[Federal Register Volume 82, Number 174 (Monday, September 11, 2017)]
[Proposed Rules]
[Pages 42613-42619]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18838]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 82, No. 174 / Monday, September 11, 2017 /
Proposed Rules
[[Page 42613]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Parts 1600, 1601, 1603, 1605, 1650, and 1690
Blended Retirement System
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Proposed rule.
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SUMMARY: The Federal Retirement Thrift Investment Board (``FRTIB'') is
proposing to amend its regulations to implement changes to the
uniformed services' retirement system that are mandated by the National
Defense Authorization Act for Fiscal Year 2016.
DATES: Comments must be received on or before November 13, 2017.
ADDRESSES: You may submit comments using one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov at
Docket ID number FRTIB-2017-0006. Follow the Web site instructions for
submitting comments.
Facsimile: 202-942-1676.
Mail or Hand Deliver/Courier: Office of General Counsel,
Federal Retirement Thrift Investment Board, 77 K Street NE., Suite
1000, Washington, DC 20002.
FOR FURTHER INFORMATION CONTACT: Brandon Ford, Attorney-Advisor,
Federal Retirement Thrift Investment Board, Office of General Counsel,
77 K Street NE., Suite 1000, Washington, DC 20002, 202-864-8734,
[email protected].
SUPPLEMENTARY INFORMATION: The FRTIB administers the Thrift Savings
Plan (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 are codified, as amended, largely at 5 U.S.C. 8351
and 8401-79. The TSP is a tax-deferred retirement savings plan for
Federal civilian employees and members of the uniformed services. The
TSP is similar to cash or deferred arrangements established for
private-sector employees under section 401(k) of the Internal Revenue
Code (26 U.S.C. 401(k)).
The National Defense Authorization Act for Fiscal Year 2016 (NDAA),
Public Law 114-92, signed into law November 25, 2015, changed the
uniformed services' retirement plan from one that relied primarily on a
cliff-vested defined benefit to one that blends a reduced defined
benefit with enhanced TSP benefits, continuation pay, and lump-sum
options. The new retirement system is known as the Blended Retirement
System (BRS). This proposed rule implements the enhanced TSP benefits
provided by the NDAA.
The BRS includes four major changes to the TSP portion of a service
member's military retirement package:
(1) Employing services will contribute an amount that equals 1% of
each service member's monthly pay to the service member's TSP account.
These contributions are additional compensation; they are not deducted
from service members' basic pay. They are referred to as ``automatic''
contributions because the services must make them whether or not the
service member also makes contributions from his/her basic pay.
(2) Service members will be auto-enrolled to contribute 3% of their
basic pay, and re-enrolled again annually if they stop making
contributions.
(3) Employing services will match service members' TSP
contributions dollar for dollar on the first three percent of basic pay
and 50 cents on the dollar for the next two percent of basic pay that
the member contributes.
(4) Unless the service member elects otherwise, contributions will
be invested in an age appropriate lifecycle fund instead of the
Government securities fund.
BRS Eligibility
BRS covers service members who first enter a uniformed service on
or after January 1, 2018. It also covers service members who (1) have
completed fewer than 12 years of service (or, if in the reserve
component, have fewer than 4,320 retirement points) as of December 31,
2017, and (2) elect, within a certain timeframe, to transfer from the
legacy retirement system to BRS (this process is also known as electing
to ``opt-in'' to BRS). The employing services are responsible for
making BRS eligibility determinations and reporting each service
member's retirement coverage status to the TSP.
Service Automatic (1%) Contributions
Timing Restrictions
The NDAA placed timing restrictions on the receipt of Service
Automatic 1% Contributions to a service member's TSP account. Service
members who first enter duty on or after January 1, 2018, cannot
receive any Service Automatic (1%) Contributions until the first full
pay period following the date that is 60 days after the member's Pay
Entry Base Date (PEBD).\1\ For members who elect to transfer to the
BRS, Service Automatic (1%) Contributions will begin the first full pay
period following their election to transfer.
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\1\ PEBD is the date that denotes how much service a member has
for the purpose of determining longevity pay rates. The Navy and
Marine Corps refer to this as the pay entry base date, while the Air
Force calls it simply the pay date. DoD refers to it as the basic
pay date. The services are responsible for determining each member's
PEBD and providing each member's PEBD to the TSP.
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Service Automatic (1%) Contributions must stop the first full pay
period that is 26 years after the service member's PEBD. This rule
applies to all BRS participants whether they entered duty on or after
January 1, 2018, or they elected to transfer to BRS. For example, a
member who has served six years before electing to transfer to BRS can
receive matching contributions for only 20 years.
Vesting
The NDAA requires each BRS participant to complete 2 years of
military service before they are vested in their Service Automatic (1%)
Contributions. A service member's civil service will not count toward
the completion of that two years. Therefore, the FRTIB proposes to
amend section 1603.1 to have separate definitions for civilian service
and military service. The definition for civilian service will remain
the same as it is today. Military service will be defined as service
that is creditable under 37 U.S.C. 205, which is the provision that
defines years of service for purposes of computing basic pay. For
service members who elect to transfer to BRS, all military service
completed prior to the election will count towards the vesting
requirement. For example, if a service member has completed 3 years of
service prior to transferring to BRS, that member will be
[[Page 42614]]
immediately vested in the Service Automatic (1%) Contributions made to
his or her TSP account.
Enrollment and Member Contributions
Automatic Enrollment
NDAA requires employing services to automatically enroll all
uniformed service members who first enter service on or after January
1, 2018. Employing services must also automatically enroll all BRS
participants (whether they entered duty on or after January 1, 2018, or
transferred to BRS) who separate from service and later re-enter
service.
The FRTIB proposes to defer automatic enrollment for BRS
participants until the first full pay period following the date that is
60 days after the member's PEBD because the member would not be
eligible for Service Automatic (1%) Contributions until that date.
Additionally, the attrition rate is high in the first 60 days of
service and to require automatic enrollment during that period would
result in a large number of automatic cash-outs, resulting in increased
operational costs which are then passed along to all TSP participants.
The Executive Director has the statutory authority to select a
default contribution percentage rate for automatically enrolled
participants that is no less than 2% and no more than 5%. The FRTIB
proposes to set the default percentage rate for BRS participants at 3%.
This is the same contribution rate at which civilian participants are
automatically enrolled. A participant who is automatically enrolled may
change the amount that he or she is contributing by filing a
contribution election with his or her payroll office.
Service members who elect to transfer to BRS will continue to make
contributions at the rate that they were making contributions prior to
their election to transfer. They will not be automatically enrolled.
However, if a member who transfers to BRS separates from service and
later re-enters service, that member will be automatically enrolled to
contribute 3% of his or her basic pay beginning the first full pay
period following the date that is 60 days after the member's PEBD.
Service members who are not covered by BRS will not be
automatically enrolled even if they separate from service and later re-
enter service.
Annual Automatic Re-Enrollment
NDAA requires employing services to automatically re-enroll, on
January 1st of each year, BRS participants who have declined automatic
enrollment for a year. Accordingly, service members subject to
automatic enrollment who terminate their contributions at any point
during the year and do not elect to resume them by the last full pay
period of the year will be automatically re-enrolled at a contribution
rate of 3% as of January 1st of the following year. The employing
services are responsible for determining which BRS participants are not
making contributions in the last full pay period of the year.
Automatic Enrollment Refunds
Service members who are automatically enrolled in the TSP may
request a refund of the automatic enrollment contributions deducted
from their basic pay (including associated earnings) within the first
90 days of the member's first automatic enrollment contribution.
Members who stop making contributions are not eligible for refunds of
contributions deducted when they are automatically re-enrolled on
January 1st because, under rules mandated by the Internal Revenue
Service, a new 90-day refund period is not allowed unless one full
calendar year (January through December) has passed since the member's
last automatic enrollment contribution.
There are very few participants who will go an entire plan year
without any default employee contributions because they will be subject
to automatic re-enrollment for each plan year. There are significant
programming limitations to track the small number of members who will
go an entire plan year without any default employee contributions. For
these reasons, the Board has decided to disallow refunds of
contributions associated with automatic re-enrollment.
Hardship Withdrawals and Automatic Enrollment
Under existing IRS rules, a participant who obtains a financial
hardship in-service withdrawal may not contribute to the TSP for a
period of six months after the withdrawal is processed. This proposed
regulation provides that no BRS participant will be automatically
enrolled or re-enrolled during a six month non-contribution period. For
example, a service member who is in a non-contribution period at the
end of the year will not be reenrolled in January. However, if the
member does not resume contributions after the end of the six month
non-contribution period and consequently is not making contributions
during the last full pay period of the year, the member's employing
service must automatically enroll the member on January 1st of the
subsequent year.
Affirmative Member Contribution Elections
The TSP will not accept service member contributions from members
who are covered by BRS until 60 days after the member's PEBD for the
same reasons that the FRTIB proposes to defer automatic enrollment
until 60 days after the member's PEBD.
Service Matching Contributions
Timing Restrictions
Service Matching Contributions begin the first full pay period that
is 2 years after the service member's PEBD. For members who elect to
transfer to the BRS, Service Matching Contributions begin the first
full pay period following their election to transfer. For example, a
member who has served 1 year before electing to transfer to BRS will
receive Service Matching Contributions beginning the first full pay
period following their election even though 2 years have not passed
since their PEBD.
Service Matching Contributions must stop at the same time Service
Automatic (1%) Contributions stop, which is the first full pay period
that is 26 years after the service member's PEBD. This is true
regardless of how the service member became covered by BRS.
Vesting
All BRS participants will immediately vest in their Service
Matching Contributions.
Repeal of Existing Matching Program for Critical Specialties
The NDAA repeals the service matching program described in 37
U.S.C. 211(d) as of January 1, 2018. There are no service members
currently participating in the program. Therefore, the FRTIB proposes
to delete all references to 37 U.S.C. 211(d).
Default Investment Fund
A member who first enters service on or after January 1, 2018, will
have his or her contributions invested in an age-appropriate L Fund by
default until the member makes an affirmative contribution allocation
that directs incoming contributions into a different fund or
combination of funds. Likewise, if a service member who elects to
transfer to BRS has not made either an affirmative contribution
allocation or an interfund transfer, then any contributions made after
becoming covered by BRS will be invested in an age-appropriate L Fund.
If a service member who elects to transfer to BRS has made an
interfund transfer in the past but not a contribution allocation, then
any
[[Page 42615]]
contributions made after becoming covered by BRS will be invested in
the G Fund. If a service member who elects to transfer to BRS has made
an affirmative contribution allocation in the past, then any
contributions made after becoming covered by BRS will be invested in
accordance with the member's contribution allocation. However, if a
member elects to transfer to BRS and has a zero account balance,
contributions will be invested in an age-appropriate L Fund regardless
of any past contribution allocation or interfund transfer. The
investment of contributions made prior to becoming covered by BRS will
remain unchanged. Uniformed service members who are not covered by BRS
will continue to have their contributions defaulted into the G Fund.
When an employing agency automatically re-enrolls a participant
because they were not making contributions in the last full pay period
of the year, the participant's contributions will be invested in the
same manner as they were prior to re-enrollment (regardless of whether
it was an affirmative contribution allocation or a default investment).
Likewise, contributions of a rehired service member will also be
invested in the fund(s) to which they were being invested prior to
being rehired (regardless of whether the fund(s) were an affirmative
contribution allocation or a default investment and regardless of how
much time has passed since the rehired service member separated from
service). However, if a re-enrolled or re-hired service member has a
zero account balance, future contributions will be defaulted to an age-
appropriate L Fund.
The first time a BRS participant's employing agency automatically
enrolls them or when he or she first transfers to BRS, or as soon as
practicable thereafter, the TSP will provide each BRS participant who
is subject to default investment in an age-appropriate L Fund with a
notification concerning the risk of investing.
Correction of Administrative Errors
BRS introduces new potential errors that are not currently
addressed in regulations. Specifically, employing services may classify
members of the uniformed services in the wrong retirement system (i.e.,
legacy instead of BRS and vice versa). If this error occurs, it is
possible that service members will not be automatically enrolled and
not receive service contributions. Additionally, if this error were to
occur, service member contributions may be invested in the wrong
default investment fund which would require breakage calculations.
Therefore, the FRTIB proposes to amend Part 1605 to provide the
necessary mechanisms to correct errors related to BRS.
If a BRS participant is misclassified by an employing agency as a
non-BRS participant, when the misclassification is corrected, 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 BRS
participant during the period of misclassification. In addition, the
employing service must, under the rules of Sec. 1605.11, make up
Service Automatic (1%) Contributions and Service Matching Contributions
on employee contributions.
If a non-BRS participant is misclassified by an employing service
as a BRS participant, employee contributions may remain in the
participant's account when the misclassification is corrected. If the
participant requests a refund of employee contributions, the employing
service must submit a negative adjustment record to remove the funds
under the procedure described in Sec. 1605.12. The TSP will forfeit
all service contributions that were made to a non-BRS participant's
account, except that an employing service may submit a negative
adjustment record to request the return of an erroneous contribution
that has been in the participant's account for less than one year.
The TSP will charge the employing service for any positive breakage
that results from an incorrect default investment. To initiate a
breakage calculation for the uniformed service member, the employing
service must notify the TSP that the participant is entitled to
breakage. Notification from the employing service to the TSP that the
participant has been misclassified will not itself trigger the TSP to
take corrective action other than to update the participant's
retirement system coverage.
Finally, the FRTIB proposes to amend Section 1605.31 to reduce
makeup civilian agency contributions by any Service Automatic (1%)
Contributions the participant receives while in military service.
Currently, USERRA requires civilian agencies to makeup automatic (1%)
and matching contributions missed while a member was separated or in a
non-pay status for military service. The regulations currently reduce
the agency makeup matching contributions by any matching contributions
received while performing military service. The proposed amendments
will extend that reduction to include Service Automatic (1%)
Contributions received while performing military service. The proposed
amendments also provide that breakage on agency or service
contributions will be based on the contribution allocation(s) on file
for the participant during the period of military service.
Regulatory Flexibility Act
I certify that this regulation will not have a significant economic
impact on a substantial number of small entities. This regulation will
affect Federal employees and members of the uniformed services who
participate in the TSP.
Paperwork Reduction Act
I certify that these regulations do not require additional
reporting under the criteria of the Paperwork Reduction Act.
Unfunded Mandates Reform Act of 1995
Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602,
632, 653, and 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 2 U.S.C. 1532 is not required.
List of Subjects
5 CFR Part 1600
Government employees, Pensions, Retirement.
5 CFR Part 1601
Government employees, Pensions, Retirement.
5 CFR Part 1603
Government employees, Pensions, Retirement.
5 CFR Part 1605
Claims, Government employees, Pensions, Retirement.
5 CFR Part 1650
Alimony, Claims, Government employees, Pensions, Retirement.
5 CFR Part 1690
Government employees, Pensions, Retirement.
Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons stated in the preamble, the FRTIB proposes to amend
5 CFR Chapter VI as follows:
[[Page 42616]]
PART 1600--EMPLOYEE CONTRIBUTION ELECTIONS, CONTRIBUTION
ALLOCATIONS, AND AUTOMATIC ENROLLMENT PROGRAM
0
1. The authority citation for part 1600 is revised to read as follows:
Authority: 5 U.S.C. 8351, 8432(a), 8432(b), 8432(c), 8432(j),
8432d, 8474(b)(5) and (c)(1), and 8440e.
0
2. Amend Sec. 1600.12 to revise paragraph (d) to read as follows:
Sec. 1600.12 Contribution elections.
* * * * *
(d) A contribution election will take effect in accordance with the
rules set forth in this section.
(1) Except as provided in paragraph (d)(2) of this section, a
contribution election will become effective no later than the first
full pay period after it is received by the employing agency.
(2) In the case of a uniformed service member who entered service
on or after January 1, 2018, and who has not yet served 60 days, a
contribution election will become effective the first full pay period
following the date that is 60 days after the member's PEBD.
* * * * *
0
3. Add Sec. 1600.14 to subpart B to read as follows:
Sec. 1600.14 Effect of election to be covered by BRS.
(a) If a uniformed service member elects to be covered by BRS, the
member may make a contribution election at any time.
(b) Eligibility to make employee contributions, and therefore to
have Agency Matching Contributions made on the member's behalf, is
subject to the restrictions on making employee contributions after
receipt of a financial hardship in-service withdrawal described at 5
CFR part 1650.
(c) If the member had elected to make TSP contributions while not
covered by BRS, the election remains effective until the member makes a
new election.
(d) Agency Automatic (1%) Contributions for all members covered
under this section and, if applicable, Agency Matching Contributions
attributable to employee contributions must begin the first full pay
period that the transfer to BRS becomes effective.
0
3. Amend Sec. 1600.19 to revise paragraphs (a), (b)(1) introductory
text, (b)(2) and (c) to read as follows:
Sec. 1600.19 Employing agency contributions.
(a) Agency Automatic (1%) Contributions. Each pay period, subject
to the limitations in paragraph (d) of this section, any agency that
employs an individual covered by FERS or BRS must make a contribution
to that employee's tax-deferred balance for the benefit of the
individual equal to 1% of the basic pay paid to such employee for
service performed during that pay period. The employing agency must
make Agency Automatic (1%) Contributions without regard to whether the
employee elects to make employee contributions.
(b) Agency Matching Contributions. (1) Subject to the limitations
in paragraph (d) of this section, any agency that employs an individual
covered by FERS or BRS must make a contribution to the employee's tax-
deferred balance for the benefit of the employee equal to the sum of:
* * * * *
(2) A uniformed service member is not entitled to matching
contributions for contributions deducted from special or incentive pay
(including bonuses).
(c) Timing of employing agency contributions. (1) An employee
appointed or reappointed to a position covered by FERS is immediately
eligible to receive employing agency contributions.
(2) A uniformed service member covered by BRS will be eligible to
receive employing agency contributions pursuant to the following rules:
(i) A uniformed service member who first entered service on or
after January 1, 2018 is entitled to:
(A) Agency Automatic (1%) Contributions beginning in the first full
pay period following the date that is 60 days after the uniformed
service member's PEBD and ending in the first full pay period following
the date that is 26 years after the uniformed service member's PEBD.
(B) Agency Matching Contributions beginning in the first full pay
period following the date that is 2 years after the uniformed service
member's PEBD and ending in the first full pay period following the
date that is 26 years after the uniformed service member's PEBD.
(ii) A uniformed service member who elects to enroll in BRS is
entitled to:
(A) Agency Automatic (1%) Contributions beginning in the first full
pay period following the date the uniformed service member enrolled in
BRS and ending in the first full pay period following the date that is
26 years after the Uniformed service member's PEBD.
(B) Agency Matching Contributions beginning in the first full pay
period following the date the uniformed service member enrolled in BRS
and ending in the first full pay period following the date that is 26
years after the uniformed service member's PEBD.
0
4. Revise Sec. 1600.34 to read as follows:
Sec. 1600.34 Automatic enrollment program.
(a) All newly hired civilian employees who are eligible to
participate in the Thrift Savings Plan and those civilian employees who
are rehired after a separation in service of 31 or more calendar days
and who are eligible to participate in the TSP will automatically have
3% of their basic pay contributed to the employee's traditional TSP
balance (default employee contribution) unless, by the end of the
employee's first pay period (subject to the agency's processing time
frames), they elect:
(1) To not contribute;
(2) To contribute at some other level; or
(3) To make Roth contributions in addition to, or in lieu of,
traditional contributions.
(b) All uniformed service members who either enter service on or
after January 1, 2018 or re-enter service after a separation in service
of 31 or more calendar days after having been covered by BRS at the
time of separation will automatically have 3% of their basic pay
contributed to the member's traditional TSP balance (default employee
contribution) beginning the first full pay period following the date
that is 60 days after the member's PEBD unless they elect by the end of
that 60 day period:
(1) To not contribute;
(2) To contribute at some other level; or
(3) To make Roth contributions in addition to, or in lieu of,
traditional contributions.
(c) If, for any calendar year, a uniformed service member described
in paragraph (b) of this section does not make a contribution in the
final full pay period of such calendar year due to the member's
election to terminate contributions prior to the final full pay period,
then that member will automatically have 3% of his or her basic pay
contributed to his or her traditional TSP balance beginning the first
full pay period of the following calendar year unless he or she makes a
subsequent election by December 31st:
(1) To not contribute;
(2) To contribute at some other level;
(3) To make Roth contributions in addition to, or in lieu of,
traditional contributions.
0
5. Amend Sec. 1600.35 by revising the first sentence of paragraph (a)
and adding paragraph (f) to read as follows:
[[Page 42617]]
Sec. 1600.35 Refunds of default employee contributions.
(a) Subject to the limitations in paragraph (f) of this section, a
participant may request a refund of any default employee contributions
made on his or her behalf (i.e., the contributions made while under the
automatic enrollment program) provided the request is received within
90 days after the date that the first default employee contribution was
processed. * * *
* * * * *
(f) A participant may not receive a refund of default employee
contributions made pursuant to 5 CFR 1600.34(c).
0
6. Amend Sec. 1600.37 by revising the introductory text and paragraph
(d) to read as follows:
Sec. 1600.37 Notice.
The Board shall furnish all new employees and all rehired employees
covered by the automatic enrollment program, and all employees
described in paragraph (c) of 5 CFR 1600.34, covered by the automatic
enrollment program a notice that accurately describes:
* * * * *
(d) The employee's ability (or inability) to request a refund of
any default employee contributions (adjusted for allocable gains and
losses) and the procedure to request such a refund; and
* * * * *
PART 1601--PARTICIPANTS' CHOICES OF TSP FUNDS
0
7. The authority citation for part 1601 continues to read as follows:
Authority: 5 U.S.C. 8351, 8432d, 8438, 8474(b)(5) and (c)(1).
0
8. Revise Sec. 1601.13 to read as follows:
Sec. 1601.13 Elections.
(a) Contribution allocation. Each participant may indicate his or
her choice of TSP Funds for the allocation of future deposits by using
the TSP Web site or the ThriftLine, or by completing and filing the
appropriate paper TSP form with the TSP record keeper in accordance
with the form's instructions. 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 TSP Funds
must equal 100 percent;
(2) The percentage elected by a participant for investment of
future deposits in a TSP Fund will be applied to all sources of
contributions and transfers (or rollovers) from traditional IRAs and
eligible employer plans. A participant may not make different
percentage elections for different sources of contributions;
(3) The following default investment rules shall apply to civilian
participants:
(i) All deposits made on behalf of a civilian participant enrolled
prior to September 5, 2015 who does not have a contribution allocation
in effect will be invested in the G Fund. A civilian participant who is
enrolled prior to September 5, 2015 and subsequently rehired on or
after September 5, 2015 and has a positive account balance will be
considered enrolled prior to September 5, 2015 for purposes of this
paragraph; and
(ii) All deposits made on behalf of a civilian participant first
enrolled on or after September 5, 2015 who does not have a contribution
allocation in effect will be invested in the age-appropriate TSP
Lifecycle Fund;
(iii) A civilian participant enrolled prior to September 5, 2015
who elects for the first time to invest in a TSP Fund other than the G
Fund must execute an acknowledgement of risk in accordance with Sec.
1601.33;
(4) The following default investment rules shall apply to uniformed
services participants:
(i) All deposits made on behalf of a uniformed services participant
who first entered service prior to January 1, 2018, has not elected to
be covered by BRS, and does not have a contribution allocation in
effect will be invested in the G Fund;
(ii) All deposits made on behalf of a uniformed services
participant who first entered service on or after January 1, 2018 and
who does not have a contribution allocation in effect will be invested
in the age-appropriate TSP Lifecycle Fund;
(iii) If a uniformed services participant makes an election to be
covered by BRS as described in 5 CFR 1600.14 and does not have a
contribution allocation in effect at the time of the election, then all
deposits made after the date of such election will be invested in the
age-appropriate TSP Lifecycle Fund. Deposits made prior to the date of
the election will remain invested in the G Fund.
(iv) A uniformed services participant who first entered service
prior to January 1, 2018 and has not made an election to be covered by
the BRS who elects for the first time to invest in a TSP Fund other
than the G Fund must execute an acknowledgement of risk in accordance
with Sec. 1601.33;
(5) Once a contribution allocation becomes effective, it remains in
effect until it is superseded by a subsequent contribution allocation
or the participant's account balance is reduced to zero. If a rehired
participant has a positive account balance and a contribution
allocation in effect, then the participant's contribution allocation
will remain in effect until a new allocation is made. If, however, the
participant (other than a participant described in paragraph (a)(4)(i)
of this section) has a zero account balance, then the participant's
contributions will be allocated to the age-appropriate TSP Lifecycle
Fund until a new allocation is made.
(b) Effect of rejection of contribution allocation. If a
participant does not correctly complete a contribution allocation, 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
or type of employee contributions he or she wishes to make to the TSP
or may stop contributions only in accordance with 5 CFR part 1600.
0
9. Amend Sec. 1601.33 by revising the first sentence of paragraph (a)
to read as follows:
Sec. 1601.33 Acknowledgment of risk.
(a) Uniformed services participants who first entered service prior
to January 1, 2018 and who have not elected to be covered by BRS and
civilian participants who enrolled prior to September 5, 2015 must
execute an acknowledgement of risk in order to invest in a TSP Fund
other than the G Fund. * * *
* * * * *
PART 1603--VESTING
0
10. 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).
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11. Amend paragraph (b) of Sec. 1603.1 as follows:
0
a. Amend the definition of ``Service'' by removing ``Service'' and
adding in its place ``Civilian service''.
0
b. Add ``Military service means service that is creditable under 37
U.S.C. 205'' in alphabetical order.
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12. Revise Sec. 1603.2 to read as follows:
Sec. 1603.2 Basic vesting rules.
(a) All amounts in a CSRS employee's individual account are
immediately vested.
(b) Except as provided in paragraph (c) of this section, all
amounts in a FERS employee's or uniformed service member's individual
account (including all first conversion contributions) are immediately
vested.
[[Page 42618]]
(c) Except as provided in paragraph (d) of this section, upon
separation from Government service without meeting the applicable
service requirements of Sec. 1603.3, a FERS employee's or a BRS
uniformed service member's Agency Automatic (1%) Contributions and
attributable earnings will be forfeited.
(d) If a FERS employee or uniformed service member dies (or died)
after January 7, 1988, without meeting the applicable service
requirements set forth in Sec. 1603.3, the Agency Automatic (1%)
Contributions and attributable earnings in his or her individual
account are deemed vested and shall not be forfeited. If a FERS
employee died on or before January 7, 1988, without meeting those
service requirements, his or her Agency Automatic (1%) Contributions
and attributable earnings are forfeited to the Thrift Savings Plan.
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13. Amend Sec. 1603.3 to revise paragraph (a) and the introductory
text in paragraph (b), and to add a new paragraph (c) to read as
follows:
Sec. 1603.3 Service requirements.
(a) Except as provided under paragraph (b) of this section, FERS
employees will be vested in their Agency Automatic (1%) Contributions
and attributable earnings upon separating from Government only if, as
of their separation date, they have completed three years of civilian
service.
(b) FERS employees will be vested in their Agency Automatic (1%)
Contributions and attributable earnings upon separating from Government
service if, as of their separation date, they have completed two years
of civilian service and they are serving in one of the following
positions:
* * * * *
(c) Uniformed service members who are covered by BRS will be vested
in their Agency Automatic (1%) Contributions and attributable earnings
upon separation from the uniformed services only if, as of their
separation date, they have completed two years of military service.
PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS
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14. The authority citation for part 1605 continues to read as follows:
Authority: 5 U.S.C. 8351, 8432a, 8432d, 8474(b)(5) and (c)(1).
Subpart B also issued under section 1043(b) of Public Law 104-106,
110 Stat. 186 and Sec. 7202(m)(2) of Public Law 101-508, 104 Stat.
1388.
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15. Amend paragraph (b) of Sec. 1605.1 by adding in alphabetical order
as follows:
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a. ``BRS participant means any member of the Uniformed Services
described in 5 U.S.C. 8440e(e)(1).''
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b. ``Non-BRS participant means any member of the Uniformed Services not
described in 5 U.S.C. 8440e(e)(1).''
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16. Amend Sec. 1605.3 to add paragraph (c) to read as follows:
Sec. 1605.3 Calculating, posting, and charging breakage on errors
involving investment in the wrong fund.
* * * * *
(c) If a uniformed services participant's retirement system is
misclassified and the error results in default investment in the wrong
fund, when the error is corrected pursuant to 5 CFR 1605.14(f)-(g), the
TSP will charge the employing agency for any positive breakage that
results from the incorrect default investment. The retirement
misclassification correction received from an employing agency will not
trigger corrective action other than to update the participant's
retirement system coverage. To initiate a breakage calculation for the
uniformed service member, the employing agency must notify the TSP that
the participant is entitled to breakage.
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17. Amend Sec. 1605.11 by revising the introductory text of paragraph
(b) to read as follows:
Sec. 1605.11 Makeup of missed or insufficient contributions.
* * * * *
(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) and 5 U.S.C. 8440e(e)(3)(A), or Agency
Matching Contributions that are required under section 8432(c)(2) and 5
U.S.C. 8440e(e)(3)(B), the following rules apply:
* * * * *
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18. Amend Sec. 1605.14 by adding paragraphs (f) and (g) to read as
follows:
Sec. 1605.14 Misclassified retirement system coverage.
* * * * *
(f) If a BRS participant is misclassified by an employing agency as
a non-BRS participant, when the misclassification is corrected:
(1) The participant may not elect to have the contributions made
while classified as non-BRS 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 BRS 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; and
(4) The employing agency must submit makeup employee contributions
on current payment records and service makeup contributions may be
submitted on either current or late payment records.
(g) If a non-BRS participant is misclassified by an employing
agency as a BRS participant, when the misclassification is corrected:
(1) Employee contributions may remain in the participant's account.
If the participant requests a refund of employee contributions, the
employing agency must submit a negative adjustment record to remove
these funds under the procedure described in Sec. 1605.12.
(2) The TSP will forfeit all agency contributions that were made to
a non-BRS participant's account. An employing service may submit a
negative adjustment record to request the return of an erroneous
contribution that has been in the participant's account for less than
one year.
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19. Amend Sec. 1605.31 by revising paragraphs (c)(1) and (d), and by
adding paragraph (c)(5) to read as follows:
Sec. 1605.31 Contributions missed as a result of military service.
* * * * *
(c) * * *
(1) The employee is entitled to receive the Agency Automatic (1%)
Contributions that he or she would have received had he or she remained
in civilian service or pay status. Within 60 days of the employee's
reemployment or restoration to pay status, the employing agency must
calculate the Agency Automatic (1%) makeup contributions and report
those contributions to the record keeper, subject to any reduction in
Automatic (1%) Contributions required by paragraph (c)(5) of this
section.
* * * * *
(5) If the employee received uniformed services Automatic (1%)
Contributions, the Agency Automatic (1%) Contributions will be reduced
by the amount of the uniformed services Automatic (1%) Contributions.
* * * * *
(d) Breakage. The employee is entitled to breakage on agency
contributions made under paragraph (c) of this section. Breakage will
be calculated based on the contribution allocation(s)
[[Page 42619]]
on file for the participant during the period of military service.
PART 1650--METHODS OF WITHDRAWING FUNDS FROM THE THRIFT SAVINGS
PLAN
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20. The authority citation for part 1650 continues to read as follows:
Authority: 5 U.S.C. 8351, 8432d, 8433, 8434, 8435, 8474(b)(5)
and 8474(c)(1).
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21. Amend Sec. 1650.33 to revise the second sentence of paragraph (b)
to read as follows:
Sec. 1650.33 Contributing to the TSP after an in-service withdrawal.
* * * * *
(b) * * * Therefore, the participant's employing agency will
discontinue his or her contributions (and any applicable Agency
Matching Contributions) for six months after the agency is notified by
the TSP; in the case of a FERS or BRS participant, Agency Automatic
(1%) Contributions will continue. * * *
PART 1690--THRIFT SAVINGS PLAN
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22. The authority citation for part 1690 continues to read as follows:
Authority: 5 U.S.C. 8474.
0
23. Amend Sec. 1690.1 as follows:
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a. Revise the definitions of Agency Automatic (1%) Contributions,
Agency Matching Contributions, Bonus contribution, Civilian employee,
Employer contributions, Employing agency, Uniformed service member, and
Uniformed services.
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b. Add definitions for BRS, BRS participant, Employee and PEBD in
alphabetical order.
Sec. 1690.1 Definitions.
* * * * *
Agency Automatic (1%) Contributions means any contributions made
under 5 U.S.C. 8432(c)(1) and (c)(3). It also includes service
automatic (1%) contributions made under 5 U.S.C. 8440e(e)(3)(A).
Agency Matching Contributions means any contributions made under 5
U.S.C. 8432(c)(2). It also includes service matching contributions
under 5 U.S.C. 8440e(e)(3)(B).
* * * * *
Bonus contributions means contributions made by a participant from
any part of any special or incentive pay that the participant receives
under chapter 5 of title 37.
* * * * *
BRS means the blended retirement system as established by the
National Defense Authorization Act for FY 2016, Public Law 114-92,
Sec. Sec. 631-635 (2015).
BRS participant means a TSP participant covered by BRS.
* * * * *
Civilian employee or civilian participant means a TSP participant
covered by the Federal Employees' Retirement System, the Civil Service
Retirement System, or equivalent retirement plan.
* * * * *
Employer contributions means Agency Automatic (1%) Contributions
under 5 U.S.C. 8432(c)(1), 8432(c)(3), or 5 U.S.C. 8440e(e)(3)(A) and
Agency Matching Contributions under 5 U.S.C. 8432(c)(2) or 5 U.S.C.
8440e(e)(3)(B).
Employing agency means the organization (or the payroll office that
services the organization) that employs an individual eligible to
contribute to the TSP and that has authority to make personnel
compensation decisions for the individual. It includes the employing
service for members of the uniformed services.
* * * * *
PEBD means the pay entry base date (or pay entry basic date for
some services), which is determined by each uniformed service and is
used to calculate how much time in service a member has for the purpose
of determining longevity pay rates.
* * * * *
Uniformed service member or uniformed services participant means a
TSP participant who is a member of the uniformed services on active
duty or a member of the Ready Reserve in any pay status.
* * * * *
Uniformed services means the Army, Navy, Air Force, Marine Corps,
Coast Guard, Public Health Service Commissioned Corps, and the National
Oceanic and Atmospheric Administration Commissioned Officer Corps.
[FR Doc. 2017-18838 Filed 9-8-17; 8:45 am]
BILLING CODE 6760-01-P