Participants' Choices of TSP Funds, 73251-73252 [E7-25007]

Download as PDF 73251 Rules and Regulations Federal Register Vol. 72, No. 247 Thursday, December 27, 2007 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. Prices of new books are listed in the first FEDERAL REGISTER issue of each week. FEDERAL RETIREMENT THRIFT INVESTMENT BOARD 5 CFR Part 1601 Participants’ Choices of TSP Funds Federal Retirement Thrift Investment Board. ACTION: Interim rule, with request for comments. pwalker on PROD1PC71 with RULES AGENCY: SUMMARY: The Agency is amending its interfund transfer regulations to provide that the Executive Director may adopt a policy of setting limits on the number of interfund transfer requests. In the near term, this amendment will allow the Executive Director to immediately address and, if necessary, restrict the activity of frequent traders, who have disrupted management of the Funds and whose activity has resulted in increased costs to participants. DATES: This interim rule is effective January 7, 2008. ADDRESSES: Comments may be sent to Thomas K. Emswiler, General Counsel, Federal Retirement Thrift Investment Board, 1250 H Street, NW., Washington, DC 20005. The Agency’s Fax number is (202) 942–1676. FOR FURTHER INFORMATION CONTACT: Tracey Ray on (202) 942–1665. SUPPLEMENTARY INFORMATION: The Agency administers the 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 taxdeferred retirement savings plan for Federal civilian employees and members of the uniformed services. The TSP is similar to cash or deferred arrangements established for privatesector employees under section 401(k) of the Internal Revenue Code (26 U.S.C. 401(k)). VerDate Aug<31>2005 16:06 Dec 26, 2007 Jkt 214001 Interfund Transfer Requests The Agency is amending its regulations pertaining to interfund transfers. While most private-sector defined contribution plans, record keepers and/or investment managers, e.g., Vanguard, Federated, ING, Janus, and Royce, have adopted policies designed to limit frequent trading, the Agency currently places no limit on its participants regarding the number or frequency of interfund transfers. Recently, however, this policy has been called into question as excessive trading caused costs borne by TSP participants to more than double from 2005 to 2006 (from $6.7 million in 2005 to $15 million in 2006), and this pattern of frequent trading has continued in 2007. These costs, which have resulted largely from the activities of approximately 3,000 of the TSP’s 3.8 million participants, increase expenses for all TSP participants. In 2006, the unrestricted trading in the I Fund resulted in trades of $12 billion of securities with associated trading costs of $13.8 million or 8 basis points ($.80 per $1,000); nearly three times the TSP’s net administrative expense of 3 basis points ($.30 per $1,000). Because the Board and Executive Director have a fiduciary duty to manage the TSP prudently, for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the Thrift Savings Fund, the Agency must respond to this abusive and costly investment activity. 5 U.S.C. 8477(b). As mentioned, the Agency studied the policies of other funds as well as regulatory guidance from the Securities and Exchange Commission (SEC). Vanguard, for example, limits its participants to one repurchase every sixty days, and the SEC recommends that, under certain circumstances, plans charge trading fees. Other investment vehicles limit participants to a fixed number of trades per year or charge fees on certain redemptions. The Agency desires to stop this excessive trading immediately and also, after continued analysis, to design an interfund transfer policy that provides for administrative efficiency, investment flexibility, retirement security, as well as reduced trading costs. To that end, in the near term, the Agency is adopting a regulation to grant PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 the Executive Director the authority to notify the small percentage of participants who are driving up costs through their excessive trading and request that they cease their practices. Otherwise, these participants will be required to request interfund transfers by mail. It is the Agency’s hope that this swift and direct action will inform such participants of the unreasonable expenses associated with their trading and persuade them to voluntarily curb their trading, thereby curtailing the excessive trading costs borne by all participants who hold the C, F, S, I, and L Funds. Further, upon continued inquiry, including an analysis of the actions that can be taken on an automated basis, the Agency likely will amend its regulations (via a separate publication in the Federal Register) to permit two interfund transfers per calendar month with subsequent unlimited interfund transfers only into the G Fund. The Agency believes this policy, when compared to others adopted in the private sector, provides the desired level of administrative simplicity, investment flexibility and security, and control over excessive trading. Regulatory Flexibility Act I certify that these regulations will not have a significant economic impact on a substantial number of small entities. They will affect only employees of the Federal Government. Paperwork Reduction Act I certify that these regulations do not require additional reporting under the criteria of the Paperwork Reduction Act. Unfunded Mandates Reform Act of 1995 Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 632, 653, 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 § 1532 is not required. Submission to Congress and the General Accounting Office Pursuant to 5 U.S.C. 810(a)(1)(A), the Agency submitted a report containing this rule and other required information E:\FR\FM\27DER1.SGM 27DER1 73252 Federal Register / Vol. 72, No. 247 / Thursday, December 27, 2007 / Rules and Regulations to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States before publication of this rule in the Federal Register. This rule is not a major rule as defined at 5 U.S.C. 814(2). List of Subjects in 5 CFR Part 1601 Government employees, Pensions, Retirement. Gregory T. Long, Executive Director, Federal Retirement Thrift Investment Board. For the reasons set forth in the preamble, the Agency amends 5 CFR chapter VI as follows: I Classification PART 1601—PARTICIPANTS’ CHOICES OF TSP FUNDS 1. The authority citation for part 1601 continues to read as follows: I Authority: 5 U.S.C. 8351, 8438, 8474(b)(5) and (c)(1). 2. Amend § 1601.32, by revising paragraph (b) to read as follows: I § 1601.32 This Final Rule follows the publication of the Proposed Rule on February 17, 2006, and takes into consideration the public comments received in response to the Proposed Rule. EFFECTIVE DATE: April 1, 2008. FOR FURTHER INFORMATION CONTACT: Michael S. Feinberg, Chief, Loan Origination Branch, Rural Housing Service, USDA, Ag Box 0783, Room 2214, 1400 Independence Avenue, SW., Washington, DC 20250–0783, Telephone: 202–720–1474. SUPPLEMENTARY INFORMATION: Timing and Posting Dates. * * * * * (b) Limit. There is no limit on the number of contribution allocation or interfund transfer requests that may be made by a participant. In order to mitigate excessive trading expenses, the Executive Director may write to any participant who engages in excessive trading and ask the participant to stop this practice. If the participant continues to engage in excessive trading, the participant may be required to request interfund transfers by mail. [FR Doc. E7–25007 Filed 12–26–07; 8:45 am] BILLING CODE 6760–01–P DEPARTMENT OF AGRICULTURE Rural Housing Service This rule has been determined to be significant by the Office of Management and Budget (OMB) under Executive Order 12866 and has been reviewed by OMB. Regulatory Flexibility Act In compliance with the Regulatory Flexibility Act (5 U.S.C. 601–602), the undersigned has determined and certified by signature of this document that this rule will not have a significant economic impact on a substantial number of small entities. This rule does not impose any new requirements on Agency applicants and borrowers, and the regulatory changes affect only Agency determination of program benefits for individual loans. Environmental Impact Statement This document has been reviewed in accordance with 7 CFR part 1940, subpart G, ‘‘Environmental Program.’’ It is the determination of RHS that this proposed action does not constitute a major Federal Action significantly affecting the quality of the human environment and in accordance with the National Environmental Policy Act of 1969, Public Law 91–190, an Environmental Impact Statement is not required. 7 CFR Part 3550 Unfunded Mandates Reform Act RIN 0575–AC59 Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104–4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, the Agency generally must prepare a written statement, including a costbenefit analysis, for proposed and final rules with ‘‘Federal mandates’’ that may result in expenditures to State, local, or tribal governments, in the aggregate, or to the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of the UMRA generally requires the Single Family Housing Loans, Payment Assistance Rural Housing Service, USDA. Final rule. AGENCY: pwalker on PROD1PC71 with RULES ACTION: SUMMARY: This Final Rule implements a change in the regulations for the Rural Housing Service (RHS) 502 Direct Single Family Housing Loans by amending the formula that calculates payment assistance for which a borrower qualifies. This action is being taken to improve the distribution of program benefits, simplify the application process and improve customer service. VerDate Aug<31>2005 16:06 Dec 26, 2007 Jkt 214001 PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 Agency to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective or least burdensome alternative that achieves the objectives of the rule. This rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local, and tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of the UMRA. Executive Order 13132 The policies contained in this rule do not have any substantial direct effect on States, on the relationship between the national government and States, or on the distribution of power and responsibilities among the various levels of government. Nor does this rule impose substantial direct compliance costs on State and local governments. Therefore, consultation with the States is not required. Programs Affected This program is listed in the Catalog of Federal Domestic Assistance under No. 10.410, Low Income Housing Loans. Intergovernmental Consultation For the reasons set forth in the final rule to 7 CFR part 3015, subpart V, and related notice (48 FR 29115) this program is excluded from the scope of Executive Order (E.O.) 12372, which requires intergovernmental consultation with State and local officials. Civil Justice Reform This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. In accordance with this Executive Order: (1) All State and local laws and regulations that are in conflict with this rule will be preempted, (2) no retroactive effect will be given to this rule, and (3) administrative proceedings in accordance with the regulations of the Agency at 7 CFR part 11 must be exhausted before bringing litigation challenging action taken under this rule. Paperwork Reduction Act The information collection requirements contained in these regulations have been approved by OMB under the provisions of 44 U.S.C. chapter 35 and have been assigned OMB control number 0575–0172 in accordance with the Paperwork Reduction Act. This rule does not revise or impose any new information collection requirements. E:\FR\FM\27DER1.SGM 27DER1

Agencies

[Federal Register Volume 72, Number 247 (Thursday, December 27, 2007)]
[Rules and Regulations]
[Pages 73251-73252]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-25007]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================


Federal Register / Vol. 72, No. 247 / Thursday, December 27, 2007 / 
Rules and Regulations

[[Page 73251]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1601


Participants' Choices of TSP Funds

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Interim rule, with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Agency is amending its interfund transfer regulations to 
provide that the Executive Director may adopt a policy of setting 
limits on the number of interfund transfer requests. In the near term, 
this amendment will allow the Executive Director to immediately address 
and, if necessary, restrict the activity of frequent traders, who have 
disrupted management of the Funds and whose activity has resulted in 
increased costs to participants.

DATES: This interim rule is effective January 7, 2008.

ADDRESSES: Comments may be sent to Thomas K. Emswiler, General Counsel, 
Federal Retirement Thrift Investment Board, 1250 H Street, NW., 
Washington, DC 20005. The Agency's Fax number is (202) 942-1676.

FOR FURTHER INFORMATION CONTACT: Tracey Ray on (202) 942-1665.

SUPPLEMENTARY INFORMATION: The Agency administers the 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)).

Interfund Transfer Requests

    The Agency is amending its regulations pertaining to interfund 
transfers. While most private-sector defined contribution plans, record 
keepers and/or investment managers, e.g., Vanguard, Federated, ING, 
Janus, and Royce, have adopted policies designed to limit frequent 
trading, the Agency currently places no limit on its participants 
regarding the number or frequency of interfund transfers.
    Recently, however, this policy has been called into question as 
excessive trading caused costs borne by TSP participants to more than 
double from 2005 to 2006 (from $6.7 million in 2005 to $15 million in 
2006), and this pattern of frequent trading has continued in 2007. 
These costs, which have resulted largely from the activities of 
approximately 3,000 of the TSP's 3.8 million participants, increase 
expenses for all TSP participants. In 2006, the unrestricted trading in 
the I Fund resulted in trades of $12 billion of securities with 
associated trading costs of $13.8 million or 8 basis points ($.80 per 
$1,000); nearly three times the TSP's net administrative expense of 3 
basis points ($.30 per $1,000).
    Because the Board and Executive Director have a fiduciary duty to 
manage the TSP prudently, for the exclusive purpose of providing 
benefits to participants and their beneficiaries and defraying 
reasonable expenses of administering the Thrift Savings Fund, the 
Agency must respond to this abusive and costly investment activity. 5 
U.S.C. 8477(b).
    As mentioned, the Agency studied the policies of other funds as 
well as regulatory guidance from the Securities and Exchange Commission 
(SEC). Vanguard, for example, limits its participants to one repurchase 
every sixty days, and the SEC recommends that, under certain 
circumstances, plans charge trading fees. Other investment vehicles 
limit participants to a fixed number of trades per year or charge fees 
on certain redemptions.
    The Agency desires to stop this excessive trading immediately and 
also, after continued analysis, to design an interfund transfer policy 
that provides for administrative efficiency, investment flexibility, 
retirement security, as well as reduced trading costs.
    To that end, in the near term, the Agency is adopting a regulation 
to grant the Executive Director the authority to notify the small 
percentage of participants who are driving up costs through their 
excessive trading and request that they cease their practices. 
Otherwise, these participants will be required to request interfund 
transfers by mail. It is the Agency's hope that this swift and direct 
action will inform such participants of the unreasonable expenses 
associated with their trading and persuade them to voluntarily curb 
their trading, thereby curtailing the excessive trading costs borne by 
all participants who hold the C, F, S, I, and L Funds.
    Further, upon continued inquiry, including an analysis of the 
actions that can be taken on an automated basis, the Agency likely will 
amend its regulations (via a separate publication in the Federal 
Register) to permit two interfund transfers per calendar month with 
subsequent unlimited interfund transfers only into the G Fund. The 
Agency believes this policy, when compared to others adopted in the 
private sector, provides the desired level of administrative 
simplicity, investment flexibility and security, and control over 
excessive trading.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities. They will 
affect only employees of the Federal Government.

Paperwork Reduction Act

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

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 
632, 653, 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 Sec.  
1532 is not required.

Submission to Congress and the General Accounting Office

    Pursuant to 5 U.S.C. 810(a)(1)(A), the Agency submitted a report 
containing this rule and other required information

[[Page 73252]]

to the U.S. Senate, the U.S. House of Representatives, and the 
Comptroller General of the United States before publication of this 
rule in the Federal Register. This rule is not a major rule as defined 
at 5 U.S.C. 814(2).

List of Subjects in 5 CFR Part 1601

    Government employees, Pensions, Retirement.

Gregory T. Long,
Executive Director, Federal Retirement Thrift Investment Board.

0
For the reasons set forth in the preamble, the Agency amends 5 CFR 
chapter VI as follows:

PART 1601--PARTICIPANTS' CHOICES OF TSP FUNDS

0
1. The authority citation for part 1601 continues to read as follows:

    Authority: 5 U.S.C. 8351, 8438, 8474(b)(5) and (c)(1).

0
2. Amend Sec.  1601.32, by revising paragraph (b) to read as follows:


Sec.  1601.32  Timing and Posting Dates.

* * * * *
    (b) Limit. There is no limit on the number of contribution 
allocation or interfund transfer requests that may be made by a 
participant. In order to mitigate excessive trading expenses, the 
Executive Director may write to any participant who engages in 
excessive trading and ask the participant to stop this practice. If the 
participant continues to engage in excessive trading, the participant 
may be required to request interfund transfers by mail.

 [FR Doc. E7-25007 Filed 12-26-07; 8:45 am]
BILLING CODE 6760-01-P