[Federal Register Volume 60, Number 77 (Friday, April 21, 1995)]
[Rules and Regulations]
[Pages 19990-19992]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9606]




[[Page 19989]]

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Part II





Federal Retirement Thrift Investment Board





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5 CFR Part 1620



Thrift Savings Plan, Continuation of Eligibility; Interim Final Rule

Federal Register / Vol. 60, No. 77 / Friday, April 21, 1995 / Rules 
and Regulations 
[[Page 19990]] 

FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1620


Thrift Savings Plan; Continuation of Eligibility

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Interim rule with request for comments.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) is publishing interim regulations concerning 
the eligibility of certain individuals to have make-up contributions 
credited to their Thrift Savings Plan (TSP) accounts and, in certain 
cases, restore withdrawn funds and reestablish loan accounts. Section 4 
of the Uniformed Services Employment and Reemployment Rights Act amends 
Title 5 of the United States Code to add a new section 8432b that 
addresses TSP benefits that apply to any Federal employee whose release 
from military service, discharge from hospitalization related to that 
service, or other similar event making the individual eligible to seek 
restoration from leave-without-pay status or reemployment under 38 
U.S.C. Chapter 43, occurs on or after August 2, 1990. This interim rule 
governs retroactive participation in the TSP by these employees.

DATES: The interim rule is effective August 2, 1990. Comments must be 
received by June 21, 1995.

ADDRESSES: Comments may be sent to: John J. O'Meara, Federal Retirement 
Thrift Investment Board, 1250 H Street NW., Washington, DC 20005.

FOR FURTHER INFORMATION CONTACT:
John J. O'Meara (202) 942-1660.

SUPPLEMENTARY INFORMATION: These regulations are being given 
retroactive effect to August 2, 1990, in order to provide eligible 
employees an opportunity to seek and obtain TSP benefits from the 
effective date of Public Law 103-353.
    These regulations include provisions to ensure that all employees 
are given the opportunity to make up any TSP contributions that were 
not made to their TSP accounts because they separated (or were in a 
leave-without-pay status) from Federal civilian employment to perform 
military service. Employing agencies are required to deposit the 
appropriate amount of Agency Matching Contributions to the accounts of 
those employees covered by the Federal Employees' Retirement System 
(FERS) who elect to make up missed contributions. In addition, 
employing agencies are required to deposit to the accounts of eligible 
FERS employees an amount equal to one percent of their basic pay for 
the retroactive period. Subject to de minimis rules, lost earnings will 
also be paid by the employing agencies on retroactive agency 
contributions that are reported for investment.
    Employing agencies are required to notify the TSP recordkeeper if 
an employee's Agency Automatic (1%) Contributions and associated 
earnings were forfeited because the employee was not vested when he or 
she separated to perform military service. The employing agency will 
request that these funds be restored.
    Employees who are subject to the TSP automatic cashout provisions 
(those employees whose account balances were $3,500 or less) and 
employees who separated without eligibility for retirement benefits and 
prior to March 1995 withdrew amounts greater than $3,500, may elect to 
have the separation for military service treated as if it had never 
occurred. These employees will be allowed to return amounts to the 
Thrift Savings Plan that represent the full amount of the withdrawal. 
In addition, in certain cases, if a taxable distribution was declared 
on a Thrift Savings Plan loan and the employee returns the full amount 
of the withdrawal to the Thrift Savings Plan, the taxable distribution 
that was declared on a Thrift Savings Plan loan may be reversed. In 
this case, the employee will be able to resume regular loan payments.

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 Federal employees who leave, or have left, Federal civilian 
service to perform military service and have, under certain conditions, 
returned to Federal civilian service.

Paperwork Reduction Act

    I certify that these regulations do not require additional 
reporting under the Paperwork Reduction Act.

Waiver of Notice of Proposed Rulemaking and 30-Day Delay of Effective 
Date

    Under 5 U.S.C. 553(b)(B) and (d)(3), I find that good cause exists 
for waiving the general notice of proposed rulemaking and for making 
these regulations effective in less than 30 days. It is necessary for 
these regulations to be effective as of August 2, 1990, which is the 
day on which employees eligible under the regulations were first 
eligible to obtain retroactive Thrift Savings Plan benefits.

List of Subjects in 5 CFR Part 1620

    Employee benefit plans, Government employees, Retirement, Pensions.

    Dated: April 13, 1995.
Roger W. Mehle,
Executive Director, Federal Retirement Thrift Investment Board.

    Accordingly, 5 CFR Part 1620 is amended as follows:

PART 1620--CONTINUATION OF ELIGIBILITY

    1. The authority citation for Part 1620 is revised to read as 
follows:

    Authority: 5 U.S.C. 8474 and 8432b; Pub. L. 99-591, 100 Stat. 
3341; Pub. L. 100-238, 101 Stat. 1744; Pub. L. 100-659, 102 Stat. 
3910.

    2. Part 1620 is amended by adding subpart H, consisting of 
Secs. 1620.100 through 1620.107, to read as follows:

Subpart H--Military Service

Sec.
1620.100  Scope.
1620.101  Definitions.
1620.102  Processing contribution elections.
1620.103  Processing lost earnings.
1620.104  Agency payments to recordkeeper; agency ultimately 
responsible.
1620.105  Restoring forfeited Agency Automatic (1%) Contributions.
1620.106  Returning withdrawals.
1620.107  Agency responsibilities.

Subpart H--Military Service


Sec. 1620.100  Scope.

    (a) General. To be covered by this subpart, an employee must have:
    (1) Been separated from Federal civilian service or entered leave-
without-pay status in order to perform military service;
    (2) Been reemployed; and
    (3) Become eligible to seek reemployment by virtue of a release 
from military service, discharge from hospitalization, or other similar 
event that occurred on or after August 2, 1990.
    (b) Other rules. Except as provided in this part, the rules 
governing contributions to the TSP set forth in 5 CFR Part 1600 will 
apply to persons reemployed under this subpart.


Sec. 1620.101  Definitions.

    As used in this subpart:
    (a) Basic pay has one of two meanings:
    (1) For the portion of the retroactive period when an employee did 
not receive a Federal civilian salary, the rate of basic pay is that 
which would have been payable to the employee if the 
[[Page 19991]] employee had remained continuously employed in the 
position which he or she last held before separating (or entering 
leave-without-pay status) to perform military service;
    (2) For the portion of the retroactive period that occurs after the 
employee is reemployed, his or her actual basic pay will be used to 
calculate contributions.
    (b) Current contributions means those contributions that are made 
prospectively for any pay period after the employee has been 
reemployed.
    (c) Employee means any Federal employee whose release from military 
service, discharge from hospitalization, or other similar event making 
the individual eligible to seek restoration or reemployment under 38 
U.S.C. chapter 43 occurs on or after August 2, 1990.
    (d) Leave-without-pay means a temporary nonpay status and absence 
from duty (including military furlough) to perform military service.
    (e) Recordkeeper means the organization designated by the Federal 
Retirement Thrift Investment Board as the Thrift Savings Plan's 
recordkeeper.
    (f) Reemployed or reemployment means reemployed in (or restored to) 
a position pursuant to 38 U.S.C. chapter 43, which is subject to 5 
U.S.C. chapter 84 or which entitles the employee to contribute to the 
Thrift Savings Plan pursuant to 5 U.S.C. 8351.
    (g) Retroactive period means the period for which an employee is 
entitled to make up missed Employee Contributions and to receive 
retroactive Agency Automatic (1%) Contributions and Agency Matching 
Contributions.
    (1) Beginning of retroactive period. For an employee who was 
eligible to make contributions when military service began, the 
retroactive period begins on the date following the effective date of 
separation or, in the case of leave-without-pay, the date the employee 
enters leave-without-pay status. For an employee who was not eligible 
to make contributions when military service began, the retroactive 
period begins on the first day of the first pay period in the election 
period during which the employee would have been eligible to make 
contributions had the employee remained in Federal civilian service.
    (2) End of retroactive period. The retroactive period ends on the 
earlier of the following two dates: the date before the first day of 
the first election period during which a contribution election could 
have been made effective after reemployment, or the last day of the pay 
period before the pay period during which routine current contributions 
are begun after the employee is reemployed (or restored). If an 
employee who was making contributions when he or she separated elects 
not to make routine current contributions, the ending date of the 
retroactive period is the last day of the pay period during which the 
employee elects to terminate contributions.
    (h) Separation or separated means the period an employee was 
separated from Federal civilian service (or entered a leave-without-pay 
status) in order to perform military service.


Sec. 1620.102  Processing contribution elections.

    (a) Current contribution elections. Immediately upon reemployment, 
an employee's agency will give an eligible employee the opportunity to 
submit a contribution election form (Form TSP-1) to make current 
contributions. The effective date of the current Form TSP-1 will be the 
first day of the first full pay period in the most recent TSP election 
period. If the employee is reemployed during a TSP Open Season but 
before the election period, he or she can also submit an election form 
that will become effective the first day of the first full pay period 
in the following election period.
    (b) Retroactive contribution elections. (1) An employee has the 
following options for making retroactive contributions:
    (i) If the employee had a valid contribution election form (Form 
TSP-1) on file when he or she separated, that election form will be 
reinstated for purposes of retroactive contributions upon the 
employee's reemployment, unless a new contribution election form is 
submitted to terminate all retroactive contributions or those 
contributions that would have been made from the date of separation 
through the end of the Open Season that occurred immediately after the 
separation.
    (ii) Instead of making the contributions for the retroactive period 
under the reinstated contribution election form, the employee may 
submit a new election form for any Open Season that occurred during the 
retroactive period. However, the allocation election on each Form TSP-1 
for the retroactive period must be the same as the allocation election 
on the current Form TSP-1.
    (2) An employee who terminated contributions within two months 
before entering military service will be eligible to make a retroactive 
contribution election effective for the first Open Season that occurs 
after the effective date that the contributions were terminated. This 
election may be made even if the termination was made outside of an 
Open Season.
    (3) Employees may not make any retroactive contributions that will 
cause them to exceed the Internal Revenue Service's elective deferral 
limit. If an employee's current contributions, when added to the make-
up contributions, will exceed the annual elective deferral limit, the 
employing agency must suspend the make-up contributions in accordance 
with 5 CFR 1605.2(b)(2)(ii).


Sec. 1620.103  Processing lost earnings.

    (a) Agency Automatic (1%) Contributions. Subject to the de minimis 
rules in 5 CFR part 1606, employing agencies are required to pay lost 
earnings on the Agency Automatic (1%) Contributions that are made for 
the retroactive period.
    (b) Agency Matching Contributions. Subject to the de minimis rules 
in 5 CFR part 1606, employing agencies are required to pay lost 
earnings for the agency contributions that match make-up Employee 
Contributions.
    (c) Make-up Employee Contributions. Employing agencies may not pay 
lost earnings for make-up Employee Contributions associated with the 
retroactive period.
    (d) Lost earnings calculation. Lost earnings will be calculated on 
all retroactive agency contributions using the rates of return for the 
Government Securities Investment Fund (G Fund), unless the employee 
submitted one or more interfund transfer requests during the period of 
separation. In the case of interfund transfer requests, the earnings 
will be calculated using the G Fund rates of return until the first 
interfund transfer was processed. The contribution that is subject to 
lost earnings will be moved to the investment fund(s) the employee 
requested and lost earnings will be calculated based on the earnings 
for that fund(s). The amount of lost earnings calculated will be posted 
to the investment fund(s) to which the contribution was moved. If there 
were no interfund transfers processed during the lost earnings 
calculation period, the amount of lost earnings calculated will be 
posted to the employee's G Fund account.


Sec. 1620.104  Agency payments to recordkeeper; agency ultimately 
chargeable.

    (a) Agency making payments to recordkeeper. The current employing 
agency will always be the agency responsible for making payments to the 
recordkeeper for all contributions (both employee and agency) and lost 
earnings, regardless of whether some of that expense is ultimately 
chargeable to a prior employing agency. [[Page 19992]] 
    (b) Agency ultimately chargeable with expense. The agency 
ultimately chargeable with the expense of agency contributions and lost 
earnings attributable to the retroactive period is ordinarily the 
agency that reemployed the employee. However, if an employee changed 
agencies during the period between the date of reemployment and October 
13, 1994, the employing agency as of October 13, 1994, is the agency 
ultimately chargeable with the expense.
    (c) Reimbursement by agency ultimately chargeable with expense. If 
the agency that made the payments to the recordkeeper for agency 
contributions and lost earnings is not the agency ultimately chargeable 
with that expense, the agency that made the payments to the 
recordkeeper may, but is not required to, obtain reimbursement from the 
agency ultimately chargeable with the expense.


Sec. 1620.105  Restoring forfeited Agency Automatic (1%) Contributions.

    If an employee's Agency Automatic (1%) Contributions were forfeited 
because the employee was not vested when he or she separated to perform 
military service, the employee must notify the employing agency that a 
forfeiture occurred. Employing agencies will submit a written request 
to the recordkeeper to restore any Agency Automatic (1%) Contributions 
that were forfeited from an employee's account because he or she was 
not vested at the time the employee separated to perform military 
service.


Sec. 1620.106  Returning withdrawals.

    (a) General. Employees who are subject to the TSP automatic cashout 
provisions (employees whose account balances were $3,500 or less) and 
employees who separated without eligibility for retirement benefits and 
prior to March 1995 withdrew amounts greater than $3,500, may elect to 
have the separation for military service treated as if it had never 
occurred. These employees will be allowed to return amounts to the 
Thrift Savings Plan that represent the full amount of the withdrawal. 
Eligible employees must notify the recordkeeper by April 21, 1996, or 
one year from the date of reemployment, whichever is later, of their 
intent to return the withdrawn funds.
    (b) Documentation. An eligible employee who elects to return the 
full amount of a withdrawal under this section must provide 
documentation of reemployment to the recordkeeper. The recordkeeper 
will notify the employee of the amount of funds to be returned and the 
deadline for making that payment. The employee must provide the funds 
in a single payment to the recordkeeper within 90 days after the 
recordkeeper sends the employee the notice advising of the amount and 
procedures for returning the funds.
    (c) Earnings. Employees will not receive retroactive earnings on 
any amounts withdrawn that they later return to their accounts.
    (d) Taxable distribution reversed. Employees who return withdrawn 
funds under this section may be eligible to have a taxable distribution 
associated with a loan reversed. At the time the recordkeeper notifies 
the employee of the amount required to return the withdrawn funds, it 
will notify the employee whether he or she is eligible to have a 
taxable distribution reversed.


Sec. 1620.107  Agency responsibilities.

    (a) General. Each employing agency must establish procedures for 
implementing these regulations. These procedures must at a minimum, 
require agency personnel to identify and notify eligible employees 
concerning their options under these regulations and tell them the time 
period within which those options must be exercised. For employees who 
are reemployed on or after August 2, 1990, and before April 21, 1995, 
the agency must perform these functions by June 20, 1995. For employees 
who are reemployed on or after April 21, 1995, employing agencies must 
perform these functions within 60 days of the employee's reemployment. 
An employee must submit a written request to the employing agency to 
make up Employee Contributions for the retroactive period on or before 
April 21, 1996, or one year from the date the employee was reemployed, 
whichever is later, or forfeit the right to make up these 
contributions.
    (b) Agency records; procedure for reimbursement. The agency that is 
making the payments to the recordkeeper for all contributions (both 
employee and agency) and lost earnings will obtain from prior employing 
agencies whatever information is necessary in order to make accurate 
payments. If a prior employing agency is ultimately chargeable under 
Sec. 1620.104(b) for all or part of the expense of agency contributions 
and lost earnings, the agency making the payments to the recordkeeper 
will determine the procedure to follow in order to collect amounts owed 
to it by the agency ultimately chargeable with the expense.
    (c) Payment schedule; matching contributions report. Agencies will, 
with the employee's consent, prepare a payment schedule for making 
retroactive Employee Contributions. In addition, the employing agencies 
will calculate the Agency Matching Contributions that will be reported 
for investment to the recordkeeper in equal installments for each pay 
period covered by the payment schedule. The employing agency may impose 
limits on the maximum amount of time during which an employee may make 
up the missed contributions. This maximum amount of time may be no less 
than two times and no more than four times the number of pay periods 
that were covered by the period of missed contributions. An employee 
may decide to terminate the make-up contributions; however, such a 
decision is irrevocable.
    (d) Agency Automatic (1%) Contributions. Employing agencies must 
calculate the Agency Automatic (1%) Contributions for all reemployed 
FERS employees, report these contributions to the recordkeeper, and 
submit lost earnings records to cover the retroactive period by June 
20, 1995, or 60 days from the date of reemployment, whichever is later.
    (e) Forfeiture restoration. When notified by an employee that a 
forfeiture of the Agency Automatic (1%) Contributions occurred after 
the employee separated to perform military service, the employing 
agency must submit a written request to the recordkeeper to restore 
these funds.
    (f) Thrift Savings Plan Service Computation Date. The agencies must 
review the Thrift Savings Plan Service Computation Date for all 
reemployed Federal Employees' Retirement System employees for purposes 
of crediting military service performed during the separation period. 
If the period of military service has not been credited, the agency 
must submit a corrected Thrift Savings Plan Service Computation Date to 
the recordkeeper.

[FR Doc. 95-9606 Filed 4-20-95; 8:45 am]
BILLING CODE 6760-01-M