This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

42613 

Vol. 82, No. 174 

Monday, September 11, 2017 

1PEBD is the date that denotes how much service 

a member has for the purpose of determining 

longevity pay rates. The Navy and Marine Corps 

refer to this as the pay entry base date, while the 

Air Force calls it simply the pay date. DoD refers 

to it as the basic pay date. The services are 

responsible for determining each member’s PEBD 

and providing each member’s PEBD to the TSP. 

FEDERAL RETIREMENT THRIFT 

INVESTMENT BOARD 

5 CFR Parts 1600, 1601, 1603, 1605, 

1650, and 1690 

Blended Retirement System 

AGENCY: Federal Retirement Thrift 

Investment Board. 

ACTION: Proposed rule. 

SUMMARY: The Federal Retirement Thrift 

Investment Board (‘‘FRTIB’’) is 

proposing to amend its regulations to 

implement changes to the uniformed 

services’ retirement system that are 

mandated by the National Defense 

Authorization Act for Fiscal Year 2016. 

DATES: Comments must be received on 

or before November 13, 2017. 

ADDRESSES: You may submit comments 

using one of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov at Docket ID 

number FRTIB–2017–0006. Follow the 

Web site instructions for submitting 

comments. 

• Facsimile: 202–942–1676. 

• Mail or Hand Deliver/Courier: 

Office of General Counsel, Federal 

Retirement Thrift Investment Board, 77 

K Street NE., Suite 1000, Washington, 

DC 20002. 

FOR FURTHER INFORMATION CONTACT: 

Brandon Ford, Attorney-Advisor, 

Federal Retirement Thrift Investment 

Board, Office of General Counsel, 77 K 

Street NE., Suite 1000, Washington, DC 

20002, 202–864–8734, Brandon.Ford@

tsp.gov. 

SUPPLEMENTARY INFORMATION: The 

FRTIB administers the Thrift Savings 

Plan (TSP), which was established by 

the Federal Employees’ Retirement 

System Act of 1986 (FERSA), Public 

Law 99–335, 100 Stat. 514. The TSP 

provisions of FERSA are codified, as 

amended, largely at 5 U.S.C. 8351 and 

8401–79. The TSP is a tax-deferred 

retirement savings plan for Federal 

civilian employees and members of the 

uniformed services. The TSP is similar 

to cash or deferred arrangements 

established for private-sector employees 

under section 401(k) of the Internal 

Revenue Code (26 U.S.C. 401(k)). 

The National Defense Authorization 

Act for Fiscal Year 2016 (NDAA), Public 

Law 114–92, signed into law November 

25, 2015, changed the uniformed 

services’ retirement plan from one that 

relied primarily on a cliff-vested defined 

benefit to one that blends a reduced 

defined benefit with enhanced TSP 

benefits, continuation pay, and lumpsum options. The new retirement 

system is known as the Blended 

Retirement System (BRS). This 

proposed rule implements the enhanced 

TSP benefits provided by the NDAA. 

The BRS includes four major changes 

to the TSP portion of a service member’s 

military retirement package: 

(1) Employing services will contribute 

an amount that equals 1% of each 

service member’s monthly pay to the 

service member’s TSP account. These 

contributions are additional 

compensation; they are not deducted 

from service members’ basic pay. They 

are referred to as ‘‘automatic’’ 

contributions because the services must 

make them whether or not the service 

member also makes contributions from 

his/her basic pay. 

(2) Service members will be autoenrolled to contribute 3% of their basic 

pay, and re-enrolled again annually if 

they stop making contributions. 

(3) Employing services will match 

service members’ TSP contributions 

dollar for dollar on the first three 

percent of basic pay and 50 cents on the 

dollar for the next two percent of basic 

pay that the member contributes. 

(4) Unless the service member elects 

otherwise, contributions will be 

invested in an age appropriate lifecycle 

fund instead of the Government 

securities fund. 

BRS Eligibility 

BRS covers service members who first 

enter a uniformed service on or after 

January 1, 2018. It also covers service 

members who (1) have completed fewer 

than 12 years of service (or, if in the 

reserve component, have fewer than 

4,320 retirement points) as of December 

31, 2017, and (2) elect, within a certain 

timeframe, to transfer from the legacy 

retirement system to BRS (this process 

is also known as electing to ‘‘opt-in’’ to 

BRS). The employing services are 

responsible for making BRS eligibility 

determinations and reporting each 

service member’s retirement coverage 

status to the TSP. 

Service Automatic (1%) Contributions 

Timing Restrictions 

The NDAA placed timing restrictions 

on the receipt of Service Automatic 1% 

Contributions to a service member’s TSP 

account. Service members who first 

enter duty on or after January 1, 2018, 

cannot receive any Service Automatic 

(1%) Contributions until the first full 

pay period following the date that is 60 

days after the member’s Pay Entry Base 

Date (PEBD).1 For members who elect to 

transfer to the BRS, Service Automatic 

(1%) Contributions will begin the first 

full pay period following their election 

to transfer. 

Service Automatic (1%) Contributions 

must stop the first full pay period that 

is 26 years after the service member’s 

PEBD. This rule applies to all BRS 

participants whether they entered duty 

on or after January 1, 2018, or they 

elected to transfer to BRS. For example, 

a member who has served six years 

before electing to transfer to BRS can 

receive matching contributions for only 

20 years. 

Vesting 

The NDAA requires each BRS 

participant to complete 2 years of 

military service before they are vested in 

their Service Automatic (1%) 

Contributions. A service member’s civil 

service will not count toward the 

completion of that two years. Therefore, 

the FRTIB proposes to amend section 

1603.1 to have separate definitions for 

civilian service and military service. 

The definition for civilian service will 

remain the same as it is today. Military 

service will be defined as service that is 

creditable under 37 U.S.C. 205, which is 

the provision that defines years of 

service for purposes of computing basic 

pay. For service members who elect to 

transfer to BRS, all military service 

completed prior to the election will 

count towards the vesting requirement. 

For example, if a service member has 

completed 3 years of service prior to 

transferring to BRS, that member will be 


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42614 Federal Register / Vol. 82, No. 174 / Monday, September 11, 2017 / Proposed Rules 

immediately vested in the Service 

Automatic (1%) Contributions made to 

his or her TSP account. 

Enrollment and Member Contributions 

Automatic Enrollment 

NDAA requires employing services to 

automatically enroll all uniformed 

service members who first enter service 

on or after January 1, 2018. Employing 

services must also automatically enroll 

all BRS participants (whether they 

entered duty on or after January 1, 2018, 

or transferred to BRS) who separate 

from service and later re-enter service. 

The FRTIB proposes to defer 

automatic enrollment for BRS 

participants until the first full pay 

period following the date that is 60 days 

after the member’s PEBD because the 

member would not be eligible for 

Service Automatic (1%) Contributions 

until that date. Additionally, the 

attrition rate is high in the first 60 days 

of service and to require automatic 

enrollment during that period would 

result in a large number of automatic 

cash-outs, resulting in increased 

operational costs which are then passed 

along to all TSP participants. 

The Executive Director has the 

statutory authority to select a default 

contribution percentage rate for 

automatically enrolled participants that 

is no less than 2% and no more than 

5%. The FRTIB proposes to set the 

default percentage rate for BRS 

participants at 3%. This is the same 

contribution rate at which civilian 

participants are automatically enrolled. 

A participant who is automatically 

enrolled may change the amount that he 

or she is contributing by filing a 

contribution election with his or her 

payroll office. 

Service members who elect to transfer 

to BRS will continue to make 

contributions at the rate that they were 

making contributions prior to their 

election to transfer. They will not be 

automatically enrolled. However, if a 

member who transfers to BRS separates 

from service and later re-enters service, 

that member will be automatically 

enrolled to contribute 3% of his or her 

basic pay beginning the first full pay 

period following the date that is 60 days 

after the member’s PEBD. 

Service members who are not covered 

by BRS will not be automatically 

enrolled even if they separate from 

service and later re-enter service. 

Annual Automatic Re-Enrollment 

NDAA requires employing services to 

automatically re-enroll, on January 1st 

of each year, BRS participants who have 

declined automatic enrollment for a 

year. Accordingly, service members 

subject to automatic enrollment who 

terminate their contributions at any 

point during the year and do not elect 

to resume them by the last full pay 

period of the year will be automatically 

re-enrolled at a contribution rate of 3% 

as of January 1st of the following year. 

The employing services are responsible 

for determining which BRS participants 

are not making contributions in the last 

full pay period of the year. 

Automatic Enrollment Refunds 

Service members who are 

automatically enrolled in the TSP may 

request a refund of the automatic 

enrollment contributions deducted from 

their basic pay (including associated 

earnings) within the first 90 days of the 

member’s first automatic enrollment 

contribution. Members who stop making 

contributions are not eligible for refunds 

of contributions deducted when they are 

automatically re-enrolled on January 1st 

because, under rules mandated by the 

Internal Revenue Service, a new 90-day 

refund period is not allowed unless one 

full calendar year (January through 

December) has passed since the 

member’s last automatic enrollment 

contribution. 

There are very few participants who 

will go an entire plan year without any 

default employee contributions because 

they will be subject to automatic reenrollment for each plan year. There are 

significant programming limitations to 

track the small number of members who 

will go an entire plan year without any 

default employee contributions. For 

these reasons, the Board has decided to 

disallow refunds of contributions 

associated with automatic reenrollment. 

Hardship Withdrawals and Automatic 

Enrollment 

Under existing IRS rules, a participant 

who obtains a financial hardship inservice withdrawal may not contribute 

to the TSP for a period of six months 

after the withdrawal is processed. This 

proposed regulation provides that no 

BRS participant will be automatically 

enrolled or re-enrolled during a six 

month non-contribution period. For 

example, a service member who is in a 

non-contribution period at the end of 

the year will not be reenrolled in 

January. However, if the member does 

not resume contributions after the end 

of the six month non-contribution 

period and consequently is not making 

contributions during the last full pay 

period of the year, the member’s 

employing service must automatically 

enroll the member on January 1st of the 

subsequent year. 

Affirmative Member Contribution 

Elections 

The TSP will not accept service 

member contributions from members 

who are covered by BRS until 60 days 

after the member’s PEBD for the same 

reasons that the FRTIB proposes to defer 

automatic enrollment until 60 days after 

the member’s PEBD. 

Service Matching Contributions 

Timing Restrictions 

Service Matching Contributions begin 

the first full pay period that is 2 years 

after the service member’s PEBD. For 

members who elect to transfer to the 

BRS, Service Matching Contributions 

begin the first full pay period following 

their election to transfer. For example, 

a member who has served 1 year before 

electing to transfer to BRS will receive 

Service Matching Contributions 

beginning the first full pay period 

following their election even though 2 

years have not passed since their PEBD. 

Service Matching Contributions must 

stop at the same time Service Automatic 

(1%) Contributions stop, which is the 

first full pay period that is 26 years after 

the service member’s PEBD. This is true 

regardless of how the service member 

became covered by BRS. 

Vesting 

All BRS participants will immediately 

vest in their Service Matching 

Contributions. 

Repeal of Existing Matching Program for 

Critical Specialties 

The NDAA repeals the service 

matching program described in 37 

U.S.C. 211(d) as of January 1, 2018. 

There are no service members currently 

participating in the program. Therefore, 

the FRTIB proposes to delete all 

references to 37 U.S.C. 211(d). 

Default Investment Fund 

A member who first enters service on 

or after January 1, 2018, will have his 

or her contributions invested in an ageappropriate L Fund by default until the 

member makes an affirmative 

contribution allocation that directs 

incoming contributions into a different 

fund or combination of funds. Likewise, 

if a service member who elects to 

transfer to BRS has not made either an 

affirmative contribution allocation or an 

interfund transfer, then any 

contributions made after becoming 

covered by BRS will be invested in an 

age-appropriate L Fund. 

If a service member who elects to 

transfer to BRS has made an interfund 

transfer in the past but not a 

contribution allocation, then any 


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contributions made after becoming 

covered by BRS will be invested in the 

G Fund. If a service member who elects 

to transfer to BRS has made an 

affirmative contribution allocation in 

the past, then any contributions made 

after becoming covered by BRS will be 

invested in accordance with the 

member’s contribution allocation. 

However, if a member elects to transfer 

to BRS and has a zero account balance, 

contributions will be invested in an ageappropriate L Fund regardless of any 

past contribution allocation or interfund 

transfer. The investment of 

contributions made prior to becoming 

covered by BRS will remain unchanged. 

Uniformed service members who are not 

covered by BRS will continue to have 

their contributions defaulted into the G 

Fund. 

When an employing agency 

automatically re-enrolls a participant 

because they were not making 

contributions in the last full pay period 

of the year, the participant’s 

contributions will be invested in the 

same manner as they were prior to reenrollment (regardless of whether it was 

an affirmative contribution allocation or 

a default investment). Likewise, 

contributions of a rehired service 

member will also be invested in the 

fund(s) to which they were being 

invested prior to being rehired 

(regardless of whether the fund(s) were 

an affirmative contribution allocation or 

a default investment and regardless of 

how much time has passed since the 

rehired service member separated from 

service). However, if a re-enrolled or rehired service member has a zero account 

balance, future contributions will be 

defaulted to an age-appropriate L Fund. 

The first time a BRS participant’s 

employing agency automatically enrolls 

them or when he or she first transfers to 

BRS, or as soon as practicable thereafter, 

the TSP will provide each BRS 

participant who is subject to default 

investment in an age-appropriate L 

Fund with a notification concerning the 

risk of investing. 

Correction of Administrative Errors 

BRS introduces new potential errors 

that are not currently addressed in 

regulations. Specifically, employing 

services may classify members of the 

uniformed services in the wrong 

retirement system (i.e., legacy instead of 

BRS and vice versa). If this error occurs, 

it is possible that service members will 

not be automatically enrolled and not 

receive service contributions. 

Additionally, if this error were to occur, 

service member contributions may be 

invested in the wrong default 

investment fund which would require 

breakage calculations. Therefore, the 

FRTIB proposes to amend Part 1605 to 

provide the necessary mechanisms to 

correct errors related to BRS. 

If a BRS participant is misclassified 

by an employing agency as a non-BRS 

participant, when the misclassification 

is corrected, the participant may, under 

the rules of § 1605.11, elect to make up 

contributions that he or she would have 

been eligible to make as a BRS 

participant during the period of 

misclassification. In addition, the 

employing service must, under the rules 

of § 1605.11, make up Service 

Automatic (1%) Contributions and 

Service Matching Contributions on 

employee contributions. 

If a non-BRS participant is 

misclassified by an employing service as 

a BRS participant, employee 

contributions may remain in the 

participant’s account when the 

misclassification is corrected. If the 

participant requests a refund of 

employee contributions, the employing 

service must submit a negative 

adjustment record to remove the funds 

under the procedure described in 

§ 1605.12. The TSP will forfeit all 

service contributions that were made to 

a non-BRS participant’s account, except 

that an employing service may submit a 

negative adjustment record to request 

the return of an erroneous contribution 

that has been in the participant’s 

account for less than one year. 

The TSP will charge the employing 

service for any positive breakage that 

results from an incorrect default 

investment. To initiate a breakage 

calculation for the uniformed service 

member, the employing service must 

notify the TSP that the participant is 

entitled to breakage. Notification from 

the employing service to the TSP that 

the participant has been misclassified 

will not itself trigger the TSP to take 

corrective action other than to update 

the participant’s retirement system 

coverage. 

Finally, the FRTIB proposes to amend 

Section 1605.31 to reduce makeup 

civilian agency contributions by any 

Service Automatic (1%) Contributions 

the participant receives while in 

military service. Currently, USERRA 

requires civilian agencies to makeup 

automatic (1%) and matching 

contributions missed while a member 

was separated or in a non-pay status for 

military service. The regulations 

currently reduce the agency makeup 

matching contributions by any matching 

contributions received while performing 

military service. The proposed 

amendments will extend that reduction 

to include Service Automatic (1%) 

Contributions received while 

performing military service. The 

proposed amendments also provide that 

breakage on agency or service 

contributions will be based on the 

contribution allocation(s) on file for the 

participant during the period of military 

service. 

Regulatory Flexibility Act 

I certify that this regulation will not 

have a significant economic impact on 

a substantial number of small entities. 

This regulation will affect Federal 

employees and members of the 

uniformed services who participate in 

the TSP. 

Paperwork Reduction Act 

I certify that these regulations do not 

require additional reporting under the 

criteria of the Paperwork Reduction Act. 

Unfunded Mandates Reform Act of 

1995 

Pursuant to the Unfunded Mandates 

Reform Act of 1995, 2 U.S.C. 602, 632, 

653, and 1501–1571, the effects of this 

regulation on state, local, and tribal 

governments and the private sector have 

been assessed. This regulation will not 

compel the expenditure in any one year 

of $100 million or more by state, local, 

and tribal governments, in the aggregate, 

or by the private sector. Therefore, a 

statement under 2 U.S.C. 1532 is not 

required. 

List of Subjects 

5 CFR Part 1600 

Government employees, Pensions, 

Retirement. 

5 CFR Part 1601 

Government employees, Pensions, 

Retirement. 

5 CFR Part 1603 

Government employees, Pensions, 

Retirement. 

5 CFR Part 1605 

Claims, Government employees, 

Pensions, Retirement. 

5 CFR Part 1650 

Alimony, Claims, Government 

employees, Pensions, Retirement. 

5 CFR Part 1690 

Government employees, Pensions, 

Retirement. 

Ravindra Deo, 

Executive Director, Federal Retirement Thrift 

Investment Board. 

For the reasons stated in the 

preamble, the FRTIB proposes to amend 

5 CFR Chapter VI as follows: 


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PART 1600—EMPLOYEE 

CONTRIBUTION ELECTIONS, 

CONTRIBUTION ALLOCATIONS, AND 

AUTOMATIC ENROLLMENT 

PROGRAM 

■ 1. The authority citation for part 1600 

is revised to read as follows: 

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

8432(c), 8432(j), 8432d, 8474(b)(5) and (c)(1), 

and 8440e. 

■ 2. Amend § 1600.12 to revise 

paragraph (d) to read as follows: 

§ 1600.12 Contribution elections. 

* * * * * 

(d) A contribution election will take 

effect in accordance with the rules set 

forth in this section. 

(1) Except as provided in paragraph 

(d)(2) of this section, a contribution 

election will become effective no later 

than the first full pay period after it is 

received by the employing agency. 

(2) In the case of a uniformed service 

member who entered service on or after 

January 1, 2018, and who has not yet 

served 60 days, a contribution election 

will become effective the first full pay 

period following the date that is 60 days 

after the member’s PEBD. 

* * * * * 

■ 3. Add § 1600.14 to subpart B to read 

as follows: 

§ 1600.14 Effect of election to be covered 

by BRS. 

(a) If a uniformed service member 

elects to be covered by BRS, the member 

may make a contribution election at any 

time. 

(b) Eligibility to make employee 

contributions, and therefore to have 

Agency Matching Contributions made 

on the member’s behalf, is subject to the 

restrictions on making employee 

contributions after receipt of a financial 

hardship in-service withdrawal 

described at 5 CFR part 1650. 

(c) If the member had elected to make 

TSP contributions while not covered by 

BRS, the election remains effective until 

the member makes a new election. 

(d) Agency Automatic (1%) 

Contributions for all members covered 

under this section and, if applicable, 

Agency Matching Contributions 

attributable to employee contributions 

must begin the first full pay period that 

the transfer to BRS becomes effective. 

■ 3. Amend § 1600.19 to revise 

paragraphs (a), (b)(1) introductory text, 

(b)(2) and (c) to read as follows: 

§ 1600.19 Employing agency 

contributions. 

(a) Agency Automatic (1%) 

Contributions. Each pay period, subject 

to the limitations in paragraph (d) of 

this section, any agency that employs an 

individual covered by FERS or BRS 

must make a contribution to that 

employee’s tax-deferred balance for the 

benefit of the individual equal to 1% of 

the basic pay paid to such employee for 

service performed during that pay 

period. The employing agency must 

make Agency Automatic (1%) 

Contributions without regard to whether 

the employee elects to make employee 

contributions. 

(b) Agency Matching Contributions. 

(1) Subject to the limitations in 

paragraph (d) of this section, any agency 

that employs an individual covered by 

FERS or BRS must make a contribution 

to the employee’s tax-deferred balance 

for the benefit of the employee equal to 

the sum of: 

* * * * * 

(2) A uniformed service member is 

not entitled to matching contributions 

for contributions deducted from special 

or incentive pay (including bonuses). 

(c) Timing of employing agency 

contributions. (1) An employee 

appointed or reappointed to a position 

covered by FERS is immediately eligible 

to receive employing agency 

contributions. 

(2) A uniformed service member 

covered by BRS will be eligible to 

receive employing agency contributions 

pursuant to the following rules: 

(i) A uniformed service member who 

first entered service on or after January 

1, 2018 is entitled to: 

(A) Agency Automatic (1%) 

Contributions beginning in the first full 

pay period following the date that is 60 

days after the uniformed service 

member’s PEBD and ending in the first 

full pay period following the date that 

is 26 years after the uniformed service 

member’s PEBD. 

(B) Agency Matching Contributions 

beginning in the first full pay period 

following the date that is 2 years after 

the uniformed service member’s PEBD 

and ending in the first full pay period 

following the date that is 26 years after 

the uniformed service member’s PEBD. 

(ii) A uniformed service member who 

elects to enroll in BRS is entitled to: 

(A) Agency Automatic (1%) 

Contributions beginning in the first full 

pay period following the date the 

uniformed service member enrolled in 

BRS and ending in the first full pay 

period following the date that is 26 

years after the Uniformed service 

member’s PEBD. 

(B) Agency Matching Contributions 

beginning in the first full pay period 

following the date the uniformed service 

member enrolled in BRS and ending in 

the first full pay period following the 

date that is 26 years after the uniformed 

service member’s PEBD. 

■ 4. Revise § 1600.34 to read as follows: 

§ 1600.34 Automatic enrollment program. 

(a) All newly hired civilian employees 

who are eligible to participate in the 

Thrift Savings Plan and those civilian 

employees who are rehired after a 

separation in service of 31 or more 

calendar days and who are eligible to 

participate in the TSP will 

automatically have 3% of their basic 

pay contributed to the employee’s 

traditional TSP balance (default 

employee contribution) unless, by the 

end of the employee’s first pay period 

(subject to the agency’s processing time 

frames), they elect: 

(1) To not contribute; 

(2) To contribute at some other level; 

or 

(3) To make Roth contributions in 

addition to, or in lieu of, traditional 

contributions. 

(b) All uniformed service members 

who either enter service on or after 

January 1, 2018 or re-enter service after 

a separation in service of 31 or more 

calendar days after having been covered 

by BRS at the time of separation will 

automatically have 3% of their basic 

pay contributed to the member’s 

traditional TSP balance (default 

employee contribution) beginning the 

first full pay period following the date 

that is 60 days after the member’s PEBD 

unless they elect by the end of that 60 

day period: 

(1) To not contribute; 

(2) To contribute at some other level; 

or 

(3) To make Roth contributions in 

addition to, or in lieu of, traditional 

contributions. 

(c) If, for any calendar year, a 

uniformed service member described in 

paragraph (b) of this section does not 

make a contribution in the final full pay 

period of such calendar year due to the 

member’s election to terminate 

contributions prior to the final full pay 

period, then that member will 

automatically have 3% of his or her 

basic pay contributed to his or her 

traditional TSP balance beginning the 

first full pay period of the following 

calendar year unless he or she makes a 

subsequent election by December 31st: 

(1) To not contribute; 

(2) To contribute at some other level; 

(3) To make Roth contributions in 

addition to, or in lieu of, traditional 

contributions. 

■ 5. Amend § 1600.35 by revising the 

first sentence of paragraph (a) and 

adding paragraph (f) to read as follows: 


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§ 1600.35 Refunds of default employee 

contributions. 

(a) Subject to the limitations in 

paragraph (f) of this section, a 

participant may request a refund of any 

default employee contributions made on 

his or her behalf (i.e., the contributions 

made while under the automatic 

enrollment program) provided the 

request is received within 90 days after 

the date that the first default employee 

contribution was processed. * * * 

* * * * * 

(f) A participant may not receive a 

refund of default employee 

contributions made pursuant to 5 CFR 

1600.34(c). 

■ 6. Amend § 1600.37 by revising the 

introductory text and paragraph (d) to 

read as follows: 

§ 1600.37 Notice. 

The Board shall furnish all new 

employees and all rehired employees 

covered by the automatic enrollment 

program, and all employees described in 

paragraph (c) of 5 CFR 1600.34, covered 

by the automatic enrollment program a 

notice that accurately describes: 

* * * * * 

(d) The employee’s ability (or 

inability) to request a refund of any 

default employee contributions 

(adjusted for allocable gains and losses) 

and the procedure to request such a 

refund; and 

* * * * * 

PART 1601—PARTICIPANTS’ 

CHOICES OF TSP FUNDS 

■ 7. The authority citation for part 1601 

continues to read as follows: 

Authority: 5 U.S.C. 8351, 8432d, 8438, 

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

■ 8. Revise § 1601.13 to read as follows: 

§ 1601.13 Elections. 

(a) Contribution allocation. Each 

participant may indicate his or her 

choice of TSP Funds for the allocation 

of future deposits by using the TSP Web 

site or the ThriftLine, or by completing 

and filing the appropriate paper TSP 

form with the TSP record keeper in 

accordance with the form’s instructions. 

The following rules apply to 

contribution allocations: 

(1) Contribution allocations must be 

made in one percent increments. The 

sum of the percentages elected for all of 

the TSP Funds must equal 100 percent; 

(2) The percentage elected by a 

participant for investment of future 

deposits in a TSP Fund will be applied 

to all sources of contributions and 

transfers (or rollovers) from traditional 

IRAs and eligible employer plans. A 

participant may not make different 

percentage elections for different 

sources of contributions; 

(3) The following default investment 

rules shall apply to civilian participants: 

(i) All deposits made on behalf of a 

civilian participant enrolled prior to 

September 5, 2015 who does not have 

a contribution allocation in effect will 

be invested in the G Fund. A civilian 

participant who is enrolled prior to 

September 5, 2015 and subsequently 

rehired on or after September 5, 2015 

and has a positive account balance will 

be considered enrolled prior to 

September 5, 2015 for purposes of this 

paragraph; and 

(ii) All deposits made on behalf of a 

civilian participant first enrolled on or 

after September 5, 2015 who does not 

have a contribution allocation in effect 

will be invested in the age-appropriate 

TSP Lifecycle Fund; 

(iii) A civilian participant enrolled 

prior to September 5, 2015 who elects 

for the first time to invest in a TSP Fund 

other than the G Fund must execute an 

acknowledgement of risk in accordance 

with § 1601.33; 

(4) The following default investment 

rules shall apply to uniformed services 

participants: 

(i) All deposits made on behalf of a 

uniformed services participant who first 

entered service prior to January 1, 2018, 

has not elected to be covered by BRS, 

and does not have a contribution 

allocation in effect will be invested in 

the G Fund; 

(ii) All deposits made on behalf of a 

uniformed services participant who first 

entered service on or after January 1, 

2018 and who does not have a 

contribution allocation in effect will be 

invested in the age-appropriate TSP 

Lifecycle Fund; 

(iii) If a uniformed services 

participant makes an election to be 

covered by BRS as described in 5 CFR 

1600.14 and does not have a 

contribution allocation in effect at the 

time of the election, then all deposits 

made after the date of such election will 

be invested in the age-appropriate TSP 

Lifecycle Fund. Deposits made prior to 

the date of the election will remain 

invested in the G Fund. 

(iv) A uniformed services participant 

who first entered service prior to 

January 1, 2018 and has not made an 

election to be covered by the BRS who 

elects for the first time to invest in a 

TSP Fund other than the G Fund must 

execute an acknowledgement of risk in 

accordance with § 1601.33; 

(5) Once a contribution allocation 

becomes effective, it remains in effect 

until it is superseded by a subsequent 

contribution allocation or the 

participant’s account balance is reduced 

to zero. If a rehired participant has a 

positive account balance and a 

contribution allocation in effect, then 

the participant’s contribution allocation 

will remain in effect until a new 

allocation is made. If, however, the 

participant (other than a participant 

described in paragraph (a)(4)(i) of this 

section) has a zero account balance, 

then the participant’s contributions will 

be allocated to the age-appropriate TSP 

Lifecycle Fund until a new allocation is 

made. 

(b) Effect of rejection of contribution 

allocation. If a participant does not 

correctly complete a contribution 

allocation, the attempted allocation will 

have no effect. The TSP will provide the 

participant with a written statement of 

the reason the transaction was rejected. 

(c) Contribution elections. A 

participant may designate the amount or 

type of employee contributions he or 

she wishes to make to the TSP or may 

stop contributions only in accordance 

with 5 CFR part 1600. 

■ 9. Amend § 1601.33 by revising the 

first sentence of paragraph (a) to read as 

follows: 

§ 1601.33 Acknowledgment of risk. 

(a) Uniformed services participants 

who first entered service prior to 

January 1, 2018 and who have not 

elected to be covered by BRS and 

civilian participants who enrolled prior 

to September 5, 2015 must execute an 

acknowledgement of risk in order to 

invest in a TSP Fund other than the G 

Fund. * * * 

* * * * * 

PART 1603—VESTING 

■ 10. The authority citation for part 

1603 continues to read as follows: 

Authority: 5 U.S.C. 8432(g), 8432b(h)(1), 

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

■ 11. Amend paragraph (b) of § 1603.1 

as follows: 

■ a. Amend the definition of ‘‘Service’’ 

by removing ‘‘Service’’ and adding in its 

place ‘‘Civilian service’’. 

■ b. Add ‘‘Military service means 

service that is creditable under 37 

U.S.C. 205’’ in alphabetical order. 

■ 12. Revise § 1603.2 to read as follows: 

§ 1603.2 Basic vesting rules. 

(a) All amounts in a CSRS employee’s 

individual account are immediately 

vested. 

(b) Except as provided in paragraph 

(c) of this section, all amounts in a FERS 

employee’s or uniformed service 

member’s individual account (including 

all first conversion contributions) are 

immediately vested. 


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42618 Federal Register / Vol. 82, No. 174 / Monday, September 11, 2017 / Proposed Rules 

(c) Except as provided in paragraph 

(d) of this section, upon separation from 

Government service without meeting 

the applicable service requirements of 

§ 1603.3, a FERS employee’s or a BRS 

uniformed service member’s Agency 

Automatic (1%) Contributions and 

attributable earnings will be forfeited. 

(d) If a FERS employee or uniformed 

service member dies (or died) after 

January 7, 1988, without meeting the 

applicable service requirements set forth 

in § 1603.3, the Agency Automatic (1%) 

Contributions and attributable earnings 

in his or her individual account are 

deemed vested and shall not be 

forfeited. If a FERS employee died on or 

before January 7, 1988, without meeting 

those service requirements, his or her 

Agency Automatic (1%) Contributions 

and attributable earnings are forfeited to 

the Thrift Savings Plan. 

■ 13. Amend § 1603.3 to revise 

paragraph (a) and the introductory text 

in paragraph (b), and to add a new 

paragraph (c) to read as follows: 

§ 1603.3 Service requirements. 

(a) Except as provided under 

paragraph (b) of this section, FERS 

employees will be vested in their 

Agency Automatic (1%) Contributions 

and attributable earnings upon 

separating from Government only if, as 

of their separation date, they have 

completed three years of civilian 

service. 

(b) FERS employees will be vested in 

their Agency Automatic (1%) 

Contributions and attributable earnings 

upon separating from Government 

service if, as of their separation date, 

they have completed two years of 

civilian service and they are serving in 

one of the following positions: 

* * * * * 

(c) Uniformed service members who 

are covered by BRS will be vested in 

their Agency Automatic (1%) 

Contributions and attributable earnings 

upon separation from the uniformed 

services only if, as of their separation 

date, they have completed two years of 

military service. 

PART 1605—CORRECTION OF 

ADMINISTRATIVE ERRORS 

■ 14. The authority citation for part 

1605 continues to read as follows: 

Authority: 5 U.S.C. 8351, 8432a, 8432d, 

8474(b)(5) and (c)(1). Subpart B also issued 

under section 1043(b) of Public Law 104– 

106, 110 Stat. 186 and § 7202(m)(2) of Public 

Law 101–508, 104 Stat. 1388. 

■ 15. Amend paragraph (b) of § 1605.1 

by adding in alphabetical order as 

follows: 

■ a. ‘‘BRS participant means any 

member of the Uniformed Services 

described in 5 U.S.C. 8440e(e)(1).’’ 

■ b. ‘‘Non-BRS participant means any 

member of the Uniformed Services not 

described in 5 U.S.C. 8440e(e)(1).’’ 

■ 16. Amend § 1605.3 to add paragraph 

(c) to read as follows: 

§ 1605.3 Calculating, posting, and 

charging breakage on errors involving 

investment in the wrong fund. 

* * * * * 

(c) If a uniformed services 

participant’s retirement system is 

misclassified and the error results in 

default investment in the wrong fund, 

when the error is corrected pursuant to 

5 CFR 1605.14(f)–(g), the TSP will 

charge the employing agency for any 

positive breakage that results from the 

incorrect default investment. The 

retirement misclassification correction 

received from an employing agency will 

not trigger corrective action other than 

to update the participant’s retirement 

system coverage. To initiate a breakage 

calculation for the uniformed service 

member, the employing agency must 

notify the TSP that the participant is 

entitled to breakage. 

■ 17. Amend § 1605.11 by revising the 

introductory text of paragraph (b) to 

read as follows: 

§ 1605.11 Makeup of missed or insufficient 

contributions. 

* * * * * 

(b) Employer makeup contributions. If 

an employing agency has failed to make 

Agency Automatic (1%) Contributions 

that are required under 5 U.S.C. 

8432(c)(1)(A) and 5 U.S.C. 

8440e(e)(3)(A), or Agency Matching 

Contributions that are required under 

section 8432(c)(2) and 5 U.S.C. 

8440e(e)(3)(B), the following rules 

apply: 

* * * * * 

■ 18. Amend § 1605.14 by adding 

paragraphs (f) and (g) to read as follows: 

§ 1605.14 Misclassified retirement system 

coverage. 

* * * * * 

(f) If a BRS participant is misclassified 

by an employing agency as a non-BRS 

participant, when the misclassification 

is corrected: 

(1) The participant may not elect to 

have the contributions made while 

classified as non-BRS removed from his 

or her account; 

(2) The participant may, under the 

rules of § 1605.11, elect to make up 

contributions that he or she would have 

been eligible to make as a BRS 

participant during the period of 

misclassification; 

(3) The employing agency must, 

under the rules of § 1605.11, make 

Agency Automatic (1%) Contributions 

and Agency Matching Contributions on 

employee contributions that were made 

while the participant was misclassified; 

and 

(4) The employing agency must 

submit makeup employee contributions 

on current payment records and service 

makeup contributions may be submitted 

on either current or late payment 

records. 

(g) If a non-BRS participant is 

misclassified by an employing agency as 

a BRS participant, when the 

misclassification is corrected: 

(1) Employee contributions may 

remain in the participant’s account. If 

the participant requests a refund of 

employee contributions, the employing 

agency must submit a negative 

adjustment record to remove these 

funds under the procedure described in 

§ 1605.12. 

(2) The TSP will forfeit all agency 

contributions that were made to a nonBRS participant’s account. An 

employing service may submit a 

negative adjustment record to request 

the return of an erroneous contribution 

that has been in the participant’s 

account for less than one year. 

■ 19. Amend § 1605.31 by revising 

paragraphs (c)(1) and (d), and by adding 

paragraph (c)(5) to read as follows: 

§ 1605.31 Contributions missed as a result 

of military service. 

* * * * * 

(c) * * * 

(1) The employee is entitled to receive 

the Agency Automatic (1%) 

Contributions that he or she would have 

received had he or she remained in 

civilian service or pay status. Within 60 

days of the employee’s reemployment or 

restoration to pay status, the employing 

agency must calculate the Agency 

Automatic (1%) makeup contributions 

and report those contributions to the 

record keeper, subject to any reduction 

in Automatic (1%) Contributions 

required by paragraph (c)(5) of this 

section. 

* * * * * 

(5) If the employee received 

uniformed services Automatic (1%) 

Contributions, the Agency Automatic 

(1%) Contributions will be reduced by 

the amount of the uniformed services 

Automatic (1%) Contributions. 

* * * * * 

(d) Breakage. The employee is entitled 

to breakage on agency contributions 

made under paragraph (c) of this 

section. Breakage will be calculated 

based on the contribution allocation(s) 


asabaliauskas on DSKBBXCHB2PROD with PROPOSALS
Federal Register / Vol. 82, No. 174 / Monday, September 11, 2017 / Proposed Rules 42619 

on file for the participant during the 

period of military service. 

PART 1650—METHODS OF 

WITHDRAWING FUNDS FROM THE 

THRIFT SAVINGS PLAN 

■ 20. The authority citation for part 

1650 continues to read as follows: 

Authority: 5 U.S.C. 8351, 8432d, 8433, 

8434, 8435, 8474(b)(5) and 8474(c)(1). 

■ 21. Amend § 1650.33 to revise the 

second sentence of paragraph (b) to read 

as follows: 

§ 1650.33 Contributing to the TSP after an 

in-service withdrawal. 

* * * * * 

(b) * * * Therefore, the participant’s 

employing agency will discontinue his 

or her contributions (and any applicable 

Agency Matching Contributions) for six 

months after the agency is notified by 

the TSP; in the case of a FERS or BRS 

participant, Agency Automatic (1%) 

Contributions will continue. * * * 

PART 1690—THRIFT SAVINGS PLAN 

■ 22. The authority citation for part 

1690 continues to read as follows: 

Authority: 5 U.S.C. 8474. 

■ 23. Amend § 1690.1 as follows: 

■ a. Revise the definitions of Agency 

Automatic (1%) Contributions, Agency 

Matching Contributions, Bonus 

contribution, Civilian employee, 

Employer contributions, Employing 

agency, Uniformed service member, and 

Uniformed services. 

■ b. Add definitions for BRS, BRS 

participant, Employee and PEBD in 

alphabetical order. 

§ 1690.1 Definitions. 

* * * * * 

Agency Automatic (1%) Contributions 

means any contributions made under 5 

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

includes service automatic (1%) 

contributions made under 5 U.S.C. 

8440e(e)(3)(A). 

Agency Matching Contributions 

means any contributions made under 5 

U.S.C. 8432(c)(2). It also includes 

service matching contributions under 5 

U.S.C. 8440e(e)(3)(B). 

* * * * * 

Bonus contributions means 

contributions made by a participant 

from any part of any special or incentive 

pay that the participant receives under 

chapter 5 of title 37. 

* * * * * 

BRS means the blended retirement 

system as established by the National 

Defense Authorization Act for FY 2016, 

Public Law 114–92, §§ 631–635 (2015). 

BRS participant means a TSP 

participant covered by BRS. 

* * * * * 

Civilian employee or civilian 

participant means a TSP participant 

covered by the Federal Employees’ 

Retirement System, the Civil Service 

Retirement System, or equivalent 

retirement plan. 

* * * * * 

Employer contributions means 

Agency Automatic (1%) Contributions 

under 5 U.S.C. 8432(c)(1), 8432(c)(3), or 

5 U.S.C. 8440e(e)(3)(A) and Agency 

Matching Contributions under 5 U.S.C. 

8432(c)(2) or 5 U.S.C. 8440e(e)(3)(B). 

Employing agency means the 

organization (or the payroll office that 

services the organization) that employs 

an individual eligible to contribute to 

the TSP and that has authority to make 

personnel compensation decisions for 

the individual. It includes the 

employing service for members of the 

uniformed services. 

* * * * * 

PEBD means the pay entry base date 

(or pay entry basic date for some 

services), which is determined by each 

uniformed service and is used to 

calculate how much time in service a 

member has for the purpose of 

determining longevity pay rates. 

* * * * * 

Uniformed service member or 

uniformed services participant means a 

TSP participant who is a member of the 

uniformed services on active duty or a 

member of the Ready Reserve in any pay 

status. 

* * * * * 

Uniformed services means the Army, 

Navy, Air Force, Marine Corps, Coast 

Guard, Public Health Service 

Commissioned Corps, and the National 

Oceanic and Atmospheric 

Administration Commissioned Officer 

Corps. 

[FR Doc. 2017–18838 Filed 9–8–17; 8:45 am] 

BILLING CODE 6760–01–P 

DEPARTMENT OF THE TREASURY 

Office of the Comptroller of the 

Currency 

12 CFR Parts 12 and 151 

[Docket ID OCC–2017–0013] 

RIN 1557–AE24 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 344 

RIN 3064–AE64 

Securities Transaction Settlement 

Cycle 

AGENCY: Office of the Comptroller of the 

Currency, Treasury (OCC); and Federal 

Deposit Insurance Corporation (FDIC). 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The OCC and the FDIC 

(‘‘Agencies’’) are proposing to shorten 

the standard settlement cycle for 

securities purchased or sold by national 

banks, federal savings associations, and 

FDIC-supervised institutions. The 

Agencies’ proposal is consistent with an 

industry-wide transition to a twobusiness-day settlement cycle, which is 

designed to reduce settlement exposure 

and align settlement practices across all 

market participants. 

DATES: You must submit comments by 

October 11, 2017. 

ADDRESSES: Interested parties are 

encouraged to submit written comments 

jointly to both of the Agencies. 

Commenters are encouraged to use the 

title ‘‘Securities Transaction Settlement 

Cycle’’ to facilitate the organization and 

distribution of comments among the 

Agencies. 

OCC 

You may submit comments to the 

OCC by any of the methods set forth 

below. Because paper mail in the 

Washington, DC area and at the OCC is 

subject to delay, commenters are 

encouraged to submit comments 

through the Federal eRulemaking Portal 

or email, if possible. You may submit 

comments by any of the following 

methods: 

• Federal eRulemaking Portal— 

‘‘Regulations.gov’’: Go to 

www.regulations.gov. Enter ‘‘Docket ID 

OCC–2017–0013’’ in the Search Box and 

click ‘‘Search.’’ Click on ‘‘Comment 

Now’’ to submit public comments. 

• Click on the ‘‘Help’’ tab on the 

Regulations.gov home page to get 

information on using Regulations.gov, 

including instructions for submitting 

public comments. 


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