[Federal Register: April 25, 2005 (Volume 70, Number 78)] [Proposed Rules] [Page 21289-21304] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr25ap05-20] [[Page 21289]] ----------------------------------------------------------------------- Part III Federal Retirement Thrift Investment Board ----------------------------------------------------------------------- 5 CFR Parts 1600, 1601, 1604, et al. Various Changes to the Thrift Savings Plan; Proposed Rule [[Page 21290]] ----------------------------------------------------------------------- FEDERAL RETIREMENT THRIFT INVESTMENT BOARD 5 CFR Parts 1600, 1601, 1604, 1605, 1606, 1620, 1640, 1645, 1650, 1651, 1653, 1655 and 1690 Various Changes to the Thrift Savings Plan AGENCY: Federal Retirement Thrift Investment Board. ACTION: Proposed rule with request for comments. ----------------------------------------------------------------------- SUMMARY: The Executive Director of the Federal Retirement Thrift Investment Board (Board) proposes to amend the Thrift Savings Plan (TSP) regulations to accommodate new TSP lifecycle investment allocation funds, eliminate references to open seasons (which Congress repealed), and to require participants to file all death benefit beneficiary designation forms with the TSP record keeper. The Executive Director also proposes to remove obsolete and unhelpful provisions from the regulations, eliminate references to TSP form numbers, notify TSP participants of a new mailing address for loan payments, and otherwise make the regulations easier to understand. DATES: Comments must be received on or before May 25, 2005. ADDRESSES: Comments may be sent to Patrick J. Forrest, Federal Retirement Thrift Investment Board, 1250 H Street, NW., Washington, DC 20005. The Board's Fax number is (202) 942-1676. FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest on (202) 942-1661. SUPPLEMENTARY INFORMATION: The Board 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)). Lifecycle Funds The Executive Director proposes to amend TSP regulations to include references to the TSP ``lifecycle funds,'' which the TSP will offer to participants in mid-2005. In general, lifecycle funds are ``target asset allocation portfolios'' which hold a variety of investments including stable value, bond, and stock funds. The mix of these funds is chosen based on the date the investor expects to need the money in his or her account for retirement. The assumption underlying lifecycle funds is that people with longer time horizons for investment are both willing and able to tolerate risk while seeking higher rates of return. A further assumption is that as people approach the time when they will begin to withdraw their assets from the Plan, their portfolios should be adjusted to reflect a lower tolerance for risk. Thus, a young person who is many years from retirement would have more of his or her account invested in a lifecycle fund containing investments with higher risk and higher potential returns (such as stocks), and less in low-risk, lower-return investments (such as Government securities). The investments in a lifecycle fund would be adjusted gradually and automatically to lower risk portfolios as the need for withdrawal approaches. This process is referred to as rebalancing. Our analysis of TSP data shows that some TSP participants appear either to be ``chasing'' the latest returns or to be leaving their accounts unattended altogether, never rebalancing their portfolios. Some participants leave their entire account in the most conservative fund, the G Fund, when they may need the higher potential returns of the other funds to give them the retirement income they want. The evidence therefore suggests that many TSP participants could benefit from automatic professional asset allocation offered by a lifecycle fund. The TSP lifecycle funds will invest only in the five funds currently offered by the TSP. We will not be adding new funds or asset classes. Thus, the lifecycle funds will be composed of various percentages of the G, F, C, S, and I Fund assets. The C, S, and I Funds will provide exposure to domestic and international equities, while the G and F Funds will provide fixed income and stable value investments. Participation in the TSP lifecycle funds is voluntary, although the TSP strongly encourages every participant to consider the option. The TSP will make information available to participants that explain lifecycle funds in detail. Participants should read these materials closely before investing in one of the TSP lifecycle funds. Open Seasons On December 21, 2004, the President signed into law the Thrift Savings Plan Open Seasons Act of 2004 (Pub. L. No. 108-469). That new law eliminates open seasons for the TSP and the restrictions on contribution elections that are tied to open seasons. The TSP will implement that law on July 1, 2005, and the Executive Director proposes to amend TSP regulations to explain the new rules under which participants can make TSP contribution elections after open seasons are eliminated. The last TSP open season will run from April 15 through June 30, 2005. This means that participants may file contribution elections with their agencies or uniformed services at any time beginning April 15. Through June 30, these elections will be processed under the current rules. Beginning July 1, contribution elections will be processed under the new rules [uacute] that is, an election will be effective the first full pay period after it is filed. Participants will continue to file contribution elections with their agencies or services, and the agencies and services will continue to implement the elections by deducting contributions from participants' pay and reporting these amounts to the TSP each pay period. The Open Season Act does not affect the waiting period that new employees covered by the Federal Employees' Retirement System must serve before they become eligible for agency contributions to their accounts. The Act also does not affect contribution allocations or interfund transfers, which can be made at any time by using the TSP Web site or the ThriftLine or by submitting an investment allocation form to the TSP. Death Benefits Federal law requires the TSP to pay a deceased participant's account to the beneficiary or beneficiaries identified in a statutory order of precedence codified at 5 U.S.C. 8242(d). See 5 U.S.C. 8433(e). The participant's designated beneficiary or beneficiaries are first in the order of precedence. A participant must use a specially designed paper designation of beneficiary form (a Form TSP-3) to designate a TSP beneficiary and TSP regulations explain the validity requirements for the form at 5 CFR 1651.3. Before 1995, a participant who was still employed by the Federal government was required to submit Form TSP-3 to his or her employing agency. Beginning on January 1, 1995, all TSP participants were required to submit Forms TSP-3 to the TSP record keeper; to be valid, the form must be received by the record keeper on or before the date of the participant's death. 5 CFR 1651.3(a). In addition to requiring all participants to submit the forms to the TSP record keeper, the new policy also required employing agencies [[Page 21291]] to search their records and forward all Forms TSP-3 in their possession to the TSP record keeper. The TSP codified the new policy in TSP regulations at 5 CFR 1651.3 on June 13, 1997 (62 FR 32429), after proposing the regulation on March 27, 1997, and seeking public comment (61 FR 14653). The TSP also directly announced the new policy to employing agencies and participants. Specifically, the TSP mailed two ``Thrift Savings Plan Bulletins'' (Bulletins) to the TSP representatives of every employing agency and three editions of ``Highlights for Thrift Savings Plan Participants'' (Highlights) to every participant. The Bulletins, dated November 22, 1994, and November 16, 1995, instructed employing agencies to search their files for Forms TSP-3 and to forward them to the TSP record keeper. The Highlights, dated November 1994, November 1995, and May 1996, notified each participant of the policy change, including the requirement that employing agencies forward their Forms TSP-3 to the TSP record keeper. The Highlights also advised participants to review their participant statements to learn if their employing agencies had forwarded their forms to the record keeper. (Beginning in November 1995, every TSP participant statement states, on page 1, whether the TSP has received a Form TSP-3 for the participant, and if so, the date it was signed.) The Highlights also advised participants that they could file a new Form TSP-3 and that the TSP would honor the valid form with the latest date. TSP regulations currently provide that the TSP will honor a Form TSP-3 if the participant's employing agency received it before 1995, as long as the TSP receives it before paying a death benefit. The TSP continued to accept the agency-filed forms to allow employing agencies sufficient opportunity to send them to the TSP. Employing agencies have had sufficient time to accomplish this task. In addition, in any case where an employing agency has not forwarded a participant's Form TSP-3 to the TSP, the TSP has informed the participant at least twice a year for 10 years on participant statements that it does not possess a beneficiary form for the participant. A reasonable participant who received that information and wished to designate a beneficiary would have filed a new Form TSP-3. Therefore, the Executive Director proposes to amend 5 CFR 1651.3(a) to provide that all TSP beneficiary designations must be made with a valid Form TSP-3 received by the TSP record keeper on or before the date of the participant's death. Miscellaneous Amendments The Executive Director proposes to remove obsolete provisions from the regulations, such as 5 CFR part 1606, which was no longer effective after August 31, 2003, and 5 CFR 1620.33, which regulated retirement plan decisions pertaining to employment changes made before August 10, 1996. The Executive Director also proposes to remove references to TSP form numbers from the regulations because they do not aid the reader and because the references require the TSP to amend its regulations whenever it changes form numbers. In addition, the Executive Director proposes to remove discussions of Federal income tax code provisions from the regulations because the TSP provides comprehensive tax information to participants and beneficiaries elsewhere, and because the references require the TSP to amends its regulations whenever TSP- related provisions of the tax laws are amended. The Executive Director also proposes to simplify the regulations and make them more easily understood. For example, this proposed rule would simplify several provisions in Part 1605 of the TSP regulations to more clearly explain how the TSP and the employing agencies correct errors. The TSP has established a new mailing address for use by participants to mail loan repayment checks to the TSP. The proposed regulations inform participants that they should use this address only for loan repayments and not mail correspondence to that address. The proposed regulations also inform participants that the TSP does not agree to accept less than the total amount due on the loan by negotiating an instrument such as a check, share draft or money order with a restrictive legend on it (such as ``payment in full'' or ``submitted in full satisfaction of claims''), or by negotiating an instrument that is conditionally tendered to the TSP with an offer of compromise. Finally, the Executive Director proposes to remove from the TSP regulations the references in section 1655.18(d) to the TSP's investigation of fraud and forgery allegations by spouses of participants. The TSP will continue to investigate these allegations, and may refer them to the United States Department of Justice for criminal prosecution and to an appropriate administrative agency for administrative action. However, it is not necessary to explain this process in the TSP regulations. This is because the TSP regulations explain to participants and beneficiaries their rights and obligations. The TSP investigates allegations of fraud or forgery only to preserve the integrity of the TSP loan and withdrawal programs, not to recover benefits for the individual who makes the allegation. Regulatory Flexibility Act I certify that these regulations will not have a significant economic impact on a substantial number of small entities. They will affect only employees and former employees of the Federal Government. Paperwork Reduction Act I certify that these regulations do not require additional reporting under the criteria of the Paperwork Reduction Act of 1980. Unfunded Mandates Reform Act of 1995 Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532, the Agency has considered 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, the Agency is not required to prepare a written statement regarding these regulations under 2 U.S.C. 1532. List of Subjects 5 CFR Parts 1600, 1601, 1606, 1620, 1645, 1650, 1651, 1653, 1690 Employment benefit plans, Government employees, Pensions, Retirement. 5 CFR Parts 1604, 1655 Employment benefit plans, Government employees, Military personnel, Pensions, Retirement. 5 CFR Part 1605 Administrative practice and procedure, Employment benefit plans, Government employees, Pensions, Retirement. 5 CFR Part 1640 Employment benefit plans, Government employees, Pensions, Reporting and recordkeeping requirements, Retirement. Gary A. Amelio, Executive Director Federal Retirement Thrift Investment Board. For the reasons set forth in the preamble, the Board proposes to amend 5 CFR chapter VI as follows: [[Page 21292]] PART 1600--EMPLOYEE CONTRIBUTON ELECTIONS AND CONTRIBUTION ALLOCATIONS 1. The authority citation for part 1600 continues to read as follows: Authority: 5 U.S.C. 8351, 8432(a), 8432(b), 8432(j), 8474(b)(5) and (c)(1). Subpart B--Elections 2. Amend Sec. 1600.11 by removing ``TSP's investment funds'' from paragraph (b) and adding in its place ``TSP Funds''. 3. Revise Sec. 1600.12 to read as follows: Sec. 1600.12 Contribution elections. (a) An employee may make a contribution election at any time. (b) A participant must submit a contribution election to his or her employing agency. To make an election, employees may use either the paper election form provided by the TSP, or, if available from their employing agency, electronic media. If an electronic medium is used, all relevant elements contained on the paper form must be included in the electronic medium. (c) A contribution election must: (1) Be completed in accordance with the instructions on the form, if a paper form is used; (2) Be made in accordance with the employing agency's instructions, if the submission is made electronically; and (3) Not exceed the maximum contribution limitations described in Sec. 1600.22. (d) A contribution election will become effective no later than the first full pay period after it is received by the employing agency. 4. Remove Sec. Sec. 1600.13 through 1600.18. 5. Add a new Sec. 1600.13 to read as follows: Sec. 1600.13 Timing of agency contributions. (a) Employees not previously eligible to receive agency contributions. An employee appointed or reappointed to a position covered by FERS who had not been previously eligible to receive agency contributions is eligible to receive agency contributions under the following rules: (1) If the effective date of the appointment is any day during the period June 1 through November 30, the agency contributions must begin the first full pay period of the following June; and (2) If the effective date of the appointment is any day during the period December 1 through May 31, the agency contributions must begin the first full pay period of the following December. (b) Employees previously eligible to receive agency contributions. An employee reappointed to a position covered by FERS who was previously eligible to receive agency contributions is immediately eligible to receive agency contributions. 6. Add a new Sec. 1600.14 to read as follows: Sec. 1600.14 Effect of transfer to FERS. (a) If an employee appointed to a position covered by CSRS elects to transfer to FERS, the employee may make a contribution election at any time. (b) Eligibility to make employee contributions, and therefore to have agency matching contributions made on the employee's behalf, is subject to the restrictions on making employee contributions after receipt of a financial hardship in-service withdrawal described at 5 CFR part 1650. (c) If the employee had elected to make TSP contributions while covered by CSRS, the election continues to be valid until the employee makes a new valid election. (d) Agency automatic (1%) contributions for all employees covered under this section and, if applicable, agency matching contributions attributable to employee contributions must begin the same pay period that the transfer to FERS becomes effective. Subpart C--Program of Contributions 7. Revise Sec. 1600.22 to read as follows: Sec. 1600.22 Maximum contributions. (a) Regular employee contributions. A participant's regular TSP contributions are subject to the following limitations: (1) FERS percentage limit. The maximum employee contribution from basic pay for a FERS participant for 2005 is 15 percent. After 2005 the percentage of basic pay limit will not apply and the maximum contribution will be limited only by the provisions of the Internal Revenue Code (26 U.S.C.). (2) CSRS and uniformed services percentage limit. The maximum employee contribution from basic pay for a CSRS or uniformed services participant for 2005 is 10 percent. After 2005 the percentage of basic pay limit will not apply and the maximum contribution will be limited only by the provisions of the Internal Revenue Code. (b) Catch-up contributions. (1) A participant may make tax-deferred catch-up contributions from basic pay at any time during the calendar year if he or she: (i) Is at least age 50 by the end of the calendar year; (ii) Is making regular TSP contributions at a rate that will result in the participant making the maximum regular contributions permitted under paragraph (a) of this section; and (iii) Does not exceed the annual limit on catch-up contributions contained in the Internal Revenue Code. (2) Elections to make catch-up contributions shall be separate from the participant's regular contribution election. (3) A participant who has both a civilian and a uniformed services account can make catch-up contributions to both accounts, but the total amount of the catch-up contributions to both accounts cannot exceed the Internal Revenue Code catch-up contribution limit for the year. (4) Catch-up contributions are not eligible for matching contributions. 8. Remove Sec. 1600.23. 9. Revise the part 1601 Part Heading to read as follows: PART 1601--PARTICIPANTS' CHOICES OF TSP FUNDS 10. The Authority citation for part 1601 is revised to read as follows: Authority: 5 U.S.C. 8351, 8438, 8474(b)(5) and (c)(1). Subpart A--General 11. Amend Sec. 1601.1 by removing ``the F Fund, C Fund, S Fund or I'' from paragraph (b) and by inserting in its place ``a TSP Fund other than the G''. 12. Amend Sec. 1601.11 by removing ``investment funds'' wherever it appears and adding in its place ``TSP Funds''. 13. Revise Sec. 1601.12 to read as follows: Sec. 1601.12 Investing future deposits in the TSP Funds. (a) Allocation. Future deposits in the TSP, including contributions, loan payments, and transfers or rollovers from traditional IRAs and eligible employer plans, will be allocated among the TSP Funds based on the most recent contribution allocation on file for the participant. (b) TSP Funds availability. All participants may elect to invest all or any portion of their deposits in any of the TSP Funds. 14. Amend Sec. 1601.13 by revising paragraphs (a) and (b) to read as follows: Sec. 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 [[Page 21293]] 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) A participant who elects for the first time to invest in a TSP Fund other than the G Fund must execute an acknowledgment of risk in accordance with Sec. 1601.33; (4) All deposits made on behalf of a participant who does not have a contribution allocation in effect will be invested in the G Fund; and (5) Once a contribution allocation becomes effective, it remains in effect until it is superseded by a subsequent contribution allocation. If a separated participant is rehired and had not withdrawn his or her entire TSP account, the participant's last contribution allocation before separation from service will be effective until a new allocation is made. (b) Effect of rejection of contribution allocation. If a participant does 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. * * * * * Subpart C--Redistributing Participants' Existing Account Balances (Interfund Transfers) 15. Amend Sec. 1601.21 by removing ``TSP's investment funds'' and adding in its place ``TSP Funds''. 16. Revise Sec. 1601.22 to read as follows: Sec. 1601.22 Methods of requesting an interfund transfer. (a) Participants may make an interfund transfer 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 an interfund transfer request: (1) Interfund transfer requests must be made in whole percentages (one percent increments). The sum of the percentages elected for all of the TSP Funds must equal 100 percent. (2) The percentages elected by the participant will be applied to the balances in each source of contributions and to both tax-deferred and tax-exempt balances on the effective date of the interfund transfer. (3) Any participant who elects to invest in a TSP Fund other than the G Fund for the first time must execute an acknowledgement of risk in accordance with Sec. 1601.33. (b) An interfund transfer request has no effect on deposits made after the effective date of the interfund transfer request; subsequent deposits will continue to be allocated among the investment funds in accordance with the participant's contribution allocation made under subpart B of this part. (c) If an interfund transfer is found to be invalid pursuant to Sec. 1601.34, the purported transfer will not be made. The TSP will provide the participant with a written statement of the reason the transaction was rejected. Subpart D--Contribution Allocations and Interfund Transfer Requests 17. Revise Sec. 1601.32 to read as follows: Sec. 1601.32 Timing and posting dates. (a) Posting dates. The date on which the TSP processes or posts a contribution allocation or interfund transfer request (transaction request) is subject to a number of factors, including some that are outside of the control of the TSP, such as power outages, the failure of telephone service, acts of God, and unusually heavy transaction volume. These factors also could affect the availability of the TSP Web site and the ThriftLine. Therefore, the TSP cannot guarantee that a transaction request will be processed on a particular day. However, the TSP will process transaction requests under ordinary circumstances according to the following rules: (1) A transaction request entered into the TSP record keeping system by a participant who uses the TSP Web site or the ThriftLine, or by a TSP Service Office participant service representative at the participant's request, at or before 12 noon eastern time of any business day, will ordinarily be posted that business day. A transaction request entered into the system after 12 noon eastern time of any business day will ordinarily be posted on the next business day. (2) A transaction request made on the TSP Web site or the ThriftLine on a non-business day will ordinarily be posted on the next business day. (3) A transaction request made on a paper TSP form will ordinarily be posted under the rules in paragraph (a)(1) of this section, based on when the TSP record keeper enters the form into the TSP system. The TSP record keeper ordinarily enters such forms into the system within 24 hours of their receipt. (4) In most cases, the share price(s) applied to an interfund transfer request is the value of the shares on the date the relevant transaction is posted. In some circumstances, such as error correction, the share price(s) for an earlier date will be used. (b) Limit. There is no limit on the number of contribution allocations or interfund transfer requests that may be made by a participant. (c) Multiple contribution allocations or interfund transfer requests. If two or more contribution allocations or two or more interfund transfer requests (transaction requests) are received for a participant and would be posted on the same day, the following rules will apply: (1) A transaction request submitted through the TSP Web site or the ThriftLine will take precedence over one that is submitted on a paper form. (2) If one or more transaction requests are made through the TSP Web site or the ThriftLine, only the request entered by the participant at the latest time will be posted. The date and time of a transaction request made through the TSP Web site or the ThriftLine is the date and time (in Eastern time) that the participant confirms the percentages. (3) If the transaction requests are submitted using paper TSP forms, the forms will be posted in the order the TSP record keeper receives them. (d) Cancellation of contribution allocation or interfund transfer request. A participant may cancel a contribution allocation or an interfund transfer request (transaction cancellation request) through the TSP Web site or the ThriftLine, through written correspondence, or by contacting a participant service representative. (1) A transaction cancellation request may be made on the TSP Web site or the ThriftLine only up to the deadline, described in paragraph (a) of this section, which applies to the original request. If the cancellation request is not received until after the deadline, the original transaction request will be processed as scheduled. (2) A participant may also make a transaction cancellation request by submitting a letter to the TSP record keeper. To be effective, the TSP must receive and process the letter before the cutoff for the day the relevant transaction is submitted for processing. The letter must contain the following information to be processed: [[Page 21294]] (i) It must be signed, dated, contain the participant's name, Social Security number, and date of birth; and (ii) It should state unambiguously the specific transaction the participant seeks to cancel. (A) If the letter does not identify the specific transaction the participant seeks to cancel, the cancellation request will apply to any pending contribution allocation or interfund transfer request with a date (as determined under this paragraph (d)(2)) before the date of the cancellation letter. (B) If the date of a cancellation letter is the same as the date of a pending transaction that was made on a paper TSP form, the form will be cancelled. (C) A letter will be effective to cancel a Web site or ThriftLine transaction request only if the cancellation request specifies the date of the TSP Web site or ThriftLine transaction request. (D) If there is no contribution allocation or interfund transfer pending when the written cancellation is processed by the TSP record keeper, the cancellation will have no effect. Cancellation letters will not be held until a contribution allocation or interfund transfer request is received. 18. Revise Sec. 1601.33 to read as follows: Sec. 1601.33 Acknowledgment of risk. (a) A participant who wants to invest in a TSP Fund other than the G Fund must execute an acknowledgment of risk for that fund. If a required acknowledgment of risk has not been executed, no transactions involving the fund(s) for which the acknowledgment is required will be accepted. (b) The acknowledgment of risk may be executed in association with a contribution allocation or an interfund transfer using the TSP Web site, the ThriftLine, or a paper TSP form. 19. Remove Sec. Sec. 1601.34 and 1601.35 and redesignate Sec. 1601.36 as Sec. 1601.34. 20. Add a new subpart E to read as follows: Subpart E--Lifecycle Funds Sec. 1601.40 Lifecycle Funds. The Executive Director will establish TSP Lifecycle Funds, which are target date asset allocation portfolios. The TSP Lifecycle Funds will invest solely in the funds established by the TSP pursuant to 5 U.S.C. 8438. PART 1604--UNIFORMED SERVICES ACCOUNTS 21. The authority citation for part 1604 continues to read as follows: Authority: 5 U.S.C. 8440e, 8474(b)(5) and (c)(1). 22. Amend Sec. 1604.2 by removing the definitions of ``eligible retirement plan'' and ``TSP record keeper''. 23. Revise Sec. 1604.3 to read as follows: Sec. 1604.3 Contribution elections. A service member may make contribution elections as described in 5 CFR part 1600. A service member may elect to contribute sums to the TSP from basic pay, incentive pay, and special pay (including bonuses). However, the service member must elect to contribute to the TSP from basic pay in order to contribute to the TSP from incentive pay and special pay (including bonuses). A service member may elect to contribute from special pay or incentive pay (including bonuses) in anticipation of receiving such pay (that is, he or she does not have to be receiving the special pay or incentive pay when the contribution election is made); those elections will take effect when the service member receives the special or incentive pay. 24. Amend Sec. 1604.4 by revising paragraphs (a) and (b) to read as follows: Sec. 1604.4 Contributions. (a) Employee contributions. Subject to the regulations at 5 CFR part 1600 and the following limitations, a service member may make regular contributions to the TSP from basic pay. If the service member makes regular contributions, he or she also may contribute all or a portion of incentive pay and special pay (including bonuses) to the TSP. The maximum TSP regular employee contribution (including contributions from pay earned in a combat zone) a service member may make for 2005 is 10 percent of basic pay. After 2005 the percentage of basic pay limit will not apply and the maximum contribution will be limited only by the provisions of the Internal Revenue Code (26 U.S.C.). (b) Matching contributions. When matching contributions are authorized for a service member, that service member's regular contributions will be matched dollar-for-dollar on the first three percent of basic pay contributed to the TSP, and 50 cents on the dollar on the next two percent of basic pay contributed. Matching contributions only apply to regular contributions. * * * * * 25. Amend Sec. 1604.5 by revising paragraphs (a)(1) and (b)(3) to read as follows: Sec. 1604.5 Separate service member and civilian accounts. (a) * * * (1) If a participant contributes to a service member account and a civilian account, the contributions to both accounts together cannot exceed the Internal Revenue Code (26 U.S.C.) contribution limits. * * * * * (b) * * * (3) Transferred funds will be allocated among the TSP Funds according to the contribution allocation in effect for the account into which the funds are transferred. * * * * * 26. Amend Sec. 1604.7 by revising paragraph (c) to read as follows: Sec. 1604.7 Withdrawals. * * * * * (c) Combat zone contributions. If a service member account contains combat zone contributions, the withdrawal will be distributed pro rata from all sources. If a participant requests the TSP to transfer all, or a portion, of a withdrawal to a traditional IRA or eligible employer plan, the share of the withdrawal attributable to combat zone contributions (if any) can be transferred only if the IRA or plan accepts such funds. * * * * * 27. Amend Sec. 1604.8 by revising paragraph (c) to read as follows: Sec. 1604.8 Death benefits. * * * * * (c) Trustee-to-trustee transfers. The surviving spouse of a TSP participant can request the TSP to transfer a death benefit payment to a traditional IRA or eligible employer plan. The share of the death benefit payment that is attributable to combat zone contributions (if any) can be transferred only if the IRA or plan accepts such funds. * * * * * 28. Amend Sec. 1604.9 by revising paragraph (c) to read as follows: Sec. 1604.9 Court orders and legal processes. * * * * * (c) Trustee-to-trustee transfers. The current or former spouse of a TSP participant can request the TSP to transfer a court-ordered payment to a traditional IRA or eligible employer plan. If the payee requests the TSP to transfer all or a portion of the court-ordered payment to an IRA or plan, the share of the payment attributable to combat zone contributions (if any) can be transferred only if the IRA or plan accepts such funds. * * * * * 29. Amend Sec. 1604.10 by removing paragraph (a)(4). [[Page 21295]] PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS Subpart A--General 30. The authority citation for Part 1605 continues to read as follows: Authority: 5 U.S.C. 8351, 8432a, and 8474(b)(5) and (c)(1). 31. Amend paragraph (b) of Sec. 1605.1 by removing the definitions of ``Board error'', ``Employing agency error'', and ``Record keeper error'', and by adding a new definition of ``Error'' to read as follows: Sec. 1605.1 Definitions. * * * * * (b) * * * Error means any act or omission by the Board, the TSP Record Keeper, or the participant's employing agency that is not in accordance with applicable statutes, regulations, or administrative procedures that are made available to employing agencies and/or TSP participants. It does not mean an act or omission caused by events that are beyond the control of the Board, the TSP Record Keeper, or the participant's employing agency. * * * * * 32. Revise Sec. 1605.2 to read as follows: Sec. 1605.2 Calculating, posting, and charging breakage. (a) The TSP will calculate breakage on late contributions, makeup agency contributions, and loan payments as described by Sec. 1605.15(b). This breakage calculation is subject to the following rules: (1) The TSP will not calculate breakage if contributions or loan payments are posted within 30 days of the ``as of'' date, or if the total amount on a late payment record or the total agency contributions on a current payment record is less than $1.00; and (2) The TSP will not take the participant's interfund transfers into account when determining breakage. (b) Calculating breakage. The TSP will calculate breakage as follows: (1) For contributions or loan payments with ``as of'' dates on or after January 1, 2000, the TSP will: (i) Use the participant's contribution allocation on file for the ``as of'' date to determine how the funds would have been invested. If there is no contribution allocation on file, or one cannot be derived based on the investment of contributions, the TSP will consider the finds to have been invested in the G Fund; (ii) Determine the number of shares of the applicable investment funds the participant would have received had the contributions or loan payments been made on time. If the ``as of'' date is before TSP account balances were converted to shares, this determination will be the number of shares the participant would have received on the conversion date, and will include the monthly earnings the participant would have received had the contributions or loan payments been made on the ``as of'' date; and (iii) Determine the dollar value on the posting date of the number of shares the participant would have received had the contributions or loan payments been made on time. The difference between the dollar value of the contribution or loan payment on the posting date and the dollar value of the contribution or loan payment on the ``as of'' date is the breakage. (2) For contributions and loan payments with an ``as of'' date before January 1, 2000, the TSP will: (i) Value the contributions and loan payments from the ``as of'' date through the date TSP accounts were converted to shares, by using the greater of either the G Fund monthly rate of return or the average monthly rate of return for all TSP Funds; (ii) Determine the number of shares the participant would have received at conversion; and (iii) Determine the dollar value of those shares on the posting date by using the greater of either the G Fund share price or the average share price for all of the TSP Funds. The difference between the dollar value of the contribution or loan payment on the posting date and the dollar value of the contribution or loan payment on the ``as of'' date is the breakage. (c) Posting contributions and loan payments. Makeup and late contributions, late loan payments, and breakage, will be posted to the participant's account according to his or her contribution allocation on file for the posting date. If there is no contribution allocation on file for the posting date, they will be posted to the G Fund. (d) Charging breakage. If the dollar amount posted to the participant's account is greater than the dollar amount of the makeup or late contribution or late loan payment, the TSP will charge the agency the additional amount. If the dollar amount posted to the participant's account is less than the dollar amount of the makeup or late contribution, or late loan payment, the difference between the amount of the contribution and the amount posted will be forfeited to the TSP. (e) Posting of multiple contributions. If the TSP posts multiple makeup or late contributions or late loan payments with different ``as of'' dates for a participant on the same business day, the amount of breakage charged to the employing agency or forfeited to the TSP will be determined separately for each transaction, without netting any gains or losses attributable to different ``as of'' dates. In addition, gains and losses from different sources of contributions or different TSP Funds will not be netted against each other. Instead, breakage will be determined separately for each as-of date, TSP Fund, and source of contributions. Subpart B--Employing Agency Errors 33. Amend Sec. 1605.11 by revising paragraphs (c)(5), (c)(6) and (c)(8) to read as follows: Sec. 1605.11 Makeup of missed or insufficient contributions. * * * * * (c) * * * (5) Employee makeup contributions will be invested in accordance with the participant's current contribution allocation. The number of shares of each TSP Fund that will be purchased will be determined by dividing the amount of the makeup contributions by the share price of the applicable fund(s) on the posting date. (6) Employee makeup contributions will be included for purposes of applying the annual limit contained in Internal Revenue Code (I.R.C.) section 402(g) (26 U.S.C. 402(g)(1)). For purposes of applying that limit, employee makeup contributions will be applied against the limit for the year of the ``as of'' date. (i) Before establishing a schedule of employee makeup contributions, the employing agency must review any schedule proposed by the affected participant, as well as the participant's prior TSP contributions, if any, to determine whether the makeup contributions, when combined with prior contributions for the same year, would exceed the annual contribution limit(s) contained in I.R.C. section 402(g) for the year(s) with respect to which the contributions are being made. (ii) The employing agency must not permit contributions that, when combined with prior contributions, would exceed the applicable annual contribution limit contained in I.R.C. section 402(g). * * * * * (8) A participant may elect to terminate a schedule of employee makeup contributions at any time, but a [[Page 21296]] termination is irrevocable. If a participant separates from Federal service, the participant may elect to accelerate the payment schedule by a lump sum contribution from his or her final paycheck. * * * * * 34. Revise Sec. 1605.12 to read as follows: Sec. 1605.12 Removal of erroneous contributions. (a) Applicability. This section applies to the removal of funds erroneously contributed to the TSP. The TSP calls this action a negative adjustment, and agencies may only request negative adjustments of erroneous contributions made on or after January 1, 2000. Excess contributions addressed by this section include, for example, excess employee contributions that result from employing agency error and excess employer contributions. This section does not address excess contributions resulting from a FERCCA correction; those contributions are addressed in Sec. 1605.14. (b) Method of correction. Negative adjustment records must be submitted by employing agencies in accordance with this part and with any other procedures provided by the Board. (1) To remove money from a participant's account, the employing agency must submit, for each attributable pay date involved, a negative adjustment record stating the attributable pay date and the amount, by source, of the erroneous contribution. (2) A negative adjustment record may be for any part of the contributions made for the attributable pay date. However, for each source of contributions, the negative adjustment may not exceed the amount of contributions made for that date, less any prior negative adjustments for the same date. (c) Processing negative adjustments. To determine current value, a negative adjustment will be allocated among the TSP Funds as it would have been allocated on the attributable pay period (as reported by the employing agency). (1) If the attributable pay date for the erroneous contribution is on or before the date TSP accounts were converted to shares (and on or after January 1, 2000), the TSP will, for each source of contributions and investment fund: (i) Determine the dollar value of the amount to be removed by using the monthly returns for the applicable TSP Fund; (ii) Determine the number of shares the dollar value determined in paragraph (c)(1)(i) of this section would have purchased on the conversion date; and (iii) Multiply the price per share for the date the adjustment is posted by the number of shares calculated in paragraph (c)(1)(ii) of this section. (2) If the attributable pay date of the negative adjustment is after the date TSP accounts were converted to shares, the TSP will, for each source of contributions and TSP Fund: (i) Determine the number of shares that represent the amount of the contribution to be removed using the share price on the attributable pay date; and (ii) Multiply the price per share on the date the adjustment is posted by the number of shares calculated in paragraph (c)(2)(i) of this section. (d) Employee contributions. The following rules apply to negative adjustments involving employee contributions: (1) If, on the posting date, the amount calculated under paragraph (c) of this section is equal to or greater than the amount of the proposed negative adjustment, the full amount of the adjustment will be removed from the participant's account and returned to the employing agency. Earnings on the erroneous contribution will remain in the participant's account; (2) If, on the posting date, the amount calculated under paragraph (c) of this section is less than the amount of the proposed negative adjustment, the amount of the adjustment, reduced by the investment loss, will be removed from the participants account and returned to the employing agency. However, the employing agency must refund to the participant the full amount of the erroneous contribution; (3) If an employing agency requests the removal of erroneous employee contributions from a participant's account, it must also request the removal, under paragraph (e) of this section, of any attributable agency matching contributions; and (4) If all employee contributions are removed from a participant's account under the rules set forth in this section, the earnings attributable to those contributions will remain in the account until the participant removes them with an in-service or a post-employment withdrawal. If the participant is not eligible to maintain a TSP account, the employing agency must submit an employee data record to the TSP indicating that the participant has separated from Federal service (this will allow the TSP-ineligible participant to make a post- employment withdrawal election). (e) Employer contributions. The following rules apply to negative adjustments involving erroneous employer contributions: (1) The amount calculated under paragraph (c) of this section will be removed from the participant's account. (2) Erroneous employer contributions will be returned to the employing agency only if the negative adjustment record is posted by the TSP record keeper within one year of the date the erroneous contribution was posted. If one year or more has elapsed when the negative adjustment record is posted, the amount computed under paragraph (c) of this section will be removed from the participant's account and used to offset TSP administrative expenses; (3) If the erroneous contribution has been in the participant's account for less than one year when the negative adjustment record is posted and the amount computed under paragraph (c) of this section is equal to or greater than the amount of the adjustment, the employing agency will receive the full amount of the erroneous contribution. Any earnings attributable to the erroneous contribution will be removed from the participant's account and used to offset TSP administrative expenses; (4) If the erroneous contribution has been in the participant's account for less than one year when the negative adjustment record is posted and the amount computed under paragraph (c) of this section is less than the amount of the adjustment, the employing agency will receive the amount of the erroneous contribution reduced by the investment loss; and (5) An employing agency's obligation to submit negative adjustment records to remove erroneous contributions from a participant's account is not affected by the length of time the contributions have been in the account. (f)(1) If multiple negative adjustments for the same attributable pay date for a participant are posted on the same business day, the amount removed from the participant's account and used to offset TSP administrative expenses or returned to the employing agency will be determined separately for each adjustment. Earnings and losses for erroneous contributions made on different dates will not be netted against each other. In addition, for a negative adjustment for any attributable pay date, gains and losses from different sources of contributions or different TSP Funds will not be netted against each other. Instead, for each attributable pay date each source of contributions and each TSP Fund will be treated separately for purposes of these calculations. The amount computed by application of the [[Page 21297]] rules in this section will be removed from the participant's account pro rata from all funds, by source, based on the allocation of the participant's account among the TSP Funds when the transaction is posted; and (2) If there is insufficient money in the same source of contributions to cover the amount to be removed or the amount of the requested adjustment, the negative adjustment record will be rejected. 35. Amend Sec. 1605.13 by revising paragraphs (a)(2)(ii), (a)(3), (b)(3), and (d) to read as follows: Sec. 1605.13 Back pay awards and other retroactive pay adjustments. (a) * * * (2) * * * (ii) Instead of making contributions for the period of separation in accordance with the reinstated contribution election, the participant may submit a new contribution election if he or she would have been eligible to make such an election but for the erroneous separation. (3) All contributions made under this paragraph (a) and associated breakage will be invested according to the participant's contribution allocation on the posting date. Breakage will be calculated using the G Fund share prices in accordance with Sec. 1605.2 unless otherwise required by the employing agency or the court or other tribunal with jurisdiction over the back pay case. (b) * * * (3) All contributions under this paragraph (b) and associated breakage will be posted to the participant's account based on the participant's contribution allocation on the posting date. Breakage will be calculated in accordance with Sec. 1605.2. * * * * * (d) Prior withdrawal of TSP account. If a participant has withdrawn his or her TSP account other than by purchasing an annuity, and the separation from Federal service upon which the withdrawal was based is reversed, resulting in reinstatement of the participant without a break in service, the participant will have the option to restore the amount withdrawn to his or her TSP account. The right to restore the withdrawn funds will expire if the participant does not provide notice to the Board within 90 days of reinstatement. If the participant returns the funds that were withdrawn, the number of shares purchased will be determined by using the share price of the applicable investment fund on the posting date. No breakage will be incurred on any restored funds. * * * * * 36. Amend Sec. 1605.14 by removing the word ``excess'' from the last sentence of paragraph (a)(1) and by revising paragraphs (b)(4), (b)(5), and (c)(3) to read as follows: Sec. 1605.14 Misclassified retirement system coverage. * * * * * (b) * * * (4) If the retirement coverage correction is a FERCCA correction, the employing agency must submit makeup employee contributions on late payment records. The participant is entitled to breakage on contributions from all three sources. Breakage will be calculated pursuant to Sec. 1605.2. If the retirement coverage correction is not a FERCCA correction, the employing agency must submit makeup employee contributions on current payment records; in such cases, the employee is not entitled to breakage. Agency makeup contributions may be submitted on either current or late payment records; and (5) If employee contributions were made up before [the date Office of Personnel Management (OPM) implemented its regulations on FERCCA correction], and the correction is considered to be a FERCCA correction, OPM may calculate pursuant to its regulations a dollar amount to replicate breakage, and transmit the dollar amount to the employing agency for transmission to the TSP record keeper. (c) * * * (3) The TSP will deem a participant to be separated from Federal service for all TSP purposes and the employing agency must submit an employee data record to reflect separation from Federal service. If the participant has an outstanding loan, it will be subject to the provisions of 5 CFR 1655.13. The participant may make a TSP post- employment withdrawal election pursuant to 5 CFR part 1650, subpart B, and the withdrawal will be subject to the provisions of 5 CFR 1650.60(b). * * * * * 37. Amend Sec. 1605.16 by revising paragraphs (a) and (b) to read as follows: Sec. 1605.16 Claims for correction of employing agency errors; time limitations. (a) Agency's discovery of error. Upon discovery of an error made within the past six months involving the correct or timely remittance of payments to the TSP (other than a retirement system misclassification error, as covered in paragraph (c) of this section), an employing agency must promptly correct the error on its own initiative. If the error was made more than six months before its discovery, the agency may exercise sound discretion in deciding whether to correct it, but, in any event, the agency must act promptly in doing so. (b) Participant's discovery of error. If an agency fails to discover an error of which a participant has knowledge involving the correct or timely remittance of a payment to the TSP (other than a retirement system misclassification error as covered by paragraph (c) of this section), the participant may file a claim for correction of the error with his or her employing agency without a time limit. The agency must promptly correct any such error for which the participant files a claim within six months of its occurrence; the correction of any such error for which the participant files a claim after that time is in the agency's sound discretion. * * * * * Subpart C--Board or Record Keeper Errors 38. Revise Sec. 1605.21 to read as follows: Sec. 1605.21 Plan-paid breakage and other corrections. (a) Plan-paid breakage. (1) Subject to paragraph (a)(3) of this section, if, because of an error committed by the Board or the TSP record keeper, a participant's account is not credited or charged with the investment gains or losses that he or she would have received had the error not occurred, the participant's TSP account will be so credited. (2) Errors warranting the crediting of breakage under paragraph (a)(1) of this section include, but are not limited to: (i) Delay in crediting contributions or other monies to a participant's account; (ii) Improper issuance of a loan or withdrawal payment to a participant or beneficiary which requires the money to be restored to the participant's account; and (iii) Investment of all or part of a participant's account in the wrong investment fund(s). (3) A participant will not be entitled to breakage under paragraph (a)(1) of this section if the participant had the use of the money on which the investment gains would have accrued. (4) If the participant continued to have a TSP account, or would have continued to have a TSP account but for the Board or TSP record keeper error, the TSP will compute gains or losses under paragraph (a)(1) of this section for the relevant period based upon the [[Page 21298]] investment funds in which the affected monies would have been invested had the error not occurred. If the participant did not have, and should not have had, an account in the TSP during this period, then the TSP will use the G Fund rate of return for the relevant period and return the monies to the participant. (b) Other corrections. The Executive Director may, in his discretion and consistent with the requirements of applicable law, correct any other errors not specifically addressed in this section, including payment of breakage, if the Executive Director determines that the correction would serve the interests of justice and fairness and equity among all participants of the TSP. 39. Amend Sec. 1605.22 by revising paragraph (c)(2) to read as follows: Sec. 1605.22 Claims for correction of Board or TSP record keeper errors; time limitations. * * * * * (c) * * * (2) For errors involving contribution allocations or interfund transfers of which a participant or beneficiary has knowledge, he or she may file a claim for correction with the Board or TSP record keeper no later than 30 days after the TSP provides the participant with a transaction confirmation reflecting the error or makes available on its Web site a participant statement detailing the error. The Board or TSP record keeper must promptly correct such errors. * * * * * Subpart D--Miscellaneous Provisions 40. Amend Sec. 1605.31 by revising paragraphs (b), (c)(1) and (d) to read as follows: Sec. 1605.31 Contributions missed as a result of military service. (a) * * * (b) Missed employee contributions. An employee who separates or enters nonpay status to perform military service may be eligible to make up TSP contributions when he or she is reemployed or restored to pay status in the civilian service. Eligibility for making up missed employee contributions will be determined in accordance with the rules specified at 5 CFR part 1620, subpart E. Missed employee contributions must be made up in accordance with the rules set out in Sec. 1605.11(c) and 5 CFR 1620.42. (c) * * * (1) The employee is entitled to receive the agency automatic (1%) contributions that he or she would have received had the employee 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. * * * * * (d) Breakage. The employee is entitled to breakage on agency contributions made under paragraph (c) of this section. The employee will elect to have the calculation based on either the contribution allocation(s) on file for the participant during the period of military service or the G Fund; the participant must make this election at the same time his or her makeup schedule is established pursuant to Sec. 1605.11(c). 41. Remove and reserve part 1606. PART 1620--EXPANDED AND CONTINUING ELIGIBILITY 42. The authority citation for part 1620 is revised to read as follows: Authority: 5 U.S.C. 8474(b)(5) and (c)(1). Subpart C also issued under 5 U.S.C. 8440a(b)(7), 8440b(b)(8), and 8440c(b)(8). Subpart D also issued under sec. 1043(b) of Pub. L. 104-106, 110 Stat. 186, and sec. 7202(m)(2) of Pub. L. 101-508, 104 Stat. 1388. Subpart E also issued under 5 U.S.C. 8432b(1) and 8440e. Subpart A--General 43. Amend Sec. 1620.1 by removing ``, waives open season rules,'' from the third sentence. 44. Revise Sec. 1620.2 to read as follows: Sec. 1620.2 Definitions. The definitions generally applicable to the Thrift Savings Plan are set forth at 5 CFR 1690.1. Subpart B--Cooperative Extension Service, Union, and Intergovernmental Personnel Act Employees 45. Amend Sec. 1620.12 by revising the third sentence to read as follows: Sec. 1620.12 Employing authority contributions. * * * The employing authority can commence or terminate employer contributions at any time after providing all affected employees with notice of a decision to commence or terminate such contributions at least 45 days before the beginning of the applicable election period. * * * 46. Revise the Subpart C heading to read as follows: Subpart C--Justices and Judges 47. Amend Sec. 1620.20 by adding the word ``judge'' to paragraphs (a)(2) and (b) after the word ``magistrate''. 48. Amend Sec. 1620.21 by adding the word ``judge'' to paragraph (b)(2) after the word ``magistrate'', and by revising paragraph (a) to read as follows: Sec. 1620.21 Contributions. (a) An individual covered under this subpart can make contributions to the TSP from basic pay in the amount described at 5 CFR 1600.22(a)(1). Unless stated otherwise in this subpart, he or she is covered by the same rules that apply to a CSRS participant in the TSP. * * * * * 49. Amend Sec. 1620.22 by adding the word ``judge'' to paragraph (a)(2)(ii) after the word ``magistrate''. 50. Amend Sec. 1620.23 by revising paragraph (b) to read as follows: Sec. 1620.23 Spousal rights. * * * * * (b) A current or former spouse of a bankruptcy judge, a United States magistrate judge, or a judge of the United States Court of Federal Claims, possesses the rights described at 5 U.S.C. 8435 and 8467 if the judge is covered under this subpart. Subpart D--Nonappropriated Fund Employees 51. Remove and reserve Sec. 1620.33. Subpart E--Uniformed Services Employment and Reemployment Rights Act (USERRA)--Covered Military Service 52. Revise Sec. 1620.42 to read as follows: Sec. 1620.42 Processing TSP contribution elections. (a) Current contribution election. If the employee entered nonpay status with a valid contribution election on file, the agency must immediately reinstate that election for current contributions when the employee returns to pay status, unless the employee files a new contribution election. If the employee separated to perform military service, he or she must make a new contribution election to begin current contributions. (b) Makeup contribution election. Upon reemployment or return to pay status, an employee has 60 days to elect to make up missed contributions. An employee's right to make retroactive TSP contributions will expire if an election is not made within 60 days of the participant's reemployment or return to pay status. [[Page 21299]] (c) Makeup contributions. Makeup contributions will be processed as follows: (1) If the employee had a valid contribution election on file when he or she separated or entered nonpay status to perform military service, that election form will be reinstated for purposes of determining the makeup contributions, unless the employee submits a new contribution election which he or she otherwise could have made but for the performance of military service. (2) An employee who terminated contributions within two months of entering military service also will be eligible to make a retroactive contribution election to be effective on the date the contributions were terminated. 53. Revise Sec. 1620.43 to read as follows: Sec. 1620.43 Agency payments to record keeper; agency ultimately responsible. (a) Agency making payments to record keeper. The current employing agency is responsible for making payments to the record keeper for all contributions, regardless of whether some of that expense is ultimately chargeable to a prior employing agency. (b) Agency ultimately chargeable with expense. The agency that reemployed the participant is ordinarily the agency ultimately chargeable with the expense of agency contributions and the breakage attributable to them. 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 record keeper for agency contributions is not the agency ultimately chargeable for that expense, the agency that made the payments to the record keeper may, but is not required to, obtain reimbursement from the agency ultimately chargeable with the expense. 54. Amend Sec. 1620.45 by revising paragraphs (a)(1), (a)(2), (c)(2) and (d) to read as follows: Sec. 1620.45 Suspendi