This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

9595

Vol. 60, No. 34

Tuesday, February 21, 1995

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: Final rule.

SUMMARY: The Executive Director of the

Federal Retirement Thrift Investment

Board (Board) is publishing final

regulations concerning methods of

withdrawing funds from the Thrift

Savings Plan (TSP). These regulations

reflect changes made to eligibility

requirements for the withdrawal of

accounts from the Thrift Savings Plan

resulting from the enactment of section

9 of the Federal Workforce

Restructuring Act of 1994. That law

provides that all of the withdrawal

methods formerly reserved for persons

retiring from Government employment,

and all related spousal rights, would

become available to all Thrift Savings

Plan participants who separates from

Government employment, regardless of

the person’s length of service or

retirement eligibility at the time of

separation.

EFFECTIVE DATE: These rules are effective

March 10, 1995.

FOR FURTHER INFORMATION CONTACT:

James B. Petrick, (202) 942–1661.

SUPPLEMENTARY INFORMATION: The TSP

was originally established by the

Federal Employees’ Retirement System

Act of 1986 (FERSA), Public Law 99–

335. FERSA set forth provisions, found

in subchapter III of chapter 84 of title 5,

United States Code, for the

administration of the TSP. Provisions

concerning TSP withdrawals were

found primarily in sections 8433 and

8434 of title 5. Provisions concerning

spousal rights relating to withdrawals

were found primarily in section 8435 of

title 5.

As originally enacted, FERSA

conditioned eligibility for the various

withdrawal methods upon eligibility for

basic retirement benefits. Consequently,

persons without such eligibility upon

separation from Government

employment (generally less than 5 years

of service) were not permitted to leave

their accounts in the TSP and were only

permitted to withdraw them by

transferring them to an Individual

Retirement Arrangement (IRA) or other

eligible retirement plan. They could not

receive a cash payment of their account.

Persons with 5 or more years of service

could leave their accounts in the TSP

and had more withdrawal options, but

cash payment options were only

available to them when they reached

retirement age. Spousal rights were also

conditioned upon the retirement

eligibility of the participant at time of

separation.

These rules proved confusing to

participants and difficult to administer,

requiring, for example, various

withdrawal forms depending upon the

participant’s retirement eligibility. As a

result of Public Law 103–226, which

was enacted on March 30, 1994, all TSP

participants who separate from

Government employment will now have

the same withdrawal options available

to them.

Spousal rights rules were also

simplified by Public Law 103–226.

Under the new rules, spouses of all

FERS participants who separate from

Government service with an account

balance of more than $3,500 have the

right to a survivor annuity, unless the

spouse waives that right. The required

annuity is a joint life annuity with the

spouse with 50 percent survivor

benefits, level payments, and no cash

refund feature. Spouses of Civil Service

Retirement System (CSRS) participants

are entitled to notice whether or not the

participant separated from Federal

service with eligibility for basic

retirement benefits. Public Law 103–226

eliminated the requirement to notify

former spouses of FERS and CSRS

participants who separated from Federal

service without eligibility for basic

retirement benefits that the participant

is withdrawing his or her TSP account.

On December 28, 1994, the Board

published a proposed rule in the

Federal Register (59 FR 66796)

proposing a new subpart 1650 reflecting

the new simplified TSP withdrawal

rules. Previously, on September 13,

1994, the Board had published

amendments to spousal rights

regulations in the Federal Register (59

FR 46934) reflecting the changes in

spousal rights rules made by the new

legislation. Additionally, the September

13, 1994 proposed amendments also

amended the rules for obtaining an

exception to the spousal waiver and

notice requirements to allow

participants seeking such an exception

to submit copies of documents rather

than originals or certified copies and to

use statements instead of affidavits and

declarations. Further, those

amendments provided that a

withdrawal form received within one

year of an approved exception may be

processed without obtaining a new

exception.

The Board is now issuing both sets of

regulations in this final rule

promulgating new Part 1650. The Board

did not receive any comments on the

proposed rule issued on December 28,

1994. However, the Board did receive

one comment on the proposed changes

to spousal rights rules published on

September 13, 1994. The comment

concurred with the proposed revisions

to the spousal rights rules, including the

elimination of the word ‘‘current’’ when

referring to the spouse. The comment

recommended that the word ‘‘current’’

be included in the title to the subpart

dealing with spousal rights because

subpart A includes a definition of

‘‘current spouse.’’ However, in

accordance with the changes made by

Public Law 103–226, the definitions of

both ‘‘former spouse’’ and ‘‘current

spouse’’ have been removed from the

definitions section of part 1650 and

have been replaced by a definition of

‘‘spouse.’’ Thus, it is no longer

necessary to include the term ‘‘current

spouse’’ in the title to the subpart

dealing with spousal rights.

The comment also recommended that

the title to 5 CFR 1650.17 be revised to

replace the word ‘‘notification’’ with the

word ‘‘notice’’ to align with title with

other changes made to subpart G. This

change has been made in the final rule.

The Board has made a number of

other changes to the proposed rule

published on September 13, 1994. Based

upon the experience gained in rewriting

the remainder of part 1650, as issued on
9596 Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations

December 28, 1994, the Board has

decided to rewrite and reorganize the

spousal rights provisions, which the

September 13 proposal only amended.

This is being done in order to set forth

more clearly the simplified spousal

rights rules enacted by Public Law 103–

226. Therefore, new § 1650.18 deals

comprehensively with the rights of

spouses of FERS participants, new

§ 1650.19 deals with the right of the

spouses of CSRS participants to notice,

and new § 1650.20 deals with spousal

rights relating to changes in withdrawal

elections. The sections concerning the

granting of spousal waivers have been

changed only by redesignating some of

the paragraphs for the sake of clarity.

The Board has also made one change

to the regulations published on

December 28, 1994. Previously, the

definition of an ‘‘insurable interest’’

found at § 1650.10(b)(4)(i), the existence

of which would allow the purchase of

a joint life annuity for the participant

and a person other than his or her

spouse, included a common-law spouse.

However, the Board has determined

that, if a person is a common-law

spouse in a jurisdiction that recognizes

common-law marriages, that person is

treated under the law as being the

spouse in all respects. Therefore, in the

final regulations the treatment of a

common-law spouse has been moved

from the definition of ‘‘insurable

interest’’ to the definition of ‘‘spouse’’

found in § 1650.1. This change makes it

clear that a common-law spouse will be

treated as a legal spouse for all purposes

under these regulations.

In reissuing part 1650, the Board also

decided to reorganize some of its

provisions, to publish some provisions

separately, and to eliminate others.

Therefore, under this final rule, original

subpart G, Spousal Rights, is designated

in new part 1650 as subpart D. A new

subpart, dealing with minimum

distributions and to be designated as

subpart E, will be issued separately. The

subparts dealing with court-ordered

payments from TSP accounts and death

benefits are each being issued as

separate parts in the Code of Federal

Regulations. Experience has shown that

each of these areas has complex rules

which are different from those used to

process withdrawals. Finally, the

subpart entitled ‘‘Denial of Benefits,’’

which was originally published as

subpart K of part 1650, is being

eliminated entirely. Experience in

paying withdrawal benefits has shown

that there is no need for a formal

‘‘claims’’ procedure with respect to

those benefits. Participants or others

who wish to question or challenge

certain aspects of a TSP withdrawal are

free to do so simply by contacting the

TSP Service Office or the Board. Each

case must often be addressed or handled

on its own merits, although, as

permitted in § 1650.6, the account can

be ‘‘frozen’’ while the matter is under

review. The Board currently sees no

merit in having particular procedures

which participants must follow in order

to request such a review. Further,

participants and beneficiaries remain

free to pursue any claim for benefits in

Federal court pursuant to 5 U.S.C. 8477.

Section-by-Section Analysis

Subpart A

Subpart A of part 1650 sets forth the

general rules affecting a participant’s

eligibility to withdraw his or her TSP

account.

Section 1650.1 sets forth definitions

of terms used in part 1650. The TSP is

a defined contribution retirement plan,

similar to a private sector 401(k) plan,

for persons employed by the Federal

Government. It is administered by the

Board, an independent Federal agency

within the Executive Branch, pursuant

to the provisions of FERSA. Thus

§ 1650.1 provides general definitions for

the terms ‘‘Board,’’ ‘‘TSP’’ and ‘‘Plan.’’

Participants in the Plan are generally

covered under either the Federal

Employees’ Retirement System (FERS),

established in 1986 along with the TSP,

or the Civil Service Retirement System

(CSRS), which was the previous

retirement system for Federal

employees. However, some Federal

employees, such as those employed by

the State Department, are covered under

separate retirement systems, which are

modeled after either FERS or CSRS.

Therefore, definitions of ‘‘FERS’’ and

‘‘CSRS’’ are provided which make it

clear that these terms also encompass

‘‘equivalent retirement systems’’ such as

those for State Department employees.

Definitions are also provided for the

terms ‘‘account balance,’’ ‘‘participant,’’

and ‘‘spouse.’’ The term ‘‘account

balance,’’ is defined to mean the

nonforfeitable, valued account balance

as of the month-end prior to a

withdrawal. Pursuant to 5 U.S.C.

8432(g) and part 1603, Vesting, Agency

Automatic (1%) Contributions of

persons who separate with less than

three years (or in some cases two years)

of service are forfeited to the TSP prior

to withdrawal of an account. Also, as

noted in the discussion of § 1650.7, only

the most recent valued account balance

is eligible to be withdrawn. Therefore, it

was deemed preferable to define

‘‘account balance’’ to mean the

nonforfeitable (also referred to as

‘‘vested’’), valued account balance

rather than to repeat both modifiers

each time the term was used. The term

‘‘participant’’ rather than ‘‘employee’’ is

used to describe persons having a TSP

account, since the withdrawal rules

primarily affect people who have ceased

to be ‘‘employed’’ but who are still

participating in the Plan.

The term ‘‘spouse’’ is defined to

include any person to whom the

participant is married (as determined

under the laws of the appropriate

jurisdiction) on the date the participant

signs a TSP withdrawal form asking him

or her to state marital status. This

definition recognizes that the TSP does

not have information to determine

marital status as of the date of

separation or as of the date of payment.

Instead, the TSP must rely upon the

statement of the participant as to his or

her marital status when the participant

files TSP withdrawal forms. These

statements are accompanied by a

warning that a false statement is subject

to criminal penalties under 18 U.S.C.

1001. The regulation makes it clear that

a separated spouse is treated as a spouse

under these rules. The regulation also

includes in the definition of ‘‘spouse’’ a

common-law spouse with whom the

person is living in a jurisdiction that

recognizes common-law spouses. Again,

the participant is responsible for

informing the TSP if he or she has

common-law spouse under this

definition.

Section 1650.2 states the general rule

that, as a result of Public Law 103–226,

all TSP participants who separate from

Government employment have the right

to choose any of the TSP withdrawal

options. Those withdrawal options are

set forth in subpart B. However, the

availability of those withdrawal options

may be affected by two other sets of

rules. First, the spousal rights

provisions of FERSA restrict the

withdrawal options of married

participants covered by the Federal

Employees’ Retirement System (FERS

participants) to the 50 percent joint life

annuity with level payments and no

cash refund feature unless the spouse

waives his or her right to that option.

Married participants covered by the

Civil Service Retirement System (CSRS

participants) are not restricted in their

choice of withdrawal options, buy the

law requires that their spouses be

notified of the withdrawal method the

participant chooses. The rules

implementing the changes to spousal

rights resulting from Public Law 103–

226 are found in subpart D.

Second, the rules relating to required

minimum distributions, which are

found in section 401(a)(9) of the Internal

Revenue Code, require tax-qualified
Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations 9597

government retirement plans, including

the TSP, to begin making distributions

to participants by April 1 of the year

following the year they become age 701⁄2

or the year they separate from

Government employment, whichever is

later. These rules also require that, in

certain circumstances, minimum

distribution amounts be paid directly to

the participant rather than transferred to

an IRA or other eligible retirement plan

or used to purchase an annuity.

Consequently, the minimum

distribution rules can limit the ability of

some participants to have their entire

accounts paid according to the

withdrawal method they choose under

these rules. The Board intends to

publish separate rules, adding subpart E

to part 1650, describing the effect of

minimum distributions on TSP

accounts. Reference to the minimum

distribution rules is required here

because they limit the participant’s

ability to withdraw the entire account

according to his or her choice. Until

regulations are issued adding subpart E

to part 1650, those rules will simply be

referred to as ‘‘minimum distribution

requirements.’’

Third, the rules concerning

matrimonial court orders and child

support and alimony orders can affect

the ability of the participant to

withdraw his or her account, as well as

the amount in the account available for

withdrawal. Those rules are being

published separately in part 1653.

Section 1650.3 describes what

constitutes a ‘‘separation from

Government employment’’ for purposes

of determining who is entitled to

withdraw his or her TSP account.

Section 8433 of title 5 limits the ability

to withdraw an account from the TSP to

persons who have ‘‘separated from

Government employment.’’ This

limitation is in keeping with the

primary purpose of the TSP as a

retirement plan under which

contributions and earnings are afforded

favorable tax treatment because they

will be used primarily to fund

retirement benefits.

Section 1650.3 makes it clear that the

term ‘‘separation from Government

employment’’ encompasses separation

from positions in the Federal

Government, the Postal Service, and in

organizations that have employees who

by statute are eligible to contribute to

the TSP. For example, certain

employees of employee organizations

and employees working for a state or

local government on an

Intergovernmental Personnel Act (IPA)

assignment are eligible to participate in

the TSP under the provisions of Public

Law 100–238. (See 5 CFR Part 1620).

Under these regulations, separation

from such positions will be considered

a separation from Government

employment (unless the participant

returns to his or her position with the

Federal Government).

Section 1650.3 also makes it clear that

the Board interprets the term

‘‘separation’’ to mean separation from

Government employment (as described

above) for at least 31 full calendar days.

Because Congress limited access to the

often significant amounts of money in

TSP accounts to persons who had

separated from Government

employment, the Board determined that

persons transferring between

Government jobs (for example) should

not be able to gain access to their TSP

accounts after a short break in service.

Thus the regulation states that a break

in service must be at least 31 full

calendar days. Similar rules have been

adopted by Congress to limit access to

refunds under the FERS and CSRS basic

annuity programs.

Section 1650.4 sets forth rules for

dealing with employees who are rehired

by the Government before they

withdraw their TSP accounts. Because

the Board has decided to define

‘‘separation’’ to mean a break in service

of 31 or more full calendar days, it is

necessary to establish procedures to

ensure that participants who are

withdrawing have the requisite break in

service. Therefore, § 1650.4(a) describes

the statements that participants must

make concerning their employment

status and the length of their expected

break in service in order to be able to

withdraw their TSP accounts.

This ‘‘self-certifying’’ approach was

deemed preferable to an approach

requiring the agency immediately to

report all rehired employees. Because

rehired employees are not permitted to

resume TSP contributions until the next

election period (see 5 U.S.C. 8432(b)),

agencies may not need to report

transactions to the TSP concerning these

employees for up to six months after the

date of rehire. Consequently,

information concerning the rehired

employee would not otherwise be

reported to the TSP promptly or within

a consistent timeframe after the date of

rehire. Also, the Board wanted to avoid

imposing upon the employing agencies

the administrative burden of reporting

every rehire action to the TSP, when

only a few of those actions would ever

affect TSP withdrawals. Because false

information provided by the participant

is subject to criminal penalties, selfcertification was deemed a reasonable

way to ensure that persons who have

been rehired (or expect to be rehired)

within 31 days are prevented from

withdrawing their accounts.

Section 1650.4(b) states the rules for

persons who are rehired after 31 full

calendar days but still want to withdraw

the portion of their accounts attributable

to the earlier period of employment.

Section 1650.4(b) provides that such a

participant can only withdraw the

portion of the account balance

attributable to the first period of

employment. The term ‘‘attributable to

the first period of employment’’ means

amounts contributed to the account

during the period of employment to

which the separation relates and any

earnings on those amounts as of the date

of payment. Amounts contributed after

the date of rehire and earnings on such

amounts are excluded.

Section 1650.4(b) also provides that, if

the amount in the account attributable

to the first period of employment is

more than $3,500, the participant can

withdraw that amount only if he or she

submits a valid withdrawal request form

prior to the date the participant is

rehired. As explained above, this

requirement is fulfilled by the

requirement that the participant state on

the form if he or she has been rehired.

It was not feasible to require that

withdrawal actually occur before the

date of rehire, because administrative

delays on the part of the employing

agency or the Board might make

withdrawal impossible before then.

However, it seemed inappropriate to

give rehired participants the ability to

withdraw their funds at any time

(perhaps many years) after they were

rehired. Thus, the Board has established

the rule that the withdrawal request

must be submitted before the date of

rehire.

If, however, the amount in the

participant’s account attributable to the

first period of employment is $3,500 or

less, the participant is eligible to receive

an ‘‘automatic cashout’’ under the

procedures set forth in § 1650.17

without submitting any withdrawal

forms. Therefore, the participant cannot

be required to submit a withdrawal form

prior to rehire in order to receive a

withdrawal. For such a participant,

§ 1650.4(b) allows the scheduled

automatic cashout of the amount

attributable to the first period of

employment to proceed, even if the

person has already been rehired (after

more than 31 days) and no forms are

submitted.

Section 1650.5 states the rule that a

participant cannot withdraw his or her

TSP account until an outstanding loan

has either been paid in full or declared

to be a taxable distribution. Under the

TSP loan program (see 5 CFR Part 1655),
9598 Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations

a participant who separates with an

outstanding loan must repay his or her

loan in full within 90 days. If the

participant does not do so, the

outstanding loan balance is declared to

be a taxable distribution. The

participant can also speed up the

declaration of the taxable distribution

by signing a statement that he or she

does not intend to repay the loan. The

withdrawal must be delayed until this

process is completed so that, if the

participant pays the loan in full, that

amount will be available to be included

in the withdrawal.

Section 1650.6 recognizes that, in

certain circumstances, a withdrawal

cannot be paid because a TSP

participant’s account is ‘‘frozen.’’ The

most common reason for placing a

freeze on an account is that the Board

receives a retirement benefits court

order or an alimony or child support

enforcement order. The Board is

required by title 5 to honor the terms of

such orders if they meet certain

requirements. The requirements for

such orders are discussed in part 1653,

which was published in proposed form

in the Federal Register on October 26,

1994 (59 FR 53874). If such orders are

found to be qualifying, the account

cannot be paid to the participant until

the interest of the other party (most

frequently a spouse or former spouse)

has been determined and paid out. At

that point the account can be

‘‘unfrozen’’ and the withdrawal can

proceed. See 5 CFR 1653.3. This section

also recognizes that the Board may need

to place a freeze on an account for

administrative reasons. For example, an

employing agency error may have

caused the account to have the wrong

address. Until such an error is corrected,

the account should not be paid.

Section 1650.7 discusses the timing of

TSP withdrawal payments. The TSP is

a ‘‘monthly valued’’ plan. This means

that the earnings (either positive or

negative) on a TSP account, and thus

the ‘‘value’’ of the account, is

determined once a month as of the end

of the preceding month. For the TSP,

this determination occurs at

approximately mid-month, although the

exact date varies, depending on the

availability of the applicable rates of

return. A TSP withdrawal cannot occur

until the valuation process is completed

for a given month; otherwise the amount

to be withdrawn cannot be accurately

determined. (Since all TSP funds are

held in individual accounts, the amount

to be withdrawn must be determined

precisely; if too much or too little is

paid, the difference must be absorbed by

all other accounts.) The timing of the

withdrawal payments in a monthly

valued plan is also important for

determining the timing of other actions,

such as when a withdrawal election can

be changed or canceled (see § 1650.14).

Subpart B of part 1650 describes the

basic TSP withdrawal options which, as

noted above, are now available to any

TSP participant who is eligible to

withdraw his or her TSP account

balance under the rules stated in

subpart A, and subject to the limitations

found in the other rules identified in

§ 1650.2. The conditions for eligibility

contained in subpart A are not repeated

for each withdrawal method identified

in subpart B. Subpart B contains the

rules governing the way each

withdrawal option can be exercised (for

example, the availability of certain

annuity options to certain participants),

as well as the rules for transferring all

or part of certain withdrawal payments

to an IRA or other eligible retirement

plan, making deferred withdrawal

elections, changing withdrawal

elections, and imposing limits on the

date by which a withdrawal choice must

be made.

Section 1650.8 provides that all TSP

participants can withdraw their account

balances in a single payment. The term

‘‘lump sum’’ is not used, since that term

has a specific meaning for the tax

treatment of the payment, which may or

may not be applicable to all payments

made under this method. All or part of

the single payment received under this

method can be transferred to an IRA or

other eligible retirement plan in

accordance with the rules set forth in

§ 1650.11.

Section 1650.9 sets forth the types of

monthly payment options a participant

can choose. Section 8433 of title 5

requires that the Board offer a

participant the opportunity to receive

his or her account in ‘‘one or more

substantially equal payments to be made

not less frequently than annually

* * *.’’ Under this provision, the board

has established three options for

calculating monthly payments. The

options provide only for monthly

payments because this was considered

to be consistent with the presumed

intent of the law to provide participants

with the ability to receive a regular

stream of retirement income from their

TSP accounts.

Under the first option, described in

§ 1650.9(a)(1), a participant can choose

monthly payments in a fixed dollar

amount of his or her choice, with a

minimum monthly payment amount of

$25. The minimum amount avoids the

administrative expense of processing

small monthly payments. Under this

option, which allows the participant to

receive a predictable monthly income,

payments continue until the entire

account is paid out. When the account

decreases to a point that the amount

remaining is less than two payments,

the remaining amount is paid out in a

single payment. Therefore, the last

payment may be larger than the chosen

amount.

The second option, described in

§ 1650.9(a)(2), allows the participant to

choose a fixed number of monthly

payments instead of a fixed monthly

payment amount. Under this option,

payments are initially calculated by

dividing the account balance by the

number of payments chosen. Initial

payments must be at least $25 for the

election to be accepted. Payments are

then recalculated each year in January

by dividing the immediately preceding

December 31 account balance by the

remaining number of payments.

Although each year’s monthly payment

amount will be different from that of the

previous year, because earnings will be

reflected in the annual recalculation, the

annual recalculation allows the account

to be paid out as evenly as possible

within the elected number of payments.

Each year’s monthly payment amount

will be increased to $25, if necessary.

The third option, described in

§ 1650.9(a)(3), allows a participant to

have monthly payments calculated

based on Internal Revenue Service (IRS)

life expectancy multiple Table No. V,

found at 26 CFR 1.72–9. Under this

method, the monthly payment amount

is calculated by dividing the account

balance by the multiple from the table

corresponding to the participant’s age

on his or her birthday in the year

payments are being made, and then

dividing the result by 12. Payments are

recalculated in January of each year

based upon the December 31 account

balance and the multiple corresponding

to the participant’s age as of his or her

birthday in the new payment year. This

method allows a participant to spread

monthly payments over his or her entire

life expectancy. It also allows a

participant who separates from

Government employment prior to the

year in which he or she becomes age 55

to avoid the 10 percent early withdrawal

penalty on monthly payments received

before the participant becomes age 591⁄2.

This result is allowed under the Internal

Revenue Code because payments are

based on life expectancy. The early

withdrawal penalty cannot be avoided

by choosing the other two monthly

payment methods. However, payments

made under a TSP annuity (see

§ 1650.10) are also exempted because

they are based on life expectancy.

Section 1650.9(b) states the rule that

a participant cannot change his or her
Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations 9599

monthly payment election and choose a

different calculation method or amount

once payments have begun. This

restriction is imposed because the

statute requires that the payments be

‘‘substantially equal.’’ If a participant

were able to change the calculation

method or amount at will, the payments

would not comply with the

‘‘substantially equal’’ requirement. Such

a process could also create significant

administrative burdens for the Plan.

However, under § 1650.9(c), a

participant can decide at any time to

receive his or her remaining account

balance in a final single payment. This

recognizes that participants may have a

sudden need to liquidate their account

balances, for example in cases where

there is a medical emergency. It was

determined that the ‘‘substantially

equal’’ rule was not violated where the

account would be entirely liquidated

through a final single payment.

Section 1650.9(d) Provides that, once

they begin receiving equal payments,

participants may invest their TSP

account balances in accordance with the

rules provided in part 1601, Participant

Choices of Investment Funds. Under

current regulations, participant accounts

must be invested entirely in the

Government Securities Investment Fund

(G Fund) while participants are

receiving monthly payments. It was

originally thought that accounts of

persons receiving monthly payments

should be invested only in the G Fund

to ensure a predictable monthly

payment stream. However, with the

elimination of the restrictions on

participants’ investment choices which

originally existed, demand has grown to

eliminate this restriction also. The

calculation methods described above

automatically account for positive and

negative earnings associated with

investing in the Common Stock Index

Investment Fund (C Fund) or the Fixed

Income Investment Fund (F Fund), thus

insuring a relatively predictable income

stream. The Board intends in the future

to allow participants receiving monthly

payments to invest in any investment

funds offered by the TSP. When this

change is implemented, part 1601 will

be amended, and the language of

§ 1650.9(d) will automatically

incorporate the new rules.

Section 1650.10 describes the rules

relating to TSP annuities, including the

various annuity options and features

among which a participant can choose.

TSP annuities are monthly payments

made to the participant during his or

her life or to the participant and a

designated joint annuitant while either

one is alive. The TSP purchases

annuities for participants from a private

sector annuity provider using the

participant’s entire account balance

(although in some cases minimum

distribution amounts must first be paid

directly to the participants).

Section 1650.10(a) describes the basic

procedures and rules relating to the

purchase of a TSP annuity. Annuities

are purchased in the mid-month

processing cycle and payments

commence within approximately thirty

days after purchase. Because it is not

practicable to purchase annuities using

small account balances, the minimum

amount that can be used to purchase an

annuity is $3,500. All TSP annuities and

annuity features have equivalent

actuarial values. This means that

selection of additional features will

result in a reduction in the amount of

the monthly annuity payment.

Section 1650.10(b) describes the basic

annuity types. Section 8434 of title 5

requires that the Board offer certain

types of annuities for the TSP. The basic

types of annuities offered by the TSP

conform to the statutory requirement.

These are a single life annuity for the

participant with level payments

(§ 1650.10(b)(1)), a joint life annuity for

the participant and his or her spouse

with level payments (§ 1650.10(b)(2)), a

single life annuity or a joint life annuity

with the spouse that has annual

increasing payments (§ 1650.10(b)(3)),

and a joint life annuity with a former

spouse or a person having an insurable

interest in the participant

(§ 1650.10(b)(4)).

Section 1650.10(b)(3) describes how

the annual increase for increasing

annuities is calculated. The amount of

the increase is based upon the change in

the Consumer Price Index. The statute

prohibits decreases in annual payments;

therefore, the annual increases will be

zero in years where the relevant change

in the index is either negative or zero.

Also, because of Internal Revenue Code

limits, the annual increase cannot be

more than 3 percent.

Section 1650.10(b)(4) describes the

rules for the option of a joint life

annuity with a person other than the

spouse. As required by the statute, this

option can only be used to purchase a

joint life annuity with a former spouse

or with a person having an ‘‘insurable

interest’’ in the participant. The statute

gives the Board discretion to define the

term ‘‘insurable interest’’ in regulations.

The definition of ‘‘insurable interest’’ is

based upon the idea that the survivor

could be expected to obtain continuing

financial benefit from the participant’s

life. Under this definition, close

relatives are presumed to have an

insurable interest in the participant.

However, a method is also prescribed by

which the participant can establish by

affidavit that another person, not in the

presumed group, has an insurable

interest in him or her.

Section 1650.10(c) describes the two

levels of survivor benefits that are

available for joint life annuities,

whether with a spouse or with another

person. These particular levels were not

prescribed by statute, but rather were

adopted by the Board based upon

annuity options commonly available in

the private sector. A participant who

chooses a joint life annuity must also

choose one of these levels. The 50

percent survivor benefit provides that,

whenever one of the joint annuitants

dies, the other will receive, during his

or her lifetime, 50 percent of the benefit

that was paid to the participant when

both were alive. The 100 percent

survivor benefit provides that the same

amount paid to the participant when

both the participant and the joint

annuitant are alive will continue to be

paid to the survivor during the

survivor’s lifetime. The initial payment

amount will be lower if the 100 percent

survivor level is chosen than if the 50

percent survivor level is chosen. Under

the IRS minimum distribution rules, the

100 percent survivor benefit cannot be

chosen for a joint annuity with someone

other than the spouse if the joint

annuitant is more than 10 years younger

than the participant. This rule is

designed to prevent the use of

retirement annuities to transfer income

to a much younger beneficiary (for

example, a child or grandchild).

However, the regulations provide (in

accordance with IRS regulations) that a

100 percent benefit can be chosen for a

joint annuity with any former spouse,

regardless of age, if a qualifying court

order (as described in part 1653) so

provides.

Section 1650.10(d) describes two

additional features that can be

combined with certain annuities. These

features are not required by statute. The

Board decided to make them available

based upon its evaluation of annuity

features that participants would be

likely to find attractive. If either feature

is chosen, the monthly payment amount

is reduced.

The first feature, described in

§ 1650.10(d)(1), is the ‘‘cash refund’’

feature. This feature, which can be

selected for any type of annuity,

provides that, if the participant (or the

participant and joint annuitant in the

case of a joint annuity) dies before the

amount used to purchase the annuity

has been paid out, the remainder of the

amount used to purchase the annuity

will be paid in a lump sum to the

beneficiary or beneficiaries named by
9600 Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations

the participant. The participant who

chooses this feature must, before the

annuity can be purchased, complete

Form TSP–11–B, Beneficiary

Designation for a TSP Annuity, to name

the beneficiaries to receive this payment

and to state the portion of the payment

to be paid to each beneficiary. After the

annuity is purchased, the participant

may change the beneficiaries. If the

annuity is a joint life annuity, the

survivor (even if not the participant)

may also change the beneficiaries or

their shares. Beneficiary changes after

the purchase of an annuity are handled

between the annuitant and the annuity

provider and do not involve the TSP.

The second feature, described in

§ 1650.10(d)(2), is known as the ‘‘10-

year certain’’ feature. This feature

provides that, if a single life annuity is

chosen, payments will be made for at

least 10 years. If the participant dies

before the 10-year period expires,

payments will be made to a designated

beneficiary for the remainder of the

period. Beneficiaries under this feature

are designated on a Form TSP–11–B, in

the same way as under the cash refund

feature. The 10-year certain feature is

only available for single life annuities,

because it is expected that, in most

cases, payments under joint life

annuities would last at least 10 years.

Section 1650.10(e) provides that the

Board can establish other types of

annuities and other optional annuity

features, as it did in the case of the cash

refund and 10-year certain features. The

statute makes it clear that the Board can

decide to offer additional annuity

options.

Section 1650.10(f) reflects the

requirement found in the statute that

any annuity method must be available

to separating participants for at least 5

years after the date it is eliminated. This

provision appears to have been designed

to prevent the Board from eliminating

annuity methods precipitously, when a

participant may have been planning to

choose such a method. Although the 5

year requirement may have little

applicability to younger participants, it

appears to be designed to preserve

options for those participants who are

near retirement age and who might be

able to change their retirement date if

they knew in advance that an annuity

method would cease to be offered.

Although the statute only speaks in

terms of elimination of a ‘‘method of

payment,’’ the regulation makes it clear

that the Board would apply this rule to

any annuity type (other than the

statutorily prescribed annuity types),

any benefit level, or any other annuity

feature (such as the cash refund feature)

that the Board has previously decided to

offer.

Section 1650.11 describes the

situations under which a participant can

have the TSP transfer all or a portion of

a TSP withdrawal payment to an IRA or

other eligible retirement plan, as

defined in the Internal Revenue Code.

Transfer of the entire account balance to

an eligible retirement plan was

mandated by Congress in FERSA. At the

time of issuance of the original interim

regulations in 1987, the participant had

to choose to transfer either the entire

account balance or nothing at all.

However, in 1992 Congress enacted

Public Law 102–318, which required all

tax-qualified retirement plans

(including the TSP), effective in 1993, to

allow the transfer to an IRA or other

eligible retirement plan of all or part of

any ‘‘eligible rollover distribution.’’ Any

part of an eligible rollover distribution

that is not directly transferred is subject

to mandatory 20 percent income tax

withholding. Therefore, beginning in

1993, the Board implemented changes

in the TSP transfer option to comply

with the requirements of Public Law

102–318. This means that all TSP

withdrawals that are identified as

‘‘eligible rollover distributions’’ can

now be transferred, in whole or in part,

to an IRA or other eligible retirement

plan. Eligible rollover distributions

include all single payments, as well as

final single payments that end a series

of monthly payments. Thus, a

participant who wants his or her entire

account balance transferred can elect a

single payment (which is an option now

available to all) and can have the entire

payment transferred.

Because the definition of ‘‘eligible

rollover distribution’’ in Public Law

102–318 includes monthly payments

expected to be made for fewer than 10

years and not based on life expectancy,

certain TSP monthly payments also

qualify for transfer. Section 1650.11

explains that monthly payments can be

transferred if the participant elects

fewer than 120 payments (i.e., fewer

than 10 years of monthly payments), or

the participant elects a monthly

payment amount which, when divided

into the account balance, yields a

number less than 85. This number was

chosen based upon an assumed annual

earnings rate of 8 percent for the

account. This means that a fixed

payment amount chosen by the

participant that would result in fewer

than 85 payments if paid in equal

monthly installments from his or her

existing account balance could be

expected to result in fewer than 120

payments if the account accrued

earnings at the rate of 8 percent per year

during the payout period. TSP monthly

payments calculated based on life

expectancy cannot be transferred. This

is because the Internal Revenue Code

does not allow any payment which is

calculated based on life expectancy to

be transferred. (This also means that

TSP annuity payments and minimum

distribution payments cannot be

transferred.)

Section 1650.11(d) states the

definition of an eligible retirement plan,

which is found in section 402(c)(8) of

the Internal Revenue Code. An IRA is

included in the definition of an eligible

retirement plan. The Internal Revenue

Code also requires that an IRA or other

eligible retirement plan be maintained

in the United States, which is defined

as the 50 states and the District of

Columbia. Plans maintained in foreign

countries or in United States

possessions, such as Puerto Rico, the

Virgin Islands, or Guam, do not qualify.

Section 1650.12(a) contains the basic

rule establishing the participant’s right

to choose that a single payment be

made, or that monthly payments or an

annuity begin, at a future date of his or

her own choosing. This type of election

is referred to as a ‘‘deferred withdrawal’’

election, and is specifically authorized

in 5 U.S.C. 8433(b).

Section 1650.12(b) describes the time

limit placed by 5 U.S.C. 8433(b) upon

the participant’s right to make a

deferred withdrawal election. Under

that section, a participant must choose

a date for his or her withdrawal to begin

that is no later than April 1 of the year

following the year the participant

becomes age 701⁄2. Because the TSP is a

monthly valued plan, as explained in

§ 1650.7, the month chosen for payment

under § 1650.12(b) must be no later than

March of the relevant year, so that a

payment can be made by April 1. Also,

because the first annuity payment is

made approximately 30 days after the

annuity is purchased, an annuity will be

purchased in the monthly cycle prior to

the month chosen. Therefore, if a

participant chooses an annuity to begin

in March of the year following the year

in which he or she becomes age 701⁄2

(i.e., the latest possible date), the

annuity will be purchased in February

of that year. Persons who are already

past the limit date (e.g., participants

who separate when they are age 73)

when they make a withdrawal election

cannot make a deferred withdrawal

election. They must elect an immediate

withdrawal.

The rule stated in § 1650.12(b)

generally comports with the minimum

distribution requirements found in the

Internal Revenue Code. The minimum

distribution rules generally require
Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations 9601

separated participants to begin receiving

payments from their accounts by April

1 of the year following the year they

become age 701⁄2. The rule set forth in

§ 1650.12(b) requires a TSP withdrawal

method to begin by the same date.

Eventually, the Board expects the rule

set forth in § 1650.12(b), in conjunction

with the rule set forth in § 1650.13

concerning the date by which an

election is required, to eliminate the

need for most required minimum

distribution payments, except for those

made in conjunction with another

withdrawal election. However, as

explained further in the discussion of

§ 1650.13, because some participants

over age 701⁄2 who leave Government

employment with less than 10 years of

service will still be able to defer making

a decision, minimum distribution

payments will continue to be made to

this group.

Sections 1650.12 (c) and (d) describe

the TSP procedures for notifying

participants who have made deferred

withdrawal elections of what actions

they are permitted or required to take

prior to implementation of their

election.

Section 1650.13 provides rules for

implementing the provisions of 5 U.S.C.

8433(h)(2). This section requires a TSP

participant to make a withdrawal

election by February 1 of the year

following the year in which the later of

three events occurs—the participant

becomes age 65, the participant

separates from Government

employment, or the participant has 10

years of Plan participation. The statute

expresses the latter event as ‘‘the tenth

anniversary of the year in which * * *

[the participant] became subject to this

subchapter.’’ The regulation reflects the

Board’s interpretation of this language

to mean the effective date of the first

contribution made to the participant’s

TSP account, but no earlier than April

1, 1987, the date the TSP first began

accepting contributions. The effective

date of the first contribution is also

chosen for administrative purposes,

because it is a date that is clearly

reflected in TSP records.

For most participants (i.e., those with

10 or more years of Government service

who separate or retire before age 65),

this provision will operate to require a

choice by February 1 of the year

following the year in which the

participant reaches age 65. The

participant is still permitted to make a

deferred election at that time, but the

date of the deferral is subject to the

limits stated in § 1650.12(b), which

require that a deferred election must

begin by April 1 of the year following

the year a participant becomes age 701⁄2.

Together, these provisions ensure that a

decision about the method of

withdrawing the TSP account is made

on or about the time a participant might

be expected to retire and that payments

begin no later than the year following

the year in which the participant

becomes age 701⁄2. This allows both the

TSP and the participant’s spouse, who

has certain rights with respect to the

election, to be aware of the chosen

withdrawal method by the normal

retirement age. This also prevents the

participant from receiving his or her

entire account balance through the

minimum distribution process without

spousal involvement. However, because

TSP participation only began in April

1987, the 10th anniversary of the first

TSP contributions will not occur until

1997. Therefore, a withdrawal election

will not need to be made under this

provision until February 1, 1998, at the

earliest.

By establishing a date by which the

participant must make an election, the

Board has also interpreted the statute as

providing that a separated TSP

participant need not make any

withdrawal election prior to that date.

Instead, a participant who separates

from Government employment can

decide to leave his or her account in the

Plan and take no action until the

required date.

If a withdrawal election is not made

by the required date, the statute

provides that the ‘‘benefits under this

subchapter will be paid as an annuity

* * *.’’ Because the 10-year anniversary

has not yet occurred for any TSP

participant, there has as yet been no

need to address participants who do not

make an election by the required date.

Section 1650.13(d) describes procedures

which reasonably accommodate the

language of the statute requiring that an

annuity be purchased for such persons,

yet also recognizes that the TSP may not

be able to purchase an annuity for a

participant who will not provide

required information (such as a current

address).

Section 1650.13(d) also provides that,

for married FERS participants, the

annuity that must be purchased is the

required joint life annuity with the

spouse. Although this is not explicitly

stated in 5 U.S.C. 8433(h)(3), 5 U.S.C.

8435 requires a married FERS

participant to purchase the required

joint life annuity with his or her spouse

if the spouse does not waive that right.

If the required joint life annuity were

not purchased under § 1650.13, a

married FERS participant could

effectively avoid the requirement to

purchase a joint life annuity with the

spouse by refusing to make any election

at all. For single participants covered by

FERS and all participants covered by

CSRS, however, a single life annuity

will be purchased, since there is no

statutory requirement to purchase a

joint life annuity with the spouse.

Section 1650.13(d)(3) recognizes that,

in certain cases, the participant will not

provide the TSP with adequate

information to purchase the required

annuity (either single life or joint life

with spouse). Because the law does not

allow accounts in this status to remain

open indefinitely, the regulation

describes a procedure whereby an

account will be forfeited if there is not

adequate information to purchase an

annuity. However, if any person (such

as the spouse or guardian, for example)

can provide such information, the

account will be restored and the annuity

purchased. At the time of forfeiture, the

participant generally would lose the

right to choose a different method of

withdrawal.

Section 1650.14 sets forth rules

concerning participants who change or

cancel their withdrawal elections.

Generally, participants can change their

withdrawal elections as long as they

have met any applicable spousal rights

requirements with respect to the new

election. For example, if a spouse of a

FERS participant waives his or her right

to a survivor benefit when the

participant chooses a single life annuity,

the participant can later change his or

her election to a single payment without

obtaining another waiver from that

spouse. However, if the participant has

a different spouse when a new election

is made, a waiver would be required

from the new spouse.

The right both to change and cancel

a withdrawal election is also affected by

the date the payment is scheduled. As

explained in § 1650.7, the TSP is a

monthly valued plan. As such,

payments are scheduled to occur once a

month during the mid-month processing

cycle. Participants who have their

accounts invested only in the G Fund

can change or cancel their election as

long as the change or cancellation can

be processed prior to the mid-month

cycle in which the account is scheduled

to pay. This is because the underlying

value of investments in the G Fund does

not fluctuate. However, if a participant

has all or a portion of his or her account

invested in the C Fund or the F Fund,

the underlying value can fluctuate.

Therefore, the change or cancellation

must be processed no later than the

second-to-last business day (the ‘‘cutoff

date’’) of the month preceding the midmonth cycle in which the account is

scheduled to pay, so that the amount to

be withdrawn can be insulated from
9602 Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations

fluctuations in value after the end of the

month. Failure to remove funds

scheduled for withdrawal from the C

and F Funds on the last day of the

month would result in all other

accounts having to absorb the

fluctuations in the C and F Fund values

after the end of the month. However, a

person with money in the C or F Funds

can change (but not cancel) his or her

withdrawal election after the cutoff date

if, under the changed election method,

there is no change in the amount to be

withdrawn from the C and F Funds as

originally scheduled.

Section 1650.14(d) provides an

example to illustrate the treatment of

elections to change withdrawal methods

made by participants whose accounts

are invested in the C or F Funds.

Subpart C of part 1650 sets forth

procedures adopted by the Board for

processing TSP withdrawal elections

and payments.

Section 1650.15 sets forth the

information that must be provided by

the employing agency both to the TSP

and to the participant at the time of the

participant’s separation from

Government employment.

Section 1650.15(a) requires the agency

to inform the TSP recordkeeper of the

participant’s separation from

Government employment. This is done

by submitting a code indicating the

separation from employment and the

date of separation. Until this

information is received, the withdrawal

cannot be processed. Also, a withdrawal

cannot occur until 30 days have elapsed

since the date of separation reported by

the agency. This interval ensures that

normal contributions are received before

the date of withdrawal and that the

participant has a reasonable period of

time after receipt of withdrawal and tax

information from the employing agency

to make withdrawal and tax

withholding decisions. (The 30-day

interval described in this section does

not operate to enforce the rule stated in

§ 1650.3 that an employee rehired

within 31 days is not permitted to

withdraw. As explained earlier, the TSP

does not maintain information on the

date employees are rehired. Therefore,

the 30-day interval could not ensure

that employees rehired within that

period were not paid. Rather, as

provided in § 1650.4, that requirement

is enforced by requiring the participant

to certify to the length of his or her

break in service and his or her

employment status.)

Section 1650.15(b) requires the

agency to provide certain withdrawal

and tax information to the participant at

the time he or she separates from

employment. The Board relies on the

employing agencies to distribute this

information to participants. This

includes TSP withdrawal materials and

forms and the written explanation

required by section 402(f) of the Internal

Revenue Code. The Code requires plans

to furnish this explanation to

participants within a reasonable time

prior to their withdrawal. In order to

facilitate TSP participants’ ability to

withdraw their accounts in a timely

manner, the Board has instructed

employing agencies to provide

participants with this information when

they separate. (The TSP also mails this

notice to each participant upon receipt

of separation information from his or

her agency, unless withdrawal forms

have already been received from the

participant.)

Section 1650.16 states the basic rule

that, in order to withdraw his or her

TSP account, a participant must

complete the basic TSP withdrawal

form (TSP–70) and any other form

required by the TSP. As a result of the

standardization of TSP withdrawal

options accomplished by Public Law

103–226, the Board has been able to

devise a withdrawal form that can be

used by every participant to make a

withdrawal choice under any of the

withdrawal methods. Participants with

account balances of $3,500 or less are

also eligible to receive an ‘‘automatic

cashout’’ of their accounts which

requires no paperwork, as described in

§ 1650.17.

Section 1650.17 describes the

procedures for paying out TSP accounts

of $3,500 or less. These procedures

differ from those relating to other TSP

accounts because of Public Law 101–

335. That statute amended title 5 of the

United States Code to provide that a

separated TSP participant with an

account balance of $3,500 or less will

automatically be paid the amount in his

or her account in a single payment,

unless the participant elects another

withdrawal method. This payment is

referred to as an ‘‘automatic cashout.’’

These participants can also choose to

leave their accounts in the Plan.

Section 1650.17(c) states that spousal

notice and waiver provisions (to be

published as subpart D) do not apply to

the withdrawal of accounts of $3,500 or

less. This also reflects the provisions of

Public Law 101–335.

Section 1650.17(d) confirms that the

automatic cashout provisions apply

only while the account is $3,500 or less.

If the account increase to more than

$3,500 (due to additional contributions

or earnings), these rules cease to apply

and the participant must submit

withdrawal forms as required in

§ 1650.16.

Section 1650.17(e) excludes accounts

of less than $5.00 from the automatic

cashout procedures. Many participants

have contacted the TSP asking that they

not continue to be sent information

about very small account balances.

Often these accounts represent amounts

deposited into a participant’s account

after an initial withdrawal, where a

former employing agency has

discovered that it owned small amounts

of lost earnings to a group of employees.

(See part 1605 for rules concerning

agency paid lost earnings.) The Board

has also determined that, for accounts of

less than $5.00, it is not prudent to

undertake the administrative processing

costs associated with an automatic

cashout. The Board plans to forfeit these

accounts to the Plan automatically

under procedures to be developed. The

procedures will allow participants to

reclaim these amounts, if they wish.

Subpart D contains rules relating to

spousal rights that apply when a TSP

participant withdraws his or her

account.

Section 1650.18 implements the rules

regarding the rights of spouses of FERS

employees with respect to TSP

withdrawals. These rules are found at 5

U.S.C. 8435. As amended by Public Law

103–226, that section requires that

spouses of FERS participants with

account balances of more than $3,500

waive their right to a joint and survivor

annuity before the participant can

choose any other form of TSP

withdrawal. Section 8435 further

requires the Board, if it offers more than

one form of a joint life annuity with the

spouse, to choose the particular form of

annuity which will be purchased if the

spouse does not sign a waiver. In

accordance with this requirement,

which is referred to as the ‘‘signature

requirement,’’ the Board has chosen the

joint life annuity with 50% survivor

benefit, level payments, and no cash

refund feature. Therefore, § 1650.18(a)

prohibits a FERS participant who is

married at the time he or she submits a

withdrawal request from selecting a

withdrawal option other than this form

of joint life annuity unless his or her

spouse waives this annuity. Section

1650.18(b) states the forms which the

spouse must sign to execute a valid

waiver. Section 1650.18(c) confirms that

these procedures do not apply to FERS

participants whose account balances are

$3,500 or less.

Section 1650.19(a) implements the

requirement found in 5 U.S.C. 8351 (as

amended by Public Law 103–226) that

CSRS participants with account

balances of more than $3,500 cannot

withdraw their accounts until their

spouses are sent notice of their
Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations 9603

withdrawal elections. This is referred to

as the ‘‘notice requirement.’’ Section

1650.19(b) states that the required

notice will be sent to the last know

mailing address for the spouse, but that

it is the responsibility of the participant

to provide that address. Since the TSP

does not maintain account information

for spouses, and since spouses are

usually not employed with the Federal

Government, the TSP must rely on the

participant to provide this information.

The participant who provides false

information is subject to criminal

prosecution. Section 1650.19(c)

confirms that the notice requirement

does not apply to CSRS participants

whose account balances are $3,500 or

less.

Section 1650.20 describes the spousal

rights rules that apply when either FERS

or CSRS participants change their

withdrawal elections. Section

1650.20(a) describes the rules that apply

to spouses of FERS participants. The

basic rule, as required by 5 U.S.C. 8435,

is that spouses of FERS participants

must waive their right to the annuity

described in § 1650.18 with respect to a

changed withdrawal election if the

spouse did not waive the annuity right

with respect to the original election.

Therefore, the regulation states that,

unless the same spouse has already

signed a waiver of the prescribed form

of annuity, the participant cannot

change that withdrawal election without

obtaining a waiver. If the participant has

previously obtained an exception to the

same spouse’s signature, as described in

§ 1650.22, the exception is deemed

applicable for one year from the date the

participant signed the request form.

After that date, either a waiver or a new

exception must be obtained, because the

circumstances surrounding the granting

of the earlier exception may have

changed.

Section 1650.20(b) states that the

spouse of a married CSRS participant

must be notified when that participant

changes his or her withdrawal election.

5 U.S.C. 8351 requires another notice

whenever a change of withdrawal

election is made. However, if an

exception to the notice requirement for

the same spouse has been granted

pursuant to § 1650.21, that exception is

good for one year, and notice of a

changed withdrawal election will not be

necessary during that period.

Section 1650.21 provides that the

Executive Director may grant an

exception to the notice requirement for

spouses of CSRS employees (as

described in § 1650.19) where the

participant establishes to the

satisfaction of the Executive Director

that the spouse’s whereabouts cannot be

determined. Section 1650.21 describes

the process for establishing that a

spouse’s whereabouts are unknown.

This section has been revised to allow

participants who are seeking an

exception to the notice requirement

based on whereabouts unknown to

submit statements in lieu of affidavits or

declarations in support of their requests.

These statements must be made

pursuant to 18 U.S.C. 1001, which

provides that:

Whoever, in any matter within the

jurisdiction of any department or agency of

the United States knowingly and willfully

falsifies, conceals or covers up by any trick,

scheme, or device a material fact, or makes

any false, fictitious or fraudulent statements

or representations, or makes or uses any false

writing or document knowing the same to

contain any false, fictitious or fraudulent

statement or entry, shall be fined not more

than $10,000 or imprisoned not more than

five years, or both.

To ensure that the persons making

statements are aware of the possible

penalty, § 1650.21(c) requires inclusion

of the following on each statement: 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. The

Board has determined that this

statement and the sanctions of 18 U.S.C.

1001 provide adequate protection

against false statements, and therefore

participants seeking exceptions can be

relieved of the burden of providing

notarized affidavits.

Section 1650.22 allows the Executive

Director to grant an exception to the

requirement to obtain the signature of

the spouse of a FERS employee if the

spouse’s whereabouts cannot be

determined (based on the same

requirements as stated in § 1650.21) or

if ‘‘exceptional circumstances warrant

the exception.’’ Section 1650.22

describes how a participant can

establish that ‘‘exceptional

circumstances’’ exist.

Section 1650.22(b)(2)(iii) has been

revised to clarify the wording that must

be included in a court order to justify

the granting of an exception based on

the express language of the order.

To ease the burden on participants

further, §§ 1650.21 and 1650.22 are also

being revised to delete the requirement

that the participant seeking an

exception from the spouse notice or

signature requirements obtain and

provide only documents bearing an

original signature or which are

embossed or which bear the imprint of

a seal. Participants may not submit

photocopies of documents.

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 the ability of

Federal employees to withdraw their

TSP accounts and Board procedures

relating to those withdrawals.

Paperwork Reduction Act

I certify that these regulations do not

require additional reporting under the

criteria of the Paperwork Reduction Act

of 1980.

Waiver of 30-Day Delay of Effective

Date

Pursuant to 5 U.S.C. 553(d)(3), I find

that good cause exists for making these

regulations effective in less than 30

days. The new withdrawal rules will be

implemented during the March 1995

payment cycle, which will begin on

March 10, 1995. Therefore, the new

withdrawal rules must be in place by

that date.

List of Subjects in 5 CFR Part 1650

Employee benefit plans, Government

employees, Retirement, Pensions.

Roger W. Mehle,

Executive Director.

Federal Retirement Thrift Investment

Board

For the reasons set out in the

preamble, part 1650 of chapter VI of title

5 of the Code of Federal Regulations is

revised to read as follows:

PART 1650—METHODS OF

WITHDRAWING FUNDS FROM THE

THRIFT SAVINGS PLAN

Subpart A—General

1650.1 Definitions.

1650.2 Eligibility.

1650.3 Separation from Government

employment.

1650.4 Rehired employees.

1650.5 Outstanding loans.

1650.6 Frozen accounts.

1650.7 Monthly cycle for withdrawal

payments.

Subpart B—Withdrawal Options

1650.8 Single payment.

1650.9 Monthly payments.

1650.10 Annuities.

1650.11 Transfer of withdrawal payments.

1650.12 Deferred withdrawal elections.

1650.13 Required date for making

withdrawal election.

1650.14 Changes and cancellation of

withdrawal election.

Subpart C—Procedures for Withdrawing

TSP Accounts

1650.15 Information to be provided by

agency.

1650.16 Accounts of more than $3,500.

1650.17 Accounts of $3,500 or less.
9604 Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations

Subpart D—Spousal Rights

1650.18 Spouses of FERS participants.

1650.19 Spouses of CSRS participants.

1650.20 Spousal rights when participant

changes withdrawal election.

1650.21 Executive Director’s exception to

requirement to notify the spouse.

1650.22 Executive Director’s exception to

the requirement to obtain the spouse’s

signature.

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

8467(b)(5), and 8474(c)(1).

Subpart A—General

§ 1659.1 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 month

end prior to 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.

Participant means any person with an

account in the Thrift Savings Plan.

Spouse means the person to whom a

TSP participant is married on the date

he or she signs forms requesting spouse

information to be submitted to the TSP,

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. 8431 et seq.

Thrift Savings Plan Service Office

means the office established by the

Board to service separated TSP

participants. This office’s current

address is: Thrift Savings Plan Service

Office, National Finance Center, P.O.

Box 61500, New Orleans, Louisiana

70161–1500.

§ 1650.2 Eligibility.

A participant who separates from

Government employment, as described

in § 1650.3, is eligible to withdraw his

or her account by one of the withdrawal

methods described in subpart B of this

part, subject to the rules relating to

spouses’ rights (set forth in subpart D of

this part), minimum distributions, and

domestic relations orders. A participant

cannot choose a withdrawal method

while he or she is employed by the

Government.

§ 1650.3 Separation from Government

employment.

For purposes of this part, a separation

from Government employment occurs

when a participant ceases 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.

§ 1650.4 Rehired employees.

(a) A participant who is reemployed

in a position in which he or she can

participate in the TSP on or before the

31st full calendar day after the date of

separation is not eligible to withdraw

his or her TSP account. In order to be

eligible to withdraw his or her TSP

account, a participant must state on

Form TSP–70 (Withdrawal Request) that

he or she is separated and expects the

separation to last at least 31 full

calendar days. If a participant is

scheduled for an automatic cashout, as

described in § 1650.17, the cashout will

be canceled if the participant states to

the TSP that he or she has been

reemployed or expects to be reemployed

within 31 full calendar days.

(b) A participant who is reemployed

after 31 full calendar days after his or

her date of separation in a position in

which the participant is eligible to

participate in the TSP may withdraw

the portion of his or her account balance

attributable to the earlier period of

employment. However, if the amount in

the account attributable to the first

period of employment is greater than

$3,500, the participant must submit,

prior to the date of his or her

reemployment, a properly completed

withdrawal form (TSP–70) choosing a

withdrawal option that results in an

immediate withdrawal. A reemployed

participant may not make a deferred

withdrawal election, as described in

§ 1650.12, or an election of monthly

payments, as described in § 1650.9. If a

reemployed participant is already

receiving monthly withdrawal

payments, such payments will stop.

§ 1650.5 Outstanding loans.

A participant is not entitled to

withdraw his or her account balance

until any loan outstanding at the time of

separation has either been repaid in full

or declared to be a taxable distribution.

§ 1650.6 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

retirement benefits court order or a

child support or alimony enforcement

order or as a result of a freeze placed on

the account by the Board for another

reason.

§ 1650.7 Monthly cycle for withdrawal

payments.

The value of a TSP account is

determined at approximately midmonth, as of the end of the preceding

month, after earnings are allocated to

the account. TSP transactions that

require valued account balances, such

as withdrawals, can only occur after the

value of an account has been

determined. Because of this, withdrawal

payments are generally made once a

month, during what is known as the

‘‘mid-month processing cycle.’’

Subpart B—Withdrawal Options

§ 1650.8 Single payment.

A participant can withdraw his or her

entire account in a single payment.

§ 1650.9 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

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 multiple 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
Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations 9605

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 account.

(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.

§ 1650.10 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. If a participant chooses this

method, the TSP will be sent forms

asking 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 expentancy 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 date 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

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
9606 Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations

allow participants to purchase annuities

of the eliminated type or containing the

eliminated feature for 5 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

joint annuitant cannot be changed, and

the annuity cannot be terminated.

§ 1650.11 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

§ 1650.8;

(2) Monthly payments, as described in

§ 1650.9, 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 § 1650.9(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

§ 1650.9(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.

§ 1650.12 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

§§ 1650.8, 1650.9, or 1650.10 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.

§ 1650.13 Required date for making

withdrawal election.

(a) A participant who separates from

Government employment need not elect

one of the withdrawal methods

provided in §§ 1650.8, 1650.9, or

1650.10 until February 1 of the year

following the latest of these dates:

(1) The date upon which the

participant becomes age 65;

(2) The date that is 10 years after the

effective date of the first TSP

contribution made by or on behalf of the

participant (but not earlier than April 1,

1987); or

(3) The date the participant separated

from Government employment.

(b) A separated participant may make

a withdrawal election before the date

described in paragraph (a) of this

section, but is not required to do so.

(c) A participant will fulfill the

requirements of paragraph (a) of this

section by making a deferred

withdrawal election (as described in

§ 1650.12) by the required date,

provided that the date described in

§ 1650.12(b) has not already occurred.

(d) If a participant does not make an

election by the date required by this

section, the TSP will purchase an

annuity for the participant in

accordance with the following rules:

(1) If a participant is covered by the

Federal Employees’ Retirement System

(FERS) and is married on the date an

election is required by this section, the

TSP will purchase a joint life annuity

with his or her spouse with a 50 percent

survivor benefit, level payments, and no

cash refund feature.

(2) If the participant is covered by the

Civil Service Retirement System (CSRS)

or the participant is not married on the

date an election is required by this

section, the TSP will purchase a single

life annuity with no other features.

(3) If the participant fails to provide

the TSP with adequate information to

purchase one of the annuities described

in either paragraph (d)(1) or (d)(2) of

this section, as appropriate, by the date

an election is required by this section,

and such information cannot be

obtained by the TSP from other sources,

the participant’s account will be

forfeited. If the TSP is later provided

with the required information, the TSP

will purchase an annuity in accordance

with this section, using the amount

forfeited. No earnings will be credited to

this amount after the date of forfeiture.

§ 1650.14 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
Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations 9607

the close of business on the day before

the mid-month 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

mid-month 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 mid-month processing cycle.

(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 mid-month 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 recordkeeper by

the close of business on the day before the

May mid-month 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

recordkeeper 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

Withdrawing TSP Accounts

§ 1650.15 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 recordkeeper.

Until the TSP recordkeeper receives this

information from the employing agency,

it cannot process a withdrawal for the

participant. A 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.

§ 1650.16 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 withdrawal of his or

her account balance.

§ 1650.17 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 mid-month

cycle following the date of the notice if

the account balance 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

this 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 (b)

of this section, payment will be made as

scheduled.

(c) No spousal rights attach to any

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—Spousal Rights

§ 1650.18 Spouses of FERS participants.

(a) A married participant covered by

FERS whose account balance exceeds

$3,500 must choose to withdraw his or

her TSP account by having the TSP

purchase a joint and survivor annuity

with the spouse. The annuity chosen

must have level payments, a 50%

survivor benefit, and no cash refund. A

married FERS participant may only

choose another withdrawal election, a

different type of annuity, or different

annuity features if the spouse waives his

or her right to the required annuity.

(b) A spouse can waive his or her

right to the annuity required in

paragraph (a) of this section only by

signing Form TSP–70, Withdrawal

Election, or Form TSP 11–C, Spouse

Information and Waiver, in the

appropriate place. Once a form

containing a waiver is filed with the

TSP Service Office, the spouse’s waiver

is irrevocable.

(c) A married participant covered by

FERS whose account balance is $3,500

or less is not required to choose the

annuity identified in paragraph (a) of

this section and does not need to obtain

a waiver from his or her spouse to make

any withdrawal election.

§ 1650.19 Spouses of CSRS participants.

(a) The spouse of a married

participant covered by CSRS whose

account balance exceeds $3500 must be

sent notice of the participant’s

withdrawal of his or her account

balance prior to the participant’s

withdrawal.

(b) The TSP Service Office will send

the notice required in paragraph (a) of

this section by first class mail to the last

address of the spouse on file. The

participant is responsible for providing

the TSP Service Office with the spouse’s

correct address.

(c) The spouse of a married

participant covered by CSRS whose

account balance is $3500 or less is not

entitled to the notice prescribed in

paragraph (a) of this section.

§ 1650.20 Spousal rights when participant

changes withdrawal election.

(a) A married participant covered by

FERS who has made a withdrawal

election and who wants to change to

another withdrawal election other than

the annuity required in section

1650.17(a) must obtain a waiver from

the spouse to which 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 another withdrawal

election made by the participant; or
9608 Federal Register / Vol. 60, No. 34 / Tuesday, February 21, 1995 / Rules and Regulations

(2) The participant was granted an

exception, under the procedures set

forth in § 1650.22, to the requirement to

obtain that spouse’s signature for a

withdrawal election made by the

participant within one year of the date

the form requesting the change is

processed by the TSP.

(b) The spouse of a married

participant covered by CSRS who has

made a withdrawal election and who

wants to change to another withdrawal

election must be notified again prior to

the withdrawal, unless the participant

was granted an exception, under the

procedures set forth in § 1650.21, to the

spouse notice requirement within one

year of the date the form requesting the

change is processed by the TSP.

§ 1650.21 Executive Director’s exception

to requirement to notify the spouse.

(a) Wherever in the regulations in this

subpart it is required that the Executive

Director give notice of an action to the

spouse of a participant, an exception to

this requirement may be granted in

cases in which the participant

establishes to the satisfaction of the

Executive Director that the spouse’s

whereabouts cannot be determined. A

request for an exception based on

whereabouts unknown 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) which states that the spouse’s

whereabouts cannot be determined;

(2) A police or Governmental agency

determination that is 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.

(i) 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.

(ii) The participant’s statement must

give the full name of his or her spouse,

declare the inability to locate the

spouse, and state the efforts made to

locate the spouse. Negative statements

such as ‘‘I have not seen or heard from

him/her’’ or ‘‘I have had no contact with

him/her’’ are not sufficient. Examples of

attempting to locate the spouse include

checking with relatives and mutual

friends or using telephone directories or

directory assistance for the city of last

known address.

(iii) 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.

(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.

(c) The requirements for establishing

an exception for a withdrawal and the

one-year period of validity of an

approved exception apply to exceptions

for loans under 5 CFR 1655.18.

§ 1650.22 Executive Director’s exception

to the requirement to obtain the spouse’s

signature.

(a) In this subpart, if the spouse’s

signature is required, the Executive

Director may grant an exception to this

requirement if the participant can show

that:

(1) The spouse’s whereabouts cannot

be determined in accordance with the

provisions of § 1650.21; or

(2) Due to exceptional circumstances,

requiring the spouse’s signature would

otherwise be 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

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 is

narrowly construed and includes such

circumstances 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 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.

(c) The requirements for establishing

an exception for a withdrawal and the

one-year period of validity of an

approved exception apply to exceptions

for loans under 5 CFR 1655.18.

[FR Doc. 95–4062 Filed 2–17–95; 8:45 am]

BILLING CODE 6760–01–M

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR PART 1240

[AMS–FV–93–704CF]

RIN 0581–AB23

Honey Research, Promotion, and

Consumer Information Order and

Rules and Regulations Issued

Thereunder; Termination of Order

Provision and Conforming Correction

of the Rules and Regulations

AGENCY: Agricultural Marketing Service,

USDA.

ACTION: Final rule.

SUMMARY: This rule finalizes an interim

final rule which terminated a provision

of the Honey Research, Promotion, and

Consumer Information Order (Order)

and deleted conflicting and confusing

language in the Rules and Regulations

issued under the Order. This action is

being taken to clarify and correct the

Order and rules and regulations which

were amended in August 1991.

EFFECTIVE DATE: March 23, 1995.

FOR FURTHER INFORMATION CONTACT:

Sonia N. Jimenez, Research and

Promotion Branch, Fruit and Vegetable

Division, AMS, USDA, P.O. Box 96456,

Room 2535–So., Washington, DC

20090–6456; telephone (202) 720–9915.

SUPPLEMENTARY INFORMATION: These

amendments are issued pursuant to the

Honey Research, Promotion, and

Consumer Information Act, as amended

on November 28, 1990 [104 Stat. 3904,

7 U.S.C. 4601 et seq.], hereinafter

referred to as the Act.

The Department is issuing this final

rule in conformance with Executive

Order 12866.

This final rule has been reviewed

under Executive Order 12778, Civil

Justice reform. It is not intended to have

retroactive effect. This rule will not

preempt any state or local laws,

regulation, or policies, unless they

present an irreconcilable conflict with

this rule.

The Act provides that administrative

proceedings must be exhausted before

parties may file suit in court. Under

section 10 of the Act, a person subject

to an order may file a petition with the

Secretary stating that such order, any

provision of such order, or any