Methodology for Calculating Earnings on Court-Ordered Payments, 13407-13408 [2025-04913]

Agencies

• Federal Retirement Thrift Investment Board

[Federal Register Volume 90, Number 55 (Monday, March 24, 2025)]
[Rules and Regulations]
[Pages 13407-13408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-04913]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

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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. 

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Federal Register / Vol. 90, No. 55 / Monday, March 24, 2025 / Rules 
and Regulations

[[Page 13407]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1653


Methodology for Calculating Earnings on Court-Ordered Payments

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Final rule.

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SUMMARY: The Federal Retirement Thrift Investment Board (FRTIB) adopts 
as final, without changes, a proposed rule concerning the methodology 
used to calculate earnings and losses in connection with court-ordered 
payments to spouses, former spouses, children, or dependents (i.e., 
payees) of Thrift Savings Plan (TSP) participants.

DATES: The effective date is March 24, 2025.

FOR FURTHER INFORMATION CONTACT: 
    For press inquiries: James Kaplan, Office of External Affairs, 
(202) 864-7150.
    For information about this final rule: Laurissa Stokes, Office of 
General Counsel, (202) 308-7707.

SUPPLEMENTARY INFORMATION: The FRTIB 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 is a retirement 
savings plan for Federal civilian employees and members of the 
uniformed services. It 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)). The provisions of FERSA that 
govern the TSP are codified, as amended, largely at 5 U.S.C. 8351 and 
8401-79.
    Section 8435(c) of FERSA requires the FRTIB to obey certain 
domestic relations court orders requiring payments from a TSP 
participant's account to the participant's spouse, former spouse, 
child, or dependent. A TSP account can be divided by means of a court 
decree of divorce, annulment, or legal separation; or a court order or 
court-approved property settlement agreement resulting from such a 
decree. A court order to divide a TSP account may be issued at any 
stage of a divorce, annulment, or legal separation proceeding.
    Court orders sometimes award the participant's spouse, former 
spouse, child, or dependent (i.e., the payee) earnings that accrue 
between the date used to calculate the payee's entitlement and the date 
payment is made. Currently, when a court order awards earnings, the 
FRTIB calculates the amount to which the payee is entitled by 
determining the payee's award amount (e.g., the percentage or fraction 
of the participant's account awarded by the court) and, based on the 
participant's investment allocation as of the date used to calculate 
the payee's entitlement, the number and composition of shares that the 
payee's award amount would have purchased as of that date. The FRTIB 
then multiplies the price per share as of the payment date by the 
calculated number and composition of shares to determine the payee's 
entitlement.
    The FRTIB contracts with Accenture Federal Services to provide, 
maintain, and operate the technology platforms necessary to deliver 
retirement plan record keeping services to TSP participants. These 
services include processing retirement benefits court orders. The FRTIB 
updates its methodology for calculating court ordered earnings to align 
with the methodology used by Accenture Federal Services. Accenture 
Federal Services calculates earnings by using a money-weighted return 
commonly referred to in the financial industry as the internal rate of 
return. This methodology considers the influence of cash flows (for 
example, contributions, withdrawals, loans, and loan payments) on asset 
allocation, and the resulting effect on investment performance.
    Specifically, the FRTIB will calculate earnings by (i) identifying 
the beginning balance, ending balance, and the cash flows between the 
two balances over the period of time between the entitlement date and 
the payment date, (ii) calculating the rate of return that increases 
(or reduces in the case of a loss) the balance at the beginning of the 
period, accounting for all cash flows, to equal the balance at the end 
of the period; and then (iii) multiplying the payee's award amount by 
the resulting rate of return.
    The methodology ensures that the payee's entitlement consists of an 
award component and an earnings component that each reflects the 
percentage or fraction specified in the court order. The award 
component reflects the percentage or fraction of the participant's 
account on the entitlement date as specified in the order. The earnings 
component is based on the rate of return experienced on the 
participant's account during the period from the entitlement date to 
the payment date.
    On November 26, 2024, the FRTIB published a proposed rule with 
request for public comments in the Federal Register (89 FR 93223, 
November 26, 2024). We received no comments. For the reasons explained 
above, the FRTIB is adopting the proposed rule as final, without any 
substantive changes.

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, which is a Federal defined 
contribution retirement savings plan created under the Federal 
Employees' Retirement System Act of 1986 (FERSA), Public Law 99-335, 
100 Stat. 514, and which is administered by the FRTIB.

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.

[[Page 13408]]

Submission to Congress and the General Accountability Office

    Pursuant to 5 U.S.C. 801(a)(1)(A), the FRTIB submitted a report 
containing this rule and other required information to the U.S. Senate, 
the U.S. House of Representatives, and the Government Accountability 
Office before publication of this rule in the Federal Register. This 
rule is not a major rule as defined at 5 U.S.C. 804(2).

List of Subjects in 5 CFR Part 1653

    Alimony, Child support, Government employees, Pensions, Retirement.

Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.

    For the reasons stated in the preamble, the FRTIB amends 5 CFR 
chapter VI 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. 8432d, 8435, 8436(b), 8437(e), 8439(a)(3), 
8467, 8474(b)(5) and 8474(c)(1).


0
2. Amend Sec.  1653.1 in paragraph (b) by adding in alphabetical order 
the definition of ``Entitlement date'' and revising the definition of 
``Payment date'' to read as follows:


Sec.  1653.1  Definitions.

* * * * *
    (b) * * *
    Entitlement date means the date determined in accordance with Sec.  
1653.4(b) and (c).
    Payment date refers to the date on which a temporary account is 
established for the payee in the Thrift Savings Plan (TSP).
* * * * *


0
3. Amend Sec.  1653.3 by revising paragraph (f)(4)(ii) to read as 
follows:


Sec.  1653.3  Processing retirement benefits court orders.

* * * * *
    (f) * * *
    (4) * * *
    (ii) The anticipated payment date;
* * * * *


0
4. Amend Sec.  1653.4 by revising paragraphs (a), (c), (d)(2), and (f) 
to read as follows:


Sec.  1653.4  Calculating entitlements.

    (a) For purposes of computing the amount of a payee's entitlement 
under this section, a participant's TSP account balance will include 
any loan balance outstanding as of the entitlement date unless the 
court order provides otherwise.
* * * * *
    (c) If the court order awards a percentage of an account but does 
not contain a specific date as of which to apply that percentage, the 
TSP record keeper will use the effective date of the court order.
    (d) * * *
    (2) The vested account balance on the payment date.
* * * * *
    (f) The payee's entitlement will be credited with TSP investment 
earnings as described:
    (1) The entitlement calculated under this section will not be 
credited with TSP investment earnings unless the court order 
specifically provides otherwise. The court order may not specify a rate 
for earnings.
    (2) If earnings are awarded, the TSP record keeper will calculate 
earnings by:
    (i) Identifying the beginning balance, ending balance, and the cash 
flows between the two balances over the period of time between the 
entitlement date and the payment date;
    (ii) Calculating the rate of return that increases (or reduces in 
the case of a loss) the balance at the beginning of the period, 
accounting for all cash flows, to equal the balance at the end of the 
period; and
    (iii) Multiplying the payee's award amount by the resulting rate of 
return.
* * * * *


0
5. Amend Sec.  1653.5 by revising paragraphs (d) and (h) to read as 
follows:


Sec.  1653.5  Payment.

* * * * *
    (d) Payment will be made pro rata from the participant's 
traditional and Roth balances. The distribution from the traditional 
balance will be further pro rated between the tax-deferred balance and 
tax-exempt balance. The payment from the Roth balance will be further 
pro rated between contributions in the Roth balance and earnings in the 
Roth balance. In addition, all payments will be distributed pro rata 
from all TSP core funds in which the participant's account is invested. 
All pro rated amounts will be based on the balances in each fund or 
source of contributions on the payment date. The TSP record keeper will 
not honor provisions of a court order that require payment to be made 
from a specific TSP core fund, source of contributions, or balance.
* * * * *
    (h) If the payee dies before a payment is disbursed from the TSP, 
payment will be made to the estate of the payee, unless otherwise 
specified by the court order. A distribution to the estate of a 
deceased court order payee will be reported as income to the decedent's 
estate. If the participant dies before the payment date, the order will 
be honored so long as it is submitted to the TSP record keeper before 
the TSP account has been closed.
* * * * *


0
6. Revise Sec.  1653.14 to read as follows:


Sec.  1653.14  Calculating entitlements.

    A qualifying legal process can only require the payment of a 
specified dollar amount from the TSP. Payment pursuant to a qualifying 
legal process will be calculated in accordance with Sec.  1653.4(a), 
(d), (f), and (g), except that the term ``payment date'' shall mean the 
date the payment is disbursed from the TSP.


0
7. Revise Sec.  1653.15 to read as follows:


Sec.  1653.15  Payment.

    Payment pursuant to a qualifying legal process will be made in 
accordance with Sec.  1653.5, except the term ``payment date'' shall 
mean the date the payment is disbursed from the TSP.


0
8. Amend Sec.  1653.34 by revising paragraph (d)(4)(ii) to read as 
follows:


Sec.  1653.34  Processing Federal tax levies and criminal restitution 
orders.

* * * * *
    (d) * * *
    (4) * * *
    (ii) The anticipated date of disbursement.

[FR Doc. 2025-04913 Filed 3-21-25; 8:45 am]
BILLING CODE 6760-01-P