[Federal Register Volume 63, Number 19 (Thursday, January 29, 1998)]
[Rules and Regulations]
[Pages 4365-4366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2166]
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Rules and Regulations
Federal Register
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This section of the FEDERAL REGISTER contains regulatory documents
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to and codified in the Code of Federal Regulations, which is published
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Federal Register / Vol. 63, No. 19 / Thursday, January 29, 1998 /
Rules and Regulations
[[Page 4365]]
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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1605
Correction of Administrative Errors
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Interim rule with request for comments.
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SUMMARY: The Executive Director of the Federal Retirement Thrift
Investment Board (Board) is publishing an amendment to its final rules
on correction of administrative errors affecting Thrift Savings Plan
(TSP) accounts. The amendment provides for attribution of makeup
contributions from a participant to the appropriate prior year in which
the contributions should have been made. Such makeup contributions are
permitted only if aggregation with other contributions made in (or with
respect to) the appropriate prior year would not result in
contributions in excess of the limits imposed by sections 402(g) and
415(c) of the Internal Revenue Code (I.R.C.).
DATES: Effective date: January 29, 1998. Comment date: March 30, 1998.
ADDRESSES: Send comments to Elizabeth S. Woodruff, Associate General
Counsel, Federal Retirement Thrift Investment Board, 1250 H Street,
NW., Washington, DC 20005.
FOR FURTHER INFORMATION CONTACT:
Elizabeth S. Woodruff, (202) 942-1661.
SUPPLEMENTARY INFORMATION: A final rule governing the correction of
administrative errors was published in the Federal Register on December
24, 1996 (61 FR 68464). That rule revised the final regulations that
were published in the Federal Register on December 4, 1987 (52 FR
46314). Both sets of regulations required a limitation on TSP makeup
contributions when a retroactive adjustment to an employee's pay
included a correction for the employee's inability to have made TSP
contributions during the period of retroactivity. At the time these
regulations were issued, the Board interpreted I.R.C. 402(g) and its
discussions with the Internal Revenue Service (IRS) as requiring that
such makeup contributions always be counted against the IRS deferral
limit of the year in which they were actually made, rather than the
limit of the year to which they were attributable.
On June 25, 1997, a decision was issued in the matter of Kahmann v.
Reno, 967 F. Supp. 731 (N.D.N.Y.), holding that application of the
current IRS deferral limit to makeup contributions for prior years was
contrary to the purpose of a make-whole award. The court required the
participant's employing agency to calculate contributions for each pay
period for which the employee could have made a TSP contribution and to
deposit the appropriate contributions (and lost earnings) to the
employee's account without regard to the current deferral limit.
Because this holding involved the Board's interpretation of I.R.C.
402(g), the Board requested guidance from the IRS on whether a
participant's makeup contributions to the TSP in the current year could
be attributed to the years in which the contributions should have been
made for purposes of the limit on annual contributions found in I.R.C.
402(g). The IRS advised the Board that such makeup contributions could
indeed be so attributed.
For this reason, Sec. 1605.4(c)(1) of the Board's error correction
regulations is being amended to provide that makeup contributions to
the TSP will be attributed to the year in which the contributions
should have been made to determine compliance with the (applicable) IRS
deferral limit. The board intends to apply this rule to all situations
in which contributions should have been made in an earlier year,
regardless of the reason the employee was improperly not permitted to
contribute to the TSP. Because this change could affect the ongoing
makeup contributions of some participants, it is being given immediate
effect.
Regulatory Flexibility Act
I certify that this amendment will not have a significant economic
impact on a substantial number of small entities. It will only affect
TSP participants.
Paperwork Reduction Act
I certify that these regulations do not require additional
reporting under the criteria of the Paperwork Reduction Act of 1980.
Waiver of Notice of Proposed Rulemaking and 30-day Delay of Effective
Date
Under 5 U.S.C. 553(b)(B) and (d)(3), I find that good cause exists
for waiving the general notice of proposed rulemaking and for making
these regulations effective in less than 30 days. These regulations
facilitate correction of errors in the amount of contributions made to
Thrift Savings Plan accounts. Prompt implementation of the regulations
will provide necessary guidance to employing agencies and TSP
participants.
Unfunded Mandates Reform Act of 1995
Pursuant to the Unfunded Mandates Reform Act of 1995, section 201,
Public Law 104-4, 109 Stat. 48, 64, the effect of these regulations on
State, local, and tribal governments and on the private sector has been
assessed. This regulation will not compel the expenditure in any one
year of $100 million or more by any State, local, and tribal
governments in the aggregate, or by the private sector. Therefore, a
statement under section 202, 109 Stat. 48, 64-65, is not required.
Submission to Congress and the General Accounting Office
Under 5 U.S.C. 801(a)(1)(A), the Board submitted a report
containing this rule and other required information to the U.S. Senate,
the U.S. House of Representatives, and the Comptroller General of the
United States before the publication of this rule in today's Federal
Register. This rule is not a major rule as defined in section 804(2) of
title 5, United States Code.
List of Subjects in 5 CFR Part 1605
Claims, Government employees, Pensions, Retirement.
Roger W. Mehle,
Executive Director.
Federal Retirement Thrift Investment Board
For the reasons set forth in the preamble, part 1605 of chapter VI
of title
[[Page 4366]]
5 of the Code of Federal Regulations is amended as follows:
PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS
1. The authority citation for part 1605 continues to read as
follows:
Authority: 5 U.S.C. 8351 and 8474.
2. Section 1605.2 is amended by revising paragraph (c)(5) to read
as follows:
Sec. 1605.2 Makeup of missed or insufficient contributions.
* * * * *
(c) * * *
(5) When establishing a schedule of makeup contributions, the
employing agency must review any schedule proposed by the affected
participant, as well as the participant's prior TSP contributions, if
any, to determine whether the makeup contributions, when combined with
prior contributions, would exceed the annual contribution limit(s)
contained in sections 402(g) and 415 of the Internal Revenue Code
(I.R.C.) (26 U.S.C. 402(g) and 415) for the prior year(s) with respect
to which the contributions are being made.
(i) The employing agency must not permit contributions that, when
combined with prior contributions, would exceed the applicable annual
contribution limit(s) contained in I.R.C. 402(g) and 415.
(ii) A schedule of 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.
* * * * *
3. Section 1605.4 is amended by revising paragraph (c)(1) to read
as follows:
Sec. 1605.4 Back pay awards and other retroactive pay adjustments.
* * * * *
(c)(1) Makeup employee contributions required under paragraphs (a)
and (b) of this section must be computed before the back pay or other
retroactive pay adjustment is made. The makeup employee contributions
must be deducted from the back pay or other retroactive pay adjustment
and contributed to the TSP. However, contributions must not be made
that would cause the participant to exceed the annual contribution
limit(s) contained in sections 402(g) and 415 of the Internal Revenue
Code (I.R.C.) (26 U.S.C. 402(g) and 415) for the prior year(s) with
respect to which the contributions are being made, taking into
consideration the TSP contributions already made in (or with respect
to) that year.
* * * * *
[FR Doc. 98-2166 Filed 1-28-98; 8:45 am]
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