Simplification of Catch-Up Contribution Process, 3857-3858 [2020-00610]

Download as PDF 3857 Proposed Rules Federal Register Vol. 85, No. 15 Thursday, January 23, 2020 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. jbell on DSKJLSW7X2PROD with PROPOSALS FEDERAL RETIREMENT THRIFT INVESTMENT BOARD 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)). Background A catch-up contribution is a contribution that exceeds a statutory 5 CFR Parts 1600 and 1605 limit on the amount of contributions a participant can normally make to the Simplification of Catch-Up TSP in each calendar year. Congress’s Contribution Process reason for permitting these extra contributions was to allow participants AGENCY: Federal Retirement Thrift to ‘‘catch up’’ for years when they were Investment Board not employed or were otherwise unable ACTION: Proposed rule. to contribute toward their retirement. SUMMARY: The FRTIB proposes to reduce See Federal Thrift Savings Plan Catchpaperwork burdens on participants who Up Contributions Act, Public Law 107– are eligible to make catch-up 304, H.R. REP. 107–686, 107 Cong. 2d contributions, by removing the Sess. (2002). regulation that requires them to submit Normally, a TSP participant’s two different contribution election contributions cannot exceed the forms. statutory limits set forth in Internal DATES: Comments must be received on Revenue Code (IRC) section 402(g) or before February 24, 2020. (limiting the amount of traditional and Roth contributions to $19,500 for ADDRESSES: You may submit comments calendar year 2020) and IRC section using one of the following methods: 415(c) (limiting the total amount of • Federal Rulemaking Portal: http:// traditional, Roth, tax-exempt, matching, www.regulations.gov. Follow the and automatic 1% contributions to the instructions for submitting comments. lesser of 100% of the participant’s • Mail: Office of General Counsel, compensation or $57,000 for calendar Attn: Megan G. Grumbine, Federal year 2020). Participants who are age 50 Retirement Thrift Investment Board, 77 or older are allowed to make catch-up K Street NE, Suite 1000, Washington, contributions beyond these statutory DC 20002. • Hand Delivery/Courier: The address limits—up to the dollar amount in IRC for sending comments by hand delivery section 414(v), which is $6,500 for calendar year 2020. or courier is the same as that for submitting comments by mail. Currently, participants who wish to • Facsimile: Comments may be make catch-up contributions are submitted by facsimile at (202) 942– required to submit an election form 1676. called ‘‘TSP–1–C/TSP–U–1–C, Catch-up The most helpful comments explain Contribution Election’’ (or electronic the reason for any recommended change equivalent) to their employing agency. and include data, information, and the The catch-up contribution election form authority that supports the is separate, and in addition to, any other recommended change. contribution election that a participant FOR FURTHER INFORMATION CONTACT: may already have on file. Upon receipt Laurissa Stokes at 202–942–1645. of a catch-up contribution election form, the participant’s employing agency SUPPLEMENTARY INFORMATION: The begins submitting catch-up FRTIB administers the Thrift Savings contributions to the TSP on the Plan (TSP), which was established by participant’s behalf, using special the Federal Employees’ Retirement payroll records designed specifically for System Act of 1986 (FERSA), Public catch-up contributions. The payroll Law 99–335, 100 Stat. 514. The TSP records that employing agencies use for provisions of FERSA are codified, as submitting catch-up contributions are amended, largely at 5 U.S.C. 8351 and separate, and in addition to, the payroll 8401–79. The TSP is a tax-deferred VerDate Sep<11>2014 16:48 Jan 22, 2020 Jkt 250001 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 records that employing agencies use for submitting other types of contributions. Proposed Change The FRTIB proposes to simplify the catch-up contribution process, by no longer requiring participants to submit separate catch-up contribution election forms in addition to their other contribution election forms. Instead, the TSP will simply continue to accept contributions based on the participant’s contribution election that is already on file, until his/her contributions reach the combined limits on catch-up contributions and other types of contributions. Employing agency payroll offices will no longer submit catch-up contributions to the TSP on special payroll records designed specifically for catch-up contributions. Instead, payroll offices will submit catch-up contributions using the same payroll records that they use to submit other types of contributions. The TSP recordkeeping system will automatically determine, based on the participant’s date of birth, whether the participant is eligible to make catch-up contributions. When an employing agency payroll office submits contributions in excess of the 402(g) limit or the 415(c) limit on behalf of a catch-up eligible participant, the TSP recordkeeping system will automatically treat the excess contributions as catchup contributions, without requiring any additional paperwork from the participant or any special payroll records from the payroll office. Proposed Effective Date The proposed effective date for this change is January 1, 2021. Section-by-Section Analysis Section 1600.23 Contributions Catch-Up The FRTIB proposes to amend 5 CFR § 1600.23 by removing paragraph (b), which requires the use of a separate election form for catch-up contribution elections. The FRTIB also proposes to remove 5 CFR § 1600.23 paragraph (h), which says that catch-up contributions cannot be matched. The FRTIB codified 5 CFR § 1600.23 paragraph (h) through an interim rule that was published on June 13, 2003. 68 FR 35491. In the preamble to the interim rule, the FRTIB cited to FERSA section 8432(c)(2) as the E:\FR\FM\23JAP1.SGM 23JAP1 3858 Federal Register / Vol. 85, No. 15 / Thursday, January 23, 2020 / Proposed Rules rationale for why catch-up contributions cannot be matched. FERSA section 8432(c)(2) says nothing about catch-up contributions—it simply says that matching contributions cannot exceed a dollar-for-dollar match on the first 3% of basic pay that a participant contributes plus 50 cents on the dollar match for the next 2% of basic pay that a participant contributes. Removing the restriction on matching catch-up contributions will not increase an employing agency’s potential outlay for matching contributions as the 5% limit described in the preceding sentence still applies. FERSA section 8432(c)(2) can justify a prohibition on matching catchup contributions only if we assume that a participant will necessarily reach the FERSA section 8432(c)(2) limit on matching contributions before, or at the same time as, he/she reaches the IRC section 402(g) or 415(c) limit on contributions. To whatever extent this assumption was accurate in 2003, it is no longer accurate today. Today, it is not uncommon for a participant to reach one of the IRC’s limits on contributions before he/she reaches FERSA’s limit on matching contributions. Section 1605.13 Back Pay Awards and Other Retroactive Pay Adjustments The FRTIB proposes to amend § 1605.13 by making a technical conforming addition to paragraph (c)(2). This paragraph currently says that any corrective contributions attributable to prior years must not exceed the 402(g) limit or the 415(c) limit applicable to those years. The FRTIB proposes to add language making it clear that such contributions also cannot exceed the 414(v) catch-up contribution limit applicable to prior years. jbell on DSKJLSW7X2PROD with PROPOSALS 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, members of the uniformed services who participate in the Thrift Savings Plan, and their beneficiaries. The TSP is a Federal defined contribution retirement savings plan created by FERSA and is administered by the Agency. Paperwork Reduction Act I certify that these regulations do not require additional reporting under 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 VerDate Sep<11>2014 16:48 Jan 22, 2020 Jkt 250001 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. List of Subjects 5 CFR Part 1600 Taxes, Claims, Government employees, Pensions, Retirement. 5 CFR Part 1605 Claims, Government employees, Pensions, Retirement. Ravindra Deo, Executive Director, Federal Retirement Thrift Investment Board. For the reasons stated in the preamble, the FRTIB proposes to amend 5 CFR chapter VI as follows: PART 1600—EMPLOYEE CONTRIBUTION ELECTIONS, CONTRIBUTION ALLOCATIONS, AND AUTOMATIC ENROLLMENT PROGRAM 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), 8432d, 8474(b)(5) and (c)(1), and 8440e. 2. Amend § 1600.23 by removing and reserving paragraphs (b) and (h). ■ PART 1605—CORRECTION OF ADMINISTRATIVE ERRORS 1. The authority citation for part 1605 continues to read as follows: ■ Authority: 5 U.S.C. 8351, 8432a, 8432d, 8474(b)(5) and (c)(1). Subpart B also issued under section 1043(b) of Public Law 104– 106, 110 Stat. 186 and § 7202(m)(2) of Public Law 101–508, 104 Stat. 1388. ■ 2. Amend § 1605.13 to read as follows: § 1605.13 Back pay awards and other retroactive pay adjustments. * * * * * (c) * * * (1) * * * (2) Must not cause the participant to exceed the annual contribution limit(s) contained in sections 402(g), 415(c), or 414(v) of the I.R.C. (26 U.S.C. 402(g), 415(c), 414(v)) for the year(s) with respect to which the contributions are being made, taking into consideration the TSP contributions already made in (or with respect to) that year; and * * * * * [FR Doc. 2020–00610 Filed 1–22–20; 8:45 am] BILLING CODE 6760–01–P PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 FEDERAL LABOR RELATIONS AUTHORITY 5 CFR Part 2427 [FLRA Docket No. 0–PS–46] Notice of Opportunity To Comment on a Request for a General Statement of Policy or Guidance on Agency-Head Review of Agreements That Continue in Force Until New Agreements Are Reached Federal Labor Relations Authority. ACTION: Proposed issuance of a general statement of policy or guidance. AGENCY: The Federal Labor Relations Authority (Authority) solicits written comments on a request from the U.S. Department of Agriculture (USDA) for a general statement of policy or guidance (general statement) concerning expiring collective-bargaining agreements that state that they will remain in force until the parties reach new agreements. USDA asks for a general statement holding that, if an expiring agreement continues in force during renegotiations, then an agency head may review the legality of the expiring agreement as early as the agency head could review an expiring agreement that was renewed automatically for a fixed term. Comments are solicited on whether the Authority should issue a general statement, and, if so, what the Authority’s policy or guidance should be. DATES: To be considered, comments must be received on or before February 24, 2020. ADDRESSES: You may send comments, which must include the caption ‘‘USDA (Petitioner), Case No. 0–PS–46,’’ by one of the following methods: • Email: FedRegComments@flra.gov. Include ‘‘USDA (Petitioner), Case No. 0–PS–46’’ in the subject line of the message. • Mail or Hand Delivery: Emily Sloop, Chief, Case Intake and Publication, Federal Labor Relations Authority, Docket Room, Suite 200, 1400 K Street NW, Washington, DC 20424–0001. Instructions: Do not mail or hand deliver written comments if they have been submitted via email. Interested persons who mail or hand deliver written comments must submit an original and 4 copies of each written comment, with any enclosures, on 81⁄2 x 11 inch paper. FOR FURTHER INFORMATION CONTACT: Emily Sloop, Chief, Case Intake and Publication, Federal Labor Relations Authority, (202) 218–7740. SUMMARY: E:\FR\FM\23JAP1.SGM 23JAP1

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[Federal Register Volume 85, Number 15 (Thursday, January 23, 2020)]
[Proposed Rules]
[Pages 3857-3858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00610]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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


Federal Register / Vol. 85 , No. 15 / Thursday, January 23, 2020 / 
Proposed Rules

[[Page 3857]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1600 and 1605


Simplification of Catch-Up Contribution Process

AGENCY: Federal Retirement Thrift Investment Board

ACTION: Proposed rule.

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

SUMMARY: The FRTIB proposes to reduce paperwork burdens on participants 
who are eligible to make catch-up contributions, by removing the 
regulation that requires them to submit two different contribution 
election forms.

DATES: Comments must be received on or before February 24, 2020.

ADDRESSES: You may submit comments using one of the following methods:
     Federal Rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Office of General Counsel, Attn: Megan G. Grumbine, 
Federal Retirement Thrift Investment Board, 77 K Street NE, Suite 1000, 
Washington, DC 20002.
     Hand Delivery/Courier: The address for sending comments by 
hand delivery or courier is the same as that for submitting comments by 
mail.
     Facsimile: Comments may be submitted by facsimile at (202) 
942-1676.
    The most helpful comments explain the reason for any recommended 
change and include data, information, and the authority that supports 
the recommended change.

FOR FURTHER INFORMATION CONTACT: Laurissa Stokes at 202-942-1645.

SUPPLEMENTARY INFORMATION: The FRTIB administers the Thrift Savings 
Plan (TSP), which was established by the Federal Employees' Retirement 
System Act of 1986 (FERSA), Public Law 99-335, 100 Stat. 514. The TSP 
provisions of FERSA are codified, as amended, largely at 5 U.S.C. 8351 
and 8401-79. The TSP is a tax-deferred retirement savings plan for 
federal civilian employees and members of the uniformed services. The 
TSP is similar to cash or deferred arrangements established for 
private-sector employees under section 401(k) of the Internal Revenue 
Code (26 U.S.C. 401(k)).

Background

    A catch-up contribution is a contribution that exceeds a statutory 
limit on the amount of contributions a participant can normally make to 
the TSP in each calendar year. Congress's reason for permitting these 
extra contributions was to allow participants to ``catch up'' for years 
when they were not employed or were otherwise unable to contribute 
toward their retirement. See Federal Thrift Savings Plan Catch-Up 
Contributions Act, Public Law 107-304, H.R. REP. 107-686, 107 Cong. 2d 
Sess. (2002).
    Normally, a TSP participant's contributions cannot exceed the 
statutory limits set forth in Internal Revenue Code (IRC) section 
402(g) (limiting the amount of traditional and Roth contributions to 
$19,500 for calendar year 2020) and IRC section 415(c) (limiting the 
total amount of traditional, Roth, tax-exempt, matching, and automatic 
1% contributions to the lesser of 100% of the participant's 
compensation or $57,000 for calendar year 2020). Participants who are 
age 50 or older are allowed to make catch-up contributions beyond these 
statutory limits--up to the dollar amount in IRC section 414(v), which 
is $6,500 for calendar year 2020.
    Currently, participants who wish to make catch-up contributions are 
required to submit an election form called ``TSP-1-C/TSP-U-1-C, Catch-
up Contribution Election'' (or electronic equivalent) to their 
employing agency. The catch-up contribution election form is separate, 
and in addition to, any other contribution election that a participant 
may already have on file. Upon receipt of a catch-up contribution 
election form, the participant's employing agency begins submitting 
catch-up contributions to the TSP on the participant's behalf, using 
special payroll records designed specifically for catch-up 
contributions. The payroll records that employing agencies use for 
submitting catch-up contributions are separate, and in addition to, the 
payroll records that employing agencies use for submitting other types 
of contributions.

Proposed Change

    The FRTIB proposes to simplify the catch-up contribution process, 
by no longer requiring participants to submit separate catch-up 
contribution election forms in addition to their other contribution 
election forms. Instead, the TSP will simply continue to accept 
contributions based on the participant's contribution election that is 
already on file, until his/her contributions reach the combined limits 
on catch-up contributions and other types of contributions. Employing 
agency payroll offices will no longer submit catch-up contributions to 
the TSP on special payroll records designed specifically for catch-up 
contributions. Instead, payroll offices will submit catch-up 
contributions using the same payroll records that they use to submit 
other types of contributions.
    The TSP recordkeeping system will automatically determine, based on 
the participant's date of birth, whether the participant is eligible to 
make catch-up contributions. When an employing agency payroll office 
submits contributions in excess of the 402(g) limit or the 415(c) limit 
on behalf of a catch-up eligible participant, the TSP recordkeeping 
system will automatically treat the excess contributions as catch-up 
contributions, without requiring any additional paperwork from the 
participant or any special payroll records from the payroll office.

Proposed Effective Date

    The proposed effective date for this change is January 1, 2021.

Section-by-Section Analysis

Section 1600.23 Catch-Up Contributions

    The FRTIB proposes to amend 5 CFR Sec.  1600.23 by removing 
paragraph (b), which requires the use of a separate election form for 
catch-up contribution elections.
    The FRTIB also proposes to remove 5 CFR Sec.  1600.23 paragraph 
(h), which says that catch-up contributions cannot be matched. The 
FRTIB codified 5 CFR Sec.  1600.23 paragraph (h) through an interim 
rule that was published on June 13, 2003. 68 FR 35491. In the preamble 
to the interim rule, the FRTIB cited to FERSA section 8432(c)(2) as the

[[Page 3858]]

rationale for why catch-up contributions cannot be matched. FERSA 
section 8432(c)(2) says nothing about catch-up contributions--it simply 
says that matching contributions cannot exceed a dollar-for-dollar 
match on the first 3% of basic pay that a participant contributes plus 
50 cents on the dollar match for the next 2% of basic pay that a 
participant contributes. Removing the restriction on matching catch-up 
contributions will not increase an employing agency's potential outlay 
for matching contributions as the 5% limit described in the preceding 
sentence still applies. FERSA section 8432(c)(2) can justify a 
prohibition on matching catch-up contributions only if we assume that a 
participant will necessarily reach the FERSA section 8432(c)(2) limit 
on matching contributions before, or at the same time as, he/she 
reaches the IRC section 402(g) or 415(c) limit on contributions. To 
whatever extent this assumption was accurate in 2003, it is no longer 
accurate today. Today, it is not uncommon for a participant to reach 
one of the IRC's limits on contributions before he/she reaches FERSA's 
limit on matching contributions.

Section 1605.13 Back Pay Awards and Other Retroactive Pay Adjustments

    The FRTIB proposes to amend Sec.   1605.13 by making a technical 
conforming addition to paragraph (c)(2). This paragraph currently says 
that any corrective contributions attributable to prior years must not 
exceed the 402(g) limit or the 415(c) limit applicable to those years. 
The FRTIB proposes to add language making it clear that such 
contributions also cannot exceed the 414(v) catch-up contribution limit 
applicable to prior years.

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, members of the uniformed services who 
participate in the Thrift Savings Plan, and their beneficiaries. The 
TSP is a Federal defined contribution retirement savings plan created 
by FERSA and is administered by the Agency.

Paperwork Reduction Act

    I certify that these regulations do not require additional 
reporting under 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.

List of Subjects

5 CFR Part 1600

    Taxes, Claims, Government employees, Pensions, Retirement.

5 CFR Part 1605

    Claims, Government employees, Pensions, Retirement.


Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.
    For the reasons stated in the preamble, the FRTIB proposes to amend 
5 CFR chapter VI as follows:

PART 1600--EMPLOYEE CONTRIBUTION ELECTIONS, CONTRIBUTION 
ALLOCATIONS, AND AUTOMATIC ENROLLMENT PROGRAM

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), 
8432d, 8474(b)(5) and (c)(1), and 8440e.


0
2. Amend Sec.  1600.23 by removing and reserving paragraphs (b) and 
(h).

PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS

0
1. The authority citation for part 1605 continues to read as follows:

    Authority:  5 U.S.C. 8351, 8432a, 8432d, 8474(b)(5) and (c)(1). 
Subpart B also issued under section 1043(b) of Public Law 104-106, 
110 Stat. 186 and Sec.  7202(m)(2) of Public Law 101-508, 104 Stat. 
1388.


0
2. Amend Sec.  1605.13 to read as follows:


Sec.  1605.13  Back pay awards and other retroactive pay adjustments.

* * * * *
    (c) * * *
    (1) * * *
    (2) Must not cause the participant to exceed the annual 
contribution limit(s) contained in sections 402(g), 415(c), or 414(v) 
of the I.R.C. (26 U.S.C. 402(g), 415(c), 414(v)) for the year(s) with 
respect to which the contributions are being made, taking into 
consideration the TSP contributions already made in (or with respect 
to) that year; and
* * * * *
[FR Doc. 2020-00610 Filed 1-22-20; 8:45 am]
 BILLING CODE 6760-01-P