22088 Federal Register / Vol. 66, No. 85 / Wednesday, May 2, 2001 / Rules and Regulations

FEDERAL RETIREMENT THRIFT

INVESTMENT BOARD

5 CFR Part 1600

Employee Elections to Contribute to

the Thrift Savings Plan

AGENCY: Federal Retirement Thrift

Investment Board.

ACTION: Final rule.

SUMMARY: The Executive Director of the

Federal Retirement Thrift Investment

Board (Board) is amending the

regulations on employee elections to

contribute to the Thrift Savings Plan

(TSP) to provide for employee

participation in the TSP to begin

immediately upon the employee’s

appointment to a position covered by

FERS or CSRS, or an equivalent

retirement plan. Beginning July 1, 2001,

participants also will be able to transfer

into their TSP accounts funds from

certain qualified retirement plans or

conduit individual retirement accounts

(IRAs). In addition, the limitations on

employee contributions (as a percentage

of basic pay) are phased out over the

next 5 years.

EFFECTIVE DATE: May 2, 2001.

FOR FURTHER INFORMATION CONTACT:

Salomon Gomez on (202) 942–1661;

Merritt A. Willing on (202) 942–1666; or

Patrick J. Forrest on (202) 942–1659.

FAX (202) 942–1676.

SUPPLEMENTARY INFORMATION: The Board

administers the TSP, which was

established by the Federal Employees’

Retirement System Act of 1986

(FERSA), Public Law 99–335, 100 Stat.

514, which has been 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. Sums in a TSP

participant’s account are held in trust

for that participant.

On October 27, 2000, Congress passed

Public Law 106–361. In it, Congress

eliminates the waiting period for new

and rehired employees to begin making

employee contributions. The Act also

permits participants to transfer moneys

from certain qualified retirement

accounts and conduit IRAs into their

TSP accounts. Also, on December 21,

2000, Congress passed the Consolidated

Appropriations Act for Fiscal Year 2001,

Public Law 106–554, which includes a

provision changing the limits on FERS

and CSRS TSP employee contributions

(i.e., 10 and 5 percent of basic pay,

respectively) by raising the percentage

limitation one percent each year until

2006, when the limits are removed

altogether. However, the Internal

Revenue Code annual limits on elective

deferrals, I.R.C. sections 402(g) and

415(c), will continue to be applicable to

TSP contributions.

On March 26, 2001, the Board

published a proposed rule with a

request for comments in the Federal

Register (66 FR 16415). The Board

received two comments on the proposed

rule, one from a Federal agency and the

other from a Washington, D.C., attorney

who represents federal employees in

domestic relations disputes.

The Federal agency commenter

suggested that § 1600.13(a), describing

the effective date of TSP contribution

elections made after May 15, 2001, be

clarified by omitting redundant

language. The Board accepted the

suggestion and revised § 1600.13(a).

The other commenter suggested that

the rule be amended to permit Federal

employees to transfer into their TSP

accounts retirement funds they received

through a domestic relations court

order, either from the spouse’s TSP

account or other qualified retirement

plan or from an IRA set up to receive

funds transferred from a qualified

retirement plan. Public Law 106–361

authorizes the TSP to accept any eligible

rollover distribution that a qualified

trust can accept under the Internal

Revenue Code. A qualified trust can

accept a transfer of funds received

pursuant to a qualified domestic

relations court order, and the proposed

regulation is sufficiently broad to permit

the TSP to accept a similar transfer.

There is nothing in the Board’s current

court order regulation at 5 CFR

§ 1653.5(b) which would lead to a

contrary result. Thus, the Board believes

that the proposed regulation is

sufficiently broad to include the

transfers contemplated by the

commenter. The Board will, however,

include a more specific description of

these transfers when it revises its court

order regulations at 5 CFR part 1653.

Therefore, with the one exception

discussed above to § 1600.13, the Board

adopts the provisions of the proposed

rule as the final rule.

Analysis

Subpart A includes definitions that

are relevant to contributions; the

definition of highly compensated

employee in the existing regulation is

deleted because it is obsolete.

Subpart B combines the provisions

that relate to contribution elections. The

rule deletes obsolete references to the

initial open season in 1987, and makes

changes necessary to permit immediate

employee contributions. It eliminates

the requirement that an employee who

was previously eligible to participate in

the TSP must wait until an open season

to make a contribution election. Under

the amended rule, an employee is

immediately eligible to make a

contribution election for employee

contributions. If the employee was

previously eligible to receive employer

contributions, the employee will also be

immediately eligible to receive

employer contributions. The

amendment makes other changes to

differentiate between contribution

elections, provided for in this part, and

contribution allocations, provided for in

part 1601.

In subpart C, the Board has

reorganized the provisions that describe

the contributions program in general.

The amendment phases out the limits

on employee contributions as a

percentage of basic pay and explains the

Internal Revenue Code’s limitations on

TSP contributions, which still apply.

Subpart D describes the kinds of

qualified retirement accounts and

conduit IRAs that may be transferred to

the TSP, the method by which a transfer

may be made, and the treatment

accorded such funds in the TSP.

CROSS-REFERENCE TABLES

Old section New section

1600.1 ................................ 1600.1.

1600.2(a) ........................... Deleted.

1600.2(b) ........................... 1600.12(b).

1600.2(c) ............................ 1600.15.

1600.2(d) ........................... 1600.16.

1600.3 ................................ Deleted.

1600.4(a) ........................... 1600.11(a).

1600.4(b) ........................... Deleted.

1600.5 ................................ 1600.12(c).

1600.6 ................................ 1600.14.

1600.7 ................................ 1600.13.

1600.8 ................................ Deleted.

1600.9 ................................ 1600.21.

1600.10 .............................. 1600.22.

1600.11 .............................. 1600.23.

1600.12 .............................. 1600.18.

1600.13 .............................. Deleted.

1600.14 .............................. Deleted.

1600.15 .............................. Deleted.

1600.16 .............................. Deleted.

1600.17 .............................. Deleted.

1600.18 .............................. Deleted.

1600.1 ................................ 1600.1.

1600.11 .............................. 1600.4.

1600.12 .............................. 1600.2(b),

1600.5.

1600.13 .............................. 1600.7.

1600.14 .............................. 1600.6.

1600.15 .............................. 1600.2(c).

1600.16 .............................. 1600.2(d).

1600.17 .............................. New.

1600.18 .............................. 1600.12.

1600.21 .............................. 1600.9.

1600.22 .............................. 1600.10.

1600.23 .............................. 1600.11.

1600.31 .............................. New.

1600.32 .............................. New.

Federal Register / Vol. 66, No. 85 / Wednesday, May 2, 2001 / Rules and Regulations 22089

CROSS-REFERENCE TABLES—

Continued

Old section New section

1600.33 .............................. New.

Regulatory Flexibility Act

I certify that these regulations will not

have a significant economic impact on

a substantial number of small entities.

They will affect only employees of the

Federal Government.

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, 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 section 1532 is not

required.

Submission to Congress and the

General Accounting Office

Pursuant to 5 U.S.C. 801(a)(1)(A), the

Board submitted a report containing this

rule and other required information to

the U.S. Senate, the U.S. House of

Representatives, and the Comptroller

General of the United States prior to

publication of this rule in today’s

Federal Register. This rule is not a

major rule as defined at 5 U.S.C. 804(2).

List of Subjects in 5 CFR Part 1600

Employment benefit plans,

Government employees, Pensions,

Retirement.

Roger W. Mehle,

Executive Director, Federal Retirement Thrift

Investment Board.

For the reasons set out in the

preamble, 5 CFR part 1600 is revised to

read as follows:

PART 1600—EMPLOYEE ELECTIONS

TO CONTRIBUTE TO THE THRIFT

SAVINGS PLAN

Subpart A—General

Sec.

1600.1 Definitions.

Subpart B—Elections

1600.11 Types of elections.

1600.12 Period for making contribution

elections.

1600.13 Effective dates of contribution

elections.

1600.14 Method of election.

1600.15 Number of elections.

1600.16 Belated elections.

1600.17 Timing of agency contributions.

1600.18 Effect of transfer to FERS.

Subpart C—Program of Contributions

1600.21 Contributions in whole numbers.

1600.22 Maximum contributions.

1600.23 Required reduction of contribution

rates.

Subpart D—Transfers From Other Qualified

Retirement Plans

1600.31 Accounts eligible for transfer.

1600.32 Methods for transferring account

from qualified retirement plan or conduit

IRA to TSP.

1600.33 Treatment accorded transferred

funds.

Authority: 5 U.S.C. 8351, 8432(b)(1)(A),

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

Subpart A—General

§ 1600.1 Definitions.

Terms used in this part have the

following meanings:

Account or individual account means

the account established for a participant

in the Thrift Savings Plan under 5

U.S.C. 8439(a).

Agency automatic (1%) contributions

means any contributions made under 5

U.S.C. 8432(c)(1) and (c)(3).

Agency matching contributions means

any contributions made under 5 U.S.C.

8432(c)(2).

Basic pay means basic pay as defined

in 5 U.S.C. 8331(3). For CSRS and FERS

employees, it is the rate of pay used in

computing any amount the individual is

otherwise required to contribute to the

Civil Service Retirement and Disability

Fund as a condition of participating in

the Civil Service Retirement System or

the Federal Employees’ Retirement

System, as the case may be.

Board means the Federal Retirement

Thrift Investment Board established

under 5 U.S.C. 8472.

Contribution allocation means the

apportionment of a participant’s future

contributions and loan payments among

the TSP investment funds.

Contribution election means a request

by an employee to start contributing to

the TSP, to change the amount of

contributions made to the TSP each pay

period, or to terminate contributions to

the TSP.

CSRS means the Civil Service

Retirement System established by 5

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

equivalent Federal retirement system.

CSRS employee or CSRS participant

means any employee or participant

covered by CSRS.

Date of appointment means the

effective date of an employee’s

accession by the current employing

agency.

Election period means the last

calendar month of a TSP open season.

It is the earliest period during which a

TSP contribution election can become

effective.

Employee contributions means any

contributions to the Thrift Savings Plan

made under 5 U.S.C. 8351(a), 8432(a), or

8440a through 8440e.

Employer contributions means agency

automatic (1%) contributions under 5

U.S.C. 8432(c)(1) or 8432(c)(3) and

agency matching contributions under 5

U.S.C. 8432(c)(2).

Employing agency means the

organization that employs an individual

eligible to contribute to the TSP and that

has authority to make personnel

compensation decisions for the

individual.

Executive Director means the

Executive Director of the Federal

Retirement Thrift Investment Board

under 5 U.S.C. 8474.

FERS means the Federal Employees’

Retirement System established by 5

U.S.C. chapter 84 or any equivalent

Federal retirement system.

FERS employee or FERS participant

means any employee or TSP participant

covered by FERS.

Open season means the period during

which employees may elect to make

contributions to the TSP, change the

amount of contributions, or terminate

contributions (without losing the right

to resume contributions during the next

open season).

Separation from Government service

means the cessation of employment

with the Federal Government, 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 31 or more full calendar days.

Thrift Savings Plan, TSP, or Plan

means the 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 Service Office

(TSPSO) means the office of the TSP

recordkeeper which provides service to

participants. The TSPSO’s address is:

Thrift Savings Plan Service Office,

National Finance Center, P.O. Box

61500, New Orleans, Louisiana 70161–

1500.

TSP recordkeeper means the entity

that is engaged by the Board to perform

recordkeeping services for the Thrift

Savings Plan. The TSP recordkeeper is

the National Finance Center, Office of

22090 Federal Register / Vol. 66, No. 85 / Wednesday, May 2, 2001 / Rules and Regulations

Finance and Management, United States

Department of Agriculture, located in

New Orleans, Louisiana.

Subpart B—Elections

§ 1600.11 Types of elections.

(a) Contribution elections. A

contribution election can be made on a

Form TSP–1, Thrift Savings Plan

Election Form, and includes any one of

the following elections:

(1) To make employee contributions;

(2) To change the amount of employee

contributions; or

(3) To terminate employee

contributions.

(b) Contribution allocation. A

participant may make or change the

manner in which future deposits to his

or her account are allocated among the

TSP’s investment funds only in

accordance with 5 CFR part 1601.

§ 1600.12 Period for making contribution

elections.

(a) Participation upon initial

appointment or reappointment. An

employee may make a contribution

election as follows:

(1) Appointments made during the

period January 1 through June 30, 2001.

An employee appointed, or reappointed

following a separation from Government

service, to a position covered by FERS

or CSRS during the period January 1

through June 30, 2001, may make a TSP

contribution election during the May 15

through July 31, 2001, open season.

(2) Appointments made on or after

July 1, 2001. An employee appointed, or

reappointed following a separation from

Government service, to a position

covered by FERS or CSRS may make a

TSP contribution election within 60

days after the effective date of the

appointment.

(b) Open season elections. Any

employee may make a contribution

election during an open season. Each

year an open season will begin on May

15 and will end on July 31; a second

open season will begin on November 15

and will end on January 31 of the

following year. If the last day of an open

season falls on a Saturday, Sunday, or

legal holiday, the open season will be

extended through the end of the next

business day.

(c) Election to terminate

contributions. An employee may elect to

terminate employee contributions to the

TSP at any time. If an employee’s

election to terminate contributions is

received by the employing agency

during an open season, the employee, if

otherwise eligible, may make an

election to resume contributions during

the next open season. If the election to

terminate contributions is received by

the employing agency outside an open

season, the employee may not make an

election to resume contributions until

the second open season beginning after

the election to terminate.

(d) Forced termination of employee

contributions due to in-service hardship

withdrawal restrictions under 5 CFR

part 1650. If an employee is reappointed

to a position covered by FERS or CSRS

following a separation from Government

service and, at the time of separation, he

or she had been previously ineligible to

make employee contributions or receive

agency matching contributions because

of the restrictions on participants’

ability to make contributions after

having received an in-service hardship

distribution, described in 5 CFR part

1650, the employee continues to be

ineligible to make employee

contributions or have agency matching

contributions made on the employee’s

behalf during the six-month period

described at 5 CFR 1650.32.

§ 1600.13 Effective dates of contribution

elections.

(a) Participation upon initial

appointment or reappointment. (1) TSP

contribution elections made pursuant to

§ 1600.12(a)(1) that are received by the

employing agency between May 15,

2001, and June 30, 2001, will become

effective the first full pay period in July

2001. TSP contribution elections made

pursuant to § 1600.12(a)(1) that are

received by the employing agency

during July 2001 will become effective

no later than the first full pay period

after the date the employing agency

receives the election.

(2) TSP contribution elections made

pursuant to § 1600.12(a)(2) will become

effective no later than the first full pay

period after the election is received by

the employing agency.

(b) Open season elections. TSP

contribution elections made pursuant to

§ 1600.12(b) that are received by an

employing agency during a portion of an

open season which precedes the

election period, except for an election to

terminate contributions, will become

effective the first full pay period of the

election period. TSP contribution

elections made pursuant to § 1600.12(b)

that are received by an employing

agency during the election period will

become effective no later than the first

full pay period after the date the

employing agency receives the election.

(c) Election to terminate

contributions. An election to terminate

contributions, whenever it is made, will

become effective no later than the first

full pay period after the date the

employing agency receives the election.

(d) Elections resulting from transfer to

FERS. Elections made pursuant to

§ 1600.18 will become effective no later

than the first full pay period after the

date the employing agency receives the

election. If the employee submits a

contribution election at the same time

that he or she submits the FERS transfer

election, both elections will become

effective the same pay period.

§ 1600.14 Method of election.

(a) A participant must submit a

contribution election to his or her

employing agency. Employees may use

either the paper TSP election form,

Form TSP–1, or, if provided by their

employing agency, electronic media to

make an election. If an electronic

medium is used, all relevant elements

contained on the paper Form TSP–1

must be included in the electronic

medium.

(b) A contribution election must:

(1) Be completed in accordance with

the instructions on Form TSP–1, if a

paper form is used;

(2) Be made in accordance with the

employing agency’s instructions, if the

submission is made electronically; and

(3) Not exceed the maximum

contribution limitations described in

§ 1600.22.

§ 1600.15 Number of elections.

Once a contribution election made

during an open season becomes

effective, no further contribution

elections may be made during the same

open season, except an election to

terminate contributions.

§ 1600.16 Belated elections.

When an employing agency

determines that an employee was

unable, for reasons that were beyond the

employee’s control (other than agency

administrative error, as provided in 5

CFR part 1605), to make a contribution

election within the time limits

prescribed by this part, the agency may

accept the employee’s election within

30 calendar days after it advises the

employee of its determination. The

election will become effective no later

than the first full pay period after the

date the employing agency receives the

election.

§ 1600.17 Timing of agency contributions.

(a) Employees not previously eligible

to receive agency contributions. An

employee appointed or reappointed to a

position covered by FERS who had not

been previously eligible to receive

agency contributions is eligible to

receive agency contributions the full

second election period following the

effective date of the appointment. If an

Federal Register / Vol. 66, No. 85 / Wednesday, May 2, 2001 / Rules and Regulations 22091

employee is appointed during an

election period, that election period is

not counted as the first election period.

(b) Employees previously eligible to

receive agency contributions. An

employee reappointed to a position

covered by FERS who was previously

eligible to receive agency contributions

is immediately eligible to receive agency

contributions.

(c) Agency matching contributions

that are attributable to the employee

contributions made to the account of a

FERS participant must change or

terminate, as applicable, when the

employee’s contribution election

becomes effective.

§ 1600.18 Effect of transfer to FERS.

(a) If an employee appointed to a

position covered by CSRS elects to

transfer to FERS, the employee may

make a contribution election

simultaneously with the election to

transfer to FERS, or within 30 calendar

days after the effective date of his or her

transfer.

(b) Eligibility to make employee

contributions, and therefore to have

agency matching contributions made on

the employee’s behalf, is subject to the

restrictions on making employee

contributions after receipt of a financial

hardship in-service withdrawal

described at 5 CFR part 1650.

(c) If the employee had elected to

make TSP contributions while covered

by CSRS, the election continues to be

valid until the employee makes a new

valid election.

(d) Agency automatic (1%)

contributions for all employees covered

under this section and, if applicable,

agency matching contributions

attributable to employee contributions

must begin the same pay period that the

transfer to FERS becomes effective.

Subpart C—Program of Contributions

§ 1600.21 Contributions in whole numbers.

Employees may elect to contribute a

percentage of basic pay or a dollar

amount, subject to the limits described

in § 1600.22. The election must be

expressed in whole percentages or

whole dollar amounts.

§ 1600.22 Maximum contributions.

(a) Percentage of basic pay. (1) Subject

to paragraphs (b) and (c) of this section,

the maximum FERS employee

contribution for 2001 is 11 percent of

basic pay per pay period. The maximum

contribution will increase one percent a

year until 2005, after which the

percentage of basic pay limit will not

apply and the maximum contribution

will be limited only as provided in

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

(2) Subject to paragraphs (b) and (c) of

this section, the maximum CSRS

employee contribution for 2001 is 6

percent of basic pay per pay period. The

maximum contribution will increase

one percent a year until 2005, after

which the percentage of basic pay limit

will not apply and the maximum

contribution will be limited only as

provided in paragraphs (b) and (c) of

this section.

(b) Internal Revenue Code (I.R.C.)

limit on elective deferrals. Section

402(g) of the I.R.C. (26 U.S.C. 402(g))

places a limit on the amount an

employee may save on a tax-deferred

basis through the TSP. Employee

contributions to the TSP will be

restricted to the I.R.C. limit; the TSP

will not accept any contribution that

exceeds the I.R.C. section 402(g) limit. If

a participant contributes to the TSP and

another plan, and the combined

contributions exceed the I.R.C. section

402(g) limit, he or she may request a

refund of employee contributions from

the TSP to conform with the limit.

(c) I.R.C. limit on contributions to

qualified plans. Section 415(c) of the

I.R.C. (26 U.S.C. 415(c)) also places a

limit on the amount an employee may

save on a tax-deferred basis through the

TSP. Employee contributions, described

in this section, and employer

contributions, described in § 1600.17,

made to the TSP will be restricted to the

I.R.C. section 415(c) limit. No employee

contribution may be made to the TSP for

any year to the extent that the sum of

the employee contributions and the

employer contributions for that year

would exceed the I.R.C. section 415(c)

limit.

§ 1600.23 Required reduction of

contribution rates.

(a) The employing agency will reduce

the contribution of any FERS or CSRS

employee who has elected a whole

dollar amount but whose elected

contribution for any pay period exceeds

any of the applicable maximum

percentages set forth in § 1600.22. The

employing agency will reduce the whole

dollar amount to the highest whole

dollar amount that does not exceed the

applicable maximum percentage.

(b) An employing agency will not

contribute to a participant’s TSP

account any amounts in excess of the

limits referred to in § 1600.22(b) or (c).

Subpart D—Transfers From Other

Qualified Retirement Plans

§ 1600.31 Accounts eligible for transfer.

Effective July 1, 2001, participants

may transfer funds in the following

types of accounts into their existing TSP

accounts. This option is not available to

participants who have already made a

full withdrawal of their account or who

are receiving monthly payments.

(a) Qualified retirement plan. For the

purposes of this part, a qualified

retirement plan is a qualified trust,

described in section 401(a) of the I.R.C.

(26 U.S.C. 401(a)), which is exempt from

taxation under I.R.C. section 501(a) (26

U.S.C. 501(a)), or an annuity plan,

described in section 403(a) of the I.R.C.

(26 U.S.C. 403(a)).

(b) Conduit individual retirement

account (conduit IRA). For the purposes

of this part, a conduit IRA is an

individual retirement account,

described in I.R.C. section 408(a) (26

U.S.C. 408(a)), or an individual

retirement annuity, described in I.R.C.

section 408(b) (26 U.S.C. 408(b)), that

contains only funds transferred or rolled

over from a qualified retirement plan

(and earnings on those amounts).

(c) Eligible rollover distribution. In

order to be eligible for transfer to the

TSP, distributions from accounts that

qualify under either paragraph (a) or (b)

of this section must also be eligible

rollover distributions pursuant to I.R.C.

section 402(c)(4) (26 U.S.C. 402(c)(4)).

§ 1600.32 Methods for transferring

account from qualified retirement plan or

conduit IRA to TSP.

(a) Trustee to trustee transfer.

Participants may request that the

administrator of their qualified

retirement plan or the custodian of their

conduit IRA transfer any or all of their

account directly to the TSP by

completing and submitting a Form TSP–

60, Request for a Rollover into the TSP,

to the administrator or custodian and

requesting that the transaction be

completed.

(b) Rollover by participant.

Participants who have already received

a distribution from their plan or conduit

IRA may roll over all or part of the

distribution into the TSP in accordance

with the following requirements:

(1) The participant must complete a

Form TSP–60, Request for a Rollover

into the TSP.

(2) The administrator of the qualified

retirement plan or the custodian of the

conduit IRA must certify on the TSP

transfer form the amount and date of the

distribution, and that the distribution is

an eligible rollover distribution in

accordance with I.R.C. section 402(c)(4)

(26 U.S.C. 402(c)(4)).

(3) The participant must submit the

completed Form TSP–60, together with

a certified check, cashier’s check,

cashier’s draft, money order, or

treasurer’s check from a credit union,

made out to the Thrift Savings Plan for

22092 Federal Register / Vol. 66, No. 85 / Wednesday, May 2, 2001 / Rules and Regulations

the entire amount of the rollover. A

participant may roll over the full

amount of the distribution by making

up, from his or her own funds, the

amount that was withheld from the

distribution for the payment of federal

taxes.

(4) The transaction must be completed

within 60 days of the participant’s

receipt of the distribution from the

retirement plan or conduit IRA. The

transaction is not complete until the

TSP recordkeeper receives the Form

TSP–60, executed by both the

participant and plan administrator or

IRA custodian, together with the

guaranteed funds for the amount to be

rolled over.

§ 1600.33 Treatment accorded transferred

funds.

(a) All funds transferred to the TSP

pursuant to §§ 1600.31 and 1600.32 will

be treated as employee contributions.

(b) All funds transferred to the TSP

pursuant to §§ 1600.31 and 1600.32 will

be invested in accordance with the

participant’s contribution allocation on

file at the time the transfer is completed.

(c) Funds transferred to the TSP

pursuant to §§ 1600.31 and 1600.32 are

not subject to the limits on

contributions described in § 1600.22.

[FR Doc. 01–10962 Filed 5–1–01; 8:45 am]

BILLING CODE 6760–01–U

FEDERAL RETIREMENT THRIFT

INVESTMENT BOARD

5 CFR Part 1601

Participants’ Choices of Investment

Funds

AGENCY: Federal Retirement Thrift

Investment Board

ACTION: Final rule.

SUMMARY: The Executive Director of the

Federal Retirement Thrift Investment

Board (Board) is amending the

regulations on participants’ choices of

investment funds. This amendment

implements a provision of the Thrift

Savings Plan Act of 1996, which added

two new investment funds to the Thrift

Savings Plan (TSP). It also implements

a decision by the Board to transfer the

processing of contribution allocations

from the employing agencies to the TSP

recordkeeper.

EFFECTIVE DATE: May 2, 2001.

FOR FURTHER INFORMATION CONTACT:

Salomon Gomez on (202) 942–1661;

Merritt A. Willing on (202) 942–1666; or

Patrick J. Forrest on (202) 942–1659.

FAX (202) 942–1676.

SUPPLEMENTARY INFORMATION: The Board

administers the TSP which was

established by the Federal Employees’

Retirement System Act of 1986

(FERSA), Public Law 99–335, 100 Stat.

514. The Thrift Savings Plan Act of

1996, Public Law 104–208, 110 Stat.

3009, amended FERSA to create two

new TSP investment funds. The TSP

provisions of FERSA have been

codified, as amended, largely at 5 U.S.C.

8351 and 8401–8479. The TSP is a taxdeferred retirement savings plan for

Federal employees, similar to cash or

deferred arrangements established

under section 401(k) of the Internal

Revenue Code. Sums in a TSP

participant’s account are held in trust

for that participant.

On March 26, 2001, the Board

published a proposed rule with a

request for comments in the Federal

Register (66 FR 16415). The Board

received no comment on the proposed

rule. Therefore, the Board is adopting

the provisions of the proposed rule as a

final rule without change.

Analysis

The final rule eliminates §§ 1601.2(a),

(c) and (d), 1601.4(b), and 1601.6

because those sections are obsolete.

Sections 1601.3 and 1601.7 have been

redesignated as § 1602.36; effective May

1, 2001, error correction will be

processed in accordance with part 1605.

Subpart A contains definitions

relevant to participants’ choices of

investment funds, as it does currently.

The definitions of allocation election,

election form, and election period in the

existing regulation are deleted as

unnecessary. Other definitions, such as

Board and CSRS, are deleted because

they are not specifically applicable to

participants’ choices of investment

funds.

In subpart B, the Board explains a

new process for making a contribution

allocation. Contribution allocations

apply to future TSP contributions and

loan payments. Currently, participants

make a contribution election and a

contribution allocation at the same time,

on Form TSP–1; this form is submitted

to the participant’s employing agency.

Participants will continue to use Form

TSP–1 to make contribution elections

and will submit that form to their

employing agency. However, on May 1,

2001, when the new funds are

implemented, contribution allocations

will be submitted to the TSP

recordkeeper following the procedures

described in Subpart B.

Subpart B includes a transition rule

that explains how new contributions

will initially be invested upon

implementation of the new funds. This

transition rule will apply to

contributions and loan payments posted

after April 30, 2001. In particular,

§ 1601.12 provides that beginning on

May 1, 2001, contributions and loan

payments for each TSP account will be

invested based on the allocation of the

most recent contribution posted to a

participant’s account between March 15

and April 30, 2001. If there was none,

contributions and loan payments will be

invested based upon any interfund

transfer request pending for April 30,

2001. If there is no interfund transfer

request pending for April 30, 2001,

contributions and loan payments will be

allocated based upon the participant’s

March 31, 2001 month-end account

balance. If a participant’s March monthend account balance is zero, his or her

contributions and loan payments will be

invested in the G Fund. This derived

allocation will continue until a valid

contribution allocation is received and

processed.

For accounts first established on or

after May 1, 2001, contributions and

other deposits received will be invested

in the G Fund until the participant

makes a different contribution

allocation. The participant may

subsequently make a contribution

allocation to change the investment of

future contributions or an interfund

transfer to change the investment of his

or her existing account balance at any

time after he or she is notified by the

TSP recordkeeper that the account has

been established. Effective May 1, 2001,

all TSP participants may elect to invest

all or part of their new contributions

and loan payments in any of the five

investment funds.

Section 1601.13 explains that,

effective May 1, 2001, a participant may

make a contribution allocation by using

the TSP Web site, the ThriftLine, or by

completing a Form TSP–50, Investment

Allocation. Section 1601.13 also

explains the requirements for a valid

contribution allocation, largely

incorporating existing § 1601.2(b). It

also explains that participants will be

able to make contribution allocations in

increments of one percent instead of the

current five percent.

Subpart C describes the rules that a

participant must follow in order to make

an interfund transfer of his or her

existing TSP account balance. Section

1601.22 of the final regulation

essentially incorporates § 1601.5 of the

existing regulations and also provides

that, effective May 1, 2001, a participant

may use the TSP Web site, the

ThriftLine, or a Form TSP–50 to request

an interfund transfer.

Subpart D has been added to part

1601 to consolidate rules that apply to