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.

Proposed Rules Federal Register

42418

Vol. 62, No. 152

Thursday, August 7, 1997

FEDERAL RETIREMENT THRIFT

INVESTMENT BOARD

5 CFR Part 1650

Methods of Withdrawing Funds From

the Thrift Savings Plan

AGENCY: Federal Retirement Thrift

Investment Board.

ACTION: Proposed rule with request for

comment.

SUMMARY: The Executive Director of the

Federal Retirement Thrift Investment

Board (Board) is publishing a proposed

rule to implement two provisions of the

Thrift Savings Plan Act of 1996. The

first specifies how long a separated

participant can maintain a Thrift

Savings Plan (TSP) account and the

second expands TSP withdrawal

options by allowing in-service

withdrawals.

DATES: Comments must be received by

September 8, 1997.

ADDRESSES: Comments may be sent to

Patrick J. Forrest, Federal Retirement

Thrift Investment Board, 1250 H Street,

NW, Washington, DC 20005.

FOR FURTHER INFORMATION CONTACT:

Patrick J. Forrest, (202) 942–1662.

SUPPLEMENTARY INFORMATION: The Board

administers the TSP, which was

established by the Federal Employees’

Retirement System Act of 1986

(FERSA), Pub. L. 99–335, 100 Stat. 514

(codified, as amended, largely at 5

U.S.C. 8351 and 8401–8479). The TSP is

a tax-deferred retirement savings plan

for Federal employees which is similar

to cash or deferred arrangements

established under section 401(k) of the

Internal Revenue Code. The Board

published its current withdrawal

regulations, which are codified at 5 CFR

part 1650, in final form on February 21,

1995 (60 FR 9595).

On September 30, 1996, the President

signed the Thrift Savings Plan Act of

1996 (the TSPA), Pub. L. 104–208, div.

A, title I, sec. 101(f), section 659. Before

passage of the TSPA, a participant was

required to make a valid withdrawal

election by February 1 of the year

following the latest of (1) the date upon

which the participant attained age 65,

(2) the date that was 10 years after the

effective date of the participant’s first

TSP contribution, or (3) the date the

participant separated from Federal

service. The Board was required by 5

U.S.C. 8433(f)(2) to purchase an annuity

for a participant who did not make such

an election. However, the Board never

purchased an annuity for a participant

under this rule because the tenth

anniversary of the first TSP

contributions did not occur until April

1997.

Section 203(a)(4) of the TSPA

amended FERSA to provide that a

participant must withdraw his or her

account balance in a single payment or

begin receiving his or her TSP account

balance in monthly payments (or in the

form of a TSP annuity) by April 1 of the

later of (1) the year following the year

in which the participant reaches age

701⁄2, or (2) the year following the year

in which the participant separates from

Federal service. If the participant does

not make an election so that payment

can be made by this deadline, the Board

must use his or her TSP account to

purchase an annuity for the participant.

The first calendar year in which

withdrawals will be required under the

amendment is 1998.

Before passage of the TSPA, FERSA

also provided at 5 U.S.C. 8433(a) that a

TSP participant could only withdraw

his or her account after separating from

Government employment. Therefore, inservice TSP withdrawals were not

permitted. Section 203(a)(6) of the TSPA

amended FERSA to allow in-service

withdrawals under two circumstances.

Under 5 U.S.C. 8433(h)(1)(A), a

participant who has turned age 591⁄2 can

withdraw an amount up to his or her

entire vested TSP account balance

before separating from Government

employment. A participant is allowed

only one withdrawal under this

provision. In addition, under section

8433(h)(1)(B), a participant can obtain a

withdrawal before separating from

Government employment on the basis of

financial hardship. A financial hardship

withdrawal is limited to the amount the

participant contributed to the TSP (plus

the earnings attributed to those

contributions). There is no limit on the

number of such withdrawals.

This proposed rule reorganizes and

amends the Board’s withdrawal

regulations at 5 CFR part 1650 to

implement the TSPA amendments.

Subpart A of part 1650 contains general

information and rules. This proposed

rule adds new definitions to § 1650.1

and rewrites the sections that describe

withdrawal eligibility (§ 1650.2) and the

effect of a freeze on a participant’s

account (renumbered as § 1650.3) to

make subpart A apply to both postemployment and in-service

withdrawals. Also, this proposed rule

removes § 1650.5 (regarding outstanding

loans) as an independent section within

subpart A. Before its removal, § 1650.5

explained that a participant must repay

an outstanding TSP loan or that his or

her loan must be declared a taxable

distribution before the participant could

obtain a post-employment withdrawal.

An outstanding TSP loan will not

prevent an in-service withdrawal.

Because the substance of § 1650.5 is still

a principle of post-employment

withdrawal eligibility, it has been

moved to new § 1650.2(c).

Subparts B and C describe postemployment withdrawals and explain

the post-employment withdrawal

process. The procedures which govern

post-employment withdrawals will

remain the same, and the only proposed

substantive change to those subparts is

a revision of § 1650.15 (which is

§ 1650.13 in the Board’s current

regulations) to reflect the new required

date for receiving a post-employment

withdrawal. However, to make room for

the two new subparts which govern inservice withdrawals, the subparts B and

C headings have been renamed and each

of the subparts’ sections have been

renumbered. To provide a more

convenient resource to the reader, the

Board will republish subparts B and C

in their entirety.

This proposed rule creates new

subparts D and E in part 1650 to

describe in-service withdrawals and

explain the in-service withdrawal

process. Section 1650.30 describes the

age-based in-service withdrawal;

§ 1650.40 explains how to obtain one;

and § 1650.42(a) describes the

participant’s payment options. A

participant is allowed only one agebased in-service withdrawal. A

participant who has reached age 591⁄2

can withdraw up to his or her entire

vested TSP account balance as a single
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Proposed Rules 42419

payment. Because an age-based inservice withdrawal is an eligible

rollover distribution, a participant can

ask the TSP to transfer all or a portion

of the withdrawal to an Individual

Retirement Arrangement (IRA) or other

eligible retirement plan. Any amount

withdrawn but not transferred is subject

to mandatory 20 percent Federal income

tax withholding. An age-based inservice withdrawal is not subject to the

additional 10 percent tax imposed by

the Internal Revenue Code (I.R.C. 72(t))

on the early withdrawal of retirement

savings.

Section 1650.31 describes the

financial hardship in-service

withdrawal; § 1650.41 explains how to

obtain one; and § 1650.42(b) describes

the participant’s payment options. Only

financial hardships described under

§ 1650.31 can be used as the basis for

requesting an in-service withdrawal,

and only sums contributed by the

participant and their attributable

earnings can be withdrawn for this

purpose.

There are two types of qualifying

financial hardships: Insufficient cash

flow and extraordinary expenses. Under

§ 1650.31(a)(1), a participant will show

financial hardship by demonstrating

that his or her monthly cash flow cannot

meet ordinary monthly household

expenses. Under § 1650.31(a)(2), a

participant will show financial hardship

by demonstrating that he or she has

incurred an unreimbursed and unpaid

extraordinary expense which cannot be

met by his or her monthly cash flow.

Extraordinary expenses are limited to

medical expenses relating to the care or

treatment of the participant, the

participant’s spouse, or the participant’s

dependents; household improvements

needed on account of a medical

condition, illness or injury to the

participant, the participant’s spouse, or

the participant’s dependents; personal

casualty loss suffered by the participant;

and legal costs associated with the

participant’s separation and divorce. A

participant can qualify for a financial

hardship withdrawal by meeting one of

the tests or by showing a combination

of negative cash flow and extraordinary

expenses.

Like an age-based withdrawal, a

financial hardship withdrawal is an

eligible rollover distribution; therefore,

the participant may ask the TSP to

transfer all or a portion of the

withdrawal to an IRA or other eligible

retirement plan. The TSP will withhold

for Federal income tax purposes 20

percent of any amount withdrawn but

not transferred. The hardship

withdrawal applicant can ask the TSP to

increase his or her withdrawal so that

the net disbursement after the

mandatory withholding will be the

amount requested (or the maximum

amount for which the participant

qualifies, if less than the amount

requested). This is subject to the

availability of employee contributions

and earnings in the participant’s

account.

Section 1650.32 explains that a

participant can continue to contribute to

the TSP after obtaining an age-based

withdrawal, but is not eligible to

contribute to the TSP for a period of six

months after obtaining a financial

hardship withdrawal. After six-months

ineligibility to contribute, the

participant can resume TSP

contributions only by making a new

TSP election on Form TSP–1. Generally,

a participant whose TSP contributions

were discontinued because of a

financial hardship withdrawal is not

required to wait until a TSP open season

to submit Form TSP–1. A FERS

participant’s agency automatic (1%)

contributions will continue following

either type of in-service withdrawal.

Finally, § 1650.33 explains that a TSP

loan and an in-service withdrawal are

not interchangeable and that a TSP

withdrawal cannot be repaid.

In addition to amending the

withdrawal provisions of part 1650, this

proposed rule would amend the spousal

rights provisions. The TSPA provides

that the spouse of a FERS participant

must consent to an in-service

withdrawal and that the spouse of a

CSRS participant is entitled to notice

when the participant applies for an inservice withdrawal. These spousal

rights, which mirror those applicable to

TSP loans, will be incorporated into the

withdrawal regulations. This proposed

rule would make no other changes to

the spousal rights provisions of the

withdrawal regulations other than by

reorganizing them for purposes of

clarity and ease of reading.

Regulatory Flexibility Act

I certify that these regulations will not

have a significant economic impact on

a substantial number of small entities

because they will apply only to Federal

agencies and employees.

Paperwork Reduction Act

I certify that these regulations do not

require additional reporting under the

criteria of the Paperwork Reduction Act

of 1980.

Unfunded Mandates Reform Act of

1995

Pursuant to the Unfunded Mandates

Reform Act of 1995, section 201, Pub. L.

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. These

regulations 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.

List of Subjects in 5 CFR Part 1650

Employee benefit plans, Government

employees, Pensions, Retirement.

Federal Retirement Thrift Investment Board.

Roger W. Mehle,

Executive Director.

For the reasons set out on the

preamble, the Federal Retirement Thrift

Investment Board proposes to revise 5

CFR part 1650 to read as follows:

PART 1650—METHODS OF

WITHDRAWING FUNDS FROM THE

THRIFT SAVINGS PLAN

Subpart A—General

Sec.

1650.1 Definitions.

1650.2 Eligibility for a TSP withdrawal.

1650.3 Frozen accounts.

Subpart B—Post-Employment Withdrawals

1650.10 Single payment.

1650.11 Monthly payments.

1650.12 Annuities.

1650.13 Transfer of withdrawal payments.

1650.14 Deferred withdrawal elections.

1650.15 Required withdrawal date.

1650.16 Changes and cancellation of

withdrawal election.

Subpart C—Procedures for PostEmployment Withdrawals

1650.20 Information to be provided by

agency.

1650.21 Accounts of more than $3,500.

1650.22 Accounts of $3,500 or less.

Subpart D—In-Service Withdrawals

1650.30 Age-based withdrawals.

1650.31 Financial hardship withdrawals.

1650.32 Contributing to the TSP after an inservice withdrawal.

1650.33 Uniqueness of loans and

withdrawals.

Subpart E—Procedures for In-Service

Withdrawals

1650.40 How to obtain an age-based inservice withdrawal.

1650.41 How to obtain a financial hardship

in-service withdrawal.

1650.42 Taxes related to in-service

withdrawals.

Subpart F—[Reserved]

Subpart G—Spousal Rights

1650.60 Spousal rights pertaining to postemployment withdrawals.

1650.61 Spousal rights when a separated

participant changes a post-employment

withdrawal election.
42420 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Proposed Rules

1650.62 Spousal rights pertaining to inservice withdrawals.

1650.63 Executive Director’s exception to

the spousal notification requirement.

1650.64 Executive Director’s exception to

requirement to obtain the spouse’s

signature.

Authority: 5 U.S.C. 8351, 8433, 8434, 8435,

8474(b)(5), and 8474(c)(1).

Subpart A—General

§ 1650.1 Definitions.

As used in this part:

Account balance means, unless

otherwise specified, the nonforfeitable

valued account balance of a TSP

participant as of the most recent monthend before the date a withdrawal occurs.

Board means the Federal Retirement

Thrift Investment Board established

pursuant to 5 U.S.C. 8472.

CSRS means the Civil Service

Retirement System established by 5

U.S.C. chapter 83, subchapter III, or any

equivalent retirement system.

FERS means the Federal Employees’

Retirement System established by 5

U.S.C. chapter 84, or any equivalent

retirement system.

In-service withdrawal means an agebased or financial hardship withdrawal

from the TSP obtained by a participant

who is still employed by the

Government.

Monthly processing cycle means the

process, beginning on the evening of the

fourth business day of the month, by

which the record keeper allocates the

amount of earnings to be credited to

participant accounts in the Plan and

authorizes disbursements from the Plan.

Participant means any person with an

account in the Thrift Savings Plan.

Post-employment withdrawal means a

withdrawal from the TSP obtained by a

participant who has separated from

Government employment, as described

at 5 CFR 1650.1.

Reimbursement means a payment

made to or on behalf of a participant by

any person or entity (including an

insurance company) to cover the cost of

an extraordinary expense described in

§ 1650.31(a)(2).

Separation from Government

employment means the cessation of

employment with the Federal

Government or the U.S. Postal Service

(or with any other employer from a

position that is deemed to be

Government employment for purposes

of participating in the TSP) for at least

31 full calendar days.

Spouse means the person to whom a

TSP participant is married on the date

he or she signs forms on which the TSP

requests spouse information including a

spouse from whom the participant is

legally separated, and including a

person with whom a participant is

living in a relationship that constitutes

a common law marriage in the

jurisdiction in which they live.

Thrift Savings Plan, TSP, or Plan

means the Federal Retirement Thrift

Savings Plan, established under

subchapters III and VII of the Federal

Employees’ Retirement System Act of

1986, 5 U.S.C. 8351 and 8401–8479.

Thrift Savings Plan (TSP) contribution

election means a request by an

employee to start contributing to the

TSP, to terminate contributions to the

TSP, to change the amount of

contributions made to the TSP each pay

period, or to change the allocation of

future TSP contributions among the

investment funds, and made effective

pursuant to 5 CFR part 1600.

Thrift Savings Plan Service Office

means the office established by the

Board to service participants. This

office’s current address is: Thrift

Savings Plan Service Office, National

Finance Center, PO Box 61500, New

Orleans, Louisiana 70161–1500.

Valuation date means, for purposes of

a required minimum distribution, the

last day of the calendar year

immediately preceding the year for

which a distribution is made.

§ 1650.2 Eligibility for a TSP withdrawal.

(a) A participant who separates from

Government employment, as described

in § 1650.1, can withdraw his or her

account by one of the withdrawal

methods described in subpart B of this

part using the procedures set out in

subpart C of this part.

(b) A separated participant who is

reemployed in a position in which he or

she is eligible to participate in the TSP

is subject to the following withdrawal

eligibility rules:

(1) A participant who is reemployed

in a TSP-eligible position on or before

the 31st full calendar day after

separation cannot withdraw his or her

TSP account (except for an in-service

withdrawal described in subpart D of

this subpart). If the participant is

scheduled for an automatic cashout, as

described in § 1650.22, the cashout will

be canceled if the participant informs

the TSP that he or she has been

reemployed or expects to be reemployed

within 31 full calendar days of

separation.

(2) A participant who is reemployed

in a TSP-eligible position more than 31

full calendar days after separation may

withdraw the portion of his or her

account balance which is attributable to

the earlier period of employment. If the

amount attributable to the earlier period

of employment is greater than $3,500,

the participant must submit a properly

completed withdrawal request (Form

TSP–70) selecting a withdrawal option

that results in an immediate

withdrawal. However, a Form TSP–70

will not be accepted unless the TSP

records indicate that the former

employing agency reported the

participant as separated from

Government employment. If a

participant has elected to receive

monthly payments under § 1650.11,

upon report by the agency that the

participant is not separated, payments

will not be made and, if already started,

will stop.

(c) A participant who has not

separated from Government

employment can elect a withdrawal

option described in subpart D of this

part by following the procedures set out

in subpart E of this part.

(d) A participant cannot make a postemployment withdrawal until any

outstanding TSP loan has been either

repaid in full or declared to be a taxable

distribution. An outstanding TSP loan

does not affect a participant’s eligibility

for an in-service withdrawal.

(e) All withdrawals are subject to the

rules relating to spouse’s rights (found

in subpart G of this part), domestic

relations orders, alimony and child

support legal process, and child abuse

enforcement orders (5 CFR part 1653).

Post-employment withdrawals are also

subject to the Internal Revenue Code’s

required minimum distribution rules.

§ 1650.3 Frozen accounts.

A participant may not withdraw any

portion of his or her account balance if

the account is frozen as a result of a

pending retirement benefits court order,

an alimony or child support

enforcement order, a child abuse

enforcement order, or as a result of a

freeze placed on the account by the

Board for another reason.

Subpart B—Post-Employment

Withdrawals

§ 1650.10 Single payment.

A participant can withdraw his or her

entire account in a single payment.

§ 1650.11 Monthly payments.

(a) A participant can withdraw his or

her account balance in two or more

substantially equal monthly payments,

to be calculated under one of the

following methods:

(1) A fixed monthly payment amount.

The amount must be at least $25 per

month and must satisfy any minimum

distribution requirements. Payments

will be made each month until the

account is expended. If the last

scheduled payment would be less than
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Proposed Rules 42421

the chosen amount, it will be combined

and paid with the previous payment;

(2) A fixed number of monthly

payments. The participant’s month-end

account balance for the month

preceding the month of the first

payment will be divided by the number

of payments chosen in order to

determine the monthly amount. If that

amount is less than $25, the election is

rejected. The payment must also meet

any minimum distribution

requirements. In January of each

subsequent year, the TSP will divide the

December 31 account balance from the

prior year by the remaining number of

payments in order to determine that

year’s monthly payments. If the monthly

payment amount is less than $25, it will

be increased to $25. This process will be

repeated each year until the account is

expended; or

(3) A monthly payment amount

calculated using the factors set forth in

Internal Revenue Service expected

return multiply table V, 26 CFR 1.72–9.

There is no $25 minimum monthly

payment under this method. In the year

payments begin, the monthly payment

amount is calculated by dividing the

month-end account balance for the

month preceding the month of the first

payment by the factor from table V

based upon the participant’s age as of

his or her birthday in that year. This

amount is then divided by 12 to yield

the monthly payment amount. In

subsequent years, the monthly payment

amount is recalculated each January by

dividing the December 31 account

balance from the previous year by the

factor from Table V based upon the

participant’s age as of his or her

birthday in the year payments will be

made. That amount is divided by 12 to

yield the monthly payment amount.

(b) A participant who chooses to

receive monthly payments calculated

using one of the three methods set forth

in paragraph (a) of this section cannot

change the method after payments

begin. Also, except as provided in

paragraph (c) of this section, the

participant cannot change the number of

payments or the payment amount after

payments begin.

(c) A participant receiving monthly

payments can choose to receive the

remainder of his or her account balance

in a final single payment.

(d) A participant receiving monthly

payments may invest his or her account

balance as provided in 5 CFR part 1601.

§ 1659.12 Annuities.

(a) A participant can withdraw his or

her entire account balance in the form

of a life annuity. The participant’s

account balance must be $3,500 or more

in order for the TSP to purchase an

annuity. The TSP will send forms to a

participant who chooses this method

which ask him or her to choose an

annuity method, name a beneficiary (if

required), and provide any necessary

spousal waiver or spousal information.

Upon receipt of the required

information, the TSP will purchase the

annuity from the TSP’s annuity vendor

using the participant’s entire account

balance, except for any amount

necessary to satisfy minimum

distribution requirements. The first

annuity payment will be made

approximately 30 calendar days after

the purchase of the annuity. The

annuity will provide a payment for life

to the participant and, if applicable, the

participant’s survivor, in accordance

with the type of annuity chosen.

(b) The following types of annuities

are available to participants:

(1) A single life annuity with level

payments. This annuity is based upon

the life expectancy of the participant at

the time of purchase and provides

monthly payments to the participant as

long as the participant lives.

(2) A joint life annuity for the

participant and his or her spouse with

level payments. This annuity is based

upon the combined life expectancies of

the participant and the spouse and

provides monthly payments to the

participant, as long as both the

participant and spouse are alive, and

monthly payments to the survivor, as

long as he or she is alive.

(3) Either a single life or joint life

annuity (as described in paragraph (b)(1)

or (b)(2) of this section) where the

amount of the monthly payment can

increase each year on the anniversary

date of the first annuity payment. The

amount of the increase is based on the

average annual change in the Consumer

Price Index for Urban Wage Earners and

Clerical Workers as measured between

the period of July through September in

the second calendar year preceding the

anniversary date and July through

September in the calendar year

preceding the anniversary date. For

example, if the anniversary of an

increasing annuity occurs in November

of 1995, the amount of the increase will

be calculated based upon the change in

the index between the July-September

period in 1993 and the July-September

period in 1994. Monthly payments

cannot decrease, nor can they increase

more than 3 percent each year. If this

option is chosen in conjunction with a

joint life annuity with the spouse, the

annual increase continues to apply to

benefits received by the survivor.

(4) A joint life annuity, with level

payments, for the participant and

another person who either is a former

spouse or has an insurable interest in

the participant. This annuity is based

upon the combined life expectancies of

the participant and the other person. It

provides monthly payments to the

participant as long as both the

participant and the joint annuitant are

alive, and monthly payments to the

survivor as long as he or she is alive.

Increasing payments cannot be chosen

for a joint annuity with a person other

than the spouse.

(i) A person has an ‘‘insurable

interest’’ in a participant if the person

is financially dependent on the

participant and could reasonably expect

to derive financial benefit from the

participant’s continued life.

(ii) A relative (whether blood or

adopted, but not by marriage) who is

closer than a first cousin will be

presumed to have an insurable interest

in the participant.

(iii) A participant can establish that a

person not described in paragraph

(b)(4)(ii) of this section has an insurable

interest in him or her by submitting

with the annuity request an affidavit

from a person other than the participant

or the joint annuitant demonstrating

that the designated joint annuitant has

an insurable interest (as defined in

paragraph (b)(4)(i) of this section) in the

participant.

(c) Participants who choose a joint life

annuity (with either a spouse or a

person with an insurable interest) must

choose either a 50 percent or a 100

percent survivor benefit. A 50 percent

survivor benefit provides a monthly

payment to the survivor which is 50

percent of the payment made when both

the participant and the joint annuitant

are alive. A 100 percent survivor benefit

provides a monthly payment to the

survivor which is the same amount as

the payment made when both the

participant and the survivor are alive.

Either the 50 percent or the 100 percent

survivor benefit may be combined with

any joint life annuity option, except that

the 100 percent survivor benefit can be

combined with a joint annuity with a

person other than the spouse (or a

former spouse, if required by a

retirement benefits court order) only if

the joint annuitant is not more than 10

years younger than the participant.

(d) The following mutually exclusive

features can be combined with certain

types of annuities, as indicated:

(1) Cash refund. This feature provides

that, if the participant (and joint

annuitant, if applicable) dies before an

amount equal to the balance used to

purchase the annuity has been paid out,

the difference between the balance used

to purchase the annuity and the sum of
42422 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Proposed Rules

monthly payments already made will be

paid to the named beneficiaries. The

participant (or the joint annuitant, if the

participant is deceased) may name or

change the beneficiaries. This feature

can be combined with any other annuity

option.

(2) Ten-year certain. This feature

provides that, if the participant dies

before annuity payments have been

made for 10 years (120 payments),

monthly payments will continue to be

made to the beneficiaries selected by the

participant until 120 payments have

been made. This feature can be

combined with any single life annuity

option, but cannot be selected in

conjunction with any joint life annuity

option.

(e) The Board can, from time to time,

establish other types of annuities, other

levels of survivor benefits, and other

annuity features.

(f) The Board can, from time to time,

eliminate a type of annuity (except for

those annuities described in paragraph

(b) of this section), a survivor benefit

level, or an annuity feature. However, if

the Board does so, it must continue to

allow participants to purchase annuities

of the eliminated type or containing the

eliminated feature for five years after the

date the decision to eliminate the

annuity type or feature is announced in

the Federal Register.

(g) Once an annuity has been

purchased, the type of annuity, any

annuity features, and the identity of the

annuitant cannot be changed, and the

annuity cannot be terminated.

§ 1650.13 Transfer of withdrawal

payments.

(a) At the participant’s request, the

TSP will transfer directly to an eligible

retirement plan all or part of any

withdrawal that is an ‘‘eligible rollover

distribution,’’ as defined in 26 U.S.C.

402(c)(4). A withdrawal method that is

not an eligible rollover distribution

cannot be transferred.

(b) The following TSP withdrawal

methods are considered eligible rollover

distributions;

(1) A single payment, as described in

§ 1650.10;

(2) Monthly payments, as described in

§ 1650.11, where payments are expected

to last less than 10 years at the time they

begin, according to the following rules:

(i) If the participant elects a number

of monthly payments, the number of

payments must be fewer than 120;

(ii) If the participant elects a monthly

payment amount, the amount, when

divided into the participant’s account

balance as of the end of the month prior

to the first payment, must yield a

number less than 85.

(3) A final single payment, as

described in § 1650.11(c).

(c) The following withdrawal methods

are not eligible rollover distributions:

(1) Any annuity purchased by the

TSP.

(2) Any monthly payment that does

not meet the rules set forth in paragraph

(b)(2) of this section, including any

monthly payment computed based on

the Internal Revenue Service expected

return multiple table V (see

§ 1650.11(a)(3)).

(3) Any minimum distribution

payment or any portion of another

payment which represents a minimum

distribution payment.

(d) An eligible retirement plan is a

plan defined in 26 U.S.C. 402(c)(8).

There are three types of eligible

retirement plans: an Individual

Retirement Arrangement (IRA) (which

can be either an individual retirement

account or an individual retirement

annuity), a plan qualified under 26

U.S.C. 401(a), and a plan described in

26 U.S.C. 403(a). An IRA or other

eligible retirement plan must be

maintained in the United States, which

means one of the 50 states or the District

of Columbia.

§ 1650.14 Deferred withdrawal elections.

(a) Subject to paragraph (b) of this

section, a participant who separates

from Government employment and

elects to withdraw his or her account

under one of the methods provided in

§§ 1650.10, 1650.11 or 1650.12 may

specify a future date (which shall be a

month and year) for payment of the

withdrawal.

(b) The future date chosen under this

section cannot be later than March of

the year following the year in which the

participant becomes age 701⁄2. If that

date has already passed when the

participant makes an election, the

participant cannot choose a future date.

(c) If the withdrawal method chosen

for future payment is a single payment

or monthly payments (and the date

specified for payment is more than four

months in the future on the date the

election form is processed), the

participant will be notified before the

date chosen that such payments are

scheduled to begin. If the payments are

eligible rollover distributions, the

participant may choose to transfer all or

part of the payments to an Individual

Retirement Arrangement (IRA) or

another eligible retirement plan.

(d) If the withdrawal method chosen

for future payment is an annuity (and

the date specified for payment is more

than four months in the future on the

date the election form is processed), the

participant will be notified before the

date chosen. At that time, the

participant will be sent information

asking him or her to choose an annuity

method, name a beneficiary (if the cash

refund or 10-year certain feature is

chosen), and provide any necessary

spousal waiver or spousal information.

§ 1650.15 Required withdrawal date.

(a) A participant must withdraw his

or her account under § 1650.10 or begin

receiving payments under §§ 1650.11 or

1650.12 by April 1 of the year following

the later of the year in which:

(1) The participant turns 701⁄2; or

(2) The participant separates from

Government employment. However, in

no event will a withdrawal be required

under this paragraph until 1998.

(b) A separated participant may elect

to withdraw his or her account or begin

receiving payments before the date

described in paragraph (a) of this

section, but is not required to do so.

§ 1650.16 Changes and cancellation of

withdrawal election.

(a) Basic rule. Subject to paragraphs

(b) and (c) of this section and the rules

relating to spouses’ rights, a participant

who has separated from Government

employment can change his or her

withdrawal election to any other

withdrawal election or can cancel his or

her withdrawal election if the change or

cancellation can be processed before the

withdrawal election is scheduled for

disbursement.

(b) Cutoff dates. For participants who

have any part of their accounts invested

in the Common Stock Index Investment

Fund (C Fund) or the Fixed Income

Index Investment Fund (F Fund), a

withdrawal payment that has been

approved is scheduled on the second-tolast business day of the month

preceding the month the withdrawal

payment is to be made. For participants

whose accounts are invested entirely in

the Government Securities Investment

Fund (G Fund), a withdrawal payment

that has been approved is scheduled by

the close of business on the day before

the monthly processing cycle in which

payments are made.

(c) Special Rule for C and F Fund

Participants. Participants who have any

part of their accounts invested in the C

or F Funds may also change to another

withdrawal method if the requested

change can be processed before the

close of business on the day before the

monthly processing cycle in which

payment will be made, and provided

that under the new withdrawal method

the amounts they have invested in the

C or F Funds will still be withdrawn as

originally scheduled from those Funds

during the monthly processing cycle.
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Proposed Rules 42423

(d) Example for participants whose

accounts are invested in the C or F

Funds. This example illustrates the

operation of the rules set forth in

paragraphs (b) and (c) of this section for

participants who have a portion of their

accounts invested in the C or F Funds.

Example 1. Assume that such a participant

wishes to withdraw the account by

purchasing a single life annuity at the earliest

possible date. The participant is married and

has obtained the necessary waiver from her

spouse for the purchase. All necessary forms

have been submitted by the middle of April;

thus, on the second-to-last business day in

April, the annuity will be scheduled to be

purchased in the May monthly processing

cycle. However, in late April, the participant

decides that she would rather receive the

account in a single payment. The participant

must submit a new Form TSP–70 electing the

new withdrawal method. (She does not need

a new spousal waiver, since her spouse

already waived his right to a survivor

benefit.) In this case, the participant will be

able to change to a single payment if her

properly completed Form TSP–70 is received

and processed by the TSP record keeper by

the close of business on the day before the

May monthly processing cycle. If that occurs,

she will receive the single payment in May,

instead of having the annuity purchased

then.

If, on the other hand, the participant

wished to cancel her annuity purchase and

leave her money in the Plan (or to change to

a deferred withdrawal option), the TSP

record keeper would have to be able to

process her cancellation or change no later

than the second-to-last business day in April.

If that did not occur, the annuity purchase

would proceed in May.

Subpart C—Procedures for Postemployment Withdrawals

§ 1650.20 Information to be provided by

agency.

(a) Information to be provided to the

TSP. When a TSP participant separates

from Government employment, his or

her employing agency must report the

separation (including the date of

separation) to the TSP record keeper.

Until the TSP record keeper receives

this information from the employing

agency, it cannot process a postemployment withdrawal for the

participant. A post-employment

withdrawal cannot occur until at least

30 full calendar days have elapsed after

the date of separation.

(b) Information to be provided to the

participant. When a TSP participant

separates from Government

employment, his or her employing

agency must furnish the participant

with the most recent copies of the TSP

withdrawal booklet, withdrawal forms,

and tax notice. The employing agency is

also responsible for counseling

participants concerning TSP

withdrawals.

§ 1650.21 Accounts of more than $3,500.

A participant whose account balance

is more than $3,500 must submit a

properly completed withdrawal election

on Form TSP–70, Withdrawal Request,

and any other form required by the TSP,

in order to elect a post-employment

withdrawal of his or her account

balance.

§ 1650.22 Accounts of $3,500 or less.

(a) Unless he or she has already

submitted a complete withdrawal

election and can be scheduled for

payment, a participant whose account

balance is $3,500 or less as of the month

end following receipt of separation

information from the employing agency

will be sent a notice informing him or

her that the account balance will be

paid directly to the participant

automatically in the third monthly

processing cycle following the date of

the notice if the account is still $3,500

or less on the date of payment. The

notice will inform the participant that

he or she can:

(1) Choose to transfer all or part of the

payment to an Individual Retirement

Arrangement (IRA) or other eligible

retirement plan;

(2) Choose another withdrawal

method (as described in subpart B of

this part);

(3) Choose to have the payment made

directly to him or her as soon as

possible; or

(4) Choose to leave his or her money

in the Plan.

(b) If the participant does not take one

of the actions described in paragraph (a)

of this section, payment will be made as

scheduled.

(c) No spousal rights attach to any

post-employment withdrawals made to

a participant whose account balance is

$3,500 or less.

(d) If a participant’s account balance

is $3,500 or less after separation but

later increases to more than $3,500, this

section will cease to apply to that

participant.

(e) This section does not apply to

accounts containing a balance of less

than $5.00.

Subpart D—In-Service Withdrawals

§ 1650.30 Age-based withdrawals.

(a) A participant who reached age

591⁄2 and who has not separated from

Government employment is eligible to

withdraw all or a portion of his or her

vested TSP account balance in a single

payment. The amount of an age-based

in-service withdrawal request must be at

least $1,000.

(b) The participant may request that

the TSP transfer all or a portion of the

withdrawal to an Individual Retirement

Arrangement (IRA) or other eligible

retirement plan. If a participant chooses

to receive directly all or a portion of the

withdrawal, the TSP will withhold for

Federal income tax purposes 20 percent

of all amounts paid directly to the

participant.

(c) A participant is permitted only one

age-based in-service withdrawal.

§ 1650.31 Financial hardship withdrawals.

(a) A participant who has not

separated from Government

employment and who demonstrates

financial hardship is eligible to

withdraw all or a portion of his or her

own contributions to the TSP and their

attributable earnings in a single

payment to meet certain specified

financial obligations. The amount of a

financial hardship in-service

withdrawal request must be at least

$1,000. A participant will demonstrate

financial hardship if he or she meets

one or both of the following tests:

(1) The participant’s monthly cash

flow is negative, i.e., net income is less

than ordinary monthly household

expenses based on TSP calculations;

and/or

(2) The participant has incurred or

will incur within the next six months an

extraordinary expense which he or she

has not paid, for which there has not

been and will not be reimbursement (as

defined in § 1650.1), and which cannot

be met by his or her monthly cash flow

over a period of six months.

Extraordinary expenses are limited to

the following four types:

(i) Medical expenses payable by the

participant and related to the treatment

of the participant, the participant’s

spouse, or the participant’s dependents.

Generally, eligible expenses are those

that would be eligible for deduction for

Federal income tax purposes, but

without regard to the Internal Revenue

Service’s (IRS) income limitations on

deductions. However, the following IRS

allowable expenses are excluded from

TSP unreimbursed medical expenses:

health insurance premiums and

expenses associated with household

improvements required as a result of a

medical condition, illness, or injury to

the participant, the participant’s spouse,

or the participant’s dependents. These

items are already taken into account

elsewhere in the financial hardship

determination.

(ii) The cost of household

improvements required as a result of a

medical condition, illness or injury to

the participant, the participant’s spouse,

or the participant’s dependents, which

is eligible for deduction as a medical

expense for Federal income tax
42424 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Proposed Rules

purposes, but without regard to the IRS

income limitations on deductions or the

fair market value of the property.

Household improvements are changes to

the participant’s living quarters or the

installation of special equipment that is

necessary to accommodate the

circumstances of the incapacitated

person;

(iii) The cost of repairs or replacement

resulting from casualty loss that would

be eligible for deduction for Federal

income tax purposes, but without regard

to the IRS income limitations on

deductions, fair market value of the

property, or number of events. This is

sudden property loss resulting from

damage or destruction by fire, storm, or

other casualty, or due to theft of

property; and

(iv) Legal costs, which are defined as

attorney fees and court costs, associated

with separation or divorce. Unpaid legal

costs do not include alimony or child

support payments or settlements a

participant must pay a spouse or former

spouse.

(b) The amount of a participant’s

financial hardship withdrawal cannot

exceed the smallest of the following:

(1) The amount requested;

(2) The amount in the participant’s

account that is equal to his or her own

contributions and attributable earnings;

or

(3) The gross amount which would,

subject to a request made under

§ 1650.42(b), result in a net

disbursement to the participant (after

the mandatory Federal income tax

withholding) of enough funds to both:

(I) Make up the participant’s negative

cash flow for a period of six months in

the case of a financial hardship

withdrawal based on ordinary monthly

household expenses; and

(ii) Pay the extraordinary expense

upon which the participant’s financial

hardship withdrawal is based. If the

participant has a negative cash flow, the

amount of the net disbursement based

on extraordinary expense is equal to the

amount of the extraordinary expense. If

there is a positive cash flow, the amount

is equal to the amount of the expense

minus six times the amount of the

calculated monthly positive cash flow.

§ 1650.32 Contributing to the TSP after an

in-service withdrawal.

(a) A participant’s TSP contribution

election will not be affected by an agebased in-service withdrawal; therefore,

his or her TSP contributions will

continue without interruption.

(b) A participant who obtains a

financial hardship in-service

withdrawal may not contribute to the

TSP for a period of six months,

beginning with the first pay date 45

days after the date of the withdrawal;

therefore, his or her TSP contributions

(and any applicable matching

contributions) will be discontinued by

his or her agency upon notification by

the TSP. A participant whose TSP

contributions were discontinued by his

or her agency because of a hardship

withdrawal can resume contributions

any time after expiration of the six

month period by submitting a new TSP

Election Form (TSP–1). If a participant

voluntarily terminated TSP

contributions, he or she can resume

contributions at the expiration of the

six-month period, or in the next open

season during which the participant

would be eligible to submit a new Form

TSP–1, whichever is later.

§ 1650.33 Uniqueness of loans and

withdrawals.

An outstanding TSP loan cannot be

converted into an in-service withdrawal,

and vice versa; nor can an in-service

withdrawal be returned or repaid.

Subpart E—Procedures for In-Service

Withdrawals

§ 1650.40 How to obtain an age-based inservice withdrawal.

To request an age-based in-service

withdrawal, a participant must submit

to the TSP Service Office a properly

completed withdrawal election on Form

TSP–75, Age-Based In-Service

Withdrawal Request.

§ 1650.41 How to obtain a financial

hardship in-service withdrawal.

To request a financial hardship inservice withdrawal, a participant must

submit to the TSP Service Office a

properly completed request for

withdrawal on Form TSP–76, Financial

Hardship In-Service Withdrawal

Request, a current earnings and leave

statement, and supporting

documentation for any extraordinary

expenses listed on the application.

§ 1650.42 Taxes related to in-service

withdrawals.

(a) An in-service withdrawal is an

eligible rollover distribution under the

Internal Revenue Code (IRC), and the

IRC requires that the Board withhold at

least 20 percent for Federal income tax

purposes from any portion of the

withdrawal that is not directly

transferred to an Individual Retirement

Arrangement (IRA) or other eligible

retirement plan. A participant who

wants the TSP to transfer all or a portion

of an in-service withdrawal to an IRA or

other eligible retirement plan must

submit to the TSP Service Office a

properly completed Form TSP–75–T,

Transfer of In-Service Withdrawal. If the

participant does not make a transfer

election, the withdrawal will be

disbursed in the form of a single

payment minus the mandatory tax

withholding. The mandatory

withholding cannot be waived, although

a participant can elect to have

additional taxes withheld by submitting

Form W–4P, Withholding Certificate for

Pension or Annuity Payments, to the

TSP Service Office.

(b) If a participant applies for a

financial hardship in-service

withdrawal and does not make a

transfer election, he or she can request

the TSP to remove additional amounts

from his or her TSP account so that the

amount received after the mandatory 20

percent tax withholding is the amount

requested (or for which the participant

qualifies, if that amount is less than the

amount requested). This option may be

limited by the amount of employee

contributions and attributable earnings

available for withdrawal.

Subpart F—[Reserved]

Subpart G—Spousal Rights

§ 1650.60 Spousal rights pertaining to

post-employment withdrawals.

(a) The spousal rights described in

this section and in § 1650.61 only apply

to post-employment withdrawals when

the participant’s vested TSP account

balance exceeds $3,500.

(b) The spouse of a CSRS participant

is entitled to notice when the

participant applies for a postemployment withdrawal, unless the

participant was granted an exception

under § 1650.63 to the spouse

notification requirement within one

year of the date the withdrawal form is

processed by the TSP. The participant

must provide the TSP record keeper

with the spouse’s correct address. The

TSP record keeper will send the

required notice by first class mail to the

most recent address provided by the

participant.

(c) The spouse of a FERS participant

has a right to a joint and survivor

annuity with a 50 percent survivor

benefit, level payments, and no cash

refund when the participant elects a

post-employment withdrawal. The

participant may make a different

withdrawal election only if his or her

spouse waives the right to this annuity.

To show that the spouse has waived the

right to this annuity, the participant

must submit to the TSP record keeper

Form TSP–70, Withdrawal Election, or

Form TSP–11–C, Spouse Information

and Waiver, signed by his or her spouse.

Once a form containing the spouse’s
Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Proposed Rules 42425

waiver has been submitted to the TSP

record keeper, the spouse’s waiver is

irrevocable for purposes of that form.

§ 1650.61 Spousal rights when a separated

participant changes post-employment

withdrawal election.

(a) The spouse of a CSRS participant

is entitled to notice if the participant

changes his or her post-employment

withdrawal election, unless the

participant was granted an exception

under § 1650.63 to the spouse

notification requirement within one

year of the date the form requesting the

change is processed by the TSP. The

participant must provide the TSP record

keeper with the spouse’s current

address. The TSP record keeper will

send the required notice by first class

mail to the most recent address

provided by the participant.

(b) A married FERS participant who

has made a post-employment

withdrawal election and who wants to

elect another withdrawal method (other

than the annuity required in

§ 1650.60(c)) must obtain a waiver from

the spouse to whom he or she is married

on the date the new withdrawal form is

signed, unless:

(1) That spouse previously signed a

waiver of the required annuity in

connection with an earlier postemployment withdrawal election made

by the participant; or

(2) The participant was granted

within one year of the date on which the

new withdrawal form is received by the

TSP an exception under § 1650.64 to the

requirement to obtain that spouse’s

signature for an in-service or postemployment withdrawal election.

Once a form containing the spouse’s

waiver has been submitted to the TSP

record keeper, the spouse’s consent is

irrevocable for purposes of that form.

§ 1650.62 Spousal rights pertaining to inservice withdrawals.

(a) The spousal rights described in

this section apply to all in-service

withdrawals and do not depend on the

amount of the participant’s vested

account balance or the amount

requested to be withdrawn.

(b) The spouse of a CSRS participant

is entitled to notice when the

participant applies for an in-service

withdrawal, unless the participant was

granted within one year of the date on

which the withdrawal form is received

by the TSP an exception to the notice

requirement under § 1650.63. The

participant must provide the TSP record

keeper with the spouse’s correct

address. The TSP record keeper will

send the required notice by first class

mail to the most recent address

provided by the participant.

(c) A participant covered by FERS

must obtain the consent of his or her

spouse before obtaining an in-service

withdrawal unless the participant was

granted, within one year of the date on

which the new withdrawal form is

received by the TSP, an exception to a

signature requirement under § 1650.64.

To show spousal consent, a participant

must submit to the TSP record keeper

Form TSP–75, Age-Based In-Service

Withdrawal Request, or Form TSP–76,

Financial Hardship In-Service

Withdrawal Request, signed by his or

her spouse. Once a form containing the

spouse’s consent has been submitted to

the TSP record keeper, the spouse’s

consent is irrevocable for purposes of

that form.

§ 1650.63 Executive Director’s exception

to the spousal notification requirement.

(a) Whenever this subpart requires the

Executive Director to give notice of an

action to the spouse of a participant, an

exception to this requirement may be

granted if the participant establishes to

the satisfaction of the Executive Director

that the spouse’s whereabouts cannot be

determined. A request for an exception

to a notification requirement based on

unknown whereabouts must be

submitted to the Executive Director on

Form TSP–16, Exception to Spousal

Requirements, accompanied by one of

the following:

(1) A judicial determination (court

order) stating that the spouse’s

whereabouts cannot be determined;

(2) A police or governmental agency

determination signed by the appropriate

department or division head which

states that the spouse’s whereabouts

cannot be determined; or

(3) Statements by the participant and

two other persons that meet the

following requirements:

(I) The participant’s statement must

give the full name of the spouse, declare

the participant’s inability to locate the

spouse, and state the efforts the

participant has made to locate the

spouse. Examples of attempting to

locate the spouse include, but are not

limited to, checking with relatives and

mutual friends or using telephone

directories or directory assistance for

the city of the spouse’s last known

address. Negative statements such as ‘‘I

have not seen nor heard from him’’ or

‘‘I have not had contact with her’’ are

not sufficient.

(ii) The statements from two other

persons must support the participant’s

statement that the participant does not

know the whereabouts of his or her

spouse.

(iii) Each statement must be signed

and dated and must state the following:

I understand that a false statement or

willful misrepresentation is punishable

under Federal law (18 U.S.C. 1001) by a fine

or imprisonment or both.

(b) A withdrawal election received

within one year of an approved

exception may be processed so long as

the spouse named on the form is the

spouse for whom the exception has been

approved.

§ 1650.64 Executive Director’s exception

to requirement to obtain the spouse’s

signature.

(a) Wherever this subpart requires a

spouse’s consent to a loan or

withdrawal or a waiver of the right to

a survivor annuity, an exception to this

requirement may be granted if the

participant establishes to the

satisfaction of the Executive Director

that:

(1) The spouse’s whereabouts cannot

be determined in accordance with the

provisions of § 1650.63; or

(2) Due to exceptional circumstances,

requiring the spouse’s signature would

be otherwise inappropriate.

(i) An exception to the spousal

signature requirement may be granted

based on exceptional circumstances

only when the participant presents a

judicial determination (court order) or a

governmental agency determination

signed by the appropriate department or

division head. A court order or a

governmental agency determination

must contain a finding or a recitation of

such exceptional circumstances

regarding the spouse as would warrant

an exception to the signature

requirement.

(ii) Exceptional circumstances are

narrowly construed and includes

circumstances such as when a court

order:

(A) Indicates that the spouse and the

participant have been maintaining

separate residences with no financial

relationship for three or more years;

(B) Indicates that the spouse

abandoned the participant, but for

religious or similarly compelling

reasons, the parties chose not to divorce;

or

(C) Expressly states that the

participant may obtain a loan from his

or her Thrift Savings Plan account or

withdraw his or her Thrift Savings Plan

account balance notwithstanding the

absence of the spouse’s signature.

(b) A withdrawal election by a

separated participant or an in-service

withdrawal request by a participant in

the Federal service received within one

year of an approved exception will be

processed so long as the spouse named

on the form is the spouse for whom the

exception has been approved.
42426 Federal Register / Vol. 62, No. 152 / Thursday, August 7, 1997 / Proposed Rules

1Copies are available for inspection or copying

for a fee from the NRC Public Document Room at

2120 L Street NW., Washington, DC 20555; the

PDR’s mailing address is Mail Stop LL–6; telephone

(202) 634–3273, fax (202) 634–3343. Interim

Revision 8 is also available for downloading from

the Internet at ‘‘http://www.nrc.gov.’’

2Copies are available for inspection or copying

for a fee from the NRC Public Document Room at

2120 L Street NW., Washington, DC 20555; the

PDR’s mailing address is Mail Stop LL–6; telephone

(202) 634–3273; fax (202) 634–3343.

(c) The requirements for establishing

an exception for a withdrawal by a

separated participant or an in-service

withdrawal by a participant in the

Federal service and the one-year period

of validity of an approved exception

also apply to exceptions for loans under

5 CFR 1655.18.

[FR Doc. 97–20729 Filed 8–6–97; 8:45 am]

BILLING CODE 6760–01–P

NUCLEAR REGULATORY

COMMISSION

10 CFR Part 55

RIN 3150–AF62

Initial Licensed Operator Examination

Requirements

AGENCY: Nuclear Regulatory

Commission.

ACTION: Proposed rule.

SUMMARY: The Nuclear Regulatory

Commission (NRC) is proposing to

amend its regulations to require all

nuclear power facility licensees to

prepare, proctor, and grade the written

examinations and prepare the operating

tests that the NRC currently uses to

evaluate the competence of individuals

applying for operator licenses at those

plants. The proposed amendment would

require the licensee to submit each

examination and test for the NRC’s

review and approval and would

preserve the NRC’s authority to prepare

the examinations and tests, as

necessary, if it loses confidence in a

licensee’s ability to prepare these

examinations acceptably. In addition,

the NRC would periodically invoke this

authority in order to maintain the

proficiency of its own license

examiners.

DATES: Submit comments by October 21,

1997. Comments received after this date

will be considered if it is practical to do

so, but the Commission is able to assure

consideration only for comments

received on or before this date.

ADDRESSES: Comments may be sent to:

Secretary, U.S. Nuclear Regulatory

Commission, Washington, DC 20555.

Attn: Rulemakings and Adjudications

Staff. Hand deliver comments to 11545

Rockville Pike, Rockville, Maryland,

between 7:30 am and 4:15 pm on

Federal workdays. For information on

submitting comments electronically, see

the discussion under Electronic Access

in the Supplementary Information

section.

Single copies of this proposed

rulemaking may be obtained by written

request or telefax ((301) 415–2260) from

Harry S. Tovmassian, Office of Nuclear

Regulatory Research, U.S. Nuclear

Regulatory Commission, Washington DC

20555. Certain documents related to this

rulemaking, including comments

received, may be examined at the NRC

Public Document Room, 2120 L Street

NW (Lower Level), Washington, DC.

These same documents may also be

viewed and downloaded electronically

via the Electronic Bulletin Board

established by NRC for this rulemaking

as indicated in the Supplementary

Information section.

FOR FURTHER INFORMATION CONTACT:

Harry S. Tovmassian, Office of Nuclear

Regulatory Research, U.S. Nuclear

Regulatory Commission, Washington,

DC 20555, telephone (301) 415–6231; email hst@nrc.gov.

SUPPLEMENTARY INFORMATION:

Background

Section 107 of the Atomic Energy Act

(AEA) of 1954, as amended, requires the

NRC to determine the qualifications of

individuals applying for an operator

license, to prescribe uniform conditions

for licensing such individuals, and to

issue licenses as appropriate. Pursuant

to the AEA, 10 CFR part 55 requires

applicants for operator licensees to pass

an examination that satisfies the basic

content requirements specified in the

regulation. Although neither the AEA

nor part 55 specifies who must prepare,

proctor, or grade these examinations,

the NRC has traditionally performed

those tasks itself or through its contract

examiners. In accordance with 10 CFR

170.12(i), NRC staff and contractual

costs are recovered from facility

licensees who receive examination

services. The NRC and its contract

examiners have used the guidance in

NUREG–1021, ‘‘Operator Licensing

Examination Standards for Power

Reactors,’’ to prepare the initial operator

licensing examinations. This document

has been revised as experience has been

acquired in preparing these

examinations. The current version is

designated Interim Revision 8. 1

The intended modifications to 10 CFR

part 55 would allow facility licensees to

have greater participation in the initial

operator licensing process and enable

the NRC to eliminate contractor

assistance in this area. Between $3

million and $4 million in contractor

support for the preparation and

administration of the initial operator

licensing examinations and for support

of requalification program inspections

would be eliminated.

On April 18, 1995, the Commission

approved the NRC staff’s proposal to

initiate a transition process to revise the

operator licensing program and directed

the NRC staff to carefully consider

experience from pilot examinations

before fully implementing the changes.

On August 15, 1995, the NRC staff

issued Generic Letter (GL) 95–06,

‘‘Changes in the Operator Licensing

Program,’’2 outlining the revised

examination development process and

soliciting volunteers to participate in

pilot examinations to evaluate and

refine the methodology.

Between October 1, 1995, and April 5,

1996, the NRC staff reviewed and

approved 22 operator licensing

examinations, including both the

written examinations and the operating

tests, prepared by facility licensees as

part of a pilot program. These

examinations were prepared using the

guidance in Revision 7 (Supplement 1)

of NUREG–1021 and the additional

guidance in GL 95–06. 2 These

examinations were used to test 146

reactor operator (RO) and senior reactor

operator (SRO) applicants.

The results of the pilot examinations

were discussed in SECY–96–123,

‘‘Proposed Changes to the NRC Operator

Licensing Program,’’ dated June 10,

1996. Based on the results of the pilot

program, the staff recommended that the

Commission approve the

implementation of the new examination

process on a voluntary basis until

rulemaking could be completed to

require all power reactor facility

licensees to prepare the entire initial

examination for reactor operators and

senior reactor operators and to proctor

the written portion of the examination.

On July 23, 1996, the Commission

authorized the staff to continue the pilot

examination process on a voluntary

basis and requested the staff to develop

a detailed rulemaking plan to justify the

changes that may be necessary to 10

CFR part 55. The Commission also

directed the staff to address a number of

additional items (e.g., pros, cons, and

vulnerabilities) regarding the revised

examination process to facilitate a

Commission decision on whether to

implement the revised process on an

industry-wide basis.

On September 25, 1996, the staff

forwarded the requested rulemaking