`[Federal Register Volume 89, Number 228 (Tuesday, November 26, 2024)]
[Proposed Rules]
[Pages 93223-93224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-27484]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 89, No. 228 / Tuesday, November 26, 2024 / 
Proposed Rules  

[[Page 93223]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1653


Methodology for Calculating Earnings on Court-Ordered Payments

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Retirement Thrift Investment Board (FRTIB) 
proposes to change its regulations regarding the methodology used to 
calculate earnings and losses in connection with court-ordered payments 
to spouses, former spouses, children, or dependents (i.e., payees) of 
Thrift Savings Plan (TSP) participants.

DATES: Comments must be received on or before December 26, 2024.

ADDRESSES: You may submit comments using one of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Office of General Counsel, Attn: Dharmesh Vashee, 
Federal Retirement Thrift Investment Board, 77 K Street NE, Suite 1000, 
Washington, DC 20002.
    Comments will be made available to the public online at https://www.regulations.gov. Do not include any personally identifiable or 
confidential information that you do not want publicly disclosed. 
Anonymous comments are acceptable.

FOR FURTHER INFORMATION CONTACT: 
    For press inquiries: Kim Weaver at (202) 465-5220.
    For information about how to comment on this proposed rule: 
Laurissa Stokes at (202) 308-7707.

SUPPLEMENTARY INFORMATION: The FRTIB administers the TSP, which was 
established by the Federal Employees' Retirement System Act of 1986 
(FERSA), Public Law 99-335, 100 Stat. 514. The TSP is a tax-deferred 
retirement savings plan for Federal civilian employees and members of 
the uniformed services. The TSP is similar to cash or deferred 
arrangements established for private-sector employees under section 
401(k) of the Internal Revenue Code (26 U.S.C. 401(k)). The provisions 
of FERSA that govern the TSP are codified, as amended, largely at 5 
U.S.C. 8351 and 8401-79.
    Section 8435(c) of FERSA requires the FRTIB to obey certain 
domestic relations court orders requiring payments from a TSP 
participant's account to the participant's spouse, former spouse, 
child, or dependent. A TSP account can be divided by means of a court 
decree of divorce, annulment, or legal separation; or a court order or 
court-approved property settlement agreement resulting from such a 
decree. A court order to divide a TSP account may be issued at any 
stage of a divorce, annulment, or legal separation proceeding.
    Court orders sometimes award the participant's spouse, former 
spouse, child, or dependent (i.e., the payee) earnings that accrue 
between the date used to calculate the payee's entitlement and the date 
payment is made. Currently, when a court order awards earnings, the 
FRTIB calculates the amount to which the payee is entitled by 
determining the payee's award amount (e.g., the percentage or fraction 
of the participant's account awarded by the court) and, based on the 
participant's investment allocation as of the date used to calculate 
the payee's entitlement, the number and composition of shares that the 
payee's award amount would have purchased as of that date. The FRTIB 
then multiplies the price per share as of the payment date by the 
calculated number and composition of shares to determine the payee's 
entitlement.
    The FRTIB contracts with Accenture Federal Services to provide, 
maintain, and operate the technology platforms necessary to deliver 
retirement plan record keeping services to TSP participants. These 
services include processing retirement benefits court orders. The FRTIB 
proposes to update its methodology for calculating court ordered 
earnings to align with the methodology used by Accenture Federal 
Services. Accenture Federal Services calculates earnings by using a 
money-weighted return commonly referred to in the financial industry as 
the internal rate of return. This methodology considers the influence 
of cash flows (for example, contributions, withdrawals, loans, and loan 
payments) on asset allocation, and the resulting effect on investment 
performance.
    Specifically, the FRTIB proposes to calculate earnings by (i) 
identifying the beginning balance, ending balance, and the cash flows 
between the two balances over the period of time between the 
entitlement date and the payment date, (ii) calculating the rate of 
return that increases (or reduces in the case of a loss) the balance at 
the beginning of the period, accounting for all cash flows, to equal 
the balance at the end of the period; and then (iii) multiplying the 
payee's award amount by the resulting rate of return.
    The proposed methodology would ensure that the payee's entitlement 
consists of an award component and an earnings component that each 
reflects the percentage or fraction specified in the court order. The 
award component reflects the percentage or fraction of the 
participant's account on the entitlement date as specified in the 
order. The earnings component is based on the rate of return 
experienced on the participant's account during the period from the 
entitlement date to the payment date.

Regulatory Flexibility Act

    This proposed regulation will not have a significant economic 
impact on a substantial number of small entities. This regulation will 
affect Federal employees, members of the uniformed services who 
participate in the TSP, and beneficiary participants.

Paperwork Reduction Act

    This proposed regulation does not require additional reporting 
under the criteria of the Paperwork Reduction Act.

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 
632, 653, and 1501-1571, the effects of this regulation on State, 
local, and tribal governments and the private sector have been 
assessed. This regulation will not compel the expenditure in any one 
year of $100 million or more by State, local, and tribal governments, 
in the aggregate, or by the private sector. Therefore, a statement 
under 2 U.S.C. 1532 is not required.

[[Page 93224]]

List of Subjects in 5 CFR Part 1653

    Alimony, Child support, Government employees, Pensions, Retirement.

Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.

    For the reasons stated in the preamble, the FRTIB proposes to amend 
5 CFR chapter VI as follows:

PART 1653--COURT ORDERS AND LEGAL PROCESSES AFFECTING THRIFT 
SAVINGS PLAN ACCOUNTS

0
1. The authority citation for part 1653 continues to read as follows:

    Authority: 5 U.S.C. 8432d, 8435, 8436(b), 8437(e), 8439(a)(3), 
8467, 8474(b)(5) and 8474(c)(1).

0
2. In Sec.  1653.1, amend paragraph (b) by adding the definition of 
``Entitlement date'' in alphabetical order, and revising the definition 
of ``Payment date'' to read as follows:


Sec.  1653.1  Definitions.

* * * * *
    (b) * * *
* * * * *
    Entitlement date means the date determined in accordance with 
paragraphs (b) and (c) of section 1653.4.
    Payment date refers to the date on which a temporary account is 
established for the payee in the TSP.
* * * * *
0
3. Amend Sec.  1653.3 by revising paragraph (f)(4)(ii) to read as 
follows:


Sec.  1653.3  Processing retirement benefits court orders.

* * * * *
    (f) * * *
    (4) * * *
    (ii) The anticipated payment date;
* * * * *
0
4. Amend Sec.  1653.4 by revising paragraphs (a), (c), (d)(2), and (f) 
to read as follows:


Sec.  1653.4  Calculating entitlements.

    (a) For purposes of computing the amount of a payee's entitlement 
under this section, a participant's TSP account balance will include 
any loan balance outstanding as of the entitlement date unless the 
court order provides otherwise.
* * * * *
    (c) If the court order awards a percentage of an account but does 
not contain a specific date as of which to apply that percentage, the 
TSP record keeper will use the effective date of the court order.
    (d) * * *
    (1) * * *
    (2) The vested account balance on the payment date.
* * * * *
    (f) The payee's entitlement will be credited with TSP investment 
earnings as described:
    (1) The entitlement calculated under this section will not be 
credited with TSP investment earnings unless the court order 
specifically provides otherwise. The court order may not specify a rate 
for earnings.
    (2) If earnings are awarded, the TSP record keeper will calculate 
earnings by:
    (i) Identifying the beginning balance, ending balance, and the cash 
flows between the two balances over the period of time between the 
entitlement date and the payment date;
    (ii) Calculating the rate of return that increases (or reduces in 
the case of a loss) the balance at the beginning of the period, 
accounting for all cash flows, to equal the balance at the end of the 
period; and
    (iii) Multiplying the payee's award amount by the resulting rate of 
return.
* * * * *
0
5. Amend Sec.  1653.5 by revising paragraphs (d) and (h) to read as 
follows:


Sec.  1653.5  Payment.

* * * * *
    (d) Payment will be made pro rata from the participant's 
traditional and Roth balances. The distribution from the traditional 
balance will be further pro rated between the tax-deferred balance and 
tax-exempt balance. The payment from the Roth balance will be further 
pro rated between contributions in the Roth balance and earnings in the 
Roth balance. In addition, all payments will be distributed pro rata 
from all TSP core funds in which the participant's account is invested. 
All pro rated amounts will be based on the balances in each fund or 
source of contributions on the payment date. The TSP record keeper will 
not honor provisions of a court order that require payment to be made 
from a specific TSP core fund, source of contributions, or balance.
* * * * *
    (h) If the payee dies before a payment is disbursed from the TSP, 
payment will be made to the estate of the payee, unless otherwise 
specified by the court order. A distribution to the estate of a 
deceased court order payee will be reported as income to the decedent's 
estate. If the participant dies before the payment date, the order will 
be honored so long as it is submitted to the TSP record keeper before 
the TSP account has been closed.
* * * * *
0
6. Revise Sec.  1653.14 to read as follows:


Sec.  1653.14  Calculating entitlements.

    A qualifying legal process can only require the payment of a 
specified dollar amount from the TSP. Payment pursuant to a qualifying 
legal process will be calculated in accordance with Sec.  1653.4(a), 
(d), (f) and (g), except that the term ``payment date'' shall mean to 
the date the payment is disbursed from the TSP.
0
7. Revise Sec.  1653.15 to read as follows:


Sec.  1653.15  Payment.

    Payment pursuant to a qualifying legal process will be made in 
accordance with Sec.  1653.5, except the term ``payment date'' shall 
mean to the date the payment is disbursed from the TSP.
0
8. Amend Sec.  1653.34 by revising paragraph (d)(4)(ii) to read as 
follows:


Sec.  1653.34  Processing Federal tax levies and criminal restitution 
orders.

* * * * *
    (d) * * *
    (4) * * *
    (ii) The anticipated date of disbursement.

[FR Doc. 2024-27484 Filed 11-25-24; 8:45 am]
BILLING CODE 6760-01-P`