U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1

79–010

" ! SENATE 106TH CONGRESS

2d Session

REPORT

2000

106–343

Calendar No. 682

A BILL TO AMEND THE THRIFT SAVINGS

PLAN

REPORT

OF THE

COMMITTEE ON GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

TO ACCOMPANY

H.R. 208

TO AMEND TITLE 5, UNITED STATES CODE, TO ALLOW FOR THE

CONTRIBUTION OF CERTAIN ROLLOVER DISTRIBUTIONS TO ACCOUNTS IN THE THRIFT SAVINGS PLAN, TO ELIMINATE CERTAIN WAITING-PERIOD REQUIREMENTS FOR PARTICIPATING IN

THE THRIFT SAVINGS PLAN, AND FOR OTHER PURPOSES

JULY 13, 2000.—Ordered to be printed

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

FRED THOMPSON, Tennessee, Chairman

WILLIAM V. ROTH, JR., Delaware

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

ARLEN SPECTER, Pennsylvania

JUDD GREGG, New Hampshire

JOSEPH I. LIEBERMAN, Connecticut

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

JOHN EDWARDS, North Carolina

HANNAH S. SISTARE, Staff Director and Counsel

DAN G. BLAIR, Senior Counsel

MICHAEL L. LOESCH, Counsel,

International Security, Proliferation, and Federal Services Subcommittee

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel

LAWRENCE B. NOVEY, Minority Counsel

NANCI E. LANGLEY, Minority Deputy Staff Director,

International Security, Proliferation, and Federal Services Subcommittee

DARLA D. CASSELL, Chief Clerk

(III)

C O N T E N T S

Page

I. Purpose ........................................................................................................... 1

II. Background .................................................................................................... 1

III. Legislative History ......................................................................................... 4

IV. Section-by-Section Analysis .......................................................................... 4

V. Regulatory Impact Statement ....................................................................... 5

VI. Congressional Budget Office Cost Estimate ................................................ 5

VII. Executive Communications ........................................................................... 8

VIII. Changes in Existing Law .............................................................................. 9

79–010

Calendar No. 682

106TH CONGRESS REPORT

2d Session " ! SENATE 106–343

TO AMEND THE THRIFT SAVINGS PLAN

JULY 13, 2000.—Ordered to be printed

Mr. THOMPSON, from the Committee on Governmental Affairs,

submitted the following

REPORT

[To accompany H.R. 208]

The Committee on Governmental Affairs, to which was referred

the bill (H.R. 208) to amend title 5, United States Code, to allow

for the contribution of certain rollover distributions to accounts in

the Thrift Savings Plan, to eliminate certain waiting-period requirements for participating in the Thrift Savings Plan, and for

other purposes, having considered the same, reports favorably

thereon with amendments and recommends that the bill as amended do pass.

I. PURPOSE

H.R. 208, as reported by the Committee on Governmental Affairs, amends title 5, United States Code, to allow for the contribution of certain rollover distributions from qualified retirement accounts, including private sector 401(k) plans, to accounts in the

Thrift Savings Plan, and eliminates the waiting period for participating in the Thrift Savings Plan.

II. BACKGROUND AND SUMMARY OF LEGISLATION

A. BACKGROUND ON THE THRIFT SAVINGS PLAN

The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees. Congress created the TSP

when it enacted the Federal Employees’ Retirement System Act of

1986. The TSP is the public sector counterpart to private sector

‘‘401(k)’’ retirement plans whereby employees are eligible to contribute a portion of their pre-tax income to their accounts. Employees covered by the Federal Employees’ Retirement System (FERS)

and the Civil Service Retirement System (CSRS) can contribute to

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the TSP although the rules governing the participation of each

group differ depending in which retirement plan the employee participates.

The TSP is a defined contribution plan. The retirement income

an employee receives from this account depends on how much the

employee has contributed during his or her working years and the

amount of earnings on these contributions. The contributions an

employee makes to his or her account are voluntary and are separate from the contributions required to be made for the FERS Basic

Annuity or the CSRS annuity.

The TSP adds an important element of portability to federal retirement benefits. All TSP participants are immediately vested in

their contributions to the plan and any growth in the value of their

investment from interest, dividends, and capital gains. FERS participants are immediately vested in the federal matching contributions as well as those earnings on those contributions. Workers

who leave the federal government for jobs in other sectors of the

economy can leave their money in the TSP—where it will continue

to accrue interest, dividends, and capital gains according to the

performance of the funds in which they have chosen to invest—or

they can ‘‘roll over’’ their TSP funds on a tax-deferred basis into

another tax-qualified retirement savings account such as an IRA or

401(k) plan.

Further, the TSP is particularly important for those employees

covered by the FERS, since those employees receive smaller defined

benefits and need to invest greater amounts in the TSP in order

to enhance their retirement income. According to the Congressional

Research Service, workers in the middle and upper ranges of the

federal pay scale are unlikely to achieve adequate retirement income from just Social Security and the FERS basic annuity. CRS

reports that even at a modest annual rate of return of 6 percent,

the TSP can replace 32 percent of final pay for a worker who contributes 10 percent of pay over 30 years of federal service.

As of March 2000, there were 2.5 million participants in the TSP,

including 2.1 million active employees for the federal government

and the U.S. Postal Service. Of this number, almost 1.9 million employees were actively contributing some portion of their pay to the

TSP. Among active employees who were covered by FERS, 86.2

percent of those who were eligible to participate made contributions

to the TSP, compared to 86.1 percent a year earlier. Among employees enrolled in the CSRS, 64.5 percent participated in the TSP,

compared to 61.4 percent a year earlier. The combined value of the

2.5 million TSP accounts is $98.2 billion. The G Fund, which consists exclusively of investments in short-term nonmarketable U.S.

Treasury securities, held $31.4 billion. The F Fund, which is invested in an index fund tied to fixed income securities, held $3.9

billion. The C Fund, which is invested in a commingled stock index

fund that tracks the Standard & Poor’s 500, held $62.9 billion.

B. SUMMARY OF H.R. 208, AS REPORTED BY THE COMMITTEE

H.R. 208 establishes new incentives for employees to participate

in the TSP, thus encouraging savings for retirement. First, the bill

will permit newly hired Federal employees to begin making tax-advantaged contributions toward their own retirement earlier than

allowed under existing law. Current law requires new hires to wait

3

until the second TSP open season after they begin working for the

government, which for many new employees may be as long as a

year. By reducing the waiting period for participation, H.R. 208 encourages employees to begin their retirement savings immediately.

Second, employees are allowed to contribute ‘‘rollover’’ distributions

from qualified trusts, such as 401(k) plans and IRAs to the TSP.

These rollover contributions are not permitted under current law.

By permitting these roll-overs, the legislation allows employees to

consolidate their retirement savings in one account for greater ease

of administration.

Since new employees will be participating in the TSP sooner

than they otherwise could under current law, tax revenues will be

affected. During consideration of H.R. 208 by the House Government Reform Committee, the House Committee adopted an amendment to provide for an offset of these lost revenues. This offset provision required that federal agencies contribute to the Civil Service

Retirement and Disability Trust Fund (Fund) for employees covered by FERS by 1/100 of a percentage point.

The Administration objected to the funding mechanism as adopted by the House. The Administration said the mandated agency

contributions were unrelated to either the benefits derived from the

TSP or the retirement programs that are financed through the

Fund. Further, the Administration expressed concern that requiring nonprogrammatic deposits into the Fund would set a bad precedent that could lead to the future use of the Fund as a source of

payments unrelated to the retirement programs it supports.

In order to respond to Administration concerns while still providing an offset to compensate for the loss of revenues, the Committee on Governmental Affairs adopted an amendment, offered by

Senator Akaka and supported by the Administration, which would

allow the Office of Personnel Management to recognize court orders

prohibiting a federal employee who is going through a divorce proceeding from withdrawing his or her retirement contributions to

the Civil Service Retirement and Disability Trust Fund. Senator

Akaka offered the amendment and the Committee adopted the provision based on cost estimates provided by the Office of Personnel

Management. OPM estimated the provision would provide an offset

of $32.4 million. However, the Congressional Budget Office later estimated the amendment to provide an offset of $11 million.

Under current law, a withdrawal of retirement contributions

from the Fund terminates an employee’s rights, and those of the

spouse, to a retirement annuity. Furthermore, until a divorce is

final and the property settlement complete, a court is unable to

prevent an individual from withdrawing his or her contribution.

This situation can create two problems. First, the court has no

means of delaying payment of the refund while it considers whether to award the prospective former spouse an annuity. Second,

State courts often do not realize that merely awarding a survivor

annuity or a portion of an employee’s annuity, without also issuing

a specific order barring payment of a refund, will not prevent payment of a refund that will terminate those annuity rights.

The amendment grants OPM the authority to recognize a court

order barring payment of a refund of an employee’s contributions

during the pendency of a divorce. Recognition of these orders preserves the court’s ability to award retirement or survivor benefits

4

to the former spouse since payment of a refund would extinguish

the spouse’s or former spouse’s entitlement to such benefits. The

amendment gives courts the ability to issue orders that prevent

OPM from refunding an employee’s contribution until the court has

reviewed the issues, finalized the divorce, and issued a property

settlement.

The amendment is intended to provide a partial offset to the loss

of revenues by retaining money in the Fund that would otherwise

be paid out to employees.

III. LEGISLATIVE HISTORY

H.R. 208 was introduced in the House of Representatives on January 6, 1999, by Representative Connie Morella, and the bill was

referred subsequently to the Committee on Government Reform

Subcommittee on Civil Service. On February 25, 1999, the Subcommittee considered the bill and forwarded the bill to the Committee on Government Reform by voice vote. The Committee on

Government Reform considered the bill on March 17, 1999, and

H.R. 208 was ordered reported to the full House by voice vote. On

April 20, 1999, the House of Representatives approved the bill

under suspension of the rules by voice vote.

H.R. 208 was received by the Senate on April 21 and referred to

the Committee on Governmental Affairs. The legislation was referred to the Subcommittee on International Security, Proliferation

and Federal Services on May 13, 1999. On March 3, 2000, the Subcommittee reported H.R. 208 to the full Committee on Governmental Affairs by polling letter. No hearings were held on the bill.

On June 14, the full Committee considered H.R. 208. Sen. Akaka

offered an amendment to strike section 3 of the bill and insert an

alternative financing mechanism to offset the lost tax revenues incurred as a result of immediate new employee participation in the

TSP. Section 3 of the House-passed bill required agencies to increase their FERS contributions to the Civil Service Retirement

Trust Fund by 0.01% to offset the costs of the bill. The Committee

amendment replaced this financing mechanism. This provision generates savings by allowing OPM to recognize court orders to retain

funds in the Civil Service Retirement Trust, which otherwise might

be withdrawn or paid out in an annuity, during the pendency of a

divorce or until a court resolves the divorce and property settlement issues before it. The amendment was adopted by voice vote

and H.R. 208, as amended, was ordered to be reported by the full

Committee by voice vote. Committee members present were Senators Stevens, Collins, Voinovich, Cochran, Lieberman, Akaka,

Torricelli, Cleland and Thompson.

IV. SECTION-BY-SECTION ANALYSIS

Section 1. Eligible rollover distributions

As approved by the Committee, this section amends 5 U.S.C.

8432 to allow the Thrift Savings Plan (TSP) to accept the same

roll-over distributions that a (private sector) qualified trust may accept under the Internal Revenue Code (I.R.C.) of 1986. Currently,

qualified trusts, as defined by section 402(c)(8) of the I.R.C., may

accept rollovers from other qualified trusts, 403(a) qualified annuity plans, and conduit individual retirement accounts (IRAs) that

5

consist solely of assets rolled over from a qualified trust or a 403(a)

qualified annuity plan. The language approved by the Committee

would automatically allow the TSP to accept rollovers from additional sources if the rollover authority of a qualified trust is expanded by pending or future legislative changes to the I.R.C. This

section takes effect at the earliest practicable date after September

30, 2000, as determined by the Executive Director of the Federal

Retirement Thrift Investment Board.

Section 2. Immediate participation in the Thrift Savings Plan

This section amends 5 U.S.C. 8432(b) to eliminate statutorily required waiting periods before employees and Members may contribute to the TSP. Under this section, such individuals will be eligible to make employee contributions from their basic pay beginning with their first day of service or, if that is not administratively feasible, on the earliest date thereafter that the Executive

Director determines to be feasible. This amendment does not affect

employer contributions (i.e., Agency Automatic (1%) and Agency

Matching Contributions), which remain subject to the mandatory

waiting periods. This section takes effect at the earliest practicable

date after September 30, 2000, as determined by the Executive Director of the Federal Retirement Thrift Investment Board.

Section 3. Court orders affecting refunds

This section amends chapters 83 and 84 of title 5, U.S.C. to allow

the Office of Personnel Management the authority to bar payment

of refunds of an employee’s retirement contributions if it has received a court order barring such payment in order to preserve the

court’s ability to award a survivor or former spouse’s annuity, or

if payment of the refund would extinguish the entitlement of the

spouse or former spouse to retirement or survivor benefits during

the pendency of a divorce.

V. REGULATORY IMPACT STATEMENT

Paragraph 11(b)(1) of rule XXVI of Standing Rules of the Senate

requires that each report accompanying a bill evaluate ‘‘the regulatory impact which would be incurred in carrying out this bill.’’

H.R. 208 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would

have little or no impact on the budgets of state, local, or tribal governments.

VI. COST ESTIMATE PROVIDED BY THE CONGRESSIONAL BUDGET

OFFICE

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, June 29, 2000.

Hon. FRED THOMPSON, Chairman, Committee on Governmental Affairs,

U.S. Senate, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 208, a bill amending the

Thrift Savings Plan for federal employees.

6

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contact is Eric Rollins.

Sincerely,

STEVEN LIEBERMAN

(For Dan L. Crippen, Director).

Enclosure.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

H.R. 208—An act to amend title 5, United States Code, to allow for

the contribution of certain rollover distributions to accounts in

the Thrift Savings Plan, to eliminate certain waiting-period requirements for participating in the Thrift Savings Plan, and for

other purposes.

Summary: H.R. 208 would make a number of changes to the federal government’s civilian retirement programs. The act would let

newly hired federal employees make contributions to the Thrift

Savings Plan (TSP) sooner than allowed under current law and let

federal employees transfer balances from other tax-deferred savings plans to their TSP accounts. The act would also authorize

courts to prevent former federal employees from withdrawing their

retirement contributions until divorce proceedings are finalized.

CBO estimates that enacting H.R. 208 would decrease revenues

by $45 million over the 2001–2005 period. That revenue loss would

be partially offset by a reduction of $11 million in direct spending

for refunds of retirement contributions. Because this act would affect direct spending and receipts, pay-as-you-go procedures would

apply.

H.R. 208 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would

have little or no impact on the budgets of state, local, or tribal governments.

Estimated cost to the Federal Government: The estimated budgetary impact on H.R. 208 is shown in the following table. For the

purposes of this estimate, CBO assumed that H.R. 208 would be

enacted by October 2000.

By fiscal year, in millions of dollars

2000 2001 2002 2003 2004 2005

CHANGES IN DIRECT SPENDING

Estimated budget authority ............................................. 0 ¥3 ¥2 ¥2 ¥2 ¥2

Estimated outlays ............................................................. 0 ¥3 ¥2 ¥2 ¥2 ¥2

CHANGES IN REVENUES

Estimated revenues .......................................................... 0 ¥6 ¥9 ¥9 ¥10 ¥11

Note: The Joint Committee on Taxation prepared the estimates of the changes in revenues.

The effects of this legislation on direct spending fall within budget function 600 (income security).

BASIS OF ESTIMATE

Direct spending

Restrict Payments of Refunds of Retirement Contributions.—Federal employees covered by the Civil Service Retirement System

(CSRS) or the Federal Employee Retirement System (FERS) contribute a portion of their salaries to the Civil Service Retirement

7

and Disability Fund. Individuals may have their retirement contributions refunded to them after leaving government service, but

periods of service covered by refunds are not counted in calculating

the amount of retirement benefits. (FERS employees also may not

count refunded service in determining retirement eligibility.)

For this reason, in order to preserve a former spouse’s entitlement to a portion of an employee’s annuity or a survivor benefit,

divorce settlements may prohibit a former employee from taking a

refund. Under current law, however, courts can only bar refund

payments as part of a final divorce settlement. H.R. 208 would

allow courts to bar payments of refunds while divorce proceedings

are still in progress.

Based on information from the Office of Personnel Management,

CBO estimates that about 27,000 former employees would receive

refunds annually under current law. Using data on marriage and

divorce rates from the National Center for Health Statistics, CBO

anticipates that 600 of those employees would be going through divorce proceedings. CBO estimates that the bill would prevent 400

employees per year from receiving refunds, and delay payment for

another 100 employees by six months. Overall, CBO estimates that

H.R. 208 would lower refund payments by $11 million over the

2000–2005 period. Annual savings would decline in later years because an increasing number of refunds would be paid to employees

covered by FERS, which pays much smaller refunds than CSRS.

(The average refund affected by this act would be about $6,700 in

2001, and would decline to about $5,300 in 2005.) In the long run,

spending on federal retirement benefits would increase since more

employees would be eligible for retirement benefits.

Revenues

Allow New Hires to Participate in TSP Sooner.—Newly hired federal employees must now wait two open seasons (6 to 12 months)

before they can begin making contributions to the TSP. H.R. 208

would allow new hires to begin making TSP contributions immediately, although government contributions would still not begin

until the second open season. The portion of an employee’s salary

that is contributed to the TSP is not taxed until it is withdrawn

from the plan.

The Joint Committee on Taxation (JCT) estimates that the federal government would forgo tax revenues of $45 million over the

2000–2005 period as a result of this provision. Based on recent experience, JCT assumed that between 90,000 and 95,000 eligible

employees would be hired each year, and that most of those new

hires would participate in the TSP. Under the act, employees would

contribute more money to their TSP accounts than under current

law, and thus taxes would be deferred on more of their income.

Allow Rollovers from Other Tax-Deferred Savings Plans.—H.R.

208 would allow employees to transfer funds from certain tax-deferred savings plans, such as a 401(k) plan from a previous job, to

their TSP accounts. JCT estimates that this provision would not

have a significant budgetary impact.

Pay-as-you-go considerations: The Balanced Budget and Emergency Deficit Control Act sets up pay-as-you-go procedures for legislation affecting direct spending or receipts. The net changes in

outlays and governmental receipts that are subject to pay-as-youVerDate 11-MAY-2000 17:28 Jul 15, 2000 Jkt 079010 PO 00000 Frm 00011 Fmt 6659 Sfmt 6602 E:\HR\OC\SR343.XXX pfrm02 PsN: SR343
8

go procedures are shown in the following table. For the purposes

of enforcing pay-as-you-go procedures, only the affects in the current year, the budget year, and the succeeding four years are

counted.

By fiscal year, in millions of dollars

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Changes in outlays ........ 0 ¥3 ¥2 ¥2 ¥2 ¥2 ¥2 ¥2 ¥2 ¥2 ¥2

Changes in receipts ....... 0 ¥6 ¥9 ¥9 ¥10 ¥11 ¥11 ¥12 ¥13 ¥13 ¥14

Intergovernmental and private-sector impact: H.R. 208 contains

no intergovernmental or private-sector mandates as defined in the

Unfunded Mandates Reform Act and would have little or no impact

on the budgets of state, local, or tribal governments.

Previous CBO estimate: On March 26, 1999, CBO estimated that

H.R. 208, as ordered reported by the House Committee on Government Reform on March 17, 1999, would increase discretionary

spending by $35 million and have no net effect on direct spending

over the 2000–2004 period. The two major differences between the

two versions of H.R. 208 is that the House version does not have

a provision affecting refund payments, and the Senate version

would not change agency retirement contributions. In addition,

CBO has extended its estimate to include the budgetary effects in

2005.

Estimate prepared by: Federal Costs: Eric Rollins; impact on

State, Local, and Tribal Governments: Leo Lex; and impact on the

Private Sector: John Harris.

Estimate approved by: Robert A. Sunshine, Assistant Director for

Budget Analysis.

VII. EXECUTIVE COMMUNICATIONS

FEDERAL RETIREMENT

THRIFT INVESTMENT BOARD,

Washington, DC, June 22, 2000.

Hon. FRED THOMPSON,

Chairman, Committee on Governmental Affairs,

U.S. Senate, Washington, DC.

DEAR MR. CHAIRMAN: I am writing to you in my capacity as the

chief executive and managing fiduciary of the Federal Retirement

Thrift Investment Board, the agency that manages the Thrift Savings Plan (TSP) for Federal employees. I am pleased to address for

the record an issue raised by Senator Ted Stevens and conveyed to

the Board by Senator Daniel Akaka concerning H.R. 208, legislation recently considered by your committee.

As you know, the TSP offers Federal civilian employees the same

type of retirement savings and tax benefits that many private corporations offer their employees under so-called ‘‘401(k)’’ plans. H.R.

208, as amended by Senator Akaka, will permit the TSP to accept

rollover contributions from the same full range of sources as is now

allowed to similar private sector plans.

Participants would benefit from this provision because their portable retirement savings could be consolidated in the TSP, and the

special tax status accorded to such savings would be preserved. I

9

expect this additional benefit would be welcomed by participants,

and we would be pleased to make it available.

The question has arisen whether participants who roll over substantial tax-deferred savings to the TSP from other plans might in

some way be subsidized by other TSP participants with smaller accounts. This would not occur because each participant’s share of

TSP administrative expenses is progressive, i.e., it is based on the

size of his or her account balance. Thus, the larger the account balance, the larger the dollar amount charged for administrative expenses, and vice versa.

Nevertheless, because of its very low administrative expense ratios overall, participants who choose to take advantage of the rollover provision of H.R. 208, just like those who simply contribute

during their Federal service, will find the TSP to be very economical. In 1999, TSP expenses charged to participants totaled .05 percent for investments in the Government Securities Investment (G)

Fund, .06 percent for investments in the Common Stock Index Investment (C) Fund, and .07 percent for investments in the Fixed

Income Index Investment (F) Fund. In dollar terms, this means

that 1999 G Fund earnings were reduced approximately $.50 for

every $1,000 in a G Fund account balance. Similarly, C and F

Fund earnings were reduced approximately $.60 and $.70, respectively, for every $1,000 in C and F Fund account balances.

Based on the above costs, a G Fund investor with a $5,000 account balance would have paid only $2.50 (.05 percent) in TSP expenses in 1999. In return, he or she had the right, without further

charges, to start or stop contributions, change how those contributions were invested, borrow and repay, make withdrawals, execute

monthly interfund transfers, and receive two account statements

(and, if applicable, four loan statements) each year. Since a $2.50

charge would not cover the strictly allocable costs associated with

all of those activities, the small account holder is subsidized by

other Plan participants. As his or her account balance grows, however, it will cover its own notional costs and eventually cover some

of the costs associated with new, smaller accounts.

Rollover contributions would be subject to the same balancebased charges. Thus, if rollover funds of $100,000 were invested in

the G Fund in 1999, the participant would have paid .05 percent,

or $50, for the same rights, more than enough to cover the TSP

costs associated with that account, but still a very small charge

when compared to private-sector alternatives.

I hope this clarifies the benefit and cost allocation associated

with the rollover provision of H.R. 208 as amended.

Sincerely,

ROGER W. MEHLE, Executive Director.

VIII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with paragraph 12 of rule XXVI of the Standing

Rules of the Senate, changes in existing law made by the bill, as

reported, are shown as follows (existing law proposed to be omitted

is enclosed in black brackets, new matter is printed in italic, existing law in which no change is proposed is shown in roman):

10

TITLE 5, UNITED STATES CODE

* * * * * * *

PART III—EMPLOYEES

* * * * * * *

Subpart G—Insurance and Annuities

* * * * * * *

CHAPTER 83—RETIREMENT

* * * * * * *

Subchapter III-Civil Service Retirement

* * * * * * *

§ 8342. Lump-sum benefits; designation of beneficiary; order

of precedence

(a) * * *

* * * * * * *

ø(j)(1) Payment of the lump-sum credit under subsection (a) of

this section—

(A) may be made only if any current spouse and any former

spouse of the employee or Member are notified of the employee

or Member’s application; and

(B) shall be subject to the terms of a court decree of divorce,

annulment, or legal separation or any court order or court approved property settlement agreement incident to such decree

if—

(i) the decree, order, or agreement expressly relates to

any portion of the lump-sum credit involved; and

(ii) payment of the lump-sum credit would extinguish entitlement of the employee’s or Member’s spouse or former

spouse to a survivor annuity under section 8341(h) of this

title or to any portion of an annuity under section 8345(j)

of this title.¿

(j)(1)(A) Payment of the lump-sum credit under subsection (a) may

be made only if the spouse, if any, and any former spouse of the employee or Member are notified of the employee or Member’s application.

(B) The Office shall prescribe regulations under which the lumpsum credit shall not be paid without the consent of a spouse or

former spouse of the employee or Member where the Office has received such additional information and documentation as the Office

may require that—

(i) a court order bars payment of the lump-sum credit in

order to preserve the court’s ability to award an annuity under

section 8341(h) or section 8345(j); or

(ii) payment of the lump-sum credit would extinguish the entitlement of the spouse or former spouse, under a court order

11

on file with the Office, to a survivor annuity under section

8341(h) or to any portion of an annuity under section 8345(j).

* * * * * * *

CHAPTER 84—FEDERAL EMPLOYEES’ RETIREMENT

SYSTEM

* * * * * * *

Subchapter II—Basic Annuity

* * * * * * *

§ 8424. Lump-sum benefits; designation of beneficiary; order

of precedence

(a) * * *

ø(b)(1) Payment of the lump-sum credit under subsection (a)—

(A) may be made only if any current spouse and any former

spouse of the employee or Member are notified of the application by the employee or Member; and

(B) in any case in which there is a former spouse, shall be

subject to the terms of a court decree of divorce, annulment,

or legal separation issued with respect to such former spouse

if—

(i) the decree expressly relates to any portion of the

lump-sum credit involved; and

(ii) payment of the lump-sum credit would affect any

right or interest of the former spouse with respect to a survivor annuity under section 8445, or to any portion of an

annuity under section 8467.¿

(b)(1)(A) Payment of the lump-sum credit under subsection (a)

may be made only if the spouse, if any, and any former spouse of

the employee or Member are notified of the employee or Member’s

application.

(B) The Office shall prescribe regulations under which the lumpsum credit shall not be paid without the consent of a spouse or

former spouse of the employee or Member where the Office has received such additional information or documentation as the Office

may require that—

(i) a court order bars payment of the lump-sum credit in

order to preserve the court’s ability to award an annuity under

section 8445 or 8467; or

(ii) payment of the lump-sum credit would extinguish the entitlement of the spouse or former spouse, under a court order on

file with the Office, to a survivor annuity under section 8445 or

to any portion of an annuity under section 8467.

* * * * * * *

Subchapter III—Thrift Savings Plan

* * * * * * *

§ 8432. Contributions

(a) An employee or Member may contribute to the Thrift Savings

Fund in any pay period, pursuant to an election under subsection

(b)ø(1)¿, an amount not to exceed 10 percent of such individual’s

12

basic pay for such period. øContributions made under this subsection during any 6-month period for which an election period is

provided under subsection (b)(1) shall be made each pay period

during such 6-month period pursuant to a program of regular contributions provided in regulations prescribed by the Executive Director.¿ Contributions under this subsection pursuant to such an

election shall, with respect to each pay period for which such election remains in effect, be made in accordance with a program of

regular contributions provided in regulations prescribed by the Executive Director.

(b)(1)(A) * * *

(B) The amount to be contributed pursuant to an election under

subparagraph (A) (or any election allowable by virtue of paragraph

(4)) shall be the percentage of basic pay or amount designated by

the employee or Member.

* * * * * * *

(3) øNotwithstanding paragraph (2)(A), an¿ An employee or

Member who elects to become subject to this chapter under section

301 of the Federal Employees’ Retirement System Act of 1986 may

make the first election for the purpose of subsection (a) during the

period prescribed for such purpose by the Executive Director. The

period prescribed by the Executive Director shall commence on the

date on which the employee or Member makes the election to become subject to this chapter.

ø(4)(A) Notwithstanding paragraph (2)(A), an employee or Member who is an employee or Member on January 1, 1987, and continues as an employee or Member without a break in service

through April 1, 1987, may make the first election for the purpose

of subsection (a) during the election period prescribed for such purpose by the Executive Director. The Executive Director shall prescribe an election period for such purpose which shall commence on

April 1, 1987. An election by such an employee or Member during

that election period shall be effective on the first day of the employee’s or Member’s first pay period which begins after the date on

which the employee or Member makes that election.

ø(B) Notwithstanding subsection (a), the maximum amount that

an employee or Member may contribute during any pay period

which begins on or after April 1, 1987, and before October 1, 1987,

pursuant to an election made during the election period provided

under subparagraph (A) is the amount equal to 15 percent of such

individual’s basic pay for such period.¿

(4) The Executive Director shall prescribe such regulations as may

be necessary to carry out the following:

(A) Notwithstanding subparagraph (A) of paragraph (2), an

employee or Member described in such subparagraph shall be

afforded a reasonable opportunity to first make an election

under this subsection beginning on the date of commencing

service or, if that is not administratively feasible, beginning on

the earliest date thereafter that such an election becomes administratively feasible, as determined by the Executive Director.

(B) An employee or Member described in subparagraph (B) of

paragraph (2) shall be afforded a reasonable opportunity to

first make an election under this subsection (based on the appointment or election described in such subparagraph) beginning on the date of commencing service pursuant to such apVerDate 11-MAY-2000 17:28 Jul 15, 2000 Jkt 079010 PO 00000 Frm 00016 Fmt 6659 Sfmt 6602 E:\HR\OC\SR343.XXX pfrm02 PsN: SR343
13

pointment or election or, if that is not administratively feasible,

beginning on the earliest date thereafter that such an election

becomes administratively feasible, as determined by the Executive Director.

(C) Notwithstanding the preceding provisions of this paragraph, contributions under paragraphs (1) and (2) of subsection

(c) shall not be payable with respect to any pay period before

the earliest pay period for which such contributions would otherwise be allowable under this subsection if this paragraph had

not been enacted.

(D) Sections 8351(a)(2), 8440a(a)(2), 8440b(a)(2), 8440c(a)(2),

and 8440d(a)(2) shall be applied in a manner consistent with

the purposes of subparagraphs (A) and (B), to the extent those

subparagraphs can be applied with respect thereto.

(E) Nothing in this paragraph shall affect paragraph (3).

* * * * * * *

(j)(1) For the purpose of this subsection—

(A) the term ‘‘eligible rollover distribution’’ has the meaning

given such term by section 402(c)(4) of the Internal Revenue

Code of 1986; and

(B) the term ‘‘qualified trust’’ has the meaning given such

term by section 402(c)(8) of the Internal Revenue Code of 1986.

(2) An employee or Member may contribute to the Thrift Savings

Fund an eligible rollover distribution that a qualified trust could

accept under the Internal Revenue Code of 1986. A contribution

made under this subsection shall be made in the form described in

section 401(a)(31) of the Internal Revenue Code of 1986. In the case

of an eligible rollover distribution, the maximum amount transferred to the Thrift Savings Fund shall not exceed the amount

which would otherwise have been included in the employee’s or

Member’s gross income for Federal income tax purposes.

(3) The Executive Director shall prescribe regulations to carry out

this subsection.

* * * * * * *

§ 8439. Accounting and information

(a)(1) The Executive Director shall establish and maintain an account for each individual who makes contributions or for whom contributions are made under øsection 8432(c)(1)¿ section 8432 of this

title or who makes contributions to the Thrift Savings Fund under

section 8351 of this title.

* * * * * * *

(c)(1) * * *

(2) Information under this subsection shall be provided at least

30 calendar days before the beginning of each election period under

section 8432(b)(1)(A) of this title, and in a manner designed to facilitate informed decision making with respect to elections under

sections 8432 and 8438 of this title. Nothing in this paragraph

shall be considered to limit the dissemination of information only

to the times required under the preceding sentence.

* * * * * * *

14

§ 8440a. Justices and judges

(a)(1) * * *

(2) An election may be made under paragraph (1) only during a

period provided under section 8432(b) for individuals subject to

øchapter 84 of this title: Provided, however, That a justice or judge

may make the first such election within 60 days of the effective

date of this section.¿ this chapter.

* * * * * * *

§ 8440d. Judges of the United States Court of Appeals for

Veterans Claims

(a)(1) * * *

(2) An election may be made under paragraph (1) only during a

period provided under section 8432(b) of this title for individuals

subject to øchapter 84 of this title.¿ this chapter.

Æ