Court Orders and Legal Processes Affecting Thrift Savings Plan Accounts, 30509-30510 [2011-13011]

Agencies

• Federal Retirement Thrift Investment Board

[Federal Register Volume 76, Number 102 (Thursday, May 26, 2011)]
[Rules and Regulations]
[Pages 30509-30510]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-13011]



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Federal Register / Vol. 76, No. 102 / Thursday, May 26, 2011 / Rules 
and Regulations

[[Page 30509]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1653


Court Orders and Legal Processes Affecting Thrift Savings Plan 
Accounts

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Final rule.

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SUMMARY: The Federal Retirement Thrift Investment Board (Agency) is 
amending its regulations at 5 CFR part 1653. Based on the Agency's 
memorandum of understanding and data match program with the Department 
of Health and Human Services, Administration for Children and Families, 
Federal Office of Child Support Enforcement (OCSE), as well as a 
legislative amendment which subjects TSP accounts to orders issued 
pursuant to the Mandatory Victims Restitution Act (MVRA), the Agency's 
court order volume has significantly increased and will likely continue 
to increase significantly.
    In order to promote efficiency and equity in light of this current 
and likely future increase in the Agency's court order workload, the 
Agency is amending its regulations to shorten the time period in which 
child support orders and MVRA orders are payable. The amendments 
clarify that these payments are subject to Federal income tax 
withholding and that tax withholding cannot be waived. Further, the 
amendments provide that when payment of a qualifying retirement 
benefits order is to be made to a participant's current or former 
spouse, the payee may request to have the payment made as early as 30 
days after the date of the TSP decision letter.
    The Agency considers these amendments to be procedural in 
character. As a result, no notice and comment period is required by the 
Administrative Procedure Act. See 5 U.S.C. 553(b)(A).

DATES: This rule is effective on June 1, 2011.

FOR FURTHER INFORMATION CONTACT: Megan Grumbine at 202-942-1644.

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)).
    As authorized by section 466 of the Social Security Act and 5 
U.S.C. 8437(e), the Agency entered into a data-sharing agreement with 
the Department of Health and Human Services, Administration for 
Children and Families, Federal Office of Child Support Enforcement 
(OCSE). As a result of this agreement and two recent data matches, the 
number of child support orders submitted to the Agency has increased 
significantly. Year-to-date, the Agency has received more than 7,000 
child support orders, which is over thirty-six times the amount the 
Agency processed in total in 2010. This number is nearly certain to 
increase even further as several states involved in the data match have 
yet to submit orders corresponding to matched participant accounts.
    Further, in 2009, Congress amended the Agency's statute to provide 
that TSP accounts are subject to enforcement orders issued pursuant to 
the Mandatory Victims Restitution Act (MVRA). See 5 U.S.C. 8437(e) as 
well as Public Law 111-31, The Thrift Savings Plan Enhancement Act of 
2009. Pursuant to this authority, the Agency and the Department of 
Justice are working collaboratively to finalize the process by which 
TSP accounts may be garnished efficiently--consistent with law and 
regulation. At this point, the Agency does not have statistics as to 
the number of MVRA orders it may receive, but it is highly likely that 
the Agency will receive a significant number of backlogged MVRA orders.
    Currently, 5 CFR 1653.5(a)(2) provides that payments of child 
support orders and similar orders (like MVRA) are generally made 60 
days after the date of the TSP decision letter determining the parties' 
rights in the account. This 60 day period is intended to permit the 
payee sufficient time to consider decisions about tax withholding, 
payment by EFT, and transfer options. Though a participant may request 
an expedited payment, the earliest an expedited payment can be made is 
31 days after the date of the TSP decision letter. Given that the 
Agency is currently processing more than 7,000 child support orders, a 
31 to 60 day window for processing child support orders is unduly 
burdensome, expensive, and inequitable. Indeed, a 31 to 60 day window 
will likely backlog the Agency's processing of child support orders, 
thereby increasing the costs of administering the TSP. In addition, a 
31 to 60 day window will prevent the Agency from timely processing all 
child support orders. Consequently, similarly situated child support 
orders (i.e., orders received by the Agency on the same day) may be 
treated differently: While some orders may be timely processed, others 
orders will not be processed for more than 60 days and, as a result, 
not all participants' accounts will receive equal treatment.
    Thus, in order to promote efficiency and equity, the Agency amends 
its regulations to provide that payments of child support orders and 
similar orders (like MVRA) are generally payable within 30 days of the 
date of the TSP decision letter.
    Further, the Agency is amending 5 CFR 1653.5(e) to provide that the 
Agency will withhold Federal income tax from payments for child support 
orders and similar orders in accordance with Internal Revenue Code 
section 3405(b) (which provides for 10 percent withholding unless the 
taxpayer elects no withholding). Paragraph (e) will also provide that a 
participant cannot elect zero withholding on such payments. Allowing a 
participant to elect zero withholding would delay the Agency's 
processing of these payments, thereby causing inefficiency and 
inequity. Moreover, it is unlikely that a participant would request 
zero withholding from payments not received by the participant because

[[Page 30510]]

withholding on such payments is in a participant's best interest. That 
is, since the participant will be taxed on the full amount of the 
payment, it is in the participant's interest that 10 percent of the 
payment be directed toward satisfying the participant's tax liability.
    The Agency considers these amendments to be procedural in 
character. As a result, no notice and comment period is required by the 
Administrative Procedure Act (APA). See 5 U.S.C. 553(b)(A). However, if 
any part of these amendments is held to be substantive in character, 
the Agency has ``good cause,'' within the meaning of 5 U.S.C. 
553(b)(B), to promulgate the amendments without a notice and comment 
period. Specifically, it would be impracticable for the Agency to 
comply with the APA's notice and comment period--and hence the Agency 
has ``good cause''--because doing so would preclude the Agency from 
executing its statutory duties and carrying out its mission. See 5 
U.S.C. 553(b).
    Pursuant to statute, the Agency's Executive Director and the 
members of the Board must act ``solely in the interest of the [TSP's] 
participants and beneficiaries'' and for the exclusive purpose of 
providing benefits to participants and their beneficiaries and 
``defraying reasonable expenses of administering the [TSP].'' 5 U.S.C. 
8477(b)(1). Currently, the Agency effectively faces an emergency 
situation by virtue of the fact that it is trying to process more than 
7,000 child support orders. If the Agency processes these orders in 
accordance with the 31 to 60-day time period prescribed in the current 
version of 5 CFR 1653.5, then the TSP will incur significant 
administrative expenses. However, these administrative expenses can be 
greatly defrayed if the Agency amends 5 CFR 1653.5 to reduce processing 
time to 30 days. Consequently, any meaningful delay in amending 5 CFR 
1653.5 could cause the Agency to incur unreasonably large 
administrative expenses. Thus, the Agency's compliance with the notice 
and comment period would be impracticable. As a result, no notice and 
comment period is required. See 5 U.S.C. 553(b).

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities. This regulation will 
affect Federal employees and members of the uniformed services who 
participate in the Thrift Savings Plan. It will also affect their legal 
dependents.

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 
section 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 1653

    Alimony, Child support, Claims, 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 1653 as follows:

PART 1653--COURT ORDERS AND LEGAL PROCESSES AFFECTING THRIFT 
SAVINGS PLAN ACCOUNTS

0
1. The authority citation for part 1653 continues to read as follows:

    Authority:  5 U.S.C. 8435, 8436(b), 8437(e), 8439(a)(3), 8467, 
8474(b)(5), and 8474(c)(1).


0
2. Amend Sec.  1653.5 paragraphs (a) and (e)(2) to read as follows:


Sec.  1653.5  Payment.

    (a) Payment date. Payment pursuant to a qualifying retirement 
benefits court order will generally be made:
    (1) 60 days after the date of the TSP decision letter when the 
payee is the current or former spouse of the participant. The payee can 
request to receive the payment sooner than 60 days, but in no event 
earlier than 30 days after the date of the TSP decision letter, if:
    (i) The payee makes a tax withholding election, requests payment by 
EFT, or requests a transfer of all or a portion of the payment to a 
traditional IRA or eligible employer plan (the TSP decision letter will 
provide the forms a payee must use to choose one of these payment 
options); and
    (ii) Either the court order does not make an award to multiple 
payees or, if it does, each of the multiple payee requests expedited 
payment.
    (2) Within 30 days of the date of the TSP decision letter when the 
payee is someone other than the current or former spouse of the 
participant.
* * * * *
    (e) * * *
    (2) If the payment is made to anyone other than the current or 
former spouse of the participant, the payment is taxable to the 
participant and is subject to 10 percent Federal income tax under 
Internal Revenue Code section 3405(b). The participant cannot elect to 
change the amount of Federal income tax withholding. The tax 
withholding will be taken from the payee's entitlement and the gross 
amount of the payment (i.e., the net payment distributed to the payee 
plus the amount withheld from the payment for taxes) will be reported 
to the IRS as income to the participant.
* * * * *

[FR Doc. 2011-13011 Filed 5-25-11; 8:45 am]
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