fund Employees Act
of 1990 (1990 Portability Act), Public Law 101-508, 104 Stat. 1388,
1388-335 to 1388-341 (codified largely at 5 U.S.C. 8347(q)(1) and
8461(n)(1)), permitted CSRS and FERS employees of the Department of
Defense and the United States Coast Guard who moved on or after January
1, 1987, to a Nonappropriated Fund (NAF) Instrumentality of the
Department of Defense (DOD) to participate in the TSP if they elected
to maintain their CSRS or FERS retirement coverage after the move. On
June 10, 1991, the Board published an interim rule with request for
comment in the Federal Register (56 FR 26,722) implementing the 1990
Portability Act as it pertained to the TSP. The Board received no
comment on the 1991 interim rule, which was codified at 5 CFR part
1620, subpart G.
Section 1043 of the 1996 Defense Authorization Act for Fiscal Year
1996 (Defense Authorization Act), Public Law 104-106, 110 Stat. 186,
434-439, amended the 1990 Portability Act to allow a broader group of
employees to participate in the TSP, both prospectively and
retroactively. On August 9, 1996, the Board published an interim rule
with request for comment in the Federal Register (61 FR 41485) amending
interim subpart G to implement the Defense Authorization Act
amendments.
The Board received a comment from one Federal agency objecting to
three provisions of interim subpart G: Secs. 1620.93(b), 1620.93(c) and
1620.94(a). After consideration thereof, the Board determined to
promulgate those interim provisions as final. Those provisions are
renumbered as Secs. 1620.33(b), 1620.33(c) and 1620.34(a),
respectively, on the new subpart D.
The new subpart D does not change the substance of interim subpart
G; rather, it renumbers and reorganizes its provisions. The new subpart
D also does not contain certain provisions that have been moved to the
new subpart A, i.e., definitions of basic pay and retirement coverage
(Sec. 1620.91), the employee notice provision (Sec. 1620.98), and the
reference to other TSP regulations (Sec. 1620.99). The new subpart D
omits as unnecessary several provisions of interim subpart G. First,
interim rule Secs. 1620.92(a)(2) and (b) repeat the TSP contribution
election rules found at 5 CFR 1600; that repetition is removed from the
new rule and replaced with a reference to part 1600. Second, interim
rule Sec. 1620.93(b) provides a detailed restatement of the TSP error
correction procedures found at 5 CFR 1605.2(c); new Sec. 1620.33
replaces that recitation with a reference to Sec. 1605.2(c). Finally,
interim rule Sec. 1620.95, which explains that the NAF instrumentality
must submit agency contributions to the TSP record keeper, is also
omitted as an unnecessary restatement of the process described at 5 CFR
part 1600.
New Subpart E
Section 4 of the Uniformed Services Employment and Reemployment
Rights Act (USERRA), 5 U.S.C. 8432b, describes the rights to TSP
benefits afforded to an employee who is restored to a pay status from a
leave-without-pay status or reemployed in the civilian service under 38
U.S.C. chapter 43 following a release from military service, discharge
from hospitalization related to that service, or other similar event.
On April 21, 1995, the Board published an interim rule with request for
comment in the Federal Register (60 FR 19990), which was codified at 5
CFR part 1620 subpart H.
On August 20, 1996, the Small Business Job Protection Act of 1996,
Public Law 104-188, 110 Stat. 1755, added section 414(u) to the
Internal Revenue Code. Section 414(u) provides that retroactive
contributions made by a reemployed veteran pursuant to USERRA are not
subject to the elective deferral limit at 26 U.S.C. 402(g) for the year
in which the contributions are made. On April 14, 1997, the Board
published a final rule in the Federal Register (62 FR 18234) which
removed a reference in interim subpart H to the elective deferral
limit. The April 14 rule also adopted the amended subpart H as final.
This final rule makes one substantive amendment to the 1997 final
rule: under new TSP policy, a TSP participant whose loan was closed by
taxable distribution due to a USERRA-related absence will be provided
an opportunity to reinstate the TSP loan upon reemployment or upon
return to Federal employment if the participant was on approved leave-
without-pay. An employee will be given one year from the date of his or
her reemployment to request reinstatement of the loan. The TSP record
keeper will inform the employee if reinstatement is feasible, i.e.,
whether loan repayment can be accomplished within the time limits
described in 5 CFR 1655.13(a)(5), and will not violate the restriction
set forth in 5 CFR 1655.4 on the number of outstanding TSP loans. If
reinstatement is not feasible, the participant will be given a one-time
opportunity to repay the loan in full in the amount which, in effect,
reverses the taxable distribution. The TSP record keeper will inform
the employee of the amount he or she must repay, and the employee must
provide the funds in a single payment to the TSP record keeper within
90 days of that notice.
This final rule also renumbers and reorganizes the substance of
subpart H of the 1997 final rule and places it in a new subpart E. The
new subpart E does not contain the definition of record keeper,
currently at Sec. 1620.101 of the 1997 final rule, because that term is
defined in new subpart A. In addition, basic pay and retroactive period
have been redefined to be consistent with the Board's other
regulations. Section
[[Page 31055]]
1620.103 of the 1997 final rule is also omitted because lost earnings
are discussed at 5 CFR part 1606.
The provisions of this final rule amending part 1620 were published
in proposed form in the Federal Register on March 23, 1999 (64 FR
13924). The Board received no comment on that proposed rule, and
therefore adopts the rule as final without change.
Analysis of the Amendment to Part 1650
The deadline for a participant to withdraw or begin withdrawing his
or her account is governed by 5 U.S.C. 8433. Under section 8433(f),
this deadline is April 1 of the year following the later of the year in
which the participant turns age 70\1/2\ or the year in which the
participant separates from Government employment. Final regulations
governing the deadline for withdrawing a TSP account were published in
the Federal Register on September 18, 1997 (62 FR 49113). These
regulations did not address the action the Board will take if a
participant fails to comply with the withdrawal deadline.
Under this amendment to the 1997 final rule, whenever a participant
does not comply with the withdrawal deadline, the Board will transfer
all of the funds in his or her account to the Government Securities
Investment Fund (G Fund) that are not already invested in that Fund.
The participant will be sent a notice of this action and informed that
the account will be declared abandoned and forfeited unless the
participant takes the appropriate withdrawal action within 90 days of
the date of notice. Forfeiture is necessary because participants who
have not taken timely action to withdraw their accounts are no longer
eligible to have a TSP account.
If, at a later time, a participant reclaims the TSP account and a
proper withdrawal election has been received, the Board will restore
the funds to the account and authorize the withdrawal. The amount the
participant may withdraw is the amount of funds in the account at the
time the Board declared it to be abandoned and forfeited. No earnings
will be paid on these funds during the forfeiture period. If the
participant reclaims the account balance, but decides not to take a
lump sum or monthly payments withdrawal, the Board will purchase an
annuity for the participant after it has received the necessary
information from him or her. The option of electing an annuity is not
available for TSP accounts of $3,500 or less. Those accounts will be
paid in accordance with Sec. 1650.22.
This amendment to part 1650 was published in proposed form in the
Federal Register on March 22, 1999 (64 FR 13725). The Board received no
comment on the proposed amendment, and therefore adopts the rule as
final without change.
Analysis of the Amendment to Part 1651
The disbursement of death benefits from the TSP is governed by the
provisions of 5 U.S.C. 8433(e) and 8424(d). Under section 8433(e), if a
TSP participant dies before he or she has completed a withdrawal
election, the account is disbursed in accordance with the order of
precedence set forth at section 8424(d). Final regulations governing
the payment of the TSP account to a beneficiary were published in the
Federal Register on June 13, 1997 (62 FR 32426).
These regulations do not address how the account will be invested
between the participant's death and disbursement of the account to the
beneficiary(ies). In the past, the Board has maintained the account as
it was invested upon the participant's death; the Board cannot maintain
a separate account for a beneficiary and will not permit a beneficiary
to direct how the account should be invested. However, it may take
several months before the Board can identify and locate the rightful
beneficiary(ies) of an account and pay the account balance. During this
time, a participant's balances in some investment funds can experience
significant changes in value as a result of fluctuations in the market.
FERSA permits a participant to elect to invest all or any portion
of his or her contributions in several investment options. At present,
all investment options except the Government Securities Investment (G)
Fund are invested in securities that fluctuate in value as market
conditions change. In contrast, money in the G Fund is invested in
short-term Government securities that are backed by the full faith and
credit of the United States and that do not fluctuate in value.
Before a participant can invest in an investment fund other than
the G Fund, he or she must provide a one-time acknowledgment that the
investment is made at the participant's risk, that the participant is
not protected by the United States Government or by the Board against
any loss on the investment, and that neither the United States
Government nor the Board guarantees any return on the investment. FERSA
does not grant to beneficiaries the right to own or control the TSP
account of a deceased participant; instead, the account is paid out to
them as quickly as administratively feasible. Thus, beneficiaries are
not solicited to acknowledge the risk of investment in market
securities pending payout to them.
Because money in investment funds other than the G Fund remains
subject to market risk even after a participant's death, however, and
because beneficiaries have neither acknowledged nor have any control
over that risk, the Board intends to transfer the entire TSP account
into the G Fund after receiving written notice of a participant's death
if the participant dies with any portion of his or her account in an
investment fund other than the G Fund. The account will continue to
accrue earnings at the G Fund rate in accordance with part 1645 until
the account is paid in accordance with the order of precedence set
forth in paragraph (a) of this section. This action will eliminate the
market risk to the beneficiary and will preserve the value of a
deceased participant's account until it can be paid out.
This amendment to part 1651 was published in proposed form in the
Federal Register on February 11, 1999 (64 FR 6818). The Board received
nine comments from individuals, three of whom identified themselves as
TSP participants, and one comment from a Federal employee group.
Comments on the proposed regulations generally opposed the proposed
amendment on the ground that the transfer from the C and F Funds to the
G Fund might come immediately after the C and F Funds have lost value.
While the Board recognizes that this is a possibility, it is equally
possible that a transfer could come immediately before a fluctuation in
the market that causes the C and F Funds to lose value. Since there is
no way to predict if, when, or how the market will fluctuate, the Board
believes that it is more prudent to handle the account in a way that
preserves the status quo at the time of notification of death.
Six of the commenters suggested that the Board permit the
beneficiary to decide how to invest the funds. This suggestion is
legally and practically impossible. The Board may not legally permit a
beneficiary to manage investments in an account since FERSA does not
permit the Board to maintain an account for a beneficiary. Although one
commenter objected to this restriction, it is not a restriction that
the
[[Page 31056]]
Board has the authority to alter. Instead, Congress, in drafting FERSA,
decided that the Board should immediately pay out the balance in a
deceased participant's account to the rightful beneficiary. Thus, the
suggestion is also practically impossible since, as soon as the
beneficiary is identified, the account is paid.
The risk of market fluctuation which this amendment is designed to
mitigate is that fluctuation that may take place after the participant
dies but before the beneficiary has been paid. One commenter suggested
that the Board can mitigate this risk by lessening the time it takes to
identify the proper beneficiary. However, the time needed to identify a
beneficiary is dependent upon persons and events that are beyond the
Board's control. First, the Board has no knowledge that a separated
participant has died until someone (who need not be a beneficiary)
notifies the Board of the participant's death. The Board's regulations
require that this notice be accompanied by a copy of a death
certificate in order to establish the fact of death; however, persons
do not always comply with this request. Thus, payment is often delayed
until the Board can secure a copy of the participant's death
certificate.
After the fact of the death has been established, the Board must
determine the identity of the rightful beneficiary. This means not only
ensuring that the person designated is the person whom the participant
wishes to receive the balance in his or her TSP account, but also that
the address for the beneficiary is current. Participants are encouraged
to file a Form TSP-3, Designation of Beneficiary; they are also
encouraged to ensure that this designation remains current.
Participants often do neither and, even if there is a designation of
beneficiary form on file, the Board must expend time locating the
designated beneficiary.
Even more difficult and time-consuming are the situations in which
the participant has not filed a designation of beneficiary form. In
these cases, the beneficiary will be identified in accordance with
FERSA's order of precedence. However, this process of identification
often involves several rounds of correspondence among the Board, the
person who provides notice of the participant's death, and persons who
might be the appropriate beneficiary. While this process does not occur
in each case, it occurs with sufficient regularity to suggest to the
Board that participants and their beneficiaries need the protection
against market fluctuation that transferring the account into the G
Fund would provide.
Four of the commenters suggested that the Board should leave the
account invested as the participant left it. Generally, these
commenters recognized that the participant had assumed a risk that the
value of his or her account could decrease as well as increase; it was
a risk, they suggested, that the participant should be regarded as
having imposed on his or her heirs. This conclusion is unwarranted; a
living participant's investment choices are subject to his or her
control, whereas those of a deceased participant clearly are not.
Moreover, a further suggestion of one of the commenters is
inherently infeasible. That commenter suggested that participants be
given the option of authorizing the Board to transfer their accounts
into the G Fund after their death only if the market had not declined
and that, if it had declined, the Board should wait until the account
had regained its value before transferring the balance. While the Board
recognizes that some market fluctuations in the recent past have been
brief and dramatic, historically this has often not been the case.
Because the Board cannot legally maintain an account for a beneficiary,
it does not have the authority to hold an account for a period of time,
however short, until the market has regained a loss (if it does).
Given the restrictions on the Board and its duty to act in the best
interests of all participants and their beneficiaries, the Board
believes that the best way to do this is, upon notification of a
participant's death, to preserve the then-value of the account from the
possibility of decline until the balance can be paid out. For this
reason, the Board has decided to adopt the proposed rule as final
without change.
Analysis of the Amendment to Part 1690
Many sections of the Board's regulations require a TSP participant
to sign a TSP form to affect certain transactions in his or her TSP
account, including (but not limited to) withdrawals, loans, interfund
transfers, and the designation of a beneficiary in the event of death.
However, a participant may become unable to manage his or her own
account for various reasons, such as incapacity or absence due to
extended travel. In such circumstances, an attorney-in-fact may affect
transactions in the TSP on behalf of the participant by signing the TSP
form(s) as an agent of the participant.
This final rule requires that, before an attorney-in-fact may sign
a TSP form on behalf of a participant, the Board must receive and
approve either a general power of attorney that authorizes the
attorney-in-fact to act on behalf of the principal in the areas of
personal property, finance, retirement, or business transactions; or a
special power of attorney that specifically grants the attorney-in-fact
the authority to affect transactions in the TSP on behalf of the
participant. A valid power of attorney must be authenticated, attested,
acknowledged, or certified before a notary public or other authorized
official. When the Board receives a power of attorney, it will review
it and advise the participant or attorney-in-fact whether it is valid
for affecting transactions in the TSP.
This amendment to part 1690 was published in proposed form in the
Federal Register on December 14, 1998 (63 FR 68699). The Board received
no comment on the proposed rule and therefore is adopting it as a final
rule without change.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities. They will
affect only employees of the Federal Government.
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, Public Law
104-4, section 201, 109 Stat. 48, 64, the effects of this regulation on
State, local, and tribal governments, and the private sector have been
assessed. This regulation will not compel the expenditure in any one
year of $100 million or more by State, local, and tribal governments,
in the aggregate, or by the private sector. Therefore, a statement
under section 202, 109 Stat. 48, 64-65, is not required.
Submission to Congress and the General Accounting Office
Under 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
United States prior to publication of this rule in today's Federal
Register. This rule is not a major rule as defined at 5 U.S.C. 804(2).
[[Page 31057]]
List of Subjects
5 CFR Parts 1620, 1651, and 1690
Government employees, Pensions, Retirement.
5 CFR Part 1650
Alimony, Claims, Government employees, Pensions, Retirement.
Roger W. Mehle,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons set out in the preamble, chapter VI, Code of
Federal Regulations, is amended as set forth below:
1. Part 1620 is revised to read as follows:
PART 1620--EXPANDED AND CONTINUING ELIGIBILITY
Subpart A--General
Sec.
1620.1 Application.
1620.2 Definitions.
1620.3 Contributions.
1620.4 Notices.
Subpart B--Cooperative Extension Service, Union, and Intergovernmental
Personnel Act Employees
1620.10 Definition.
1620.11 Scope.
1620.12 Employing authority contributions.
1620.13 Retroactive contributions.
1620.14 Payment to the record keeper.
Subpart C--Article III Justices and Judges; Bankruptcy Judges and U.S.
Magistrates; and Judges of the Courts of Federal Claims and Veterans
Appeals
1620.20 Scope.
1620.21 Contributions.
1620.22 Withdrawals.
1620.23 Spousal rights.
Subpart D--Nonappropriated Fund Employees
1620.30 Scope.
1620.31 Definition.
1620.32 Employees who move to a NAF instrumentality on or after
August 10, 1996.
1620.33 Employees who moved to a NAF instrumentality before August
10, 1996, but after December 31, 1965.
1620.34 Employees who move from a NAF instrumentality to a Federal
Government agency.
1620.35 Loan payments.
1620.36 Transmission of information.
Subpart E--Uniformed Services Employment and Reemployment Rights Act
(USERRA)--Covered Military Service
1620.40 Scope.
1620.41 Definitions.
1620.42 Processing TSP contribution elections.
1620.43 Agency payments to record keeper; agency ultimately
responsible.
1620.44 Restoring forfeited agency automatic (1%) contributions.
1620.45 Restoring post-employment withdrawals and reversing taxable
distributions.
1620.46 Agency responsibilities.
Authority: 5 U.S.C. 8474(b)(5) and (c)(1).
Subpart C also issued under 5 U.S.C. 8440a(b)(7), 8440b(b)(8), and
8440c(b)(8).
Subpart D also issued under sec. 1043(b), Pub. L. 104-106, 110
Stat. 186, 434-435; and sec. 7202(m)(2), Pub. L. 101-508, 104 Stat.
1388.
Subpart E also issued under 5 U.S.C. 8432b(i).
Subpart A--General
Sec. 1620.1 Application.
The Federal Employees' Retirement System Act of 1986 (codified as
amended largely at 5 U.S.C. 8351 and 8401 through 8479) originally
limited TSP eligibility to specifically named groups of employees. On
various occasions, Congress has since expanded TSP eligibility to other
groups. Depending on the circumstances, that subsequent legislation
requires retroactive contributions, waives open season rules, or
provides other special features. Where necessary, this part describes
those special features. The employees and employing agencies covered by
this part are also governed by the other regulations in 5 CFR chapter
VI to the extent that they do not conflict with the regulations of this
part.
Sec. 1620.2 Definitions.
As used in this part:
Account balance means the nonforfeitable valued account balance of
a TSP participant as of the most recent month-end.
Basic pay means basic pay as defined in 5 U.S.C. 8331(3). For CSRS
and FERS employees, it is the rate of pay used in computing any amount
the individual is otherwise required to contribute to the Civil Service
Retirement and Disability Fund as a condition for participating in the
Civil Service Retirement System or the Federal Employees' Retirement
System, as the case may be.
Board means the Federal Retirement Thrift Investment Board
established under 5 U.S.C. 8472.
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 5
U.S.C. chapter 83, subchapter III, or any equivalent retirement system.
CSRS employee or CSRS participant means any employee or participant
covered by CSRS or an equivalent retirement system, including employees
authorized to contribute to the TSP under 5 U.S.C. 8351.
Election period means the last calendar month of a TSP open season
and is the earliest period in which an election to make or change a TSP
contribution election can become effective.
Employee contributions means any contributions to the Thrift
Savings Plan made under 5 U.S.C. 8351(a), 8432(a), or 8440a through
8440d.
Employer contributions means agency automatic (1%) contributions
under 5 U.S.C. 8432(c)(1) or 8432(c)(3), and agency matching
contributions under 5 U.S.C. 8432(c)(2).
Employing agency means the organization that employs an individual
described at Sec. 1620.1 as being eligible to contribute to the TSP and
that has authority to make personnel compensation decisions for such
employee.
Executive Director means the Executive Director of the Federal
Retirement Thrift Investment 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
5 U.S.C. chapter 84, and any equivalent Federal Government retirement
system.
FERS employee or FERS participant means any employee or participant
covered by FERS.
G Fund means the Government Securities Investment Fund established
under 5 U.S.C. 8438(b)(1)(A).
Individual account means the account established for a participant
in the Thrift Savings Plan under 5 U.S.C. 8439(a).
In-service withdrawal means an age-based or financial hardship
withdrawal from the TSP obtained by a participant before separation
from Government employment.
Investment fund means either the G Fund, the F Fund, or the C Fund,
and any other TSP investment funds created after December 27, 1986.
Monthly processing cycle means the process, beginning on the
evening of the fourth business day of the month, by which the TSP
record keeper allocates the amount of earnings to be credited to
participant accounts in the TSP, implements interfund transfer
requests, and authorizes disbursements from the TSP.
Open season means the period during which employees may choose to
begin making contributions to the TSP, to change or discontinue
(without losing
[[Page 31058]]
the right to recommence contributions the next open season) the amount
currently being contributed to the TSP, or to allocate prospective
contributions to the TSP among the investment funds.
Plan participant or 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.
Post-employment withdrawal means a withdrawal from the TSP obtained
by a participant who has separated from Government employment.
Separation from Government employment means the cessation of
employment with the Federal Government or the U.S. Postal Service (or
with any other employer from a position that is deemed to be Government
employment for purposes of participating in the TSP) for 31 or more
full calendar days.
Spouse means the person to whom a TSP participant is married on the
date he or she signs forms on which the TSP requests spouse information
including a spouse from whom the participant is legally separated, and
includes a person with whom a participant is living in a relationship
that constitutes a common law marriage in the jurisdiction in which
they live.
Thrift Savings Fund means the Fund described in 5 U.S.C. 8437.
Thrift Savings Plan, TSP, or Plan means the Thrift Savings Plan
established under subchapters III and VII of the Federal Employees'
Retirement System Act of 1986, 5 U.S.C. 8351 and 8401-8479.
Thrift Savings Plan (TSP) contribution 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.
Thrift Savings Plan Service Computation Date means the date, actual
or constructed, that includes all ``service'' as defined at 5 CFR
1603.1.
Thrift Savings Plan Service Office means the office established by
the Board to service participants. This office's current address is:
Thrift Savings Plan Service Office, National Finance Center, P.O. Box
61500, New Orleans, Louisiana 70161-1500.
Sec. 1620.3 Contributions.
The employing agency is responsible for transmitting to the Board's
record keeper, in accordance with Board procedures, any employee and
employer contributions that are required by this part.
Sec. 1620.4 Notices.
An employing agency must notify affected employees of the
application of this part as soon as practicable.
Subpart B--Cooperative Extension Service, Union, and
Intergovernmental Personnel Act Employees
Sec. 1620.10 Definition.
As used in this subpart, employing authority means the entity that
employs an individual described in Sec. 1620.11 and which has the
authority to make personnel compensation decisions for such employee.
Sec. 1620.11 Scope.
This subpart applies to any individual participating in CSRS or
FERS who:
(a) Has been appointed or otherwise assigned to one of the
cooperative extension services, as defined in 7 U.S.C. 3103(5);
(b) Has entered on approved leave without pay to serve as a full-
time officer or employee of an organization composed primarily of
employees as defined by 5 U.S.C. 8331(1) and 8401(11); or
(c) Has been assigned, on an approved leave-without-pay basis, from
a Federal agency to a state or local government under 5 U.S.C. chapter
33, subchapter VI.
Sec. 1620.12 Employing authority contributions.
The employing authority, at its sole discretion, may choose to make
employer contributions under 5 U.S.C. 8432(c) for employees who are
covered under FERS. Such contributions may be made for any period of
eligible service after January 1, 1984, provided that the employing
agency must treat all its employees who are eligible to receive
employer contributions in the same manner. The employing authority can
only commence or terminate employer contributions during an open season
and must provide all affected employees with notice of a decision to
commence or terminate such contributions at least 45 days before the
beginning of the applicable election period. The employing authority
may not contribute to the TSP on behalf of CSRS employees.
Sec. 1620.13 Retroactive contributions.
(a) An employing authority can make retroactive employer
contributions on behalf of FERS employees described in this subpart,
but cannot duplicate employer contributions already made to the TSP.
(b) An employing authority making retroactive employing agency
contributions on behalf of a FERS employee described in Sec. 1620.12
must continue those contributions (but only to the extent they relate
to service with the employing authority) if the employee returns to his
or her agency of record or is transferred to another Federal agency
without a break in service.
(c) CSRS and FERS employees covered by this subpart can make
retroactive employee contributions relating to periods of service
described in Sec. 1620.12, unless they already have been given the
opportunity to make contributions for these periods of service.
Sec. 1620.14 Payment to the record keeper.
(a) The employing authority of a cooperative extension service
employee (described at Sec. 1620.11(a)) is responsible for transmitting
employer and employee contributions to the TSP record keeper.
(b) The employing authority of a union employee or an
Intergovernmental Personnel Act employee (described at Sec. 1620.11(b)
and (c), respectively) is responsible for transmitting employer and
employee contributions to the employee's Federal agency of record.
Employee contributions will be deducted from the employee's actual pay.
The employee's agency of record is responsible for transmitting the
employer and employee's contributions to the TSP record keeper in
accordance with Board procedures. The employee's election form (TSP-1)
will be filed in the employee's official personnel folder or other
similar file maintained by the employing authority.
Subpart C--Article III Justices and Judges; Bankruptcy Judges and
U.S. Magistrates; and Judges of the Courts of Federal Claims and
Veterans Appeals
Sec. 1620.20 Scope.
(a) This subpart applies to:
(1) A justice or judge of the United States as defined in 28 U.S.C.
451;
(2) A bankruptcy judge appointed under 28 U.S.C. 152 or a United
States magistrate appointed under 28 U.S.C. 631 who has chosen to
receive a judges' annuity described at 28 U.S.C. 377 or section 2(c) of
the Retirement and Survivors' Annuities for Bankruptcy Judges and
Magistrates Act of 1988, Public Law 100-659, 102 Stat. 3910-3921;
[[Page 31059]]
(3) A judge of the United States Court of Federal Claims appointed
under 28 U.S.C. 171 whose retirement is covered by 28 U.S.C. 178; and
(4) A judge of the Court of Veterans Appeals appointed under 38
U.S.C. 7253.
(b) This subpart does not apply to a bankruptcy judge or a United
States magistrate who has not chosen a judges' annuity, or to a judge
of the United States Court of Federal Claims who is not covered by 28
U.S.C. 178. Those individuals may participate in the TSP only if they
are otherwise covered by CSRS or FERS.
Sec. 1620.21 Contributions.
(a) An individual covered under this subpart can contribute up to 5
percent of basic pay per pay period to the TSP, and, unless stated
otherwise in this subpart, he or she is covered by the same rules and
regulations that apply to a CSRS participant in the TSP.
(b) The following amounts are not basic pay and no TSP
contributions can be made from them:
(1) An annuity or salary received by a justice or judge of the
United States (as defined in 28 U.S.C. 451) who is retired under 28
U.S.C. 371(a) or (b), or 372(a);
(2) Amounts received by a bankruptcy judge or a United States
magistrate under a judges' annuity described at 28 U.S.C. 377;
(3) An annuity or salary received by a judge of the United States
Court of Federal Claims under 28 U.S.C. 178; and
(4) Retired pay received by a judge of the United States Court of
Veterans Appeals under 38 U.S.C. 7296.
Sec. 1620.22 Withdrawals.
(a) Post-employment withdrawal. An individual covered under this
subpart can make a post-employment withdrawal election described at 5
U.S.C. 8433(b):
(1) Upon separation from Government employment.
(2) In addition to the circumstance described in paragraph (a)(1)
of this section, a post-employment withdrawal election can be made by:
(i) A justice or judge of the United States (as defined in 28
U.S.C. 451) who retires under 28 U.S.C. 317(a) or (b) or 372(a);
(ii) A bankruptcy judge or a United States magistrate receiving a
judges' annuity under 28 U.S.C. 377;
(iii) A judge of the United States Court of Federal Claims
receiving an annuity or salary under 28 U.S.C. 178; and
(iv) A judge of the United States Court of Veterans Appeals
receiving retired pay under 38 U.S.C. 7296.
(b) In-service withdrawals. An individual covered under this
subpart can request an in-service withdrawal described at 5 U.S.C.
8433(h) if he or she:
(1) Has not separated from Government employment; and
(2) Is not receiving retired pay as described in paragraph (a)(2)
of this section.
Sec. 1620.23 Spousal rights.
(a) The current spouse of a justice or judge of the United States
(as defined in 28 U.S.C. 451), or of a Court of Veterans Appeals judge,
possesses the rights described at 5 U.S.C. 8351(b)(5).
(b) A current or former spouse of a bankruptcy judge, a United
States magistrate, or a judge of the United States Court of Federal
Claims, possesses the rights described at 5 U.S.C. 8435 and 8467 if the
judge or magistrate is covered under this subpart.
Subpart D--Nonappropriated Fund Employees
Sec. 1620.30 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 CSRS or 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, Public Law 101-508, 104 Stat. 1388, 1388-335 to
1388-341, as amended (codified largely at 5 U.S.C. 8347(q) and
8461(n)).
Sec. 1620.31 Definition.
As used in this subpart, 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 one year.
Sec. 1620.32 Employees who move to a NAF instrumentality on or after
August 10, 1996.
Any employee who moves from a CSRS- or FERS-covered position to a
NAF instrumentality on or after August 10, 1996, and who elects to
continue to be covered by CSRS or FERS, will be eligible to contribute
to the TSP as determined in accordance with 5 CFR part 1600.
Sec. 1620.33 Employees who moved to a NAF instrumentality before
August 10, 1996, but after December 31, 1965.
(a) Future TSP contributions.--(1) Employee contributions. An
employee who moved to a NAF instrumentality before August 10, 1996, but
after December 31, 1965, and who elects to be covered by CSRS or FERS
as of the date of that 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 will begin being deducted
from the employee's pay no later than the pay period following the
election to contribute to the TSP. Any TSP contribution election which
may have been in effect at the time of the employee's move will not be
effective for any future contributions.
(2) Employer contributions. If an employee who moved to a NAF
instrumentality before August 10, 1996, but after December 31, 1965,
elects to be covered by FERS:
(i) The NAF instrumentality must contribute each pay period to the
Thrift Savings Fund on behalf of that employee any amounts that 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; and
(ii) If the employee 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 that employee any amounts that 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 will take the following actions with
respect to an employee who moved to a NAF instrumentality before 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%) makeup contributions. The NAF
instrumentality must, 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
[[Page 31060]]
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 makeup contributions. (A) Within 60 days of the
election to be covered by FERS, an employee who moved to a NAF
instrumentality before August 10, 1996, but after December 31, 1965,
and who elects to be covered by FERS, may make an election regarding
employee makeup 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 a NAF instrumentality before 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
that 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, must be made according to a schedule that
meets the requirements of 5 CFR 1505.2(c). The payment schedule must
begin no later than the pay period following the date the employee
elects the schedule.
(iii) Agency matching makeup 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 which the NAF instrumentality would have
been required to make under 5 U.S.C. 8432(c), at the same time that
those employee contributions are contributed to the Fund.
(2) Makeup contributions must 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 must be invested according
to an election form (TSP-1-NAF) filed specifically for that purpose.
(c) Noneligible employees. An employee who is 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 system coverage must be removed from the TSP
as required by the regulations at 5 CFR part 1605.
(d) Elections. If a TSP election was made by an employee of a NAF
instrumentality who elected to be covered by CSRS or FERS before August
10, 1996, and the election was properly implemented by the NAF
instrumentality because it was valid under then-effective regulations,
the election is effective under the regulations in this subpart.
Sec. 1620.34 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 must 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 determined in accordance with 5 CFR part 1600.
Sec. 1620.35 Loan payments.
NAF instrumentalities must deduct and transmit TSP loan payments
for employees who elect to be covered by CSRS or FERS to the record
keeper 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 the TSP will declare the loan to be a taxable
distribution.
Sec. 1620.36 Transmission of information.
Any employee who moves to a NAF instrumentality must be reported by
the losing Federal Government agency to the TSP record keeper 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.
Subpart E--Uniformed Services Employment and Reemployment Rights
Act (USERRA)-Covered Military Service
Sec. 1620.40 Scope.
To be covered by this subpart, an employee must have:
(a) Separated from Federal civilian service or entered leave-
without-pay status in order to perform military service; and
(b) Become eligible to seek reemployment or restoration to duty by
virtue of a release from military service, discharge from
hospitalization, or other similar event that occurred on or after
August 2, 1990; and
(c) Been reemployed in, or restored to, a position covered by CSRS
or FERS pursuant to the provisions of 38 U.S.C. chapter 43.
Sec. 1620.41 Definitions.
As used in this subpart:
Basic pay means basic pay as defined in Sec. 1620.2, except for the
portion of the retroactive period when an employee did not receive a
Federal salary. In that case, basic pay is the rate of pay that would
have been payable to the employee had he or she remained continuously
employed in the position last held before separating (or entering
leave-without-pay status) to perform military service.
Current contributions means those contributions that are made
prospectively for any pay period after the employee has been
reemployed.
Leave without pay or LWOP means a temporary nonpay status and
absence from duty (including military furlough) to perform military
service.
Reemployed or reemployment means reemployed in (or restored from a
nonpay status to) a position pursuant to 38 U.S.C. chapter 43, which is
subject to 5 U.S.C. chapter 84 or which entitles the employee to
contribute to the TSP pursuant to 5 U.S.C. 8351.
Retroactive period means the period for which an employee is
entitled to
[[Page 31061]]
make up missed employee contributions and to receive retroactive agency
contributions.
Retroactive period beginning date means, for an employee who was
eligible to contribute to the TSP when military service began, the date
following the effective date of separation or, in the case of LWOP, the
date the employee enters LWOP status. For an employee who was not
eligible to make TSP contributions when military service began, the
retroactive period begins on the first day of the first pay period in
the election period during which the employee would have been eligible
to make contributions had the employee remained in Federal civilian
service.
Retroactive period ending date means the earlier of the following
two dates: the date before the first day of the first election period
during which a contribution election could have been made effective
after reemployment, or the last day of the pay period before the pay
period during which routine current contributions are begun after the
employee is reemployed (or restored). If an employee who was making
contributions when he or she separated elects not to make routine
current contributions, the ending date of the retroactive period is the
last day of the pay period during which the employee elects to
terminate contributions.
Separation or separated means the period an employee was separated
from Federal civilian service (or entered a leave-without-pay status)
in order to perform military service.
Sec. 1620.42 Processing TSP contribution elections.
(a) Current TSP contribution elections. Immediately upon
reemployment, an employee's agency will give an eligible employee the
opportunity to submit a TSP election form (Form TSP-1) to make current
contributions. 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 employee is reemployed 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.
(b) Retroactive contribution elections. (1) An employee has the
following options for making retroactive contributions:
(i) If the employee had a valid contribution election form (Form
TSP-1) on file when he or she separated, that election form will be
reinstated for purposes of retroactive contributions.
(ii) Instead of making the contributions for the retroactive period
under the reinstated contribution election form, the employee may
submit a new election form for any Open Season that occurred during the
retroactive period. However, the allocation election on each Form TSP-1
for the retroactive period must be the same as the allocation election
on the current Form TSP-1.
(2) An employee who terminated contributions within two months
before entering military service will be eligible to make a retroactive
contribution election effective for the first Open Season that occurs
after the effective date that the contributions were terminated. This
election may be made even if the termination was made outside of an
Open Season.
Sec. 1620.43 Agency payments to record keeper; agency ultimately
responsible.
(a) Agency making payments to record keeper. The current employing
agency always will be the agency responsible for making payments to the
record keeper for all contributions (both employee and agency) and lost
earnings, regardless of whether some of that expense is ultimately
chargeable to a prior employing agency.
(b) Agency ultimately chargeable with expense. The agency
ultimately chargeable with the expense of agency contributions and lost
earnings attributable to the retroactive period is ordinarily the
agency that reemployed the employee. However, if an employee changed
agencies during the period between the date of reemployment and October
13, 1994, the employing agency as of October 13, 1994, is the agency
ultimately chargeable with the expense.
(c) Reimbursement by agency ultimately chargeable with expense. If
the agency that made the payments to the record keeper for agency
contributions and lost earnings is not the agency ultimately chargeable
for that expense, the agency that made the payments to the record
keeper may, but is not required to, obtain reimbursement from the
agency ultimately chargeable with the expense.
Sec. 1620.44 Restoring forfeited agency automatic (1%) contributions.
If an employee's agency automatic (1%) contributions were forfeited
because the employee was not vested when he or she separated to perform
military service, the employee must notify the employing agency that a
forfeiture occurred. The employing agency will follow the procedure
described in Sec. 1620.47(d) to have those funds restored.
Sec. 1620.45 Restoring post-employment withdrawals and reversing
taxable distributions.
(a) Post-employment withdrawals. Employees who received automatic
cashouts because their account balances were $3,500 or less, or who
were required to withdraw their TSP accounts before March 1995 because
they were not eligible for retirement benefits when they separated, may
elect to have the separation for military service treated as if it
never occurred. These employees will be permitted to return amounts to
the TSP that represent the full amount of the post-employment
withdrawal.
(b) Reversing taxable distributions. An employee who separated or
who entered into nonpay status to perform military service, and whose
TSP loan was therefore declared a taxable distribution, may be eligible
to have that distribution reversed.
(1) If the employee received a post-employment withdrawal when he
or she separated to perform military service, he or she can have a
taxable distribution reversed only if that withdrawal is returned under
the procedures described in paragraph (a) of this section. If the
employee is not eligible to or does not return the withdrawal, he or
she cannot have the taxable distribution reversed.
(2) The taxable distribution can be reversed either by reinstating
the TSP loan or by repaying the loan in full. TSP loan repayments can
be reinstated only if the loan can be repaid within five years of its
disbursement for non-residential loans and 15 years for residential
loans; and if the employee will have no more than two loans
outstanding, one of which can be a residential loan.
(c) Process. Eligible employees must notify the TSP record keeper
of their intent to return the withdrawn funds and/or reverse a taxable
distribution. This notification must be given within one year of
reemployment and the employee must provide the TSP record keeper with a
copy of the SF-50, Notification of Personnel Action, indicating
reemployment or reinstatement was made pursuant to 38 U.S.C. chapter
43, or a letter from his or her agency indicating reemployment or
restoration pursuant to 38 U.S.C. chapter 43. If the participant is
eligible to return a withdrawal and/or reverse a distribution, the TSP
record keeper will:
(1) In the case of a request to return withdrawn funds, notify the
employee of the amount of funds to be returned.
(2) In the case of a request to reverse a taxable distribution,
reinstate the loan
[[Page 31062]]
if permitted, or if not, inform the employee of the repayment amount
for the loan.
(3) In the case of returned withdrawal and a repaid loan, inform
the employee that both actions must be accomplished in the same
transaction (i.e., one payment for both amounts).
(4) In all cases inform the employee that he or she must provide
the funds in a single payment to the TSP record keeper within 90 days
after the record keeper sends the employee the notice advising of the
amount and procedures for repaying the loan or withdrawal. Repayment
must be submitted in the form of a certified or cashier's check, a
certified or treasurer's draft from a credit union, or a money order.
(d) Earnings. Employees will not receive retroactive earnings on
any amounts returned to their accounts under this section.
Sec. 1620.46 Agency responsibilities.
(a) General. Each employing agency must establish procedures for
implementing these regulations. These procedures must at a minimum
require agency personnel to identify eligible employees and notify them
of their options under these regulations and the time period within
which these options must be exercised.
(b) Agency records; procedure for reimbursement. The agency that is
making the payments to the record keeper for all contributions (both
employee and agency) and lost earnings will obtain from prior employing
agencies whatever information is necessary to make accurate payments.
If a prior employing agency is ultimately chargeable under
Sec. 1620.43(b) for all or part of the expense of agency contributions
and lost earnings, the agency making the payments to the record keeper
will determine the procedure to follow in order to collect amounts owed
to it by the agency ultimately chargeable with the expense.
(c) Payment schedule; matching contributions report. Agencies will,
with the employee's consent, prepare a payment schedule for making
retroactive employee contributions which will be consistent with the
procedures established at 5 CFR part 1605 for the correction of
employing agency errors.
(d) Agency automatic (1%) contributions. Employing agencies must
calculate the agency automatic (1%) contributions for all reemployed
(or restored) FERS employees, report those contributions to the record
keeper, and submit lost earnings records to cover the retroactive
period within 60 days of reemployment.
(e) Forfeiture restoration. When notified by an employee that a
forfeiture of the agency automatic (1%) contributions occurred after
the employee separated to perform military service, the employing
agency must submit to the record keeper Form TSP-5-R, Request to
Restore Forfeited Funds, to have those funds restored.
(f) Thrift Savings Plan Service Computation Date. The agencies must
include the period of military service in the Thrift Savings Plan
Service Computation Date (TSP-SCD) of all reemployed FERS employees. If
the period of military service has not been credited, the agencies must
submit an employee data record to the TSP record keeper containing the
correct TSP Service Computation Date.
PART 1650--METHODS OF WITHDRAWING FUNDS FROM THE THRIFT SAVINGS
PLAN
2. The authority citation for part 1650 continues to read as
follows:
Authority: 5 U.S.C. 8351, 8433, 8434, 8435, 8474(b)(5), and
8474(c)(1).
3. Section 1650.15 is amended by adding new paragraphs (c) and (d)
to read as follows:
Sec. 1650.15 Required withdrawal date.
* * * * *
(c) In the event that a participant does not withdraw his or her
account or begin receiving payments in accordance with paragraph (a) of
this section, the Board will transfer all of the funds in the
participant's account not already invested in the Government Securities
Investment Fund (G Fund) to that Fund. A notice of this action will be
sent to the participant with a warning that his or her account will be
declared abandoned and forfeited unless the participant comes into
compliance with paragraph (a) of this section within 90 days of the
date of the notice.
(d) If the participant does not take the appropriate withdrawal
action within the 90 day period provided in paragraph (c) of this
section, the Board will purchase an annuity for the participant after
the following steps have been taken:
(1) The account has been declared abandoned and the funds in the
account have been forfeited;
(2) A notice of this action has been sent to the participant;
(3) The participant reclaims the account balance that was
abandoned, but decides against a withdrawal pursuant to Secs. 1650.10
or 1650.11; and
(4) The participant provides the information that the Board needs
to purchase an annuity pursuant to Sec. 1650.12.
PART 1651--DEATH BENEFITS
4. The authority citation for part 1651 continues to read as
follows:
Authority: 5 U.S.C. 8424(d), 8433(e), 8435(c)(2), 8474(b)(5) and
8474(c)(1).
5. Section 1651.1 is amended by adding in alphabetical order the
definitions of ``C Fund'', ``F Fund'', ``G Fund'', and ``Investment
fund'', to read as follows:
Sec. 1651.1 Definitions.
* * * * *
C Fund means the Common Stock Index Investment Fund established
under 5 U.S.C. 8438(b)(1)(C);
* * * * *
F Fund means the Fixed Income Investment Fund established under 5
U.S.C. 8438(b)(1)(B);
G Fund means the Government Securities Investment Fund established
under 5 U.S.C. 8438(b)(1)(A);
Investment fund means the C Fund, the F Fund, the G Fund, or any
other TSP investment fund created subsequent to December 27, 1986;
* * * * *
6. Section 1651.2 is amended by adding a new paragraph (c) to read
as follows:
Sec. 1651.2 Entitlement to benefits.
* * * * *
(c) If a participant dies with any portion of his or her TSP
account in an investment fund other than the G Fund, the Board will
transfer the entire account into the G Fund after receiving written
notice of the participant's death. The account will continue to accrue
earnings at the G Fund rate in accordance with 5 CFR part 1645 until it
is paid in accordance with the order of precedence set forth in
paragraph (a) of this section.
PART 1690--MISCELLANEOUS REGULATIONS
7. The authority citation for part 1690 continues to read as
follows:
Authority: 5 U.S.C. 8474.
8. Section 1690.2 is added to read as follows:
Sec. 1690.2 Power of attorney.
This section applies to all regulations in this chapter that
require a signature by the participant on a Thrift Savings Plan (TSP)
form, where the participant desires to effect transactions through an
[[Page 31063]]
agent (i.e., an attorney-in-fact). Before an attorney-in-fact may sign
a TSP form on behalf of a participant, the Board must have approved
either a general power of attorney which authorizes the attorney-in-
fact to act on behalf of the participant with respect to the
principal's personal property or in Federal Government retirement,
financial, or business transactions; or a special power of attorney
which authorizes the attorney-in-fact to effect transactions in the TSP
on behalf of the participant. For a power of attorney to be acceptable
to effect transactions in the TSP, it must be authenticated, attested,
acknowledged, or certified before a notary public or other official
authorized by law to administer oaths or affirmations. The Board will
advise the person submitting a power of attorney whether it is valid to
effect transactions in the TSP.
[FR Doc. 99-14398 Filed 6-8-99; 8:45 am]
BILLING CODE 6760-01-P
