Employee Contribution Elections and Contribution Allocations, 43799-43800 [2010-18346]
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43799
Rules and Regulations
Federal Register
Vol. 75, No. 143
Tuesday, July 27, 2010
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 1600
Employee Contribution Elections and
Contribution Allocations
Federal Retirement Thrift
Investment Board.
ACTION: Final rule.
AGENCY:
The Federal Retirement Thrift
Investment Board (Agency) is amending
its regulations at 5 CFR part 1600. These
changes implement the Agency’s
automatic enrollment program as
authorized by the Thrift Savings Plan
Enhancement Act of 2009.
DATES: This rule is effective August 1,
2010.
FOR FURTHER INFORMATION CONTACT:
Megan G. Grumbine at 202–942–1644 or
Laurissa Stokes at 202–942–1645.
SUPPLEMENTARY INFORMATION: The
Agency 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)).
On June 17, 2010, the Agency
published a proposed rule with request
for comments in the Federal Register
(75 FR 34388, June 17, 2010). The
Agency received comments from one
Federal employees’ union, three
participants, and one other party.
The Federal employees’ union
endorsed the proposed changes. The
union, however, expressed concern that
employing agencies may fail to provide
jdjones on DSK8KYBLC1PROD with RULES
SUMMARY:
VerDate Mar<15>2010
15:25 Jul 26, 2010
Jkt 220001
clear and timely notice to newly hired
or rehired employees regarding their
rights and obligations under the
Agency’s automatic enrollment
program. In response to this comment,
the Agency has provided employing
agencies with a sample notice to send to
newly hired or rehired employees who
are automatically enrolled. The Agency
promulgated separate guidance that
directs employing agencies to provide
this notice so that employees can take
action within the first automatic
enrollment pay period.
In addition, the Agency will directly
notify new enrollees of their right to opt
out of the automatic enrollment program
and to request a refund of default
employee contributions. This
information will be provided in the TSP
Welcome Letter sent to all employees
upon receipt of their first contribution.
One participant objected to the
forfeiture of agency matching
contributions attributable to refunded
default employee contributions. The
Internal Revenue Service (IRS)
mandates forfeiture of matching
contributions attributable to refunded
default employee contributions. See
‘‘Automatic Contribution Arrangements’’
74 FR 8200, 8206 (February 24, 2009).
The TSP must follow applicable IRS
guidance such as this to the extent that
it is consistent with FERSA. See 5
U.S.C. § 8440; 26 U.S.C. 7701(j).
Another participant suggested that the
Agency should not require a
participant’s notarized signature in
order to request a refund of default
employee contributions. The proposed
rule does not require a notarized
signature in order to request a refund of
default employee contributions. In
practice, however, the Agency will soon
require a notarized signature for all
withdrawal requests, including a
request for a refund of default employee
contributions, as a measure to protect
participants’ TSP accounts from
fraudulent withdrawals.
One commenter requested affirmation
that contribution elections and
contribution allocations differ with
respect to their effect on a participant’s
continued coverage under the automatic
enrollment program. A participant who
makes only a contribution allocation
will continue to receive default
employee contributions until he or she
files a contribution election or elects not
to have any default employee
PO 00000
Frm 00001
Fmt 4700
Sfmt 4700
contributions made on his or her behalf.
In contrast, section 1600.34(b) of the
proposed rule provides that a
participant will no longer be considered
to be covered by the automatic
enrollment program if the participant
makes a contribution election, i.e.,
elects to have contributions made in a
different amount or percentage of basic
pay. Section 1600.34(b) of the proposed
rule reflects section 1.414(w)–1(e)(2)(ii)
of the Internal Revenue Service’s
regulation governing refunds from
automatic contribution arrangements. 26
CFR § 1.414(w)–1(e)(2)(ii).
A participant who is no longer
automatically enrolled by reason of
having made a contribution election
will retain the right to request a refund
within 90 days following the date of the
first default employee contribution
made to his or her account. However,
the amount of the refund will be limited
to the amount of the default employee
contributions (adjusted for allocable
gains and losses) made during the
period in which the participant was
considered automatically enrolled.
One participant recommended that
the TSP provide participants with
options to self direct investment of their
retirement funds. This comment is
outside the scope of the proposed rule.
The Agency appreciates the
opportunity to review and respond to
comments from participants who take
an active interest in the TSP and offer
suggestions. The comment process
allowed the Agency to address any
misunderstandings about the proposed
change, to learn if there are
unanticipated legal or policy
impediments to the proposed change,
and to hear suggestions about how
better to implement the proposed
change. Although the comments
received did not cause the Executive
Director to make any changes to the text
of the proposed rule, he did carefully
consider all comments received and
addressed some of the concerns through
other Agency guidance. Therefore, the
Agency is publishing the proposed rule
as final without change.
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 who participate in the Thrift
Savings Plan, which is a Federal defined
contribution retirement savings plan
E:\FR\FM\27JYR1.SGM
27JYR1
43800
Federal Register / Vol. 75, No. 143 / Tuesday, July 27, 2010 / Rules and Regulations
created under the Federal Employees’
Retirement System Act of 1986, Pub. L.
No. 99–335, 100 Stat. 514, and
administered by the Agency.
Subpart E—Automatic Enrollment
Program
Paperwork Reduction Act
I certify that these regulations do not
require additional reporting under the
criteria of the Paperwork Reduction Act.
1600.34
1600.35
1600.36
1600.37
Authority: Sec. 102, Pub. L. 111–31, div.
B. tit. I, 123 Stat. 1776, 1853 (5 U.S.C.
8432(b)(2)(A)).
Unfunded Mandates Reform Act of
1995
§ 1600.34
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
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 1600
Government employees, Pensions,
Retirement.
Gregory T. Long,
Executive Director, Federal Retirement Thrift
Investment Board.
For the reasons stated in the preamble,
the Agency amends 5 CFR part 1600 as
follows:
■
PART 1600—EMPLOYEE
CONTRIBUTION 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(c), 8432(j), 8474(b)(5) and (c)(1), Thrift
Savings Plan Enhancement Act of 2009,
section 102.
2. Revise the heading to part 1600 to
read as follows:
jdjones on DSK8KYBLC1PROD with RULES
■
PART 1600—EMPLOYEE
CONTRIBUTION ELECTIONS,
CONTRIBUTION ALLOCATIONS, AND
AUTOMATIC ENROLLMENT
PROGRAM
■
3. Add subpart E to read as follows:
VerDate Mar<15>2010
15:25 Jul 26, 2010
Jkt 220001
Automatic Enrollment Program
Refunds
Matching Contributions
Employing Agency Notice
Automatic Enrollment Program.
(a) All newly hired Federal employees
who are eligible to participate in the
Thrift Savings Plan and those Federal
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 percent of their
basic pay contributed to the TSP
(default employee contribution) unless
they elect to not contribute or elect to
contribute at some other level by the
end of the employee’s first pay period
(subject to the agency’s processing
timeframes).
(b) After being automatically enrolled,
a participant may elect to terminate
default employee contributions or
change his or her contribution
percentage or amount at any time.
§ 1600.35 Refunds of default employee
contributions.
(a) 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. The election must be made
on the TSP’s refund request form and
must be received by the TSP’s record
keeper prior to the expiration of the 90day period.
(1) The distribution of a refund will
be reported as income to the participant
on IRS Form 1099–R, but it will not be
subject to the additional tax under 26
U.S.C. 72(t) (the early withdrawal
penalty tax).
(2) A participant who requests a
refund will receive the amount of any
default employee contributions
(adjusted for allocable gains and losses).
(3) Processing of refunds will be
subject to the rules set out at 5 CFR part
1650.
(b) A participant will no longer be
considered to be covered by the
automatic enrollment program if the
participant files a contribution election.
Consequently, if a participant makes a
contribution election during the 90-day
period, the participant will only be
eligible to receive as a refund an amount
equal to his or her default employee
PO 00000
Frm 00002
Fmt 4700
Sfmt 9990
contributions (adjusted for allocable
gains and losses).
(c) After the expiration of the period
allowed for the refund, any withdrawal
must be made pursuant to 5 U.S.C. 8433
and 5 CFR part 1650.
(d) A married participant may request
a refund of default employee
contributions without obtaining the
consent of his or her spouse or having
the TSP notify the spouse of the request.
(e) The rules applicable to frozen
accounts (5 CFR 1650.3) and applicable
to deceased participants (5 CFR 1650.6)
also apply to refunds of the default
employee contributions.
§ 1600.36
Matching Contributions.
(a) A participant is not entitled to
keep the matching contributions and
their associated earnings that are
attributable to refunded default
employee contributions.
(b) The matching contributions and
associated earnings attributable to
refunded default employee
contributions shall be forfeited to the
TSP and used to offset administrative
expenses.
§ 1600.37
Employing Agency Notice.
Employing agencies shall furnish all
new employees and all rehired
employees covered by the automatic
enrollment program a notice that
accurately describes:
(a) That default employee
contributions equal to 3 percent of the
employee’s basic pay will be deducted
from his or her pay and contributed to
the TSP on the employee’s behalf if the
employee does not make an affirmative
election;
(b) The employee’s right to elect to
not have default employee contributions
made to the TSP on his or her behalf or
to elect to have a different percentage or
amount of basic pay contributed to the
TSP;
(c) That the default employee
contributions will be invested in the G
Fund unless the employee makes a
contribution allocation and/or an
interfund transfer; and
(d) The employee’s ability to request
a refund of any default employee
contributions (adjusted for allocable
gains and losses) and the procedures to
request such a refund.
[FR Doc. 2010–18346 Filed 7–26–10; 8:45 am]
BILLING CODE 6760–01–P
E:\FR\FM\27JYR1.SGM
27JYR1
Agencies
[Federal Register Volume 75, Number 143 (Tuesday, July 27, 2010)]
[Rules and Regulations]
[Pages 43799-43800]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-18346]
========================================================================
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. 75, No. 143 / Tuesday, July 27, 2010 / Rules
and Regulations
[[Page 43799]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1600
Employee Contribution Elections and Contribution Allocations
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Retirement Thrift Investment Board (Agency) is
amending its regulations at 5 CFR part 1600. These changes implement
the Agency's automatic enrollment program as authorized by the Thrift
Savings Plan Enhancement Act of 2009.
DATES: This rule is effective August 1, 2010.
FOR FURTHER INFORMATION CONTACT: Megan G. Grumbine at 202-942-1644 or
Laurissa Stokes at 202-942-1645.
SUPPLEMENTARY INFORMATION: The Agency 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)).
On June 17, 2010, the Agency published a proposed rule with request
for comments in the Federal Register (75 FR 34388, June 17, 2010). The
Agency received comments from one Federal employees' union, three
participants, and one other party.
The Federal employees' union endorsed the proposed changes. The
union, however, expressed concern that employing agencies may fail to
provide clear and timely notice to newly hired or rehired employees
regarding their rights and obligations under the Agency's automatic
enrollment program. In response to this comment, the Agency has
provided employing agencies with a sample notice to send to newly hired
or rehired employees who are automatically enrolled. The Agency
promulgated separate guidance that directs employing agencies to
provide this notice so that employees can take action within the first
automatic enrollment pay period.
In addition, the Agency will directly notify new enrollees of their
right to opt out of the automatic enrollment program and to request a
refund of default employee contributions. This information will be
provided in the TSP Welcome Letter sent to all employees upon receipt
of their first contribution.
One participant objected to the forfeiture of agency matching
contributions attributable to refunded default employee contributions.
The Internal Revenue Service (IRS) mandates forfeiture of matching
contributions attributable to refunded default employee contributions.
See ``Automatic Contribution Arrangements'' 74 FR 8200, 8206 (February
24, 2009). The TSP must follow applicable IRS guidance such as this to
the extent that it is consistent with FERSA. See 5 U.S.C. Sec. 8440;
26 U.S.C. 7701(j).
Another participant suggested that the Agency should not require a
participant's notarized signature in order to request a refund of
default employee contributions. The proposed rule does not require a
notarized signature in order to request a refund of default employee
contributions. In practice, however, the Agency will soon require a
notarized signature for all withdrawal requests, including a request
for a refund of default employee contributions, as a measure to protect
participants' TSP accounts from fraudulent withdrawals.
One commenter requested affirmation that contribution elections and
contribution allocations differ with respect to their effect on a
participant's continued coverage under the automatic enrollment
program. A participant who makes only a contribution allocation will
continue to receive default employee contributions until he or she
files a contribution election or elects not to have any default
employee contributions made on his or her behalf. In contrast, section
1600.34(b) of the proposed rule provides that a participant will no
longer be considered to be covered by the automatic enrollment program
if the participant makes a contribution election, i.e., elects to have
contributions made in a different amount or percentage of basic pay.
Section 1600.34(b) of the proposed rule reflects section 1.414(w)-
1(e)(2)(ii) of the Internal Revenue Service's regulation governing
refunds from automatic contribution arrangements. 26 CFR Sec.
1.414(w)-1(e)(2)(ii).
A participant who is no longer automatically enrolled by reason of
having made a contribution election will retain the right to request a
refund within 90 days following the date of the first default employee
contribution made to his or her account. However, the amount of the
refund will be limited to the amount of the default employee
contributions (adjusted for allocable gains and losses) made during the
period in which the participant was considered automatically enrolled.
One participant recommended that the TSP provide participants with
options to self direct investment of their retirement funds. This
comment is outside the scope of the proposed rule.
The Agency appreciates the opportunity to review and respond to
comments from participants who take an active interest in the TSP and
offer suggestions. The comment process allowed the Agency to address
any misunderstandings about the proposed change, to learn if there are
unanticipated legal or policy impediments to the proposed change, and
to hear suggestions about how better to implement the proposed change.
Although the comments received did not cause the Executive Director to
make any changes to the text of the proposed rule, he did carefully
consider all comments received and addressed some of the concerns
through other Agency guidance. Therefore, the Agency is publishing the
proposed rule as final without change.
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 who participate in the Thrift Savings Plan,
which is a Federal defined contribution retirement savings plan
[[Page 43800]]
created under the Federal Employees' Retirement System Act of 1986,
Pub. L. No. 99-335, 100 Stat. 514, and administered by the Agency.
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 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 1600
Government employees, Pensions, Retirement.
Gregory T. Long,
Executive Director, Federal Retirement Thrift Investment Board.
0
For the reasons stated in the preamble, the Agency amends 5 CFR part
1600 as follows:
PART 1600--EMPLOYEE CONTRIBUTION ELECTIONS AND CONTRIBUTION
ALLOCATIONS
0
1. The authority citation for part 1600 continues to read as follows:
Authority: 5 U.S.C. 8351, 8432(a), 8432(b), 8432(c), 8432(j),
8474(b)(5) and (c)(1), Thrift Savings Plan Enhancement Act of 2009,
section 102.
0
2. Revise the heading to part 1600 to read as follows:
PART 1600--EMPLOYEE CONTRIBUTION ELECTIONS, CONTRIBUTION
ALLOCATIONS, AND AUTOMATIC ENROLLMENT PROGRAM
0
3. Add subpart E to read as follows:
Subpart E--Automatic Enrollment Program
1600.34 Automatic Enrollment Program
1600.35 Refunds
1600.36 Matching Contributions
1600.37 Employing Agency Notice
Authority: Sec. 102, Pub. L. 111-31, div. B. tit. I, 123 Stat.
1776, 1853 (5 U.S.C. 8432(b)(2)(A)).
Sec. 1600.34 Automatic Enrollment Program.
(a) All newly hired Federal employees who are eligible to
participate in the Thrift Savings Plan and those Federal 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 percent of their basic pay contributed to the TSP (default employee
contribution) unless they elect to not contribute or elect to
contribute at some other level by the end of the employee's first pay
period (subject to the agency's processing timeframes).
(b) After being automatically enrolled, a participant may elect to
terminate default employee contributions or change his or her
contribution percentage or amount at any time.
Sec. 1600.35 Refunds of default employee contributions.
(a) 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. The election must be made on the TSP's
refund request form and must be received by the TSP's record keeper
prior to the expiration of the 90-day period.
(1) The distribution of a refund will be reported as income to the
participant on IRS Form 1099-R, but it will not be subject to the
additional tax under 26 U.S.C. 72(t) (the early withdrawal penalty
tax).
(2) A participant who requests a refund will receive the amount of
any default employee contributions (adjusted for allocable gains and
losses).
(3) Processing of refunds will be subject to the rules set out at 5
CFR part 1650.
(b) A participant will no longer be considered to be covered by the
automatic enrollment program if the participant files a contribution
election. Consequently, if a participant makes a contribution election
during the 90-day period, the participant will only be eligible to
receive as a refund an amount equal to his or her default employee
contributions (adjusted for allocable gains and losses).
(c) After the expiration of the period allowed for the refund, any
withdrawal must be made pursuant to 5 U.S.C. 8433 and 5 CFR part 1650.
(d) A married participant may request a refund of default employee
contributions without obtaining the consent of his or her spouse or
having the TSP notify the spouse of the request.
(e) The rules applicable to frozen accounts (5 CFR 1650.3) and
applicable to deceased participants (5 CFR 1650.6) also apply to
refunds of the default employee contributions.
Sec. 1600.36 Matching Contributions.
(a) A participant is not entitled to keep the matching
contributions and their associated earnings that are attributable to
refunded default employee contributions.
(b) The matching contributions and associated earnings attributable
to refunded default employee contributions shall be forfeited to the
TSP and used to offset administrative expenses.
Sec. 1600.37 Employing Agency Notice.
Employing agencies shall furnish all new employees and all rehired
employees covered by the automatic enrollment program a notice that
accurately describes:
(a) That default employee contributions equal to 3 percent of the
employee's basic pay will be deducted from his or her pay and
contributed to the TSP on the employee's behalf if the employee does
not make an affirmative election;
(b) The employee's right to elect to not have default employee
contributions made to the TSP on his or her behalf or to elect to have
a different percentage or amount of basic pay contributed to the TSP;
(c) That the default employee contributions will be invested in the
G Fund unless the employee makes a contribution allocation and/or an
interfund transfer; and
(d) The employee's ability to request a refund of any default
employee contributions (adjusted for allocable gains and losses) and
the procedures to request such a refund.
[FR Doc. 2010-18346 Filed 7-26-10; 8:45 am]
BILLING CODE 6760-01-P