[Federal Register Volume 66, Number 193 (Thursday, October 4, 2001)]
[Rules and Regulations]
[Pages 50712-50717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24776]
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Part II
Federal Retirement Thrift Board
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5 CFR Part 1604
Uniformed Services Accounts; Final Rule
Federal Register / Vol. 66 , No. 193 / Thursday, October 4, 2001 /
Rules and Regulations
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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1604
Uniformed Services Accounts
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Final rule.
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SUMMARY: The Executive Director of the Federal Retirement Thrift
Investment Board (Board) is adding regulations explaining the rules
under which members of the uniformed services can participate in the
Thrift Savings Plan (TSP).
EFFECTIVE DATE: October 9, 2001.
FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest on (202) 942-1661.
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 8401-79.
The TSP is a tax-deferred retirement savings plan for Federal employees
which is similar to cash or deferred arrangements established under
section 401(k) of the Internal Revenue Code (26 U.S.C. 401(k)).
The National Defense Authorization Act for Fiscal Year 2000, Public
Law 106-65, 113 Stat. 512, as amended by the National Defense
Authorization Act for Fiscal Year 2001, Public Law 106-398, 114 Stat.
1654, extended the opportunity to participate in the TSP to uniformed
services members. The uniformed services include the Army, Navy, Air
Force, Marine Corps, Coast Guard, Public Health Service, and the
National Oceanic and Atmospheric Administration (NOAA). Therefore,
beginning on October 9, 2001, uniformed services members can elect to
contribute to the TSP, with contributions to commence in January 2002.
Generally, uniformed services members are covered by the TSP
regulations found at 5 CFR chapter VI. However, they will contribute to
the TSP under rules that differ substantially from those that apply to
civilian accounts; this rule supplements TSP regulations to explain
those differences.
On May 1, 2001, the Board published a proposed rule in the Federal
Register (66 FR 21693). After that publication date, the Internal
Revenue Code (I.R.C.) was amended by the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA), Public Law 107-16, 115 Stat. 38.
Some of those amendments affect the TSP, and this final rule reflects
those changes. This final rule also makes several changes to the
proposed rule for the purpose of clarification and to address comments
submitted to the TSP from a Federal agency. With those changes, which
are described below, the Board is adopting the proposed rule as final.
Internal Revenue Code Provisions
Under 26 U.S.C. 401(a)(31), certain distributions from the TSP can
be transferred directly to an Individual Retirement Account (IRA) or
another ``eligible retirement plan'' as defined in the I.R.C. at 26
U.S.C. 402(c)(8)(B). The EGTRRA amended the definition of eligible
retirement plan for tax years beginning in 2002 by adding two types of
retirement plans into which TSP funds can be transferred, an annuity
contract described in 26 U.S.C. 403(b) and an eligible deferred
compensation plan established under 26 U.S.C. 457(b). See EGTRRA,
sections 641(a)(1)(A), (a)(2)(A), and (b), 115 Stat. 118-20, to be
codified at 26 U.S.C. 457(e)(16), and 402(c)(8)(B)(v)-(vi),
respectively. (Generally, a section 403(b) annuity is purchased for an
employee of a tax exempt organization or public school; a section 457
plan is a deferred compensation plan for a state or local government or
tax-exempt organization.) The final rule thus contains a new definition
of ``eligible retirement plan'' at Sec. 1604.2 which incorporates those
changes made to the Internal Revenue Code.
Proposed Sec. 1604.4(a)(2)(i) explains that TSP contributions are
subject to the I.R.C. elective deferral limit found at 26 U.S.C.
402(g). Final Sec. 1604.4(a)(2)(i) describes the new elective deferral
limit for tax years beginning in 2002, which was established by section
611(d) of the EGTRRA, 115 Stat. at 97-8, to be codified at 26 U.S.C.
402(g)(1) and (g)(5).
Proposed Sec. 1604.4(a)(2)(ii) discusses 26 U.S.C. 457, which could
have affected members of the uniformed services contributing to both
the TSP and to a section 457 plan by limiting the total dollar amount
of their contributions to both plans to $8,500. The final rule deletes
proposed Sec. 1604.4(a)(2)(ii) because the EGTRRA repealed the
provision in section 457 which linked TSP contribution to the section
457 contribution limit. See EGTRRA, section 615, 115 Stat. 102, to be
codified at 26 U.S.C. 457(c).
Proposed Sec. 1604.4(a)(2)(iii) explains that 26 U.S.C. 415 limits
the amount that a participant can contribute to the TSP and to other
Federal civilian retirement systems. Effective for tax year 2002, the
EGTRRA raised those contribution limits. See sections 611(b)(2),
632(a)(1), 115 Stat. at 97, 113, to be codified at 26 U.S.C. 415(c)(1).
Therefore, proposed Sec. 1604.4(a)(2)(iii) was rewritten for the final
rule to describe the new limit; it was also renumbered, replacing the
deleted Sec. 1604.4(a)(2)(ii).
Proposed Secs. 1604.7(c), 1604.8(c) and 1604.9(c) state that the
TSP will not transfer combat zone contributions (as defined in
Sec. 1604.2) to an IRA or other eligible retirement plan. Those
sections are based on 26 U.S.C. 402(c)(2), which only permits the
transfer of sums that are included in gross income (combat zone
contributions are not included in gross income). However, effective
January 1, 2002, amendments to section 402(c)(2) will permit IRAs and
other eligible retirement plans to accept after-tax contributions (if
they choose to do so), and thus will permit the transfer of TSP combat
zone contributions if the transferee IRA or other eligible retirement
plan will accept non-taxable monies. See EGTRRA, section 643(a), 115
Stat. at 122, to be codified at 26 U.S.C. 402(c)(2). Therefore, final
Secs. 1604.7(c), 1604.8(c) and 1604.9(c) state that combat zone
contributions can be transferred to an IRA or other eligible retirement
plan if the receiving trustee will accept such funds.
Under current 26 U.S.C. 412(a)(9), the surviving spouse of a TSP
participant can only transfer a TSP death benefit to an IRA (to the
exclusion of other eligible retirement plans), and proposed
Sec. 1604.8(c) explains that limitation. The EGTRRA eliminated this
limitation for tax years beginning in 2002, see section 641(d), 115
Stat. at 120, to be codified at 26 U.S.C. 402(c)(9). Therefore, final
Secs. 1604.8(c) and (d) explain that a surviving spouse can transfer a
TSP death benefit to either an IRA or to another eligible retirement
plan, including the TSP.
Definitions
The definition of ``combat zone contributions'' found in proposed
Sec. 1604.2 implies that only members of the armed forces can earn
them. However, all members of the uniformed lservices may earn combat
zone contributions; therefore, the implication to the contrary is
removed from the final rule. The final rule also contains a more
accurate definition of ``separation from service.''
Contributions
Proposed Sec. 1604.3(e) explains that TSP contributions can be made
from basic pay, incentive pay, and special pay (including bonuses).
However, the proposed section does not explicitly
[[Page 50713]]
state that a member of the uniformed services must be making TSP
contributions from basic pay in order to contribute to the TSP from
incentive pay or special pay. Therefore, a sentence was added to final
Sec. 1604.3(e) to state this rule explicitly.
Court Orders
A TSP account can be divided in an action for divorce, annulment,
or legal separation, and is subject to legal process relating to
alimony, child support, or child abuse. Proposed Sec. 1604.9(b) states
that a payment made pursuant to a court order or legal process will be
made pro rata from all contribution sources, including combat zone
contributions. The Board has determined that the TSP can honor a court
order or legal process that apportions combat zone contributions
between the participant and the payee; therefore, final Sec. 1604.9(b)
states that a pro rata payment will be made unless the court order or
legal process directs otherwise.
TSP Loans
Proposed Sec. 1604.5(a)(2) states that a TSP loan can be obtained
by active duty members of the uniformed services and inadvertently
seems to exclude members of the Ready Reserve from loan eligibility.
Final Sec. 1404.5(a)(2) states that members of the uniformed services
in any pay status may obtain a TSP loan. In addition, proposed
Sec. 1604.10(c) explains how non-taxable combat zone contributions will
be accounted for when a participant receives a TSP loan. Final
Sec. 1604.10(c) was revised to discuss only loans that are not repaid
(and which are therefore deemed to be taxable distributions).
Spousal Rights
Proposed Sec. 1604.5(b) explains that uniformed services and
civilian TSP account balances can be combined. Paragraph (b)(4) of that
section states that a participant with a TSP account balance in excess
of $3,500 must obtain spousal consent before transferring those funds
between civilian and uniformed services TSP accounts. The Board has
determined that a narrower rule is appropriate.
The spouse of a member of the uniformed services has the same
rights with respect to his or her spouse's TSP account as the spouse of
a TSP participant who is covered under the Federal Employees'
Retirement System (FERS). Specifically, a FERS-covered participant must
obtain his or her spouse's consent before obtaining a TSP loan or an
in-service withdrawal, and the spouse is entitled to a joint life
annuity if the participant elects to receive a post-employment
withdrawal. Because these rights do not change when funds are
transferred between uniformed services accounts and FERS-covered
accounts, it is not necessary to require spousal consent for those
transfers.
In contrast, the spouse of a TSP participant who is covered under
the Civil Service Retirement System (CSRS) is entitled only to notice
that the participant has received a TSP loan or withdrawal. It is
unnecessary to require a participant to obtain spousal consent before
he or she can move funds from a CSRS-covered TSP account into a
uniformed services TSP account because the transferred funds will
become subject to more stringent spousal rights rules. However, it is
necessary to require spousal consent before a participant can move
funds from a uniformed services account into a CSRS-covered TSP account
because the transferred monies will become subject to the less
stringent CSRS spousal protection rights. Therefore, final
Sec. 1604.5(b)(4) requires spousal consent only for transfers from
uniformed services TSP accounts to CSRS-covered TSP accounts.
Comments on the Proposed Rule
The Board received one comment on the proposed rule from a Federal
civilian agency with uniformed services members. The commenter's first
remarks pertain to Sec. 1604.4(a)(1), which describes the temporary
percentage (of basic pay) limitations on TSP contributions by members
of the uniformed services beginning with 2001, and states that this
limit will increase ``one percent'' each year until 2005. The commenter
wrote that the section should begin with 2002, as that is when
uniformed services contributions will commence, and suggested that the
yearly contribution limit increase should be described as ``one
percentage point'' each year until 2005. Another suggestion from the
commenter pertains to Sec. 1604.4(b), which states that the secretaries
of the military departments may authorize TSP matching contributions.
The commenter noted that it is not only the secretaries of the military
departments but also the Secretaries of Transportation, Commerce, and
Health and Human Services who may authorize matching contributions for
members of the Coast Guard, NOAA, and the Public Health Service,
respectively. The Board agreed with the comments and incorporated all
the suggestions into Sec. 1604.4 of the final rule.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities. They will
affect only employees of the Federal Government.
Paperwork Reduction Act
I certify that these regulations do not require additional
reporting under the criteria of the Paperwork Reduction Act of 1980.
Unfunded Mandates Reform Act of 1995
Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602,
632, 653, 1501-1571, the effects of this regulation on state, local,
and tribal governments and the private sector have been assessed. This
regulation will not compel the expenditure in any one year of $100
million or more by state, local, and tribal governments, in the
aggregate, or by the private sector. Therefore, a statement under
section 1532 is not required.
Submission to Congress and the General Accounting Office
Pursuant to 5 U.S.C. 801(a)(1)(A), the Board submitted a report
containing this rule and other required information to the U.S. Senate,
the U.S. House of Representatives, and the Comptroller General of the
United States prior to publication of this rule in today's Federal
Register. This rule is not a major rule as defined at 5 U.S.C. 804(2).
List of Subjects in 5 CFR Part 1604
Employment benefit plans, Government employees, Military personnel,
Pensions, Retirement.
Roger W. Mehle,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons set out in the preamble, the Board adds a new 5 CFR
part 1604 to read as follows:
PART 1604--UNIFORMED SERVICES ACCOUNTS
Sec.
1604.1 Applicability.
1604.2 Definitions.
1604.3 Contribution elections.
1604.4 Contributions.
1604.5 Separate service member and civilian accounts.
1604.6 Error correction.
1604.7 Withdrawals.
1604.8 Death benefits.
1604.9 Court orders and legal processes.
1604.10 Loans.
Authority: 5 U.S.C. 8474(b)(5) and (c)(1); sec. 661(b), Pub. L.
106-65, 113 Stat. 512, 672 (5 U.S.C. 8440e).
[[Page 50714]]
Sec. 1604.1 Applicability.
This part describes the special features of TSP participation
applicable to members of the uniformed services. Uniformed services
members are also covered by the other regulations of 5 CFR chapter VI
to the extent they do not conflict with the regulations of this part.
Sec. 1604.2 Definitions.
As used in this part:
Basic pay means basic pay payable under 37 U.S.C. 204 and
compensation received under 37 U.S.C. 206.
Bonus contributions means contributions made by participants from a
bonus as defined in 37 U.S.C. chapter 5.
Civilian account means the TSP account to which contributions have
been made by or on behalf of a civilian employee.
Civilian employee means a TSP participant covered by the Federal
Employees' Retirement System, the Civil Service Retirement System, or
equivalent retirement plans.
Combat zone compensation means compensation received for active
service during a month in which a member of the uniformed services
serves in a combat zone.
Combat zone contributions means employee contributions that are
made from compensation subject to the Federal income tax exclusion at
26 U.S.C. 112 for combat zone compensation.
Eligible retirement plan means a plan defined at 26 U.S.C.
402(c)(8). Generally, an eligible retirement plan is an individual
retirement account (IRA) or an individual retirement annuity (other
than an endowment contract); a qualified pension, profit sharing, or
stock bonus plan; an annuity plan described in 26 U.S.C. 403(a); an
annuity contract described in 26 U.S.C. 403(b); or an eligible deferred
compensation plan described in 26 U.S.C. 457(b). The IRA or other
eligible retirement plan to which a payment from the TSP can be
transferred must be a trust established inside the United States (i.e.,
the 50 states and the District of Columbia).
Employee contributions means contributions made by participants
from basic pay, incentive pay, and special pay (including bonuses).
Employing agency means the organization that employs an individual
who is eligible to contribute to the TSP and that has authority to make
compensation decisions for that employee.
Federal civilian retirement system means the Civil Service
Retirement System established by 5 U.S.C. chapter 83, subchapter III,
the Federal Employees' Retirement System established by 5 U.S.C.
chapter 84, or any equivalent Federal civilian retirement system.
Periodic contributions means employee contributions made from
recurring incentive pay and special pay (including bonuses) as defined
in 37 U.S.C. chapter 5.
Ready Reserve means those members of the uniformed services
described at 10 U.S.C. 10142.
Regular contributions means employee contributions made from basic
pay.
Separation from service means discharge of a member from active
duty or the Ready Reserve or transfer of a member to inactive status or
to a retired list pursuant to any provision of title 10, U.S.C. The
discharge or transfer may not be followed, before the end of the 31-day
period beginning on the day following the effective date of the
discharge, by resumption of active duty, an appointment to a civilian
position covered by the Federal Employees' Retirement System, the Civil
Service Retirement System, or an equivalent retirement system, or
continued service in or affiliation with the Ready Reserve. Reserve
component members serving on full-time active duty who terminate their
active duty status and subsequently participate in the drilling reserve
are said to continue in the Ready Reserve. Active component members who
are released from active duty and subsequently participate in the
drilling reserve are said to affiliate with the Ready Reserve.
Service member means a member of the uniformed services on active
duty or a member of the Ready Reserve in any pay status.
Service member account means the account to which contributions
have been made by or on behalf of a member of the uniformed services.
Special and incentive pay means pay payable as special or incentive
pay under 37 U.S.C. chapter 5.
TSP record keeper means the entity that is engaged by the Board to
perform record keeping services for the Thrift Savings Plan. The TSP
record keeper is the National Finance Center, United States Department
of Agriculture, located in New Orleans, Louisiana.
Uniformed services means the Army, Navy, Air Force, Marine Corps,
Coast Guard, Public Health Service, and the National Oceanic and
Atmospheric Administration.
Sec. 1604.3 Contribution elections.
A service member may make contribution elections as described in 5
CFR part 1600, with the following exceptions:
(a) Initial uniformed services open season. A service member may
make a contribution election during an initial uniformed services TSP
open season beginning October 9, 2001, and ending January 31, 2002.
Contributions based on an election made on or before December 31, 2001,
will be deducted from pay the first full pay period of January 2002;
elections made in January 2002 will be effective during the first full
pay period after the election is received.
(b) New service members. An individual who is appointed as a
service member may make a TSP contribution election within 60 days
after the effective date of the appointment; contributions based on
such an election will be made during the first full pay period after
the election is received.
(c) Conversion between active duty and Ready Reserve status. A
service member who converts from Ready Reserve status to active duty
status (for more than 30 days), or who converts from active duty to
Ready Reserve status, may make a TSP contribution election within 60
days after the effective date of the conversion; contributions based on
such an election will be made during the first full pay period after it
is received.
(d) TSP open season elections. In addition to being able to make a
contribution election during the periods described in paragraphs (a)
through (c) of this section, as applicable, a service member may make a
contribution election during any TSP open season thereafter (as
described at 5 CFR part 1600, subpart B).
(e) Source of contributions. A service member may elect to
contribute sums to the TSP from basic pay, incentive pay, and special
pay (including bonuses). However, the service member must be
contributing to the TSP from basic pay in order to contribute to the
TSP from incentive pay and special pay (including bonuses). Except for
an election to contribute from bonuses, all contribution elections must
be made during one of the periods described in paragraphs (a) through
(d) of this section. A service member may elect to contribute from
special pay or incentive pay (including bonuses) in anticipation of
receiving such pay (that is, he or she does not have to be receiving
the special pay or incentive pay when the contribution election is
made); those elections will take effect when the service member
receives the special or incentive pay.
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Sec. 1604.4 Contributions.
(a) Employee contributions. Subject to the regulations at 5 CFR
part 1600 and the following limitations, a service member may make
regular contributions to the TSP from basic pay. If the service member
makes regular contributions, he or she also may contribute all or a
portion of incentive pay and special pay (including bonuses) to the
TSP:
(1) Temporary percentage limitations. Subject to paragraph (a)(2)
of this section, the maximum service member TSP regular employee
contribution (including combat zone contributions) for 2002 is 7
percent of basic pay per pay period. The maximum contribution will
increase one percentage point each year until 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.
(2) Internal Revenue Code limitations. The dollar amount of TSP
employee contributions is limited by two different provisions of the
Internal Revenue Code (I.R.C.). If a service member's employee
contributions exceed either of these limitations, the service member
may request a refund of employee contributions (and associated
earnings) from the TSP on the form titled ``Request for Return of
Excess Employee Contributions to Participant,'' which can be obtained
from the TSP record keeper. The completed form must be returned to the
TSP record keeper by February 20 of the year after the excess
contributions were made.
(i) Limit on elective deferrals. Section 402(g) of the I.R.C. (26
U.S.C. 402(g)) places a dollar limit on the amount a person may save on
a tax-deferred basis through retirement savings plans. (For 2002, the
limit is $11,000. The limit will increase each year by $1,000 until it
reaches $15,000 in 2006; thereafter, it will be periodically adjusted
by the Internal Revenue Service (IRS).) The TSP will not accept any
employee contributions that exceed the I.R.C. section 402(g) limit. If
a service member contributes to a civilian TSP account or to another
qualified employer plan described at I.R.C. sections 401(k), 403(b), or
408(k) (26 U.S.C. 401(k), 403(b), or 408(k)), and the total employee
contributions from taxable income made to all plans exceed the I.R.C.
section 402(g) limit, he or she may request a refund of employee
contributions from the TSP to conform with the limit. (Combat zone
contributions are not taken into consideration when determining the
application of the I.R.C. section 402(g) limit.)
(ii) Limit on contributions to qualified plans. Section 415(c) of
the I.R.C. (26 U.S.C. 415(c)) also places an annual limit on the
combined amount that can be contributed to the TSP and to other Federal
civilian retirement systems (as defined in Sec. 1604.2). (The limit is
periodically adjusted by the IRS; it is the lesser of 100 percent of
compensation or $40,000 in 2002.) For purposes of applying this limit,
compensation includes combat zone compensation. In implementation of
this law, no employee contribution may be made to the TSP for any year
to the extent that the sum of the employee's contributions to the TSP
and to a Federal civilian retirement system, when added to the
employer's contributions to the TSP for that year, would exceed the
I.R.C. section 415(c) limit. (If a service member contributes to a
civilian TSP account and to a service member TSP account in a single
calendar year, the annual limit on contributions will be derived from
the participant's combined service member and civilian compensation.)
Combat zone contributions are taken into consideration when determining
the application of the I.R.C. section 415(c) limit.
(b) Matching contributions. When matching contributions are
authorized for a service member, that service member's regular
contributions will be matched dollar-for-dollar on the first three
percent of basic pay contributed to the TSP, and 50 cents on the dollar
on the next two percent of basic pay contributed. Matching
contributions only apply to regular contributions. Matching
contributions are not taken into consideration when determining the
application of the contribution limit found at I.R.C. section
402(g)(described in paragraph (a)(2)(i) of this section), but they are
taken into consideration when determining the application of the
contribution limit found at I.R.C. section 415 (described in paragraph
(a)(2)(ii) of this section).
(c) Deduction and transmittal of contributions. A service member's
employing agency will deduct regular contributions from the service
member's basic pay each pay period based on his or her contribution
election and will transmit the contributions to the TSP. If a service
member also elects to make periodic contributions to the TSP, the
employing agency must deduct (and transmit to the TSP) these
contributions from the service member's incentive pay or special pay
(including bonuses), as applicable.
Sec. 1604.5 Separate service member and civilian accounts.
(a) Separate accounts. Service member accounts are maintained
separately from civilian accounts. Therefore, service members making
both civilian and uniformed services TSP contributions will have two
TSP accounts. For those participants, the accounts are treated
separately except in the following circumstances:
(1) If a participant contributes to a service member account and a
civilian account, the contributions to both accounts together cannot
exceed the Internal Revenue Code contribution limits described in
Sec. 1604.4(a)(2).
(2) A member of the uniformed services may obtain a loan from his
or her account, as described at Sec. 1604.10, and the loan will be
disbursed from the uniformed services account. If the TSP maintains a
service member account and a civilian account for an individual, the
TSP will calculate the Internal Revenue Code maximum loan amount using
both account balances, as described in Sec. 1604.10(a)(3).
(b) Transfers between TSP accounts. Service member and civilian TSP
account balances may be combined through a transfer (thus producing one
account), and the transferred funds will be treated as employee
contributions and otherwise invested as described at 5 CFR part 1600.
Transfers under this section are subject to the following rules:
(1) An account balance can be transferred once the TSP is informed
(by the participant's employing agency) that the participant has
separated from either civilian or uniformed services employment.
(2) Combat zone contributions may not be transferred from a
uniformed services TSP account to a civilian TSP account.
(3) Transferred funds will be allocated among the TSP's investment
funds according to the contribution allocation in effect for the
gaining account.
(4) A service member must obtain the consent of his or her spouse
before transferring a uniformed services TSP account balance into a
civilian account that is subject to Civil Service Retirement System
spousal rights. A request for an exception to the spousal consent
requirement will be evaluated under the rules explained in 5 CFR part
1650.
(5) Before the transfer can be accomplished, any outstanding loans
from the account to be transferred must be closed as described in 5 CFR
part 1655.
[[Page 50716]]
Sec. 1604.6 Error correction.
(a) General rule. A service member's employing agency must correct
the service member's account if, as the result of employing agency
error, a service member does not receive the TSP contributions to which
he or she is entitled. Except as provided in paragraph (b) of this
section, those corrections must be made in accordance with 5 CFR part
1605.
(b) Missed bonus contributions. This paragraph (b) applies when an
employing agency fails to implement a contribution election that was
properly submitted by a service member requesting that a TSP
contribution be deducted from bonus pay. Within 30 days of receiving
the employing agency's acknowledgment of the error, a service member
may establish a schedule of makeup contributions with his or her
employing agency to replace the missed contribution through future
payroll deductions. These makeup contributions can be made in addition
to any TSP contributions that the service member is otherwise entitled
to make.
(1) The schedule of makeup contributions may not exceed four times
the number of months it would take for the service member to earn basic
pay equal to the dollar amount of the missed contribution. For example,
a service member who earns $29,000 yearly in basic pay and who missed a
$2,500 bonus contribution to the TSP can establish a schedule of makeup
contributions with a maximum duration of 8 months. This is because it
takes the service member 2 months to earn $2,500 in basic pay (at
$2,416.67 per month).
(2) At its discretion, an employing agency may set a ceiling on the
length of a schedule of employee makeup contributions. The ceiling may
not, however, be less than twice the number of months it would take for
the service member to earn basic pay equal to the dollar amount of the
missed contribution.
Sec. 1604.7 Withdrawals.
A service member may withdraw all or a portion of his or her
account under the rules in 5 CFR part 1650, with the following
exceptions:
(a) Separate accounts. If the TSP maintains a service member
account and a civilian account for an individual, a separate withdrawal
request must be made for each account.
(b) Spousal rights. The spouse of a service member participant has
the same TSP spousal rights as the spouse of a civilian participant
covered under the Federal Employees' Retirement System; those spousal
rights in the context of a withdrawal (and the process by which a
service member may obtain an exception to them) are explained at 5 CFR
part 1650.
(c) Combat zone contributions. If a service member account contains
combat zone contributions, the withdrawal will be distributed pro rata
from all sources. If a participant requests the TSP to transfer all, or
a portion, of a withdrawal to an Individual Retirement Account (IRA) or
other eligible retirement plan, the share of the withdrawal
attributable to combat zone contributions (if any) can be transferred
only if the IRA or retirement plan accepts such funds.
(d) Separation. The definition of separation from service at
Sec. 1604.2 applies when determining a service member's eligibility for
a withdrawal.
Sec. 1604.8 Death benefits.
The account balance of a deceased service member will be paid as
described at 5 CFR part 1651, with the following exceptions:
(a) Separate accounts. To designate a beneficiary for a TSP death
benefit, a service member must file a valid beneficiary designation
form. If the TSP maintains a service member account and a civilian
account for an individual, a separate beneficiary designation form must
be filed for each account.
(b) Combat zone contributions. If a service member account contains
combat zone contributions, the death benefit payment will be made pro
rata from all sources.
(c) Trustee-to-trustee transfers. The surviving spouse of a TSP
participant can request the TSP to transfer a death benefit payment to
an Individual Retirement Account (IRA) or other eligible retirement
plan. The share of the death benefit payment that is attributable to
combat zone contributions (if any) can be transferred only if the IRA
or retirement plan accepts such funds.
(d) Transfer to a TSP account. If the TSP maintains an account for
a death benefit beneficiary who is the surviving spouse of the
participant, the spouse can request the TSP to transfer the death
benefit payment to his or her TSP account; the share attributable to
combat zone contributions (if any) cannot be transferred into a
civilian account.
Sec. 1604.9 Court orders and legal processes.
A TSP account can be divided in an action for divorce, annulment,
or legal separation, and is subject to legal process relating to child
support, alimony, or child abuse. The TSP will make a payment from a
service member's account under such orders or processes as described at
5 CFR part 1653, with the following exceptions:
(a) Separate accounts. To qualify for enforcement against the TSP,
a court order or legal process must expressly relate to the TSP.
Therefore, if the TSP maintains a service member account and a civilian
account for an individual, a qualifying court order or legal process
must expressly state from which account payment is to be made.
(b) Combat zone contributions. If a service member account contains
combat zone contributions, the payment will be made pro rata from all
sources, unless the court order or legal process directs otherwise.
(c) Trustee-to-trustee transfers. The current or former spouse of a
TSP participant can request the TSP to transfer a court-ordered payment
to an Individual Retirement Account (IRA) or other eligible retirement
plan. If the payee requests the TSP to transfer all or a portion of the
court-ordered payment to an IRA or other eligible retirement plan, the
share of the payment attributable to combat zone contributions (if any)
can be transferred only if the IRA or plan accepts such funds.
(d) Transfer to a TSP account. If the TSP maintains an account for
a court order payee who is the current or former spouse of the
participant, the payee can request the TSP to transfer the court-
ordered payment to the payee's TSP account; the pro rata share
attributable to combat zone contributions (if any) cannot be
transferred.
Sec. 1604.10 Loans.
A service member may be eligible for a TSP loan as described at 5
CFR part 1655, with the following exceptions:
(a) Separate accounts. If the TSP maintains a service member
account and a civilian account for an individual:
(1) A separate loan application must be made for each account;
(2) A participant may have no more than two loans outstanding from
each account at any time; one loan from each account may be a loan for
the purchase of a primary residence;
(3) The Internal Revenue Code maximum loan amount test, which is
described in 5 CFR part 1655, will be applied using the combined
balances in both TSP accounts; and
(4) Separate TSP loan statements will be issued for each account.
(b) Spousal rights. Before a loan agreement is approved for a
service member account, the participant's spouse must consent to the
loan by signing the loan agreement. A request for an exception to the
spousal consent
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requirement will be evaluated under the rules explained in 5 CFR part
1650.
(c) Combat zone contributions. The portion of a loan that is
attributable to combat zone contributions (if any) will be determined
when the loan is declared a taxable distribution, and that portion will
not be reported as taxable income to the participant as a result of the
declaration.
[FR Doc. 01-24776 Filed 10-3-01; 8:45 am]
BILLING CODE 6760-01-P