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[Federal Register: June 25, 2002 (Volume 67, Number 122)]
[Proposed Rules]
[Page 42855-42889]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jn02-22]
[[Page 42855]]
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Part II
Federal Retirement Thrift Investment Board
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5 CFR Part 1600 et al.
Employee Elections to Contribute to the Thrift Savings Plan,
Participants' Choice of Investment Funds, Vesting, Uniformed Services
Accounts, Correction of Administrative Errors, Lost Earnings
Attributable to Employing Agency Errors, Participant Statements,
Calculation of Share Prices, Methods of Withdrawing Funds from the
Thrift Savings Plan, Death Benefits, Domestic Relations Orders
Affecting Thrift Savings Plan Accounts, Loans, Miscellaneous; Proposed
Rule
[[Page 42856]]
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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Parts 1600, 1601, 1603, 1604, 1605, 1606, 1640, 1645, 1650,
1651, 1653, 1655, 1690
Employee Elections To Contribute to the Thrift Savings Plan,
Participants' Choices of Investment Funds, Vesting, Uniformed Services
Accounts, Correction of Administrative Errors, Lost Earnings
Attributable to Employing Agency Errors, Participant Statements,
Calculation of Share Prices, Methods of Withdrawing Funds From the
Thrift Savings Plan, Death Benefits, Domestic Relations Orders
Affecting Thrift Savings Plan Accounts, Loans, Miscellaneous
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Proposed rule with request for comments.
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SUMMARY: The Executive Director of the Federal Retirement Thrift
Investment Board (Board) proposes to revise the Board's regulations to
reflect the processes and terminology of the Thrift Savings Plan's new
record keeping system, to codify several policy decisions related to
implementation of this new system, and to add new methods of post-
employment withdrawals. This rule will allow participants more options
and greater flexibility with which to manage their TSP accounts.
DATES: Comments must be received on or before July 25, 2002.
ADDRESSES: Comments may be sent to: Elizabeth S. Woodruff, General
Counsel, Federal Retirement Thrift Investment Board, 1250 H Street,
NW., Washington, DC 20005. The Board's FAX is (202) 942-1676.
FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest on (202) 942-1659,
Thomas L. Gray on (202) 942-1644, or Merritt A. Willing on (202) 942-
1666.
SUPPLEMENTARY INFORMATION: The Board administers the TSP, which was
established by the Federal Employees' Retirement System Act of 1986
(FERSA), Public Law 99-335, 100 Stat. 514. The TSP provisions of FERSA
have 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 civilian
employees and members of the uniformed services which is similar to
cash or deferred arrangements established under section 401(k) of the
Internal Revenue Code (26 U.S.C. 401(k)). Sums in a TSP participant's
account are held in trust for the participant.
In 1996, Congress amended FERSA by enacting the Thrift Savings Plan
Act of 1996, Public Law 104-208, 110 Stat. 3009, which permitted the
Executive Director to offer, among other things, new withdrawal options
to TSP participants. In order to accommodate these new withdrawal
options and to make a number of benefits arising from recent
technological advances available to TSP participants, the Board
redesigned its record keeping system. The new record keeping system is
expected to be operational on September 16, 2002.
Thus, the Executive Director proposes to amend the TSP regulations
that will be affected by the implementation of the new record keeping
system. As explained below, the Executive Director also proposes to
adopt uniform definitions, eliminate obsolete regulations, and
reorganize various sections of the regulations to make them more easily
understood.
Analysis of Part 1600
On December 2, 1987, the Executive Director published in the
Federal Register (52 FR 45802) a final rule concerning the procedures
for open seasons and election periods during which Federal employees
could make elections to contribute to the TSP. The rule is codified at
5 CFR part 1600. The Executive Director substantially revised part 1600
in a final rule published on May 2, 2001 (66 FR 22088), and amended on
April 11, 2002 (66 FR 17603); the proposed rule further amends the
final rule.
The Executive Director proposes to remove all definitions generally
applicable to the TSP from Sec. 1600.1 and place them in Sec. 1690.1.
The proposed amendment deletes obsolete information from
Secs. 1600.12 and 1600.13 and changes the dates for the TSP open
seasons from May 15-July 31 to April 15-June 30 and from November 15-
January 31 to October 15-December 31.
The proposed rule updates references to TSP forms in Secs. 1600.11,
1600.14, and 1600.32 and makes current the reference to the percentage
of basic pay employees may contribute to the TSP in Sec. 1600.22.
Finally, Sec. 1600.32 explains that an eligible rollover distribution
may be rolled over to the TSP by using a personal check, in additional
to guaranteed funds.
Analysis of Part 1601
On July 17, 1995, and September 14, 1995, the Executive Director
published in the Federal Register (60 FR 47836 and 60 FR 36630) final
rules concerning participants' choices of investment funds. These rules
are codified at 5 CFR part 1601. The Executive Director substantially
revised part 1601 in a final rule published on May 2, 2001 (66 FR
22092); the proposed rule amends the final rule.
The Executive Director proposes to remove all definitions generally
applicable to the TSP from Sec. 1601.1 and to place them in
Sec. 1690.1; proposed Sec. 1601.1 includes only definitions that are
particularly relevant to participants' choices of investment funds,
such as acknowledgment of risk and interfund transfer.
Subparts B and C are generally revised to include transfers and
rollovers to the TSP from eligible employer plans or traditional
individual retirement accounts (IRAs) as also covered by the terms of
this subpart. Accordingly, references to future contributions and loan
payments are replaced with references to future deposits, which include
contributions, loan payments, transfers and rollovers to the TSP.
Subparts B, C, and D are also revised by deleting obsolete provisions
and by updating references to TSP forms.
Section 1601.22(c) is new and explains how the TSP will treat an
ineffective interfund transfer.
Section 1601.32 is revised to reflect the timing and posting dates
for contribution allocations and interfund transfer requests in a daily
valued environment, as opposed to the current monthly valued
environment.
Section 1601.34 is revised to explain additional reasons why a
contribution allocation or interfund transfer on a Form TSP-50 or TSP-
U-50 may be rejected.
Analysis of Part 1603
On June 23, 1997, the Executive Director published in the Federal
Register final rules concerning the vesting of participants' accounts
(62 FR 33968). These rules are codified at 5 CFR part 1603. The
proposed rule amends the final rules.
The Executive Director proposes to remove all definitions generally
applicable to the TSP from Sec. 1603.1 and to place them in
Sec. 1690.1; proposed Sec. 1603.1 is revised to include definitions
that are particularly relevant to vesting, such as year of service. In
addition, Sec. 1603.2(a) is expanded to include the vesting rule
applicable to members of the uniformed services.
Analysis of Part 1604
On October 4, 2001, the Executive Director published in the Federal
Register final rules concerning uniformed services accounts (66 FR
[[Page 42857]]
50712). The rule is codified at 5 CFR part 1604. The proposed rule
amends Sec. 1603.3(a)(1) by explaining more fully the percentage limits
on contributions from basic pay.
Analysis of Part 1605
On December 27, 1996, and May 1, 1998, the Executive Director
published in the Federal Register final rules concerning the correction
of administrative errors (61 FR 67472 and 63 FR 24380). The rule is
codified at 5 CFR part 1605. The Executive Director substantially
revised part 1605 in a final rule published on August 22, 2001 (66 FR
44277), and with a proposed rule published on May 17, 2002 (67 FR
35051). The proposed rule further amends the final rule.
The Executive Director proposes to remove all definitions generally
applicable to the TSP from Sec. 1605.1 and to place them in
Sec. 1690.1; proposed Sec. 1605.1 includes definitions that are
particularly relevant to error correction, such as Board error,
breakage, and late contributions.
Proposed Sec. 1605.2 introduces the concept of ``breakage,'' which
replaces the concept of lost earnings for investments made after August
31, 2002. Currently, the TSP record keeper calculates lost earnings
based upon the gains and losses of the appropriate investment fund from
the pay date for which a contribution should have been made to the end
of the month prior to the month during which the lost earnings record
is processed. Under the proposed rule, if, on the date makeup or late
contributions subject to breakage are posted to the participant's
account by the TSP, the value of the number of shares of the investment
fund in which the contributions should have been invested is greater
than the value of those shares on the posting date, the TSP will charge
the employing agency the difference and will post this amount to the
participant's account using the participant's current contribution
allocation. If the value is less, the TSP will use the excess funds
submitted by the employing agency to offset TSP administrative
expenses.
Section 1605.11 is amended to describe the situations in which
breakage is applied to an account.
Section 1605.12 is amended to explain how negative adjustments will
be processed in a daily valued environment.
Sections 1605.13, 1605.14, and 1605.15 are amended to delete
references to lost earnings. A new paragraph (c) to Sec. 1605.15 is
added to incorporate the rules of current Sec. 1606.8 regarding late
payroll submissions.
Analysis of Part 1606
On January 7, 1991, the Executive Director published in the Federal
Register (56 FR 606) interim rules concerning the payment of lost
earnings attributable to employing agency errors to participants' TSP
accounts. These rules are codified at 5 CFR part 1606. Under interim
part 1606, lost earnings on contributions that were not made on time
because of administrative errors are calculated based upon a dollar-
valued system and monthly rates of return. The Board's new record
keeping system is a share-based system, valued daily. Transactions will
be posted to a participant's account based upon the share prices in
effect on the date(s) that the transactions should have occurred.
Application of share prices for dates earlier than the date a
transaction is processed will replace the lost earnings process
described in part 1606.
Thus, the proposed changes to part 1606 are relevant for only a
limited period. As explained in proposed Sec. 1606.2, a transition
period from September 1, 2002, until March 31, 2003, is provided to
enable employing agencies to submit lost earnings for contributions
that were made before implementation of the daily valued TSP record
keeping system. After this approximately 6-month period, all makeup and
late contributions subject to breakage should be reported as described
in part 1605; at that time, the use of lost earning records will be
discontinued. Thus, part 1606, as revised, covers only payments posted
to participants' account before September 1, 2002; all payments posted
after August 31, 2002, are covered by part 1605.
Analysis of Part 1640
On June 24, 1997, the Executive Director published in the Federal
Register (62 FR 34154) final rules concerning the periodic information
the TSP furnishes to participants. These rules are codified at 5 CFR
part 1640. The proposed rule amends the final rules.
The Executive Director proposes to remove all definitions generally
applicable to the TSP from Sec. 1640.1 and to place them in
Sec. 1690.1.
Proposed Sec. 1640.2 reflects the Executive Director's decision to
provide comprehensive written statements to participants concerning
their accounts on a quarterly basis rather than twice yearly, the
minimum frequency required by FERSA. The new comprehensive quarterly
statements will incorporate the existing quarterly loan statements and
no separate loan statements will be issued. The amendment also explains
that Plan participants can obtain account balance information on a more
frequent basis from the TSP Web site and the ThriftLine or can disable
access to their account balance information on both the Web site and
the ThriftLine.
Proposed Secs. 1640.3 and 1640.4 set forth the information that the
TSP will provide to participants regarding the status of their
individual accounts during the reporting period. These changes reflect
the additional information that will be available as a result of
implementation of the TSP's new record keeping system, such as a
participant's contribution allocation as of the end of the statement
period.
Proposed Sec. 1640.5 is unchanged.
Proposed Sec. 1640.6 explains that a participant may elect to view
his or her account statement by accessing the TSP Web site, rather than
receiving an account statement by mail. If a participant chooses to
receive his or her account statement from the TSP Web site, no account
statement will be mailed. The section is also amended to describe more
clearly a participant's obligation to provide the TSP with a current
mailing address if the participant chooses to continue to receive an
account statement by mail.
Analysis of Part 1645
On November 20, 1996, the Executive Director published final rules
in the Federal Register (61 FR 58973) concerning the way in which
earnings are allocated to participants' accounts in the TSP. These
rules are codified at 5 CFR part 1645. The proposed rule amends the
final rules.
The proposed rule amends the title of part 1645 from ``Allocation
of Earnings'' to ``Calculation of Share Prices.'' This change is
necessary because in the TSP's new record keeping system the process
described in the current regulations is no longer relevant; an increase
or decrease in the value (calculated daily) of a participant's interest
in an investment fund will be reflected in the number and value of
shares in that fund, rather than by a separate posting of monthly
earnings to the account.
The Executive Director proposes to remove all definitions generally
applicable to the TSP from Sec. 1645.1 and place them in Sec. 1690.1;
proposed Sec. 1645.1 contains definitions primarily relevant to the
calculation of share prices, such as basis and forfeiture. The
definitions of allocation, allocation date, month-end account balance,
and valuation period are deleted because they are no longer applicable.
[[Page 42858]]
Proposed Sec. 1645.2 provides that employer contributions, employee
contributions, loan payments, and other transactions will be posted
using the appropriate share price for the relevant investment fund.
The final monthly valued processing cycle in early September 2002,
will determine account balances in the G Fund, F Fund, C Fund, S Fund,
and I Fund, as of August 31, 2002. The account balance in each
investment fund for each TSP participant will then be converted to
shares. The initial share price for each of the investment funds will
be $10.00 per share. Thus, a TSP account balance will be converted to
shares by dividing the dollar-based account balance in each investment
fund by $10.00. The number of shares in an account will be computed to
four decimal places. Thereafter, following the close of business each
business day, total net earnings (gross earnings minus administrative
expenses (net of forfeitures) and investment management fees, plus any
residual earnings from the prior business day) will be calculated for
each investment fund. The total net earnings for each investment fund
for each day will be divided by the number of shares in the fund at the
opening of that business day. The result, truncated to two decimal
places, is the daily change in share price from the prior business day.
Proposed Secs. 1645.3 and 1645.4 also reflect the conversion to a
share-based system.
Proposed Sec. 1645.5 describes the method used to calculate the
price of a share held in a TSP investment fund. Sections 1645.5(a) and
(b) of the current regulations describe how to calculate the basis of
an individual participant's account and of each investment fund in a
monthly valued system, and thus are deleted because they are no longer
relevant. Section 1645.5(c) of the current regulations is retained and
redesignated as Sec. 1645.6, and is amended to describe the calculation
of the total fund basis for each TSP investment fund in the new share-
based system.
Analysis of Part 1650
On September 18, 1997, the Executive Director published final rules
in the Federal Register (62 FR 49112) concerning the way in which
participants can withdraw their TSP accounts. These rules are codified
at 5 CFR part 1650. The final rules were amended most recently on April
11, 2002 (66 FR 17603); the proposed rule further amends the final
rules.
The Executive Director proposes to remove all definitions generally
applicable to the TSP from Sec. 1650.1 and place them in Sec. 1690.1;
proposed Sec. 1650.1 retains definitions of terms primarily relating to
withdrawals, such as in-service withdrawal and reimbursement. The
definitions of monthly processing cycle and valuation date are deleted
as obsolete.
In September 2002, the Executive Director will make available in
combination the withdrawal options that were approved by Congress in
the Thrift Savings Plan Act of 1996, Public Law 104-208, 110 Stat.
3009. Thus, proposed Sec. 1650.2, concerning eligibility for a
withdrawal, is amended to provide that a separated participant may
elect to withdraw his or her account using a combination of withdrawal
options. Currently, if a participant who is separated from Government
employment wishes to withdraw funds from the TSP, the participant must
withdraw his or her entire account in the form of a single payment, a
series of monthly payments, or a life annuity purchased by the TSP. The
proposed amendment would permit a separated participant to request a
withdrawal consisting of a combination of the withdrawal options. To
accommodate the new post-employment withdrawal process, the Board has
redesigned Form TSP-70 (for civilian employees) and Form TSP-U-70 (for
uniformed services), Request for a Full Withdrawal. Among other things,
the revision allows a participant to request a TSP annuity and to
designate a beneficiary for the annuity on one form. The proposed rule
reflects the use of the revised forms. (Other forms have also been
revised and new forms created for the uniformed services; those for
uniformed services are designated with a -U-.)
Proposed Sec. 1650.2, concerning eligibility for a TSP withdrawal,
contains several changes. The reference in current Sec. 1650.2(b)(1) to
the cancellation of an automatic cashout has been deleted because
accounts of less than $200 will be paid automatically and without prior
notice to participants who are reported as separated. These automatic
payments cannot be returned to the TSP. Proposed Sec. 1650.2(d)
provides that a separated participant who is later reemployed will not
have the option to withdraw that portion of his or her account balance
which is attributable to an earlier period of employment unless the
participant meets the criteria for an age-based or financial hardship
in-service withdrawal. Finally, existing Sec. 1650.2(e), concerning
spousal rights, is deleted because that information is contained in
Secs. 1650.60 and 1650.61.
Section 1650.3 is redrafted and reorganized but is substantively
unchanged.
Section 1650.4 is new. It parallels a similar provision in the loan
regulations (5 CFR 1655.18(d)) and provides that the Board will
investigate allegations of fraud or forgery in a participant's
withdrawal request. If the Board finds evidence to suggest that the
participant misrepresented his or her marital status, misrepresented
his or her spouse's address (for CSRS participants), or submitted a
withdrawal form with a forged spousal signature (for FERS and uniformed
services participants), the Board will refer the case to the Department
of Justice for criminal prosecution and, in the case of a participant
who is still employed, to the Inspector General or other appropriate
authority in the participant's employing agency for administrative
action.
Subpart B describes the types of withdrawals that are available to
participants after separation from Government service. The subpart is
substantially redrafted and reorganized. The Executive Director
proposes to add a new Sec. 1650.11 to explain that separated
participants may make a full withdrawal using a combination of
withdrawal methods and to add a de minimis forfeiture rule. Existing
Sec. 1650.10, concerning the right to withdraw in a single payment, is
renumbered as Sec. 1650.12 and is amended to add the option for a one-
time partial withdrawal.
Current Sec. 1650.11, concerning withdrawals in the form of monthly
payments, is renumbered as Sec. 1650.13 and is amended to eliminate the
option of computing monthly payments based on a fixed term. The
Executive Director also proposes to add an annual election period
during which a participant can change the dollar amount of his or her
monthly payments. A participant who is receiving monthly payments
calculated based upon IRS life expectancy tables may change to a fixed
dollar amount; however, a participant who is receiving monthly payments
based on a fixed dollar amount may not change to monthly payments based
on life expectancy.
Current Sec. 1650.12, concerning annuities, is reorganized and
renumbered as Sec. 1650.14, but is substantively unchanged.
Current Sec. 1650.13, concerning the transfer of a post-separation
withdrawal to an eligible employer plan or traditional IRA, has been
moved to subpart C, renumbered as Sec. 1650.25, and renamed to make the
information provided in subparts B and C more
[[Page 42859]]
consistent with that in subparts D and E.
Current Sec. 1650.14, concerning deferred withdrawal elections, is
deleted. Only immediate withdrawals will be available.
Current Sec. 1650.15 is renumbered as Sec. 1650.16, and is amended
to delete an obsolete reference to withdrawals made before 1998.
Proposed Sec. 1650.15 is new. It explains the Board's policy with
respect to inactive accounts. These accounts will be declared abandoned
when the TSP's efforts to locate the participant have failed.
Current Sec. 1650.16 is renumbered as Sec. 1650.17, and the
information has been expanded to explain more fully a participant's
right to change or cancel a withdrawal election.
Subpart C contains the procedures for participants to make a post-
employment withdrawal. Current Sec. 1650.20 is renumbered as
Sec. 1650.21 and is amended to eliminate the 30-day waiting period
after separation before a withdrawal will be paid. The TSP will process
a valid withdrawal request upon receipt of separation information from
the participant's employing agency if the participant certifies on the
withdrawal form that he or she does not expect to be reemployed by the
Federal Government within 31 days of the date of separation. The
remainder of the section is unchanged.
Sections 1650.21 and 1650.22 currently provide that, upon receipt
of a notice of separation, the TSP will automatically pay accounts of
$3,500 or less directly to participants, unless the participant elects
to leave the account in the TSP. The proposed rule renumbers those
sections as 1650.22 and 1650.23, respectively. The proposed sections
retain the cashout provision but apply it only to accounts that are
less than $200, and eliminate the option to leave the money in the TSP.
Current Sec. 1650.22(c), regarding spousal rights, has been moved to
subpart G. A new Sec. 1650.24, describing how to apply for a
withdrawal, and a new Sec. 1650.25, explaining some of the tax
consequences of a post-employment withdrawal, are added.
Subpart D describes the types of withdrawals that are available to
participants while they are still in Government service. Current
Sec. 1650.30, concerning age-based withdrawals, is renumbered
Sec. 1650.31 and contains a new paragraph which provides that a
participant who takes an age-based withdrawal is not eligible after
separation to take a partial withdrawal from that account. A
participant with both a civilian and uniformed services account can
take a partial withdrawal from each account, provided that he or she
has not taken an age-based in-service withdrawal from that account.
Current Secs. 1650.31, 1650.32, and 1650.33 are renumbered as
1650.32, 1650.33, and 1650.34, respectively, but are substantively
unchanged.
Subpart E contains the procedures for participants to make in-
service withdrawals. Current Secs. 1650.40, 1650.41, and 1650.42 are
renumbered as 1650.41, 1650.42, and 1650.43, respectively. Proposed
Sec. 1650.42 contains a new paragraph (b) that explains that there is
no limit to the number of hardship withdrawals a participant may make,
except that a participant must wait six months before submitting
another request. Proposed Sec. 1650.43 contains tax information for in-
service withdrawals that is reorganized to make it more consistent with
the tax information provided in Sec. 1650.25 for post-employment
withdrawals.
Subpart G explains the rights of spouses of participants when a
withdrawal is requested. Current Sec. 1650.60, concerning spousal
rights when a post-employment withdrawal is requested, is renumbered as
1650.61, and is amended to include the spousal rights of a uniformed
services member. A requirement is also added that the spouse's
signature be notarized any time a withdrawal is requested.
Current Sec. 1650.61, concerning spousal rights when a participant
changes a withdrawal election, is deleted because the elimination of
deferred withdrawal elections makes these rules unnecessary.
Section 1650.62, concerning spousal rights when an in-service
withdrawal is requested, is amended to require that the spouse's
consent be notarized any time a withdrawal is requested.
Sections 1650.63 and 1650.64, concerning the conditions under which
the Executive Director will grant a waiver of the spousal notice and
consent requirements (including waiver of the required spousal
annuity), are unchanged since the April 11, 2002, amendment.
Analysis of Part 1651
On June 13, 1997, and June 9, 1999, the Executive Director
published in the Federal Register (62 FR 32429 and 64 FR 31052) final
rules concerning the payment of a TSP account upon the death of a
participant. These rules are codified at 5 CFR part 1651. The Executive
Director revised part 1651 in a proposed rule published on May 17, 2002
(67 FR 35051). This proposed rule further amends the final rules.
Implementation of the TSP's new record keeping system will require
the redesign of a number of forms and will make obsolete the Form TSP-
11-B, Beneficiary Designation for a TSP Annuity, which is referenced in
the current death benefit regulations at Secs. 1651.2(b)(3), (b)(5) and
(b)(6), 1651.3(a) and (d), 1651.4(c), and 1651.10(a) and (c). This
proposed rule changes those references to reflect the use of revised
forms. In addition, definitions generally applicable to the TSP are
removed from Sec. 1651.1 and placed in Sec. 1690.1.
The proposed rule implements a new procedure for the payment of a
TSP death benefit in cases where a participant has submitted a
completed withdrawal or loan request to the TSP, but dies before
disbursement of the withdrawal or loan. Currently, if the TSP learns
that a separated participant has died after it received the
participant's request to withdraw his or her account and before the
payment is made, the TSP will not process the withdrawal. Instead, the
TSP will pay the funds as a death benefit according to the order of
precedence found at 5 U.S.C. 8424(d). If the participant has chosen to
withdraw his or her account as a joint life annuity or an annuity with
a refund or 10-year certain option, the TSP will pay the account to the
joint annuitant or to the beneficiary or beneficiaries of the annuity
as designated by the participant.
Under proposed Sec. 1651.2(b)(1), if the TSP has received a request
to withdraw an amount as a single payment, the TSP will disburse that
amount to the participant (to become the property of his or her
estate), even though he or she died before payment of the withdrawal.
If the withdrawal request directs the TSP to transfer all or a portion
of the single payment to a eligible employer plan or traditional IRA,
the TSP will transfer that portion of the withdrawal to the designated
plan or IRA. The Board has decided to adopt this practice because it
gives effect to the participant's decision to remove the funds from his
or her account, and thus to terminate the relationship with the TSP
regarding these funds.
This procedural change will not affect how the TSP will pay, as a
death benefit, the portion of a post-employment withdrawal that the
participant elected to receive in the form of monthly payments (as
opposed to a single payment). Thus, proposed Sec. 1651.2(b)(2) provides
that any amount remaining in the account when the TSP receives notice
of the participant's death will be paid to the participant's
beneficiaries according to the
[[Page 42860]]
beneficiary designation on file or under the statutory order of
precedence.
This procedural change also has no substantive effect on proposed
Sec. 1651.2(b)(3), which describes how the TSP will distribute the
portion of a TSP account identified by the participant for the purchase
of a TSP annuity.
Proposed Sec. 1651.2(c) applies the same new procedure to the
payment of an in-service withdrawal request. Under the proposed rule,
if a participant dies after completing an in-service withdrawal
request, but before payment, the portion of the account elected for
withdrawal will be paid in the same manner as a single payment post-
employment withdrawal (i.e., as a single payment to the deceased
participant, to become the property of his or her estate).
The proposed change also affects cases where a participant dies
after submitting a properly completed loan agreement (and acceptable
documentation, if required); current Board regulations do not address
this situation. Under proposed Sec. 1651.2(d), the TSP will cancel a
loan agreement if it receives notice of the participant's death before
a loan check has been issued. If notice of the participant's death is
received after a loan check has been issued but the check is not
negotiated, the check can be returned to the TSP and the loan will be
cancelled. In both cases, the loan amount will be included with the
account balance to be distributed to the participant's beneficiaries
according to the beneficiary designation on file or under the statutory
order of precedence.
The proposed rule amends Sec. 1651.14(f) to explain more fully the
TSP's practice when a death benefit is payable to the trustee of a
trust. The section is amended to state that payment will be made
payable to the trust and mailed in care of the trustee.
The proposed rule amends Sec. 1651.17 to permit beneficiaries to
disclaim a portion of the death benefit; the TSP has decided to
recognize partial disclaimers because they are acceptable in most
states. Proposed Sec. 1651.17(c) is new and provides that a disclaimer
executed on behalf of a minor must be signed by the guardian of the
minor.
Analysis of Part 1653
On March 13, 1995, and April 26, 1996, the Board published in the
Federal Register (60 FR 13609 and 60 FR 18912) final rules concerning
payment from a participant's TSP account pursuant to a retirement
benefits court order or legal process. These rules are codified at 5
CFR part 1653. The proposed rule amends the final rules.
Subpart A of part 1653 details the TSP's procedures for reviewing
retirement benefits court orders pursuant to 5 U.S.C. 8435(c)(1) and
(2) and 8467. The proposed rule removes current Sec. 1653.1, which
describes the purpose of the subpart, as unnecessary.
Proposed Sec. 1653.1 consolidates and defines terms of art that are
currently explained throughout subpart A. Definitions that are
generally applicable to the TSP have been moved to Sec. 1690.1.
Current Sec. 1653.2 describes those court orders that the TSP will
honor (called ``qualifying retirement benefits court orders''). The
section is generally reorganized and the process clarified. In
addition, under current Sec. 1653.2(b)(3)(iii), a court order can
describe a payee's entitlement using a formula, as long as its
variables are readily ascertainable from the face of the order or from
Government records. However, the TSP does not have access to Government
records in general; therefore, the proposed rule requires that the
variables must be readily ascertainable from the order or from TSP
records.
Also, under current Sec. 1653.2(c)(1), the TSP will honor a court
order relating to an account that contains non-vested money if the
money will become vested within 90 days of receipt of the order. The
90-day period was chosen because, in the TSP's monthly-valued
environment, it took approximately 90 days to process and pay a
qualifying court order. After implementation of the new record keeping
system, a court-ordered payment may be processed in as little as 31
days from receipt of the order; therefore, proposed Sec. 1653.2(b)(2)
reduces the relevant time period from 90 to 30 days.
Proposed Sec. 1653.3(b) explains that the TSP cannot act on a
retirement benefits court order if the order is incomplete, and
describes the information that is necessary before the TSP will
consider a court order to be complete. In Sec. 1653.3(c), the
terminology has been changed; currently the section states that a
participant's TSP account will be frozen ``upon receipt'' of certain
documents. The proposed section explains that a participant's account
will be frozen as soon as practicable after the TSP receives a
document. The substantive effect of the rule remains the same; the
amendment is intended to bring to the reader's attention the fact that
court order processing time might delay the freezing of a participant's
account.
When the TSP receives a retirement benefits court order that
purports to divide a participant's account, the parties are mailed a
decision letter evaluating the court order and describing its effect on
the participant's TSP account. If the court order requires a payment
from the TSP, tax and payment information are currently sent to the
appropriate parties in a separate mailing. Proposed Sec. 1653.3(f)
amends the current rule to provide that the TSP will provide tax and
payment information with the TSP decision letter.
Proposed Sec. 1653.3(j) explains how the TSP will process multiple
retirement benefits court orders relating to the same TSP account and
replaces current Sec. 1653.3(l). Currently multiple court orders
requiring payments to different payees are honored in the order of
their effective dates. As it was originally written, FERSA did not
express an order of precedence where multiple court orders awarded
funds from the TSP to different payees. Therefore, TSP regulations were
based on 5 U.S.C. 8435(d)(4), which applies where multiple court orders
award survivor annuity interests to different spouses.
Subsequently, FERSA was amended by Sec. 2(b) of the Child Abuse
Accountability Act (CAAA) of 1994, Public Law 103-358, 108 Stat. 3420,
3421 (codified at 5 U.S.C. 8437(e) and 8467) to provide that
conflicting retirement benefits court orders that award funds to
different payees will be honored on a ``first-come, first-served
basis.'' 5 U.S.C. 8467(a). The proposed rule conforms Sec. 1653.3 to
the CAAA.
Section 1653.4 is redrafted to reflect the daily valuation of TSP
accounts. Proposed Sec. 1653.4(e) codifies the TSP's practice of paying
the stated dollar amount if a retirement benefits court order describes
a payee's entitlement both as a fixed dollar amount and as a percentage
or fraction of the participant's account, even if the percentage or
fraction, when applied to the account balance, would yield a different
result.
Proposed Sec. 1653.4(f) describes a new TSP policy. Currently, if a
retirement benefits court order requires the TSP to pay interest on an
entitlement, the TSP uses the rates of return credited to the
participant's account, unless the court order specifies another rate.
Under the new policy, a court order can still specify the interest rate
to be applied to a payee's entitlement by stating an annual percentage
rate or a per diem dollar amount. If none is stated, the TSP will apply
the rate of return for the G Fund. This policy will protect court order
beneficiaries from market risk and preserve the value of their
entitlements until they can be paid.
Finally, proposed Sec. 1653.4 explains how earnings will be
calculated after the
[[Page 42861]]
introduction of the new record keeping system. Because historical data
concerning the monthly rates of return credited to a participant's
account under the old system will not be converted to the new system,
the TSP will be unable to apply those rates of return to a court-
ordered payment after the new system is introduced. Therefore, payments
processed after August 31, 2002, will be credited with earnings at the
G Fund rate (unless the order awards earnings at an annual percentage
rate or a per diem dollar amount), even if earnings are to commence
before August 31, 2002.
The court order payment process is described at Sec. 1653.5.
Currently, the TSP generally disburses a court-ordered award within 60
to 90 days after approving the payment. Under the new process described
at proposed Sec. 1653.5(a), those disbursements may be made within 31
to 60 days after approval. Proposed Sec. 1653.5(d) describes the
general rule that a payment will be made pro rata from all TSP
investment funds, contribution sources, and both tax-deferred and tax-
exempt contributions; however, the amendment permits a court to specify
tax-exempt balances that are to be paid from a uniformed services TSP
account.
Retirement benefits court orders occasionally instruct the TSP to
mail a court-ordered payment to a third party addressee, such as the
payee's attorney. The TSP's rules for this type of payment are the
subject of frequent misunderstanding; therefore, proposed
Sec. 1653.5(e) explains them in detail.
Proposed Sec. 1653.5(g) is added to describe the order of
precedence for the payment of multiple court order payees whose
entitlements are created in the same court order, if the participant's
account is insufficient to satisfy each payee's award. If the court
order establishes an order of precedence, it will be honored; however,
in the absence of an order of precedence, the TSP will first pay the
spouse or former spouse, then children or agencies or persons acting on
their behalf, and finally the attorney for the spouse or former spouse.
Subpart B of part 1653 details the TSP's procedures for reviewing
legal processes that enforce a participant's obligation to make alimony
or child support payments pursuant to 5 U.S.C. 8437(e). Several
sections of subpart B have been renumbered in the proposed rule to make
them correspond to the analogous sections of subpart A; in addition,
duplicate references have been deleted and replaced with a reference to
the corresponding rule in subpart A. The proposed rule removes current
Sec. 1653.20, which describes the purpose and scope of the subpart, as
unnecessary. Current Sec. 1653.22, which provides the mailing address
for the TSP record keeper, is condensed into proposed Sec. 1653.13(b).
The proposed rule adds a new Sec. 1653.13(i) to subpart B to
explain that the TSP will delay or cancel a payment required by a
qualifying legal process only in response to a request by the legal
authority that originally issued the legal process. Proposed
Sec. 1653.13(j) also changes the order of precedence for the processing
of multiple qualifying legal processes requiring payment to different
payees. Because retirement benefits court orders, legal processes, and
child abuse court orders require similar payments, and because the
latter two orders both satisfy judgments against TSP participants, the
TSP will process all orders or processes similarly.
A new subpart C is added to part 1653 to explain that child abuse
court orders are enforceable against the TSP and how the TSP will
process them.
Analysis of Part 1655
On April 14 1997, and August 26, 1998, the Board published in the
Federal Register (62 FR 18019 and 63 FR 45391, respectively) final
rules concerning the statutory program under which a participant may
have temporary access to his or her account while still employed. The
rule is codified at 5 CFR part 1655. The Executive Director revised
part 1655 in a proposed rule published on May 17, 2002 (67 FR 35051).
This proposed rule further amends the final rules.
Proposed Sec. 1655.1 removes all definitions that are generally
applicable to the TSP and places them in Sec. 1690.1. Definitions
relevant solely to loans, such as amortization and loan repayment
period, are retained in this section.
Sections 1655.2, 1655.4, 1655.5, and 1655.6 are reorganized so that
they are more easily understandable, but are substantially unchanged.
Proposed Sec. 1655.5(b) is amended to make five years the maximum term
for a general purpose loan and fifteen years the maximum term for a
residential loan.
Section 1655.3 is amended to reflect the availability of
information concerning the cost of a loan in the booklet TSP Loan
Program, which is available on the Board's Web site.
Section 1655.7 is amended to delete references to monthly
valuation.
Section 1655.8 is amended to provide that information concerning an
outstanding loan will now be provided to participants in their
quarterly participant statements and not in a separate statement.
Section 1655.9 is significantly revised as a result of the TSP's
conversion from monthly to daily valuation; however, the basic concepts
concerning the effect of a loan on an individual account remain the
same. For example, loan disbursements will now be issued daily and
funds will be removed from the account as soon as the loan is issued;
however, loans will continue to be disbursed from employee
contributions pro rata from each investment fund in which the
contributions are invested and pro rata from tax-deferred and tax-
exempt balances for uniformed services accounts.
Section 1655.10, describing the loan application process, is
revised to reflect the fact that a participant may apply for a loan by
submitting a paper application or by accessing the TSP Web site. The
revision takes into account variations in the processes which depend
upon the retirement coverage of the participant, the participant's
marital status, and the type of loan requested.
Sections 1655.10, 1655.11, and 1655.12, which describe the
processes for submission and approval of a loan application, submission
of a loan agreement, and approval of the loan, are being combined and
significantly reorganized to make the entire application and approval
process more understandable. The amendment now covers these topics in
Secs. 1655.10, 1655.11, 1655.12, and 1655.13.
Section 1655.14 is amended to provide that a participant may choose
to make a partial loan payment, in addition to those payments that are
required to be made through payroll deduction, by submitting a personal
check or guaranteed funds directly to the TSP record keeper. Thus, a
participant will no longer be required to reamortize his or her loan if
the TSP receives payments in an amount different from the agreed amount
and, for this reason, current Sec. 1655.15 is deleted in its entirety.
Current Sec. 1655.13, concerning taxable distributions, is
renumbered as Sec. 1655.15. The proposed rule reflects amendments to
conform to a daily valued system and the period of time after
separation within which a loan must either be repaid in full or be
declared a taxable distribution.
Section 1655.16 is amended to delete any reference to required
reamortization. A participant may now reamortize at any time unless the
loan is in default; however, the interest rate on the loan will remain
the same. A loan will automatically be reamortized upon a participant's
return from nonpay to pay status.
[[Page 42862]]
Section 1655.17 is amended to explain that a returned loan check
will be treated as a repayment and that information concerning the
amount outstanding on a loan is available from the Board's Web site,
the ThriftLine, or the TSP record keeper.
Sections 1655.18, 1655.19, and 1655.20 are being clarified but
their substance is unchanged.
Analysis of Part 1690
On June 16, 1997, the Board published a final rule in the Federal
Register (62 FR 32473) which established a plan year for the TSP. The
rule is codified at 5 CFR part 1690. On June 9, 1999, the Board
published a final rule in the Federal Register (64 FR 31062) that
amended Part 1690 by adding a rule explaining the TSP's requirements
for a valid power of attorney. The proposed rule amends the final rule.
Current part 1690 is substantially reorganized. The proposed rule
adds a Subpart A, which incorporates definitions of terms that are
applicable throughout the Board's regulations. Subpart B incorporates
the provisions of existing part 1690. The proposed rule adds
Sec. 1600.13 to subpart B to describe the documentation that is
required for the TSP to process transactions for a participant who is
legally unable to act on his or her own behalf because of physical or
mental incapacity.
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 and former 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 Sec. 202, 109 Stat. 48, 64-65, is not required.
List of Subjects
5 CFR Parts 1600, 1601, 1603, 1606, 1645, 1650, 1651, 1653, 1690
Employment benefit plans, Government employees, Pensions,
Retirement
5 CFR Parts 1604, 1655
Employment benefit plans, Government employees, Military personnel,
Pensions, Retirement.
5 CFR Part 1605
Administrative practice and procedure, Employment benefit plans,
Government employees, Pensions, Retirement.
5 CFR Part 1640
Employment benefit plans, Government employees, Pensions, Reporting
and recordkeeping requirements, Retirement.
Roger W. Mehle,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons set out in the preamble, the Executive Director of
the Federal Retirement Thrift Investment Board proposes to amend 5 CFR
chapter VI as follows:
PART 1600--EMPLOYEE ELECTIONS TO CONTRIBUTE TO THE THRIFT SAVINGS
PLAN
1. The authority citation for part 1600 is revised to read as
follows:
Authority: 5 U.S.C. 8351, 8432(b)(1)(A), 8432(j), 8474(b)(5) and
(c)(1).
2. Section 1600.1 is revised to read as follows:
Sec. 1600.1 Definitions.
Definitions generally applicable to the Thrift Savings Plan are set
forth at 5 CFR 1690.1.
3. Section 1600.11 is amended by revising paragraph (a)
introductory text to read as follows:
Sec. 1600.11 Types of elections.
(a) Contribution elections. A contribution election must be made
pursuant to Sec. 1600.14 and includes the following types of elections:
* * * * *
4. Section 1600.12 is amended by revising paragraphs (a) and (b) to
read as follows:
Sec. 1600.12 Period for making contribution elections.
(a) Participation upon initial appointment or reappointment. An
employee appointed, or reappointed following a separation from
Government service, to a position covered by FERS or CSRS may make a
TSP contribution election within 60 days after the effective date of
the appointment.
(b) Open season elections. Any employee may make a contribution
election during an open season. The next open season will be October
15, 2002, through December 31, 2002; thereafter, each year an open
season will begin on April 15 and will end on June 30; a second open
season will begin on October 15 and end on December 31. If the last day
of an open season falls on a Saturday, Sunday, or legal holiday, the
open season will be extended through the end of the next business day.
* * * * *
5. Section 1600.13 is amended by revising paragraph (a) to read as
follows:
Sec. 1600.13 Effective dates of contribution elections.
(a) Participation upon initial appointment or reappointment. TSP
contribution elections made pursuant to Sec. 1600.12(a) will become
effective no later than the first full pay period after the election is
received by the employing agency or uniformed service.
* * * * *
6. Section 1600.14 is amended by revising paragraphs (a), (b)
introductory text, and (b)(1) to read as follows:
Sec. 1600.14 Method of election.
(a) A participant must submit a contribution election to his or her
employing agency. Employees may use either the paper TSP election form,
i.e., Form TSP-1 or Form TSP-U-1, or, if provided by their employing
agency, electronic media to make an election. If an electronic medium
is used, all relevant elements contained on the paper Form TSP-1 or
Form TSP-U-1 must be included in the electronic medium.
(b) A contribution election must:
(1) Be completed in accordance with the instructions on Form TSP-1
or Form TSP-U-1, if a paper form is used;
* * * * *
7. Section 1600.22 is amended by revising paragraph (a) to read as
follows:
Sec. 1600.22 Maximum contributions.
(a) Percentage of basic pay. (1) Subject to paragraphs (b) and (c)
of this section, the maximum employee contribution from basic pay for a
FERS participant for January through November 2002 is 12 percent per
pay period. The maximum contribution will increase one percent in
December of each year until December 2005, after which the percentage
of basic pay limit will not apply and the maximum contribution will be
limited only as provided in paragraphs (b) and (c) of this section.
[[Page 42863]]
(2) Subject to paragraphs (b) and (c) of this section, the maximum
employee contribution from basic pay for a CSRS or uniformed services
participant for January through November 2002 is 7 percent per pay
period. The maximum contribution will increase one percent in December
of each year until December 2005, after which the percentage of basic
pay limit will not apply and the maximum contribution will be limited
only as provided in paragraphs (b) and (c) of this section.
* * * * *
8. Section 1600.32 is amended by revising paragraph (b)(3) to read
as follows:
Sec. 1600.32 Methods for transferring eligible rollover distribution
to TSP.
* * * * *
(b) * * *
(3) The participant must submit the completed Form TSP-60 or TSP-U-
60, together with a certified check, cashier's check, cashier's draft,
money order, treasurer's check from a credit union, or personal check,
made out to the ``Thrift Savings Plan,'' for the entire amount of the
rollover. A participant may roll over the full amount of the
distribution by making up, from his or her own funds, the amount that
was withheld from the distribution for the payment of Federal taxes.
* * * * *
PART 1601--PARTICIPANTS' CHOICES OF INVESTMENT FUNDS
9. The authority citation for part 1601 continues to read as
follows:
Authority: 5 U.S.C. 8351, 8438, 8474(b)(5) and (c)(1).
Subpart A--General
10. Section 1601.1 is revised to read as follows:
Sec. 1601.1 Definitions.
(a) Definitions generally applicable to the Thrift Savings Plan are
set forth at 5 CFR 1690.1.
(b) As used in this part:
Acknowledgment of risk means an acknowledgment that any investment
in the F Fund, C Fund, S Fund, or I Fund is made at the participant's
risk, that the participant is not protected by the United States
Government or the Board against any loss on the investment, and that
neither the United States Government nor the Board guarantees any
return on the investment.
11. Subparts B and C are revised to read as follows:
Subpart B--Investing Future Deposits
Sec.
1601.11 Applicability
1601.12 Investing future deposits in the TSP investment funds.
1601.13 Elections.
Subpart C--Redistributing Participants' Existing Account Balances
1601.21 Applicability.
1601.22 Methods of requesting an interfund transfer.
Subpart B--Investing Future Deposits
Sec. 1601.11 Applicability
This subpart applies only to the investment of future deposits to
the TSP's investment funds, including contributions, loan payments, and
transfers or rollovers from eligible employer plans and traditional
IRAs; it does not apply to redistributing participants' existing
account balances among the investment funds, which is covered in
subpart C of this part.
Sec. 1601.12 Investing future deposits in the TSP investment funds.
(a) Future deposits in the TSP, including contributions, loan
payments, and transfers or rollovers from eligible employer plans and
traditional IRAs, will be allocated among the investment funds based on
the most recent contribution allocation made by the participant
pursuant to Sec. 1601.13.
(b) Investment fund availability. All participants may elect to
invest all or any portion of their deposits in any of the TSP's five
investment funds.
Sec. 1601.13 Elections.
(a) Contribution allocation. Each participant may indicate his or
her choice of investment funds for the allocation of future deposits by
using the TSP Web site or the ThriftLine, or by completing Form TSP-50
or Form TSP-U-50, Investment Allocation. The following rules apply to
contribution allocations:
(1) Contribution allocations must be made in one percent
increments. The sum of the percentages elected for all of the
investment funds must equal 100%;
(2) The percentage elected by a participant for investment of
future deposits in an investment fund will be applied to all sources of
contributions and transfers from eligible employer plans and
traditional IRAs. A participant may not make different percentage
elections for different sources of contributions;
(3) A participant who elects for the first time to invest in the F
Fund, C Fund, S Fund, or I fund must execute an acknowledgment of risk
in accordance with Sec. 1601.33. In addition, a participant who, before
September 2002, has only invested in the F Fund or C Fund, must execute
an acknowledgment of risk in accordance with Sec. 1601.33 before making
any new election to invest in the F Fund, C Fund, S Fund, or I Fund;
(4) All deposits made on behalf of a participant who does not have
a contribution allocation in effect will be invested in the G Fund; and
(5) Once a contribution allocation becomes effective, it remains in
effect until it is superseded by a subsequent contribution allocation.
If a separated participant is rehired and had not withdrawn his or her
entire TSP account, the participant's last contribution allocation
before separation from service will be given effect until a new
allocation is made.
(b) Effect of rejection of contribution allocation. If a
contribution allocation on a Form TSP-50 or Form TSP-U-50 is found to
be ineffective pursuant to Sec. 1601.34, the attempted allocation will
have no effect. The TSP will provide the participant with a written
statement of the reason the transaction was rejected.
(c) Contribution elections. A participant may designate the amount
of employee contributions he or she wishes to make to the TSP or may
stop contributions only in accordance with 5 CFR part 1600.
Subpart C--Redistributing Participants' Existing Account Balances
Sec. 1601.21 Applicability.
This subpart applies only to redistributing participants' existing
account balances among the TSP's investment funds; it does not apply to
the investment of future deposits, which is covered in subpart B of
this part.
Sec. 1601.22 Methods of requesting an interfund transfer.
(a) Participants may make an interfund transfer using the TSP Web
site or the ThriftLine, or by completing a Form TSP-50 or Form TSP-U-
50, Investment Allocation. The following rules apply to an interfund
transfer request:
(1) Interfund transfer requests must be made in one percent
increments. The sum of the percentages elected for all of the
investment funds must equal 100%.
(2) The percentages elected by the participant will be applied to
the balances in each source of contributions and to both tax-deferred
and tax-exempt balances on the effective date of the interfund
transfer.
(3) Any participant who elects to invest in the F Fund, C Fund, S
Fund, or I Fund for the first time must execute an acknowledgment of
risk in accordance with Sec. 1601.33. In addition,
[[Page 42864]]
a participant who, before September 2002, has only invested in the F
Fund or C Fund, must execute an acknowledgment of risk in accordance
with Sec. 1601.33 before making any new election to invest in the F
Fund, C Fund, S Fund, or I Fund.
(b) An interfund transfer request has no effect on deposits made
after the effective date of the interfund transfer request; subsequent
deposits will continue to be allocated among the investment funds in
accordance with the participant's contribution allocation made under
subpart B of this part.
(c) If an interfund transfer on a Form TSP-50 or Form TSP-U-50 is
found to be ineffective pursuant to Sec. 1601.34, the purported
transfer will have no effect. The TSP will provide the participant with
a written statement of the reason the form was rejected.
Subpart D--Contribution Allocations and Interfund Transfer Requests
12. Section 1601.32 is revised to read as follows:
Sec. 1601.32 Timing and posting dates.
(a) Posting dates. (1) A contribution allocation or an interfund
transfer entered into the TSP record keeping system by a participant
who uses the TSP Web site or the ThriftLine, or by a TSPSO participant
service representative at the participant's request, at or before 11
a.m. central time of any business day, will ordinarily be posted that
business day. A contribution allocation or an interfund transfer
request made on the TSP Web site, the ThriftLine, or with a TSPSO
participant service representative, after 11 a.m. central time of any
business day will ordinarily be posted on the next business day.
(2) A contribution allocation or an interfund transfer request made
on the TSP Web site or the ThriftLine on a non-business day will
ordinarily be posted on the following business day.
(3) A contribution allocation or an interfund transfer request made
on Form TSP-50 or Form TSP-U-50 will ordinarily be posted under the
rules in paragraph (a)(1) of this section, based on when the form is
entered into the TSP system by the TSP record keeper. Such forms are
ordinarily entered into the system within 24 hours of their receipt by
the TSP record keeper.
(4) In most cases, the share price(s) applied to an interfund
transfer request is the value of the shares on the date the relevant
transaction is posted. In some circumstances, such as error correction,
the share price(s) for an earlier date will be used.
(b) Limit. There is no limit on the number of contribution
allocations or interfund transfer requests that may be made by a
participant.
(c) Multiple contribution allocations or interfund transfer
requests. (1) If two or more contribution allocations or two or more
interfund transfer requests are received for a participant and would be
posted on the same day, the following rules will apply:
(i) If one or more of the contribution allocations or interfund
transfer requests are submitted through the Web site or the ThriftLine
and one or more are made on Form TSP-50 or Form TSP-U-50 and would be
posted on the same day, only the latest contribution allocation or
interfund transfer request made through the Web site or the ThriftLine
will be posted.
(ii) If one or more of the contribution allocations or interfund
transfer requests are made through the TSP Web site or the ThriftLine,
only the contribution allocation or interfund transfer request entered
at the latest time will be posted.
(iii) If the contribution allocations or interfund transfer
requests are submitted using Form TSP-50 or Form TSP-U-50, the forms
will be posted in the order they are received by the TSP record keeper.
(2) For purposes of determining the date and time of a contribution
allocation or an interfund transfer request in applying the rules of
this paragraph (c), the following rules apply:
(i) The date and time of a contribution allocation or interfund
transfer request made through the TSP Web site or the ThriftLine is the
date and time the participant confirms the percentages.
(ii) Central time is used for determining the date and time on
which a transaction is entered and confirmed through the TSP Web site
or the ThriftLine.
(d) Cancellation of contribution allocation or interfund transfer
request. (1) A contribution allocation or an interfund transfer request
may be cancelled through the TSP Web site, the ThriftLine, through
written correspondence, or by contacting a participant service
representative.
(2) A contribution allocation or an interfund transfer request may
be cancelled by entering the cancellation on the TSP Web site or the
ThriftLine only up to the deadline, described in paragraph (a) of this
section, that is applicable to the original request. If a change or
cancellation is received after the deadline, the original request will
be processed as scheduled. Any subsequent request will then be
processed in turn.
(3) A participant may also cancel a contribution allocation or an
interfund transfer request by submitting a letter to the TSP record
keeper that requests cancellation and meets the following requirements:
(i) The cancellation letter must be signed and dated and must
contain the participant's name, Social Security number, and date of
birth.
(ii) The cancellation for the pending transaction must be received
before the relevant transaction is processed.
(iii) The letter must state unambiguously the specific contribution
allocation or interfund transfer request it seeks to cancel.
(A) If it does not identify the specific contribution allocation or
interfund transfer request it seeks to cancel, the written cancellation
will apply to any pending contribution allocation or interfund transfer
request with a date (as determined under this paragraph (c)(3)) before
the date of the cancellation letter.
(B) If the date of a cancellation letter is the same as the date of
a pending contribution allocation or an interfund transfer request and
the request was made on Form TSP-50 or Form TSP-U-50, the form will be
cancelled.
(C) If the request was made on the TSP Web site or ThriftLine, it
will only be cancelled if the written cancellation specifies the date
of the TSP Web site or ThriftLine request to be cancelled.
(D) If there is no contribution allocation or interfund transfer
pending when the written cancellation is processed by the TSP record
keeper, the cancellation will have no effect. Cancellation letters will
not be held until a contribution allocation or interfund transfer
request is received.
13. Section 1601.34 is revised to read as follows:
Sec. 1601.34 Effectiveness of Form TSP-50 or Form TSP-U-50.
A Form TSP-50 or Form TSP-U-50 will not be effective if:
(a) It is not signed and dated or contains a future date, a date
more than one year before the TSP's receipt of the form, or an invalid
date.
(b) It is missing a Social Security number, date of birth, or the
participant's first or last name.
(c) The participant's date of birth does not match the information
in the TSP records.
(d) The contribution allocation or interfund transfer percentages
do not total 100%, or the percentages are not entered as whole numbers.
An error under this paragraph (d) will not invalidate the entire form,
but only that transaction for which the error occurred.
(e) Such other reasons as may be determined by the Executive
Director.
[[Page 42865]]
PART 1603--VESTING
14. The authority citation for part 1603 continues to read as
follows:
Authority: 5 U.S.C. 8432(g), 8432b(h)(1), 8474(b)(5) and (c)(1).
15. Section 1603.1 is revised to read as follows:
Sec. 1603.1 Definitions.
(a) Definitions generally applicable to the Thrift Savings Plan are
set forth at 5 CFR 1690.1.
(b) As used in this part:
Service means:
(1) Any non-military service that is creditable under either 5
U.S.C. chapter 83, subchapter III, or 5 U.S.C. 8411, provided, however,
that such service is to be determined without regard to any time
limitations, any deposit or redeposit requirements contained in those
statutory provisions after performing the service involved, or any
requirement that the individual give written notice of that
individual's desire to become subject to the retirement system
established by 5 U.S.C. chapters 83 or 84; or
(2) Any military service creditable under the provisions of 5
U.S.C. 8432b(h)(1) and the regulations at 5 CFR part 1620, subpart H.
Uniformed services means the Army, Navy, Air Force, Marine Corps,
Coast Guard, Public Health Service, and the National Oceanic and
Atmospheric Administration.
Vested means those amounts in an individual account which are
nonforfeitable.
Year of service means one full calendar year of service.
16. Section 1603.2 is amended by revising paragraph (a) to read as
follows:
Sec. 1603.2 Basic vesting rules.
(a) All amounts in a CSRS employee's or uniformed service member's
individual account are immediately vested.
* * * * *
PART 1604--UNIFORMED SERVICES ACCOUNTS
17. The authority citation for part 1604 is revised to read as
follows:
Authority: 5 U.S.C. 8440e, 8474(b)(5) and (c)(1).
18. Section 1604.4(a)(1) is revised to read as follows:
Sec. 1604.4 Contributions.
(a) * * *
(1) Temporary percentage limitations. Subject to paragraph (a)(2)
of this section, the maximum TSP regular employee contribution
(including combat zone contributions) a service member may make for
January through November 2002 is 7 percent of basic pay per pay period.
The maximum contribution will increase one percent in December of each
year until December 2005, after which the percentage of basic pay limit
will not apply and the maximum contribution will be limited only as
provided in paragraph (a)(2) of this section.
* * * * *
PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS
19. The authority citation for part 1605 is revised to read as
follows:
Authority: 5 U.S.C. 8351, 8432a, and 8474(b)(5) and (c)(1).
Subpart A--General
20. Section 1605.1 is revised to read as follows:
Sec. 1605.1 Definitions.
(a) Definitions generally applicable to the Thrift Savings Plan are
set forth at 5 CFR 1690.1.
(b) As used in this part:
``As of'' date means the date on which a TSP contribution or other
transaction entailing acquisition of investment fund shares should have
taken place. Employing agencies use this date on payment records to
report makeup or late contributions.
Attributable pay date ordinarily means the pay date of an erroneous
contribution for which a negative adjustment is being made or, in the
case of the uniformed services, the pay date of a contribution that is
being recharacterized from tax-deferred to tax-exempt, or vice versa.
However, if the erroneous contribution was a makeup or late
contribution, the attributable pay date is the ``as of'' date of the
erroneous makeup or late contribution.
Board error means any act or omission by the Board which is not in
accordance with applicable statutes, regulations, or the Board's
administrative procedures that are made available to employing agencies
and/or TSP participants.
Breakage means the loss incurred or the gain realized on makeup or
late contributions. It is the difference between the value of the
shares of the applicable investment fund(s) that would have been
purchased had the contribution been made on the ``as of'' date and the
value of the shares of the same investment fund(s) on the date the
contribution is posted to the account.
Dollar value as of August 31, 2002, applies to contributions that
are subject to breakage with an ``as of'' date on or before August 31,
2002, or a negative adjustment with an attributable pay date on or
before August 31, 2002, and means the amount of a contribution or
negative adjustment plus earnings on that amount from the ``as of''
date or attributable pay date through August 31, 2002, computed
pursuant to TSP procedures for allocating earnings that were in effect
for the relevant time period and based upon the historic monthly rates
of return for the applicable investment fund(s), without regard to any
interfund transfer occurring between the ``as of'' date or attributable
pay date and August 31, 2002.
Employing agency error means any act or omission by an employing
agency which is not in accordance with all applicable statutes,
regulations, or administrative procedures, including internal
procedures promulgated by the employing agency and TSP procedures
provided to employing agencies by the Board.
FERCCA correction means the correction of a retirement coverage
error pursuant to the Federal Erroneous Retirement Coverage Corrections
Act, title II, Public Law 106-265, 114 Stat. 770.
Late contributions means:
(1) Employee contributions that were timely deducted from a
participant's basic pay but were not timely reported to the TSP record
keeper for investment;
(2) Employee contributions that were timely reported to the TSP but
were not timely posted to the participant's account by the TSP because
the payment record on which they were submitted contained errors;
(3) Agency matching contributions attributable to employee
contributions referred to in paragraph (1) or (2) of this definition;
and
(4) Delayed agency automatic (1%) contributions.
Makeup contributions are employee contributions that should have
been deducted from a participant's basic pay or employer contributions
that should have been charged to an employing agency on an earlier
date, but were not deducted or charged and, consequently, are being
deducted or charged currently.
Negative adjustment means the removal of money from a participant's
TSP account by an employing agency.
Negative adjustment record means a data record submitted by an
employing agency to remove from a participant's TSP account money which
the agency had previously submitted in error.
Pay date means the date established by an employing agency for
payment of its employees or service members.
[[Page 42866]]
Payment record means a data record submitted by an employing agency
to report contributions or loan payments to a participant's TSP
account.
Record keeper error means any act or omission by the TSP record
keeper that is not in accordance with applicable statutes, regulations,
or administrative procedures made available to employing agencies and/
or TSP participants.
21. A new Sec. 1605.2 is added to Subpart A to read as follows:
Sec. 1605.2 Calculating, posting, and charging breakage.
(a) Breakage will be calculated on makeup agency contributions that
are reported on current payment records, and on makeup and late
contributions from all sources that are reported on late payment
records.
(b) Breakage will be calculated and posted as follows:
(1) The participant's contribution allocation for the ``as of''
date on the payment record will be determined as follows:
(i) If the ``as of'' date is after April 30, 2001, the TSP will use
the contribution allocation on file for the ``as of'' date.
(ii) If the ``as of'' date is before May 1, 2001, the TSP will
derive a contribution allocation from the investment of a contribution
made for that date. If no contribution was made for the ``as of'' date,
the TSP will derive a contribution allocation from the investment of
the last contribution made within the 45 days preceding that date. If
no contribution was made within this time, the derived contribution
allocation will be 100% G Fund.
(2) The TSP will determine the number of shares of the applicable
investment fund(s) that would have been purchased had the contribution
been made on time by dividing the amount of the contribution that would
have been made to each investment fund (using the contribution
allocation determined in paragraph (b)(1) of this section) by the
applicable share price. If the ``as of'' date is after August 31, 2002,
the TSP will determine the number of shares of each investment fund
that would have been purchased on the ``as of'' date. If the ``as of''
date is before September 1, 2002, the TSP will determine the number of
shares that the dollar value of the contribution as of August 31, 2002,
would have purchased on August 31, 2002.
(3) For each investment fund, the TSP will determine the value of
the number of shares that would have been purchased, as determined in
paragraph (b)(2) of this section, on the date the contributions are
posted to the account.
(4) The TSP will subtract the amount of the contributions that
would have been made to each investment fund on the ``as of'' date from
the value of the shares on the posting date, as determined in paragraph
(b)(3) of this section.
(5) The TSP will post the amount determined in paragraph (b)(4) of
this section (which may be positive or negative) and the associated
contribution to the participant's account in accordance with the
participant's contribution allocation in effect on the posting date
using the applicable share prices. If the participant had no
contribution allocation in effect on the posting date, the
contributions and breakage will be allocated to the G Fund.
(6) If the TSP posts multiple employer makeup contributions with
different ``as of'' dates for a participant on the same business day,
the amount of breakage charged to the employing agency or forfeited to
the TSP will be determined separately for each contribution, without
netting any gains or losses attributable to different ``as of'' dates.
If the TSP posts multiple employer makeup contributions with the same
``as of'' date for a participant on the same business day, gains and
losses from different sources of contributions or different investment
funds will not be netted against each other. Instead, breakage will be
determined separately for each investment fund by source of
contribution.
(7) Interfund transfers occurring between the ``as of'' date of the
makeup contribution and the date the contribution is posted will not be
considered in correcting an employing agency error.
(c) If the amount determined in paragraph (b)(4) of this section is
positive (i.e., the value of the shares that would have been purchased
is greater on the posting date than on the ``as of'' date), the
employing agency will be charged the difference between the
contribution and the amount posted to the account. If the amount
determined in paragraph (b)(4) of this section is negative (i.e., the
value of the shares that would have been purchased is less than on the
posting date), the difference between the contribution and the amount
posted to the account will be forfeited to the TSP and used to offset
administrative expenses.
Subpart B--Employing Agency Errors
22. Section 1605.11 is revised to read as follows:
Sec. 1605.11 Makeup of missed or insufficient contributions.
(a) Applicability. This section applies whenever, as the result of
an employing agency error, a participant does not receive all of the
TSP contributions to which he or she is entitled. This includes
situations in which an employing agency error prevents a participant
from making an election to contribute to his or her TSP account, in
which an employing agency fails to implement a contribution election
properly submitted by a participant, in which an employing agency fails
to make agency automatic (1%) contributions or agency matching
contributions that it is required to make, or in which an employing
agency otherwise erroneously contributes less to the TSP for a
participant's account than it should have. The corrections required by
this section must be made in accordance with this part and the
procedures provided to employing agencies by the Board in bulletins or
other guidance. It is the responsibility of the employing agency to
determine whether it has made an error that entitles a participant to
correction under this section.
(b) Employer makeup contributions. If an employing agency has
failed to make agency automatic (1%) contributions that are required
under 5 U.S.C. 8432(c)(1)(A), agency matching contributions that are
required under section 8432(c)(2), conversion contributions that are
required under section 8432(c)(3), or matching contributions that are
authorized under 37 U.S.C. 211(d), the following rules apply:
(1) The employing agency must promptly submit all missed
contributions to the TSP record keeper on behalf of the affected
participant. For each pay date involved, the employing agency must
submit a separate payment record showing the ``as of'' date for the
contributions.
(2) The TSP will calculate the breakage due to the participant and
post both the contributions and the associated breakage to the account
in accordance with Sec. 1605.2.
(c) Employee makeup contributions. Within 30 days of receiving
information from his or her employing agency indicating that the
employing agency acknowledges that an error has occurred which has
caused a lesser amount of employee contributions to be made to the
participant's account than should have been made, a participant may
elect to establish a schedule to make up the deficient contributions
through future payroll deductions. Employee makeup contributions can be
made in addition
[[Page 42867]]
to any TSP contributions that the participant is otherwise entitled to
make. The following rules apply to employee makeup contributions:
(1) The schedule of makeup contributions elected by the participant
must establish the dollar amount of the contributions to be made each
pay period over the duration of the schedule. The contribution amount
per pay period may vary during the course of the schedule, but the
amounts to be contributed must be established when the schedule is
created. The length of the schedule may not exceed four times the
number of pay periods over which the error occurred.
(2) At its discretion, an employing agency may set a ceiling on the
length of a schedule of employee makeup contributions which is less
than four times the number of pay periods over which the error
occurred. The ceiling may not, however, be less than twice the number
of pay periods over which the error occurred.
(3) The employing agency must implement the participant's schedule
of makeup contributions as soon as practicable.
(4) For each pay date involved, the employing agency must submit a
separate payment record showing the ``as of'' date for which the
employee contribution should have been made. An employee is not
eligible to make up contributions with an ``as of'' date occurring
during a period of six months following a financial hardship in-service
withdrawal, as provided in 5 CFR 1650.33. An employee may make up
contributions during a period of ineligibility due to a hardship
withdrawal as long as the ``as of'' date is for an earlier period.
(5) Employee makeup contributions will be invested in accordance
with the participant's current contribution allocation. The number of
shares of each investment fund that will be purchased will be
determined by dividing the amount of the makeup contributions by the
share price of the applicable investment fund(s) on the posting date.
(6) Employee makeup contributions will not be considered in
applying the maximum amount per pay period that a participant is
permitted to contribute to the TSP, but will be included for purposes
of applying the annual limit contained in section 402(g) of the
Internal Revenue Code (26 U.S.C. 402(g)(1)). For purposes of applying
the annual limit of section 402(g), employee makeup contributions will
be applied against the limit for the year of the ``as of'' date.
(i) Before establishing a schedule of employee makeup
contributions, the employing agency must review any schedule proposed
by the affected participant, as well as the participant's prior TSP
contributions, if any, to determine whether the makeup contributions,
when combined with prior contributions for the same year, would exceed
the annual contribution limit(s) contained in section 402(g) for the
year(s) with respect to which the contributions are being made.
(ii) The employing agency must not permit contributions that, when
combined with prior contributions, would exceed the applicable annual
contribution limit contained in section 402(g).
(7) A schedule of employee makeup contributions may be suspended if
a participant has insufficient net pay to permit the makeup
contributions. If this happens, the period of suspension should not be
counted against the maximum number of pay periods to which the
participant is entitled in order to complete the schedule of makeup
contributions.
(8) A participant may elect to terminate a schedule of employee
makeup contributions at any time, but a termination is irrevocable. A
participant may not elect to make partial payments under the schedule.
If a participant separates from Government service, the participant may
elect to accelerate the payment schedule by a lump sum contribution
from his or her final paycheck.
(9) At the same time that a participant makes up missed employee
contributions, the employing agency must make any agency matching
contributions that would have been made had the error not occurred.
Agency matching contributions must be submitted pursuant to the rules
set forth in paragraph (b) of this section. A participant may not
receive matching contributions associated with any employee
contributions that are not actually made up. If employee makeup
contributions are suspended in accordance with paragraph (c)(7) of this
section, the payment of agency matching contributions must also be
suspended.
(10) If a participant transfers to an employing agency different
from the one by which the participant was employed at the time of the
missed contributions, it remains the responsibility of the former
employing agency to determine whether employing agency error was
responsible for the missed contributions. If it is determined that such
an error has occurred, the current agency must take any necessary steps
to correct the error. The current agency may seek reimbursement from
the former agency of any amount that would have been paid by the former
agency had the error not occurred.
(11) Employee makeup contributions may be made only by payroll
deduction from basic pay or, for uniformed services participants, from
basic pay, incentive pay, or special pay, including bonuses.
Contributions by check, money order, cash, or other form of payment
directly from the participant to the TSP, or from the participant to
the employing agency for deposit to the TSP, are not permitted.
23. Section 1605.12 is amended by revising paragraphs (b)(1),(c),
(f)(1), and (f)(2) to read as follows:
Sec. 1605.12 Removal of erroneous contributions.
* * * * *
(b) * * *
(1) To remove money from a participant's account, the employing
agency must submit, for each attributable pay date involved, a negative
adjustment record stating the amount of the erroneous contribution
being removed, the attributable pay date with respect to which the
erroneous contribution was made, and the source(s) of the
contributions.
* * * * *
(c) Processing negative adjustments. A negative adjustment will be
allocated among investment funds in the same manner as the original
contribution. The current value of the contributions that the agency
seeks to remove by the negative adjustment will be calculated in
accordance with the following rules:
(1) If the attributable pay date for the erroneous contribution is
on or before August 31, 2002, the TSP will:
(i) For each source of contributions, determine the dollar value as
of August 31, 2002 (as defined in Sec. 1605.1(b)), of the amount of the
contributions to be removed from each investment fund;
(ii) For each source of contributions and each investment fund,
convert the dollar value determined in paragraph (c)(1)(i) of this
section to shares by dividing by $10.00; and
(iii) Multiply the price per share for the date the adjustment is
posted by the number of shares calculated in paragraph (c)(1)(ii) of
this section.
(2) If the attributable pay date of the negative adjustment is
after August 31, 2002, the TSP will:
(i) For each source and type of contributions and for each
investment fund, determine the number of shares that represents the
amount of the contribution to be removed from the investment fund based
upon the share price on the attributable pay date; and
[[Page 42868]]
(ii) Multiply the price per share on the date the adjustment is
posted by the number of shares calculated in paragraph (c)(2)(i) of
this section.
* * * * *
(f) * * *
(1) If multiple negative adjustments for the same attributable pay
date for a participant are posted on the same business day, the amount
removed from the participant's account and used to offset TSP
administrative expenses or returned to the employing agency will be
determined separately for each adjustment. Earnings and losses for
erroneous contributions made on different dates will not be netted
against each other. In addition, for negative adjustment for any
attributable pay date, gains and losses from different sources of
contributions or different investment funds will not be netted against
each other. Instead, each attributable pay date each source of
contributions and each investment fund will be treated separately for
purposes of these calculations;
(2) The amount computed by application of the rules in this section
will be removed from the participant's account pro rata from all
investment funds, by source, based on the allocation of the
participant's most recent account balance; and
* * * * *
24. Section 1605.13 is amended by removing paragraph (a)(4) and by
revising paragraphs (a)(3), (b)(3), and (d) to read as follows:
Sec. 1605.13 Back pay awards and other retroactive pay adjustments.
(a) * * *
(3) All makeup contributions under this paragraph (a) and
associated breakage will be invested according to the participant's
contribution allocation on the posting date. However, breakage will be
calculated using the G Fund share prices and, if applicable, rates of
return, unless the court or other tribunal with jurisdiction over the
back pay case orders otherwise.
(b) * * *
(3) All makeup contributions under this paragraph (b) and
associated breakage will be posted to the participant's account based
on the participant's contribution allocation on the posting date.
However breakage will be calculated using the participant's
contribution allocation on the ``as of'' date reported by the employing
agency.
* * * * *
(d) Prior withdrawal of TSP account. If a participant has withdrawn
his or her TSP account other than by purchasing an annuity, and the
separation from Government employment upon which the withdrawal was
based is reversed, resulting in reinstatement of the participant
without a break in service, the participant will have the option to
restore the amount withdrawn to his or her TSP account. The right to
restore the withdrawn funds will expire if notice is not provided by
the participant to the Board within 90 days of reinstatement. If the
participant returns the funds that were withdrawn, the number of shares
purchased will be determined by using the share price of the applicable
investment fund on the posting date. No breakage will be incurred on
any restored funds.
* * * * *
25. Section 1605.14 is amended by revising the section heading and
paragraph (b) to read as follows:
Sec. 1605.14 Misclassified retirement system coverage.
* * * * *
(b) If a FERS participant is misclassified by an employing agency
as a CSRS participant, when the misclassi-fication is corrected:
(1) The participant may not elect to have the contributions made
while classified as CSRS removed from his or her account;
(2) The participant may, under the rules of Sec. 1605.11, elect to
make up contributions that he or she would have been eligible to make
as a FERS participant during the period of misclassification;
(3) The employing agency must, under the rules of Sec. 1605.11,
make agency automatic (1%) contributions and agency matching
contributions on employee contributions that were made while the
participant was misclassified;
(4) If the retirement coverage correction is a FERCCA correction,
the employing agency must submit makeup employee contributions on late
payment records. The participant is entitled to breakage (or lost
earnings) on contributions from all three sources. Breakage (or lost
earnings) will be calculated pursuant to Sec. 1605.2. If the retirement
coverage correction is not a FERCCA correction, the employing agency
must submit makeup employee contributions on current payroll records;
in such cases, the employee is not entitled to breakage. Agency makeup
contributions may be submitted on either current or late payment
records; and
(5) If employee contributions were made up before the Office of
Personnel Management implemented its regulations on FERCCA correction,
and the correction is considered to be a FERCCA correction, an amount
to replicate TSP lost earnings will be calculated by the Office of
Personnel Management pursuant to its regulations and provided to the
employing agency for transmission to the TSP record keeper.
* * * * *
26. A new Sec. 1605.15 is added to read as follows:
Sec. 1605.15 Reporting and processing late contributions and late loan
payments.
(a) The employing agency must promptly submit late contributions to
the TSP record keeper on behalf of the affected participant on late
payment records as soon as the error is discovered. For each pay date
involved, the employing agency must submit a separate record showing
the ``as of'' date for the contributions. Breakage for both employee
and agency contributions will be calculated, posted, and charged to the
agency or forfeited to the TSP in accordance with Sec. 1605.2.
(b) If an employing agency deducts loan payments from a
participant's pay, but fails to submit those payments to the TSP for
the pay date for which they were deducted (or submits them in a manner
that prevents them from being timely credited to the participant's
account), the employing agency will be responsible for paying breakage
using the procedure described in Sec. 1605.2. The loan payment record
must contain the ``as of'' date for which the loan payment was
deducted.
(c) All contributions or loan payments on payment records contained
in a payroll submission received from an employing agency more than 2
days after the pay date associated with the payroll submission (as
reported on the appropriate journal voucher), will be subject to
breakage calculated, posted, and charged to the employing agency (or
forfeited to the TSP) in accordance with Sec. 1605.2. The employing
agency will be apprised of the breakage due for each record reported on
the late submission.
PART 1606--LOST EARNINGS ATTRIBUTABLE TO EMPLOYING AGENCY ERRORS
27. The authority citation for part 1606 continues to read as
follows:
Authority: 5 U.S.C. 8432a, 8474(b)(3) and (c)(1). Section 1606.5
also issued under Title II, Pub. L. 106-265, 114 Stat. 770.
Subpart A--General Provisions
28. Section 1606.1 is revised to read as follows:
[[Page 42869]]
Sec. 1606.1 Definitions.
(a) Definitions generally applicable to the Thrift Savings Plan are
set forth at 5 CFR 1690.1.
(b) Definitions generally applicable to employing agency errors and
their correction are set forth at 5 CFR 1605.1.
(c) As used in this part:
Lost earnings record means a data record containing information
enabling the TSP system to compute lost earnings.
29. Section 1606.2 is revised to read as follows:
Sec. 1606.2 Purpose.
(a) With the implementation of the TSP's daily valued record
keeping system, losses suffered by participants arising out of
employing agency errors will be corrected by calculating and posting
breakage to an affected participant's account. Breakage will be
calculated as described in 5 CFR 1605.2. However, in some cases, an
employing agency may have submitted contributions subject to lost
earnings before implementation of the daily valued record keeping
system. As a result, a transition period until March 31, 2003, is
provided to enable employing agencies to submit lost earnings records
associated with these contributions.
(b) After March 31, 2003, all makeup and late contributions subject
to breakage should be reported as described in 5 CFR part 1605 and the
use of lost earning records will be discontinued. Thus, only
contributions and loan payments subject to lost earnings which were
posted to participants' account before September 1, 2002, and for which
lost earnings records are not submitted by August 31, 2002, are covered
by this part. All payments posted after August 31, 2002, are covered by
5 CFR part 1605.
30. Section 1606.4 is amended by revising paragraph (c) to read as
follows:
Sec. 1606.4 Applicability.
* * * * *
(c) As explained in Sec. 1606.2, this part applies to errors that
occurred before September 1, 2002.
* * * * *
Subpart B--Lost Earnings Attributable to Delayed or Erroneous
Contributions
31. Section 1606.5 is amended by revising paragraph (a)(4) to read
as follows:
Sec. 1606.5 Failure to timely make or deduct TSP contributions when
participant received pay.
(a) * * *
(4) The lost earnings will be posted to the participant's account
based on the contribution allocation in effect on the posting date.
* * * * *
Secs. 1606.7 and 1606.8 [Removed]
32. Sections 1606.7 and 1606.8 are removed.
Subpart C--Lost Earnings Not Attributable to Delayed or Erroneous
Contributions
33. Section 1606.9 is amended by revising paragraphs (a)(2) and
(a)(3) to read as follows:
Sec. 1606.9 Loan allotments.
(a) * * *
(2) The TSP record keeper will compute lost earnings on the late
loan allotment using the contribution allocation on file for the ``as
of'' date of the payment; and
(3) The lost earnings will be posted to the participant's account
based on the participant's contribution allocation at the time the lost
earnings are posted.
* * * * *
Subpart E--Processing Lost Earnings Records
34. Section 1606.13 is revised to read as follows:
Sec. 1606.13 Calculation and crediting of lost earnings.
(a) Lost earnings records submitted pursuant to this part will be
processed daily by the TSP record keeper.
(b) In calculating lost earnings attributable to a lost earnings
record, earnings and losses for different sources of contributions or
investment funds within a source will not be offset against each other.
(c) Notwithstanding any other provision of this part, where the net
lost earnings computed in accordance with this part on any lost
earnings record are less than zero within a source of contributions,
the employing agency shall not be credited with respect to that source
of contributions. The amount of the negative lost earnings shall be
removed from the participant's account and applied against TSP
administrative expenses.
Subpart F--[Removed]
35. Subpart F of part 1606 is removed.
36. Part 1640 is revised to read as follows:
PART 1640--PERIODIC PARTICIPANT STATEMENTS
Sec.
1640.1 Definitions.
1640.2 Information regarding account.
1640.3 Statement of individual account.
1640.4 Account transactions.
1640.5 Investment fund information.
1640.6 Methods of providing information.
Authority: 5 U.S.C. 8439(c)(1) and (c)(2), 5 U.S.C. 8474(b)(5)
and (c)(1).
Sec. 1640.1 Definitions.
Definitions generally applicable to the Thrift Savings Plan are set
forth at 5 CFR 1690.1.
Sec. 1640.2 Information regarding account.
The Board will provide to each participant four (4) times each
calendar year the information described in Secs. 1640.3, 1640.4, and
1640.5. Plan participants can obtain account balance information on a
more frequent basis from the TSP Web site and the ThriftLine.
Sec. 1640.3 Statement of individual account.
In the quarterly statements, the Board will furnish each
participant with the following information concerning the participant's
individual account:
(a) Name, Social Security number, and date of birth under which the
account is established;
(b) Retirement system coverage and employment status of the
participant, as provided by the employing agency;
(c) Statement whether the participant has a beneficiary designation
on file with the TSP record keeper;
(d) Contribution allocation that is current at the end of the
statement period;
(e) Beginning and ending dates of the period covered by the
statement;
(f) The following information for and, as of the close of business
on the ending date of, the period covered by the statement:
(1) The total account balance and tax-exempt balance, if
applicable;
(2) The account balance and activity for each source of
contributions;
(3) The account balance and activity in each of the investment
funds, including the number of shares, the share prices, and the dollar
amounts; and
(4) Loan information and activity, if applicable;
(g) Any other information concerning the account that the Board
determines should be included in the statement.
Sec. 1640.4 Account transactions.
(a) Where relevant, the following transactions will be reported in
each individual account statement:
(1) Contributions;
(2) Withdrawals;
(3) Forfeitures;
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(4) Loan disbursements and repayments;
(5) Transfers among investment funds;
(6) Adjustments to prior transactions;
(7) Transfers or rollovers from eligible employer plans and
traditional IRAs; and
(8) Any other transaction that the Executive Director determines
will affect the status of the individual account.
(b) Where relevant, the statement will contain the following
information concerning each transaction identified in paragraph (a) of
this section:
(1) Type of transaction;
(2) Investment funds affected;
(3) Date the transaction was posted and, where relevant, any
earlier date on which the transaction should have been posted or from
which the calculation of the amount of the transaction was derived;
(4) Source of the contributions affected by the transaction;
(5) Amount of the transaction (in dollars and in shares);
(6) The share price(s) at which the transaction was posted; and
(7) Any other information the Executive Director deems relevant.
Sec. 1640.5 Investment fund information.
Each open season, the Board will furnish each participant a
statement concerning each of the investment funds. This statement will
contain the following information concerning each investment fund:
(a) A summary description of the type of investments made by the
fund, written in a manner that will allow the participant to make an
informed decision; and
(b) The performance history of the type of investments made by the
fund, covering the five-year period preceding the date of the
evaluation.
Sec. 1640.6 Methods of providing information.
(a) Individual account statement. The information concerning each
participant's individual account described in Secs. 1640.3 and 1640.4
will be sent to the participant at the participant's address of record
in the TSP system by first class mail, unless otherwise elected under
paragraph (b) of this section. It is the participant's responsibility
to provide his or her current address to his or her agency or, in the
case of a separated participant, to the TSP record keeper. For employed
participants, the employing agency must provide the current address to
the TSP record keeper.
(b) Individual account statements available from the TSP Web site.
As an alternative to receiving an account statement by mail as provided
in paragraph (a) of this section, participants may elect to receive
their individual account statements by accessing the TSP Web site.
Participants who elect to receive their statements from the TSP Web
site will not receive a statement by mail.
(c) Investment information. The investment information described in
Sec. 1640.5 will be furnished to each participant by:
(1) Mailing the information to the participant by the method
described in paragraph (a) of this section;
(2) Making the information available to the participant on the TSP
Web site as described in paragraph (b) of this section; or
(3) Including the information in material published by the Board
and distributed in a manner reasonably designed to reach the
participant. This includes distributing the material through the
participant's employing agency, service, or, in the case of a separated
employee, through the TSP record keeper.
37. Part 1645 is revised to read as follows:
PART 1645--CALCULATION OF SHARE PRICES
Sec.
1645.1 Definitions.
1645.2 Posting of transactions.
1645.3 Calculation of total net earnings for each investment fund.
1645.4 Administrative expenses attributable to each investment
fund.
1645.5 Calculation of share prices.
1645.6 Basis for calculation of share prices.
Authority: 5 U.S.C. 8439(a)(3) and 8474.
Sec. 1645.1 Definitions.
(a) Definitions generally applicable to the Thrift Savings Plan are
set forth at 5 CFR 1690.1.
(b) As used in this part:
Accrued means that income is accounted for when earned and expenses
are accounted for when incurred.
Administrative expenses means expenses described in 5 U.S.C.
8437(c)(3).
Basis means the number of shares of an investment fund upon which
the calculation of a share price is based.
Business day means any calendar day for which share prices are
calculated.
Forfeitures means amounts forfeited to the TSP pursuant to 5 U.S.C.
8432(g)(2) and other non-statutory forfeited amounts, net of restored
forfeited amounts.
Sec. 1645.2 Posting of transactions.
Contributions, loan payments, loan disbursements, withdrawals,
interfund transfers, and other transactions will be posted in dollars
and in shares by source and by investment fund to the appropriate
individual account by the TSP record keeper, using the share price for
the date the transaction is posted.
Sec. 1645.3 Calculation of total net earnings for each investment
fund.
(a) Each business day net earnings will be calculated separately
for each investment fund.
(b) Net earnings for each investment fund will equal:
(1) The sum of the following items, if any, accrued since the last
business day:
(i) Interest on money of that investment fund which is invested in
the Government Securities Investment Fund;
(ii) Interest on other short-term investments of the investment
fund;
(iii) Other income (such as dividends, interest, or securities
lending income) on investments of the investment fund; and
(iv) Capital gains or losses on investments of the investment fund,
net of transaction costs.
(2) Minus the accrued administrative expenses of the investment
fund, determined in accordance with Sec. 1645.4.
(c) The net earnings for each investment fund determined in
accordance with paragraph (b) of this section will be added to the
residual net earnings for that investment fund from the previous
business day, as described in Sec. 1645.5(b), to produce the total net
earnings. The total net earnings will be used to calculate the share
price for that business day.
Sec. 1645.4 Administrative expenses attributable to each investment
fund.
A portion of the administrative expenses accrued during each
business day will be charged to each investment fund. An investment
fund's respective portion of administrative expenses will be determined
as follows:
(a) Accrued administrative expenses (other than those described in
paragraph (b) of this section) will be reduced by accrued forfeitures
and accrued earnings on forfeitures, abandoned accounts, and unapplied
deposits;
(b) Investment management fees and other accrued administrative
expenses attributable only to the F Fund, C Fund, S Fund, or I Fund
will be charged solely to the F Fund, C Fund, S Fund, or I Fund,
respectively;
(c) The amount of accrued administrative expenses not covered by
forfeitures under paragraph (a) of this section, and not described in
paragraph (b) of this section, will be charged on a pro rata basis to
all investment funds,
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based on the respective investment fund balances on the last business
day of the prior month end.
Sec. 1645.5 Calculation of share prices.
(a) Calculation of share price. The shares of each investment fund
will have an initial value of $10.00. The share price for each
investment fund for each business day will apply to all sources of
contributions for that investment fund. The total net earnings (as
computed under Sec. 1645.3) for each investment fund will be divided by
the total fund basis (as computed under Sec. 1645.6) for that
investment fund. The resulting number, computed to ten decimal places,
represents the incremental change for the current business day in the
value of that investment fund from the last business day. The share
price for that investment fund for the current business day is the sum
of the incremental change in the share price for the current business
day plus the share price for the prior business day, truncated to two
decimal places.
(b) Residual net earnings. When the total net earnings for each
business day for each investment fund are divided by the total fund
basis in that investment fund, there will be residual net earnings
attributable to the truncation described in paragraph (a) of this
section that will not be included in the incremental change in the
share price of the investment fund for that business day. The residual
net earnings that are not included in the incremental share price for
the investment fund will be added to the earnings for that investment
fund on the next business day.
Sec. 1645.6 Basis for calculation of share prices.
The total fund basis for each investment fund will be the sum of
the number of shares in all individual accounts from all sources of
contributions in that investment fund as of the opening of business on
each business day.
38. Part 1650 is revised to read as follows:
PART 1650--METHODS OF WITHDRAWING FUNDS FROM THE THRIFT SAVINGS
PLAN
Subpart A--General
Sec.
1650.1 Definitions.
1650.2 Eligibility for a TSP withdrawal.
1650.3 Frozen accounts.
1650.4 Certification of truthfulness.
Subpart B--Post-Employment Withdrawals
1650.11 Withdrawal elections.
1650.12 Single payment.
1650.13 Monthly payments.
1650.14 Annuities.
1650.15 Abandonment of inactive accounts.
1650.16 Required withdrawal date.
1650.17 Changes and cancellation of withdrawal request.
Subpart C--Procedures for Post-Employment Withdrawals
1650.21 Information provided by employing agency.
1650.22 Accounts of $200 or more.
1650.23 Accounts of less than $200.
1650.24 How to obtain a post-employment withdrawal.
1650.25 Taxes related to post-employment withdrawals.
Subpart D--In-Service Withdrawals
1650.31 Age-based withdrawals.
1650.32 Financial hardship withdrawals.
1650.33 Contributing to the TSP after an in-service withdrawal.
1650.34 Uniqueness of loans and withdrawals.
Subpart E--Procedures for In-Service Withdrawals
1650.41 How to obtain an age-based withdrawal.
1650.42 How to obtain a financial hardship withdrawal.
1650.43 Taxes related to in-service withdrawals.
Subpart F--[Reserved]
Subpart G--Spousal Rights
1650.61 Spousal rights applicable to post-employment withdrawals.
1650.62 Spousal rights applicable to in-service withdrawals.
1650.63 Executive Director's exception to the spousal notification
requirement.
1650.64 Executive Director's exception to the spousal consent
requirement.
Authority: 5 U.S.C. 8351, 8433, 8434, 8435, 8474(b)(5), and
8474(c)(1).
Subpart A--General
Sec. 1650.1 Definitions.
(a) Definitions generally applicable to the Thrift Savings Plan are
set forth at 5 CFR 1690.1.
(b) As used in this part:
Eligible employer plan means a plan qualified under I.R.C. section
401(a) (26 U.S.C. 401(a)), including a section 401(k) plan, profit-
sharing plan, defined benefit plan, stock bonus plan, and money
purchase plan; an annuity plan described in I.R.C. section 403(a) (26
U.S.C. 403(a)); an annuity contract described in I.R.C. section 403(b)
(26 U.S.C. 403(b)); and an eligible deferred compensation plan
described in I.R.C. section 457(b) (26 U.S.C. 457(b)) which is
maintained by an eligible employer described in I.R.C. section
457(e)(1)(A) (26 U.S.C. 457(e)(1)(A)).
In-service withdrawal means an age-based or financial hardship
withdrawal from the TSP that may be available to a participant who has
not yet separated from Government service.
Post-employment withdrawal means a withdrawal from the TSP that is
available to a participant who is separated from Government service.
Reimbursement means a payment made to or on behalf of a participant
by any person or entity to cover the cost of an extraordinary expense
described in Sec. 1650.32(b)(2).
Traditional IRA means an individual retirement account described in
I.R.C. section 408(a) (26 U.S.C. 408(a)) and an individual retirement
annuity described in I.R.C. section 408(b) (26 U.S.C. 408(b)) (other
than an endowment contract).
Sec. 1650.2 Eligibility for a TSP withdrawal.
(a) A participant who is separated from Government service can
elect to withdraw a portion of his or her account balance in a single
payment or the entire account balance by one or a combination of the
withdrawal methods described in subpart B of this part.
(b) A post-employment withdrawal will not be paid unless TSP
records indicate that the participant is separated from Government
service. Upon receipt of information from an employing agency that a
participant is no longer separated, the TSP will cancel a post-
employment withdrawal election.
(c) A participant cannot make a post-employment withdrawal until
any outstanding TSP loan has either been repaid in full or declared to
be a taxable distribution. An outstanding TSP loan will not affect a
participant's eligibility for an in-service withdrawal.
(d) A separated participant who is reemployed in a position in
which he or she is eligible to participate in the TSP is subject to the
following rules:
(1) A participant who is reemployed in a TSP-eligible position on
or before the 31st full calendar day after separation is not eligible
to withdraw his or her TSP account in accordance with subpart B of this
part.
(2) A participant who is reemployed in a TSP-eligible position more
than 31 full calendar days after separation and who made a post-
employment withdrawal while separated may not withdraw any remaining
portion of his or her account balance in accordance with subpart B of
this part until he or she again separates from Government service.
(e) A participant who has not separated from Government service may
be eligible to withdraw all or a portion of his or her account in
accordance with subparts D and E of this part.
(f) A participant can elect to have any portion of a single or
monthly payment
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that is not transferred to an eligible employer plan or traditional IRA
deposited directly, by electronic funds transfer, into a savings or
checking account at a financial institution in the United States.
(g) If a participant has a civilian TSP account and a uniformed
services TSP account, the rules in this part apply to each account
separately. For example, the participant is eligible to take one age-
based in-service withdrawal from each account.
Sec. 1650.3 Frozen accounts.
(a) All withdrawals from the TSP are subject to the rules relating
to spousal rights (found in subpart G of this part) and to domestic
relations orders, alimony and child support legal process, and child
abuse enforcement orders (found in 5 CFR part 1653).
(b) A participant may not withdraw any portion of his or her
account balance if the account is frozen due to a pending retirement
benefits court order, an alimony or child support enforcement order, or
a child abuse enforcement order, or because a freeze has been placed on
the account by the TSP for another reason.
Sec. 1650.4 Certification of truthfulness.
(a) By signing a TSP withdrawal form, electronically or on paper,
the participant certifies, under penalty of perjury, that all
information provided to the TSP during the withdrawal process is true
and complete, including statements concerning the participant's marital
status and, where applicable, the spouse's address at the time the
application is filed or the current spouse's consent to the withdrawal.
(b) If the Board receives a written allegation from the spouse that
the participant may have misrepresented his or her marital status or
the spouse's address (in the case of a CSRS participant), or that the
signature of the spouse of a FERS participant or uniformed services
member was forged, the Board will submit the information or document in
question to the spouse and request that he or she state in writing that
the information is false or that the spouse's signature was forged. In
the event of an alleged forgery, the Board will also request the spouse
to provide at least three samples of his or her signature.
(c) If the spouse affirms the allegation, the Board will conduct an
investigation. If, during its investigation, the Board finds evidence
to suggest that the participant misrepresented his or her marital
status or spouse's address (in the case of a CSRS participant), or
submitted the withdrawal form with a forged signature, the Board will
refer the case to the Department of Justice for criminal prosecution
and, if the participant is still employed, to the Inspector General or
other appropriate authority in the participant's employing agency for
administrative action.
Subpart B--Post-Employment Withdrawals
Sec. 1650.11 Withdrawal elections.
(a) Subject to the restrictions in this subpart, participants may
elect to withdraw all or a portion of their TSP accounts in a single
payment, a series of monthly payments, a life annuity, or any
combination of these options.
(b) If a participant's account balance is less than $5.00 when he
or she separates from Government service, the balance will
automatically be forfeited to the TSP. The participant can reclaim the
money by writing to the TSP record keeper and requesting the amount
that was forfeited; however, TSP investment earnings will not be
credited to the account after the date of the forfeiture.
Sec. 1650.12 Single payment.
(a) Partial withdrawal. A participant can elect to withdraw a
portion of his or her account balance in a single payment and leave the
rest in the TSP until a later date, subject to Sec. 1650.16 and the
following requirements:
(1) The participant is eligible for a partial withdrawal only if he
or she did not take an age-based in-service withdrawal from that
account.
(2) The participant may not elect a partial withdrawal of less than
$1,000. No disbursement will be made if, at the time of payment, the
account balance is less than $1,000.
(3) Only one partial withdrawal is permitted.
(b) Full withdrawal. A participant can elect to withdraw his or her
entire account balance in a single payment.
Sec. 1650.13 Monthly payments.
(a) A participant electing a full post-employment withdrawal (i.e.,
a withdrawal of his or her entire account) can elect to withdraw all or
a portion of the account balance in a series of substantially equal
monthly payments, to be paid in one of the following manners:
(1) A specific dollar amount. The amount elected must be at least
$25 per month; if the amount elected is less than $25 per month, the
request will be rejected. Payments will be made in the amount requested
each month until the account balance is expended.
(2) A monthly payment amount calculated based on life expectancy.
Payments based on life expectancy are determined using the factors set
forth in Internal Revenue Service life expectancy tables set forth at
26 CFR 1.401(a)(9)-9, Q&A 1 and 2. The monthly payment amount is
calculated by dividing the account balance by the factor from the IRS
life expectancy tables based upon the participant's age as of his or
her birthday in the year payments are to begin. This amount is then
divided by 12 to yield the monthly payment amount. In subsequent years,
the monthly payment amount is recalculated each January by dividing the
prior December 31 account balance by the factor in the IRS life
expectancy tables based upon the participant's age as of his or her
birthday in the year payments will be made. There is no minimum amount
for a monthly payment calculated based on this method.
(b) A participant receiving monthly payments calculated based upon
life expectancy can make one election, during a period to be determined
by the Executive Director, to change to a fixed monthly payment.
Alternatively, the participant can change the amount of his or her
fixed payments annually. A participant who is receiving monthly
payments based on a fixed dollar amount, however, cannot, elect to
change to an amount calculated based on life expectancy.
(c) A participant receiving monthly payments, regardless of the
calculation method, can elect at any time to receive the remainder of
his or her account balance in a final single payment.
(d) The TSP will ensure that the annual total monthly payments
satisfy any applicable minimum distribution requirement of the Internal
Revenue Code by making a supplemental payment in December of the year
in which a minimum distribution is required.
(e) A participant receiving monthly payments may change the
investment of his or her account balance among the TSP investment funds
as provided in 5 CFR part 1601.
(f) Participants who elect to withdraw their account balances in a
series of monthly payments cannot transfer or roll over money from a
traditional IRA or eligible employer plan into their TSP accounts.
Participants who have both a civilian TSP account and a uniformed
services TSP account cannot combine the two accounts if they are
already receiving monthly payments from one of the accounts.
Sec. 1650.14 Annuities.
(a) A participant electing a full post-employment withdrawal can
use all or
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a portion of his or her account balance to purchase a life annuity. The
portion of the participant's account balance elected and available for
the annuity purchase must be at least $3,500. The TSP will purchase the
annuity from the TSP's annuity vendor using the participant's entire
account balance or the portion specified, unless an amount is necessary
to satisfy any applicable minimum distribution requirement of the
Internal Revenue Code. In the event that a minimum distribution is
required before the date of the first annuity payment, the TSP will
compute that amount and pay it directly to the participant.
(b) An annuity will provide a payment for life to the participant
and, if applicable, to the participant's survivor, in accordance with
the type of annuity chosen. The first annuity payment will be made by
the TSP annuity vendor approximately 30 days after the TSP purchases
the annuity.
(c) The amount of an annuity payment will depend on the type of
annuity chosen, the participant's age when the annuity is purchased
(and the age of the joint annuitant, if applicable), the amount used to
purchase the annuity, and the interest rate available when the annuity
is purchased.
(d) Participants may choose among the following types of annuities:
(1) A single life annuity with level payments. This annuity
provides monthly payments to the participant as long as the participant
lives. The amount of the monthly payment remains constant.
(2) A joint life annuity for the participant and spouse with level
payments. This annuity provides monthly payments to the participant, as
long as both the participant and spouse are alive, and monthly payments
to the survivor, as long as the survivor is alive. The amount of the
monthly payment remains constant, although the amount received will
depend on the type of survivor benefit elected.
(3) A joint life annuity for the participant and another person
with level payments. This annuity provides monthly payments to the
participant as long as both the participant and the joint annuitant are
alive, and monthly payments to the survivor as long as the survivor is
alive. The amount of the monthly payment remains constant. The joint
annuitant must be either a former spouse or a person who has an
insurable interest in the participant.
(i) A person has an ``insurable interest in the participant'' if
the person is financially dependent on the participant and could
reasonably expect to derive financial benefit from the participant's
continued life.
(ii) A relative (either blood or adopted, but not by marriage) who
is closer than a first cousin is presumed to have an insurable interest
in the participant.
(iii) A participant can establish that a person not described in
paragraph (d)(4)(ii) of this section has an insurable interest in him
or her by submitting, with the annuity request, an affidavit from a
person other than the participant or the joint annuitant that
demonstrates that the designated joint annuitant has an insurable
interest in the participant (as described in paragraph (d)(4)(i) of
this section).
(4) Either a single life or joint (with spouse) life annuity with
increasing payments. This annuity provides monthly payments to the
participant only, or to the participant and spouse, as applicable. The
monthly payments are adjusted once each year on the anniversary of the
first payment, based on the Federal Bureau of Labor Statistics Consumer
Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Each
year, the percentage change in the monthly unadjusted CPI-W index for
July, August, and September over the monthly unadjusted CPI-W index for
July, August, and September of the prior year is calculated. The
following calendar year, the amount of the monthly payment is adjusted
by the lesser of 3% or the percentage increase in the CPI-W, if any. In
no case will the amount of the monthly payment be decreased based on
the CPI-W. If the participant chooses a joint life annuity, the annual
increase also applies to benefits received by the survivor.
(e) A participant who chooses a joint life annuity (with either a
spouse, a former spouse, or a person with an insurable interest) must
choose either a 50 percent or a 100 percent survivor benefit. The
survivor benefit applies when either the participant or the joint
annuitant dies.
(1) A 50 percent survivor benefit provides a monthly payment to the
survivor that is 50 percent of the amount of the payment that is made
when both the participant and the joint annuitant are alive.
(2) A 100 percent survivor benefit provides a monthly payment to
the survivor which is equal to the amount of the payment that is made
when both the participant and the joint annuitant are alive.
(3) Either the 50 percent or the 100 percent survivor benefit may
be combined with any joint life annuity option. However, the 100
percent survivor benefit can only be combined with a joint annuity with
a person other than the spouse (or a former spouse, if required by a
retirement benefits court order) if the joint annuitant is not more
than 10 years younger than the participant.
(f) The following features are mutually exclusive, but can be
combined with certain types of annuities, as |
