ATTACHMENT 4

RETIREMENT COVERAGE ERROR CORRECTION

Thrift Savings Plan Correction Instructions

BAL 02-103 Erroneous FERS Coverage In Effect for Less Than 3 Years

May 7, 2002
BAL 02-103 May 7, 2002

Attachment 4 Page 2

Removal of Erroneous Employee Contributions

You need to remove

erroneous employee

contributions when:

Employee elects CSRS, CSRS Offset, or Social

Security Only

AND ALSO

Elects to remove TSP contributions from account.

You do not need to

remove erroneous

employee contributions

from the TSP account

if:

Employee elects to keep his or her contributions in the

TSP account. It does not matter which retirement

system the employee elected.

What to tell the

employee:

If the employee declines FERS coverage, he or she

can elect to have all or part of his or her own TSP

contributions returned. Earnings on employee

contributions remain in the employee’s TSP account.

All employer contributions and earnings will be

removed from the employee’s account.

Refunded contributions are not an early withdrawal of

the TSP account. The contributions are refunded to

the employee through his or her paycheck and are

taxed as ordinary income in the year that they are

received.

Earnings associated with employee contributions

remain in the employee’s TSP account and the

employee cannot receive such earnings until he or

she withdraws the account (after separation from

Federal service).

How to remove

erroneous employee

contributions:

If the employee requests a refund of excess employee

contributions, the payroll office must submit a negative

adjustment record (26-Record) for each pay period in

which erroneous employee contributions were made.

All negative adjustment records must contain the

attributable pay date.

If the contributions to be removed were reported as

current contributions, the attributable pay date is the

“current pay date” which was in the Header Record for
BAL 02-103 May 7, 2002

Attachment 4 Page 3

Removal of Erroneous Employee Contributions

How to remove

erroneous employee

contributions:

the earlier payroll submission (and in item 4 of the

Form TSP-2 which accompanied that earlier

submission).

If the contributions to be removed were reported as

makeup or late contributions, the attributable pay date

is the “as of” date that was reported on the earlier

payment.

The payroll office must refund excess contributions to

employee in pay check. Refunded contributions are

taxable income for the year that they are received. Do

not change prior year IRS Form W-2s, Wage and Tax

Statement.

Any earnings on erroneous employee contributions

remain in the TSP account.

Additional references: 5 CFR 1605.12

TSP Bulletin 01-2, dated 1/20/01

TSP Bulletin 00-6, dated 3/30/00

TSP Bulletin 90-28, dated 10/15/90

TSP Bulletin 90-24 dated 8/7/90

TSP Bulletin 90-22, dated 8/7/90
BAL 02-103 May 7, 2002

Attachment 4 Page 4

Removal of Erroneous Agency Contributions

You need to remove

erroneous agency

contributions when:

Employee elects CSRS, CSRS Offset, or Social

Security Only.

You do not need to

remove erroneous

agency contributions if:

Employee elects to remain in FERS.

How to remove

erroneous agency

contributions:

The payroll office must submit a negative adjustment

record (26-Record) for each pay period in which

erroneous agency contributions can be returned

to the agency were made.

Agency contributions will be returned to the agency if

they have been in TSP for less than 1 year. Amounts

in TSP for 1 year or more are forfeited to TSP to

offset administrative expenses. Earnings on

erroneous agency contributions are forfeited to TSP.

If the contributions to be removed were reported as

current contributions, the attributable pay date is the

“current pay date” which was in the Header Record

for the earlier payroll submission (and in item 4 of the

Form TSP-2 which accompanied that earlier

submission).

If the contributions to be removed were reported as

makeup or late contributions, the attributable pay

date is the “as of” date that was reported on the

earlier payment.

All negative adjustment records must contain the

attributable pay date.

Additional references 5 CFR 1605.12

TSP Bulletin 01-2, dated 1/20/01

TSP Bulletin 00-6, dated 3/30/00

TSP Bulletin 90-28, dated 10/15/90

TSP Bulletin 90-24 dated 8/7/90

TSP Bulletin 90-22, dated 8/7/90
BAL 02-103 May 7, 2002

Attachment 4 Page 5

Makeup of Missed Employee Contributions

You need to give the

employee an

opportunity to makeup

missed contributions

when:

The employee elects to remain in FERS and the

earliest date the employee could have begun

contributing to TSP changes. Because the employee

now elects FERS rather than being automatically

placed in FERS, the employee could have

immediately begun making TSP contributions rather

than serving a waiting period. You must now give the

employee an opportunity to makeup TSP

contributions that could have been made during the

(erroneous) waiting period.

You do not give the

employee an

opportunity to makeup

missed contributions

when:

The employee chooses CSRS, CSRS Offset, or

Social Security Only coverage,

or

The earliest date that the employee could have

begun making TSP contributions does not change.

This only applies to errors effective on or after July 1,

2001.

What to tell the

employee:

The employee may elect to make up missed

contributions. The employee may make a

contribution election for each missed open season.

Makeup Agency Matching Contributions are payable

on the first 5% of pay that the employee elects to

contribute as makeup contributions.

The makeup contributions will be deposited [until the

new recordkeeping system is implemented]

according to the employee’s current contribution

allocation. Lost earnings are not payable on

employee makeup contributions. However, the

employee will receive lost earnings on any

attributable Agency Matching Contributions. The

employee also receives lost earnings on the Makeup

Agency Automatic (1%) Contributions.

For purposes of the IRS annual limit on elective

deferrals, makeup employee contributions are subject

to the limit for the year in which they should have

been made.

The employee must make up contributions as payroll

deductions. Personal checks cannot be accepted as
BAL 02-103 May 7, 2002

Attachment 4 Page 6

Makeup of Missed Employee Contributions

What to tell the

employee:

repayment.

The agency cannot require the employee to make up

contributions in any time frame less than 2 times the

number of pay periods over which the error occurred.

The agency can give the employee up to 4 times the

number of pay periods over which the error occurred.

How to submit

employee makeup

contributions:

Use a Current Payment Record (16-Record) to report

makeup contributions.

Agencies must submit a separate Current Payment

Record for each applicable pay date. Therefore, if a

payroll submission contains both current and makeup

contributions for a participant, the current

contributions and the makeup contributions must be

submitted on separate Current Payment Records.

Participants are not entitled to lost earnings on

employee makeup contributions.

Additional references: 5 CFR 1605.11

TSP Bulletin 01-2, dated 1/20/01

TSP Bulletin 00-06, dated 3/30/00

TSP Bulletin 98-21, dated 6/19/98
BAL 02-103 May 7, 2002

Attachment 4 Page 7

Makeup of Missed Agency Contributions

You need to make up

missed agency

contributions when:

The employee elects to remain in FERS. Because

the employee now elects FERS rather than being

automatically placed in FERS, the employee should

have been immediately eligible to receive agency

TSP contributions rather than serve a waiting period.

You must now submit the Agency Automatic (1%)

Contributions. You must also submit Agency

Matching Contributions if the employee decides to

makeup the TSP contributions that could have been

made during the (erroneous) waiting period.

Agency Automatic (1%) Contributions and Agency

Matching Contributions are subject to lost earnings.

You do not make up

missed agency

contributions when:

The employee chooses CSRS, CSRS Offset, or

Social Security Only coverage.

How to submit missed

Agency Automatic (1%)

Contributions:

Use a Current Payment Record (16-Record) to report

missed contributions.

Agencies must submit a separate Current Payment

Record for each applicable pay date. Therefore, if a

payroll submission contains both current and makeup

contributions for a participant, the current

contributions and the makeup contributions must be

submitted on separate Current Payment Records.

Lost earnings are due on makeup Agency Automatic

(1%) Contributions.

How to submit missed

Agency Matching

Contributions:

Use a Current Payment Record (16-Record) to report

missed contributions. Make up missed Agency

Matching Contributions as employee makes up

employee contributions.

Agencies must submit a separate Current Payment

Record for each applicable pay date. Therefore, if a

payroll submission contains both current and makeup

contributions for a participant, the current
BAL 02-103 May 7, 2002

Attachment 4 Page 8

Makeup of Missed Agency Contributions

How to submit missed

Agency Matching

Contributions:

contributions and the makeup contributions must be

submitted on separate Current Payment Records.

Lost earnings are due on Agency Matching

Contributions.

Additional references: 5 CFR 1605.11

TSP Bulletin 01-2, dated 1/20/01

TSP Bulletin 00-06, dated 3/30/00

TSP Bulletin 98-21, dated 6/19/98
BAL 02-103 May 7, 2002

Attachment 4 Page 9

Submitting Lost Earnings Records

You need to submit a

Lost Earnings Record

when:

The employee elects to remain in FERS,

And

The agency made up missed Agency Contributions

Agency Automatic (1%) Contributions were missed

because the employee should have been immediately

eligible to receive agency TSP contributions rather

than serve a waiting period.

Attributable Agency Matching Contributions are due

only if the employee makes up employee

contributions that could have been made during the

(erroneous) waiting period.

Agency Automatic (1%) Contributions and Agency

Matching Contributions are subject to lost earnings.

You do not submit a

Lost Earnings Record

when:

The employee chooses CSRS, CSRS Offset, or

Social Security Only coverage.

How to submit a Lost

Earnings Record:

After you report makeup contributions, you must

submit lost earnings records (51-Records) for each

applicable pay date so that lost earnings may be

calculated by the TSP system. These records must

be submitted promptly, i.e., within 30 days of the

submission of the payment records. The records

must be accompanied by Form TSP-2-E, Request to

Calculate Lost Earnings and Certification of Transfer

of Funds and Journal Voucher, or Form TSP-2-EG,

Request to Calculate Lost Earnings at the G Fund

Rates of Return and Certification of Transfer of Funds

and Journal Voucher. The records must reflect:

1. The “beginning date,” which is the pay date on

which the contribution should have been made.

2. The “ending date,” which is the pay date on which

the contribution was made.

3. The amount of the contribution by source

(employee, agency automatic (1%), or agency

matching).
BAL 02-103 May 7, 2002

Attachment 4 Page 10

Submitting Lost Earnings Records

How to submit a Lost

Earnings Record:

4. If the “beginning date” is before May 1, 2001, the

amount of the contribution must also be shown by

investment fund (G, F, or C).

Generally, agencies must use the participant’s

Election Form (TSP-1) that was in effect for the

“beginning date” to determine the amount of

contributions by investment fund.

However, if the participant has no Form TSP-1 on file

for the “beginning date,” the contributions must be

reported as “G Fund.”

Lost Earnings Records (51-Records) must be

submitted to NFC on magnetic tape or diskette. Each

agency payroll office should have a personal

computer (PC) program that is used to create

individual Lost Earnings Records (51-Records) and

Forms TSP-2-E.

Lost Earnings Records cannot be submitted on the

same magnetic tape that contains a routine payroll

submission of contributions data. For each lost

earnings journal voucher that is processed during the

midmonth processing cycle, agency payroll offices will

receive a set of reports for that journal voucher that

must be processed through the agency’s accounting

systems. Therefore, it is recommended that Lost

Earnings Records (51-Records) be submitted monthly

to NFC. Note: Lost Earnings Records must be

edited and accepted by the TSP System as of the

next-to-last business day of the month in order to be

processed during the following month’s midmonth

processing cycle.

Additional references: 5 CFR 1606

TSP Bulletin 01-35, dated 8/15/2001

TSP Bulletin 01-2, dated 1/10/01

TSP Bulletin 91-3, dated 1/29/91

TSP Bulletin 90-42, dated 12/17/90