[Senate Report 106-343]
[From the U.S. Government Publishing Office]



106th Congress 
 2d Session                      SENATE                          Report
                                                                106-343
_______________________________________________________________________


                                                       Calendar No. 682

 
                A BILL TO AMEND THE THRIFT SAVINGS PLAN

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                H.R. 208

TO AMEND TITLE 5, UNITED STATES CODE, TO ALLOW FOR THE CONTRIBUTION OF 
CERTAIN ROLLOVER DISTRIBUTIONS TO ACCOUNTS IN THE THRIFT SAVINGS PLAN, 
 TO ELIMINATE CERTAIN WAITING-PERIOD REQUIREMENTS FOR PARTICIPATING IN 
            THE THRIFT SAVINGS PLAN, AND FOR OTHER PURPOSES




                 July 13, 2000.--Ordered to be printed
                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE VOINOVICH, Ohio               RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
                      Dan G. Blair, Senior Counsel
                      Michael L. Loesch, Counsel,
      International Security, Proliferation, and Federal Services 
                              Subcommittee
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                  Lawrence B. Novey, Minority Counsel
           Nanci E. Langley, Minority Deputy Staff Director,
      International Security, Proliferation, and Federal Services 
                              Subcommittee
                     Darla D. Cassell, Chief Clerk
                            C O N T E N T S

                              ----------                              
                                                                   Page
  I. Purpose..........................................................1
 II. Background.......................................................1
III. Legislative History..............................................4
 IV. Section-by-Section Analysis......................................4
  V. Regulatory Impact Statement......................................5
 VI. Congressional Budget Office Cost Estimate........................5
VII. Executive Communications.........................................8
VIII.Changes in Existing Law..........................................9

                                                       Calendar No. 682
106th Congress                                                   Report
                                 SENATE
 2d Session                                                     106-343

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




                    TO AMEND THE THRIFT SAVINGS PLAN

                                _______
                                

                 July 13, 2000.--Ordered to be printed

                                _______
                                

Mr. Thompson, from the Committee on Governmental Affairs, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 208]

    The Committee on Governmental Affairs, to which was 
referred the bill (H.R. 208) to amend title 5, United States 
Code, to allow for the contribution of certain rollover 
distributions to accounts in the Thrift Savings Plan, to 
eliminate certain waiting-period requirements for participating 
in the Thrift Savings Plan, and for other purposes, having 
considered the same, reports favorably thereon with amendments 
and recommends that the bill as amended do pass.

                               I. Purpose

    H.R. 208, as reported by the Committee on Governmental 
Affairs, amends title 5, United States Code, to allow for the 
contribution of certain rollover distributions from qualified 
retirement accounts, including private sector 401(k) plans, to 
accounts in the Thrift Savings Plan, and eliminates the waiting 
period for participating in the Thrift Savings Plan.

               II. Background and Summary of Legislation


                A. Background on the Thrift Savings Plan

    The Thrift Savings Plan (TSP) is a retirement savings and 
investment plan for Federal employees. Congress created the TSP 
when it enacted the Federal Employees' Retirement System Act of 
1986. The TSP is the public sector counterpart to private 
sector ``401(k)'' retirement plans whereby employees are 
eligible to contribute a portion of their pre-tax income to 
their accounts. Employees covered by the Federal Employees' 
Retirement System (FERS) and the Civil Service Retirement 
System (CSRS) can contribute to the TSP although the rules 
governing the participation of each group differ depending in 
which retirement plan the employee participates.
    The TSP is a defined contribution plan. The retirement 
income an employee receives from this account depends on how 
much the employee has contributed during his or her working 
years and the amount of earnings on these contributions. The 
contributions an employee makes to his or her account are 
voluntary and are separate from the contributions required to 
be made for the FERS Basic Annuity or the CSRS annuity.
    The TSP adds an important element of portability to federal 
retirement benefits. All TSP participants are immediately 
vested in their contributions to the plan and any growth in the 
value of their investment from interest, dividends, and capital 
gains. FERS participants are immediately vested in the federal 
matching contributions as well as those earnings on those 
contributions. Workers who leave the federal government for 
jobs in other sectors of the economy can leave their money in 
the TSP--where it will continue to accrue interest, dividends, 
and capital gains according to the performance of the funds in 
which they have chosen to invest--or they can ``roll over'' 
their TSP funds on a tax-deferred basis into another tax-
qualified retirement savings account such as an IRA or 401(k) 
plan.
    Further, the TSP is particularly important for those 
employees covered by the FERS, since those employees receive 
smaller defined benefits and need to invest greater amounts in 
the TSP in order to enhance their retirement income. According 
to the Congressional Research Service, workers in the middle 
and upper ranges of the federal pay scale are unlikely to 
achieve adequate retirement income from just Social Security 
and the FERS basic annuity. CRS reports that even at a modest 
annual rate of return of 6 percent, the TSP can replace 32 
percent of final pay for a worker who contributes 10 percent of 
pay over 30 years of federal service.
    As of March 2000, there were 2.5 million participants in 
the TSP, including 2.1 million active employees for the federal 
government and the U.S. Postal Service. Of this number, almost 
1.9 million employees were actively contributing some portion 
of their pay to the TSP. Among active employees who were 
covered by FERS, 86.2 percent of those who were eligible to 
participate made contributions to the TSP, compared to 86.1 
percent a year earlier. Among employees enrolled in the CSRS, 
64.5 percent participated in the TSP, compared to 61.4 percent 
a year earlier. The combined value of the 2.5 million TSP 
accounts is $98.2 billion. The G Fund, which consists 
exclusively of investments in short-term nonmarketable U.S. 
Treasury securities, held $31.4 billion. The F Fund, which is 
invested in an index fund tied to fixed income securities, held 
$3.9 billion. The C Fund, which is invested in a commingled 
stock index fund that tracks the Standard & Poor's 500, held 
$62.9 billion.

          B. Summary of H.R. 208, as Reported by the Committee

    H.R. 208 establishes new incentives for employees to 
participate in the TSP, thus encouraging savings for 
retirement. First, the bill will permit newly hired Federal 
employees to begin making tax-advantaged contributions toward 
their own retirement earlier than allowed under existing law. 
Current law requires new hires to wait until the second TSP 
open season after they begin working for the government, which 
for many new employees may be as long as a year. By reducing 
the waiting period for participation, H.R. 208 encourages 
employees to begin their retirement savings immediately. 
Second, employees are allowed to contribute ``rollover'' 
distributions from qualified trusts, such as 401(k) plans and 
IRAs to the TSP. These rollover contributions are not permitted 
under current law. By permitting these roll-overs, the 
legislation allows employees to consolidate their retirement 
savings in one account for greater ease of administration.
    Since new employees will be participating in the TSP sooner 
than they otherwise could under current law, tax revenues will 
be affected. During consideration of H.R. 208 by the House 
Government Reform Committee, the House Committee adopted an 
amendment to provide for an offset of these lost revenues. This 
offset provision required that federal agencies contribute to 
the Civil Service Retirement and Disability Trust Fund (Fund) 
for employees covered by FERS by 1/100 of a percentage point.
    The Administration objected to the funding mechanism as 
adopted by the House. The Administration said the mandated 
agency contributions were unrelated to either the benefits 
derived from the TSP or the retirement programs that are 
financed through the Fund. Further, the Administration 
expressed concern that requiring nonprogrammatic deposits into 
the Fund would set a bad precedent that could lead to the 
future use of the Fund as a source of payments unrelated to the 
retirement programs it supports.
    In order to respond to Administration concerns while still 
providing an offset to compensate for the loss of revenues, the 
Committee on Governmental Affairs adopted an amendment, offered 
by Senator Akaka and supported by the Administration, which 
would allow the Office of Personnel Management to recognize 
court orders prohibiting a federal employee who is going 
through a divorce proceeding from withdrawing his or her 
retirement contributions to the Civil Service Retirement and 
Disability Trust Fund. Senator Akaka offered the amendment and 
the Committee adopted the provision based on cost estimates 
provided by the Office of Personnel Management. OPM estimated 
the provision would provide an offset of $32.4 million. 
However, the Congressional Budget Office later estimated the 
amendment to provide an offset of $11 million.
    Under current law, a withdrawal of retirement contributions 
from the Fund terminates an employee's rights, and those of the 
spouse, to a retirement annuity. Furthermore, until a divorce 
is final and the property settlement complete, a court is 
unable to prevent an individual from withdrawing his or her 
contribution.
    This situation can create two problems. First, the court 
has no means of delaying payment of the refund while it 
considers whether to award the prospective former spouse an 
annuity. Second, State courts often do not realize that merely 
awarding a survivor annuity or a portion of an employee's 
annuity, without also issuing a specific order barring payment 
of a refund, will not prevent payment of a refund that will 
terminate those annuity rights.
    The amendment grants OPM the authority to recognize a court 
order barring payment of a refund of an employee's 
contributions during the pendency of a divorce. Recognition of 
these orders preserves the court's ability to award retirement 
or survivor benefits to the former spouse since payment of a 
refund would extinguish the spouse's or former spouse's 
entitlement to such benefits. The amendment gives courts the 
ability to issue orders that prevent OPM from refunding an 
employee's contribution until the court has reviewed the 
issues, finalized the divorce, and issued a property 
settlement.
    The amendment is intended to provide a partial offset to 
the loss of revenues by retaining money in the Fund that would 
otherwise be paid out to employees.

                        III. Legislative History

    H.R. 208 was introduced in the House of Representatives on 
January 6, 1999, by Representative Connie Morella, and the bill 
was referred subsequently to the Committee on Government Reform 
Subcommittee on Civil Service. On February 25, 1999, the 
Subcommittee considered the bill and forwarded the bill to the 
Committee on Government Reform by voice vote. The Committee on 
Government Reform considered the bill on March 17, 1999, and 
H.R. 208 was ordered reported to the full House by voice vote. 
On April 20, 1999, the House of Representatives approved the 
bill under suspension of the rules by voice vote.
    H.R. 208 was received by the Senate on April 21 and 
referred to the Committee on Governmental Affairs. The 
legislation was referred to the Subcommittee on International 
Security, Proliferation and Federal Services on May 13, 1999. 
On March 3, 2000, the Subcommittee reported H.R. 208 to the 
full Committee on Governmental Affairs by polling letter. No 
hearings were held on the bill.
    On June 14, the full Committee considered H.R. 208. Sen. 
Akaka offered an amendment to strike section 3 of the bill and 
insert an alternative financing mechanism to offset the lost 
tax revenues incurred as a result of immediate new employee 
participation in the TSP. Section 3 of the House-passed bill 
required agencies to increase their FERS contributions to the 
Civil Service Retirement Trust Fund by 0.01% to offset the 
costs of the bill. The Committee amendment replaced this 
financing mechanism. This provision generates savings by 
allowing OPM to recognize court orders to retain funds in the 
Civil Service Retirement Trust, which otherwise might be 
withdrawn or paid out in an annuity, during the pendency of a 
divorce or until a court resolves the divorce and property 
settlement issues before it. The amendment was adopted by voice 
vote and H.R. 208, as amended, was ordered to be reported by 
the full Committee by voice vote. Committee members present 
were Senators Stevens, Collins, Voinovich, Cochran, Lieberman, 
Akaka, Torricelli, Cleland and Thompson.

                    IV. Section-by-Section Analysis


Section 1. Eligible rollover distributions

    As approved by the Committee, this section amends 5 U.S.C. 
8432 to allow the Thrift Savings Plan (TSP) to accept the same 
roll-over distributions that a (private sector) qualified trust 
may accept under the Internal Revenue Code (I.R.C.) of 1986. 
Currently, qualified trusts, as defined by section 402(c)(8) of 
the I.R.C., may accept rollovers from other qualified trusts, 
403(a) qualified annuity plans, and conduit individual 
retirement accounts (IRAs) that consist solely of assets rolled 
over from a qualified trust or a 403(a) qualified annuity plan. 
The language approved by the Committee would automatically 
allow the TSP to accept rollovers from additional sources if 
the rollover authority of a qualified trust is expanded by 
pending or future legislative changes to the I.R.C. This 
section takes effect at the earliest practicable date after 
September 30, 2000, as determined by the Executive Director of 
the Federal Retirement Thrift Investment Board.

Section 2. Immediate participation in the Thrift Savings Plan

    This section amends 5 U.S.C. 8432(b) to eliminate 
statutorily required waiting periods before employees and 
Members may contribute to the TSP. Under this section, such 
individuals will be eligible to make employee contributions 
from their basic pay beginning with their first day of service 
or, if that is not administratively feasible, on the earliest 
date thereafter that the Executive Director determines to be 
feasible. This amendment does not affect employer contributions 
(i.e., Agency Automatic (1%) and Agency Matching 
Contributions), which remain subject to the mandatory waiting 
periods. This section takes effect at the earliest practicable 
date after September 30, 2000, as determined by the Executive 
Director of the Federal Retirement Thrift Investment Board.

Section 3. Court orders affecting refunds

    This section amends chapters 83 and 84 of title 5, U.S.C. 
to allow the Office of Personnel Management the authority to 
bar payment of refunds of an employee's retirement 
contributions if it has received a court order barring such 
payment in order to preserve the court's ability to award a 
survivor or former spouse's annuity, or if payment of the 
refund would extinguish the entitlement of the spouse or former 
spouse to retirement or survivor benefits during the pendency 
of a divorce.

                     V. Regulatory Impact Statement

    Paragraph 11(b)(1) of rule XXVI of Standing Rules of the 
Senate requires that each report accompanying a bill evaluate 
``the regulatory impact which would be incurred in carrying out 
this bill.''
    H.R. 208 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would have little or no impact on the budgets of state, local, 
or tribal governments.

     VI. Cost Estimate Provided by the Congressional Budget Office

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 29, 2000.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 208, a bill 
amending the Thrift Savings Plan for federal employees.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Eric Rollins.
            Sincerely,
                                           Steven Lieberman
                                    (For Dan L. Crippen, Director).
    Enclosure.

               congressional budget office cost estimate

H.R. 208--An act to amend title 5, United States Code, to allow for the 
        contribution of certain rollover distributions to accounts in 
        the Thrift Savings Plan, to eliminate certain waiting-period 
        requirements for participating in the Thrift Savings Plan, and 
        for other purposes.

    Summary: H.R. 208 would make a number of changes to the 
federal government's civilian retirement programs. The act 
would let newly hired federal employees make contributions to 
the Thrift Savings Plan (TSP) sooner than allowed under current 
law and let federal employees transfer balances from other tax-
deferred savings plans to their TSP accounts. The act would 
also authorize courts to prevent former federal employees from 
withdrawing their retirement contributions until divorce 
proceedings are finalized.
    CBO estimates that enacting H.R. 208 would decrease 
revenues by $45 million over the 2001-2005 period. That revenue 
loss would be partially offset by a reduction of $11 million in 
direct spending for refunds of retirement contributions. 
Because this act would affect direct spending and receipts, 
pay-as-you-go procedures would apply.
    H.R. 208 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would have little or no impact on the budgets of state, local, 
or tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact on H.R. 208 is shown in the following table. 
For the purposes of this estimate, CBO assumed that H.R. 208 
would be enacted by October 2000.

----------------------------------------------------------------------------------------------------------------
                                                                By fiscal year, in millions of dollars
                                                     -----------------------------------------------------------
                                                        2000      2001      2002      2003      2004      2005
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING

Estimated budget authority..........................         0        -3        -2        -2        -2        -2
Estimated outlays...................................         0        -3        -2        -2        -2        -2

                                               CHANGES IN REVENUES

Estimated revenues..................................         0        -6        -9        -9       -10       -11
----------------------------------------------------------------------------------------------------------------
Note: The Joint Committee on Taxation prepared the estimates of the changes in revenues.

    The effects of this legislation on direct spending fall 
within budget function 600 (income security).

                           basis of estimate

Direct spending

    Restrict Payments of Refunds of Retirement Contributions.--
Federal employees covered by the Civil Service Retirement 
System (CSRS) or the Federal Employee Retirement System (FERS) 
contribute a portion of their salaries to the Civil Service 
Retirement and Disability Fund. Individuals may have their 
retirement contributions refunded to them after leaving 
government service, but periods of service covered by refunds 
are not counted in calculating the amount of retirement 
benefits. (FERS employees also may not count refunded service 
in determining retirement eligibility.)
    For this reason, in order to preserve a former spouse's 
entitlement to a portion of an employee's annuity or a survivor 
benefit, divorce settlements may prohibit a former employee 
from taking a refund. Under current law, however, courts can 
only bar refund payments as part of a final divorce settlement. 
H.R. 208 would allow courts to bar payments of refunds while 
divorce proceedings are still in progress.
    Based on information from the Office of Personnel 
Management, CBO estimates that about 27,000 former employees 
would receive refunds annually under current law. Using data on 
marriage and divorce rates from the National Center for Health 
Statistics, CBO anticipates that 600 of those employees would 
be going through divorce proceedings. CBO estimates that the 
bill would prevent 400 employees per year from receiving 
refunds, and delay payment for another 100 employees by six 
months. Overall, CBO estimates that H.R. 208 would lower refund 
payments by $11 million over the 2000-2005 period. Annual 
savings would decline in later years because an increasing 
number of refunds would be paid to employees covered by FERS, 
which pays much smaller refunds than CSRS. (The average refund 
affected by this act would be about $6,700 in 2001, and would 
decline to about $5,300 in 2005.) In the long run, spending on 
federal retirement benefits would increase since more employees 
would be eligible for retirement benefits.

Revenues

    Allow New Hires to Participate in TSP Sooner.--Newly hired 
federal employees must now wait two open seasons (6 to 12 
months) before they can begin making contributions to the TSP. 
H.R. 208 would allow new hires to begin making TSP 
contributions immediately, although government contributions 
would still not begin until the second open season. The portion 
of an employee's salary that is contributed to the TSP is not 
taxed until it is withdrawn from the plan.
    The Joint Committee on Taxation (JCT) estimates that the 
federal government would forgo tax revenues of $45 million over 
the 2000-2005 period as a result of this provision. Based on 
recent experience, JCT assumed that between 90,000 and 95,000 
eligible employees would be hired each year, and that most of 
those new hires would participate in the TSP. Under the act, 
employees would contribute more money to their TSP accounts 
than under current law, and thus taxes would be deferred on 
more of their income.
    Allow Rollovers from Other Tax-Deferred Savings Plans.--
H.R. 208 would allow employees to transfer funds from certain 
tax-deferred savings plans, such as a 401(k) plan from a 
previous job, to their TSP accounts. JCT estimates that this 
provision would not have a significant budgetary impact.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays and governmental receipts that are subject 
to pay-as-you-go procedures are shown in the following table. 
For the purposes of enforcing pay-as-you-go procedures, only 
the affects in the current year, the budget year, and the 
succeeding four years are counted.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          By fiscal year, in millions of dollars
                                                                 ---------------------------------------------------------------------------------------
                                                                   2000    2001    2002    2003    2004    2005    2006    2007    2008    2009    2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays..............................................       0      -3      -2      -2      -2      -2      -2      -2      -2      -2      -2
Changes in receipts.............................................       0      -6      -9      -9     -10     -11     -11     -12     -13     -13     -14
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: H.R. 208 
contains no intergovernmental or private-sector mandates as 
defined in the Unfunded Mandates Reform Act and would have 
little or no impact on the budgets of state, local, or tribal 
governments.
    Previous CBO estimate: On March 26, 1999, CBO estimated 
that H.R. 208, as ordered reported by the House Committee on 
Government Reform on March 17, 1999, would increase 
discretionary spending by $35 million and have no net effect on 
direct spending over the 2000-2004 period. The two major 
differences between the two versions of H.R. 208 is that the 
House version does not have a provision affecting refund 
payments, and the Senate version would not change agency 
retirement contributions. In addition, CBO has extended its 
estimate to include the budgetary effects in 2005.
    Estimate prepared by: Federal Costs: Eric Rollins; impact 
on State, Local, and Tribal Governments: Leo Lex; and impact on 
the Private Sector: John Harris.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

                     VII. Executive Communications

                                 Federal Retirement
                                   Thrift Investment Board,
                                     Washington, DC, June 22, 2000.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: I am writing to you in my capacity as 
the chief executive and managing fiduciary of the Federal 
Retirement Thrift Investment Board, the agency that manages the 
Thrift Savings Plan (TSP) for Federal employees. I am pleased 
to address for the record an issue raised by Senator Ted 
Stevens and conveyed to the Board by Senator Daniel Akaka 
concerning H.R. 208, legislation recently considered by your 
committee.
    As you know, the TSP offers Federal civilian employees the 
same type of retirement savings and tax benefits that many 
private corporations offer their employees under so-called 
``401(k)'' plans. H.R. 208, as amended by Senator Akaka, will 
permit the TSP to accept rollover contributions from the same 
full range of sources as is now allowed to similar private 
sector plans.
    Participants would benefit from this provision because 
their portable retirement savings could be consolidated in the 
TSP, and the special tax status accorded to such savings would 
be preserved. I expect this additional benefit would be 
welcomed by participants, and we would be pleased to make it 
available.
    The question has arisen whether participants who roll over 
substantial tax-deferred savings to the TSP from other plans 
might in some way be subsidized by other TSP participants with 
smaller accounts. This would not occur because each 
participant's share of TSP administrative expenses is 
progressive, i.e., it is based on the size of his or her 
account balance. Thus, the larger the account balance, the 
larger the dollar amount charged for administrative expenses, 
and vice versa.
    Nevertheless, because of its very low administrative 
expense ratios overall, participants who choose to take 
advantage of the rollover provision of H.R. 208, just like 
those who simply contribute during their Federal service, will 
find the TSP to be very economical. In 1999, TSP expenses 
charged to participants totaled .05 percent for investments in 
the Government Securities Investment (G) Fund, .06 percent for 
investments in the Common Stock Index Investment (C) Fund, and 
.07 percent for investments in the Fixed Income Index 
Investment (F) Fund. In dollar terms, this means that 1999 G 
Fund earnings were reduced approximately $.50 for every $1,000 
in a G Fund account balance. Similarly, C and F Fund earnings 
were reduced approximately $.60 and $.70, respectively, for 
every $1,000 in C and F Fund account balances.
    Based on the above costs, a G Fund investor with a $5,000 
account balance would have paid only $2.50 (.05 percent) in TSP 
expenses in 1999. In return, he or she had the right, without 
further charges, to start or stop contributions, change how 
those contributions were invested, borrow and repay, make 
withdrawals, execute monthly interfund transfers, and receive 
two account statements (and, if applicable, four loan 
statements) each year. Since a $2.50 charge would not cover the 
strictly allocable costs associated with all of those 
activities, the small account holder is subsidized by other 
Plan participants. As his or her account balance grows, 
however, it will cover its own notional costs and eventually 
cover some of the costs associated with new, smaller accounts.
    Rollover contributions would be subject to the same 
balance-based charges. Thus, if rollover funds of $100,000 were 
invested in the G Fund in 1999, the participant would have paid 
.05 percent, or $50, for the same rights, more than enough to 
cover the TSP costs associated with that account, but still a 
very small charge when compared to private-sector alternatives.
    I hope this clarifies the benefit and cost allocation 
associated with the rollover provision of H.R. 208 as amended.
            Sincerely,
                                            Roger W. Mehle,
                                                Executive Director.

      VIII. Changes in Existing Law Made by the Bill, as Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *


PART III--EMPLOYEES

           *       *       *       *       *       *       *


Subpart G--Insurance and Annuities

           *       *       *       *       *       *       *


CHAPTER 83--RETIREMENT

           *       *       *       *       *       *       *



Subchapter III-Civil Service Retirement

           *       *       *       *       *       *       *



Sec. 8342. Lump-sum benefits; designation of beneficiary; order of 
                    precedence

    (a) * * *

           *       *       *       *       *       *       *

    [(j)(1) Payment of the lump-sum credit under subsection (a) 
of this section--
          (A) may be made only if any current spouse and any 
        former spouse of the employee or Member are notified of 
        the employee or Member's application; and
          (B) shall be subject to the terms of a court decree 
        of divorce, annulment, or legal separation or any court 
        order or court approved property settlement agreement 
        incident to such decree if--
                  (i) the decree, order, or agreement expressly 
                relates to any portion of the lump-sum credit 
                involved; and
                  (ii) payment of the lump-sum credit would 
                extinguish entitlement of the employee's or 
                Member's spouse or former spouse to a survivor 
                annuity under section 8341(h) of this title or 
                to any portion of an annuity under section 
                8345(j) of this title.]
    (j)(1)(A) Payment of the lump-sum credit under subsection 
(a) may be made only if the spouse, if any, and any former 
spouse of the employee or Member are notified of the employee 
or Member's application.
    (B) The Office shall prescribe regulations under which the 
lump-sum credit shall not be paid without the consent of a 
spouse or former spouse of the employee or Member where the 
Office has received such additional information and 
documentation as the Office may require that--
          (i) a court order bars payment of the lump-sum credit 
        in order to preserve the court's ability to award an 
        annuity under section 8341(h) or section 8345(j); or
          (ii) payment of the lump-sum credit would extinguish 
        the entitlement of the spouse or former spouse, under a 
        court order on file with the Office, to a survivor 
        annuity under section 8341(h) or to any portion of an 
        annuity under section 8345(j).

           *       *       *       *       *       *       *


CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM

           *       *       *       *       *       *       *



Subchapter II--Basic Annuity

           *       *       *       *       *       *       *



Sec. 8424. Lump-sum benefits; designation of beneficiary; order of 
                    precedence

    (a) * * *
    [(b)(1) Payment of the lump-sum credit under subsection 
(a)--
          (A) may be made only if any current spouse and any 
        former spouse of the employee or Member are notified of 
        the application by the employee or Member; and
          (B) in any case in which there is a former spouse, 
        shall be subject to the terms of a court decree of 
        divorce, annulment, or legal separation issued with 
        respect to such former spouse if--
                  (i) the decree expressly relates to any 
                portion of the lump-sum credit involved; and
                  (ii) payment of the lump-sum credit would 
                affect any right or interest of the former 
                spouse with respect to a survivor annuity under 
                section 8445, or to any portion of an annuity 
                under section 8467.]
    (b)(1)(A) Payment of the lump-sum credit under subsection 
(a) may be made only if the spouse, if any, and any former 
spouse of the employee or Member are notified of the employee 
or Member's application.
    (B) The Office shall prescribe regulations under which the 
lump-sum credit shall not be paid without the consent of a 
spouse or former spouse of the employee or Member where the 
Office has received such additional information or 
documentation as the Office may require that--
          (i) a court order bars payment of the lump-sum credit 
        in order to preserve the court's ability to award an 
        annuity under section 8445 or 8467; or
          (ii) payment of the lump-sum credit would extinguish 
        the entitlement of the spouse or former spouse, under a 
        court order on file with the Office, to a survivor 
        annuity under section 8445 or to any portion of an 
        annuity under section 8467.

           *       *       *       *       *       *       *


Subchapter III--Thrift Savings Plan

           *       *       *       *       *       *       *



Sec. 8432. Contributions

    (a) An employee or Member may contribute to the Thrift 
Savings Fund in any pay period, pursuant to an election under 
subsection (b)[(1)], an amount not to exceed 10 percent of such 
individual's basic pay for such period. [Contributions made 
under this subsection during any 6-month period for which an 
election period is provided under subsection (b)(1) shall be 
made each pay period during such 6-month period pursuant to a 
program of regular contributions provided in regulations 
prescribed by the Executive Director.] Contributions under this 
subsection pursuant to such an election shall, with respect to 
each pay period for which such election remains in effect, be 
made in accordance with a program of regular contributions 
provided in regulations prescribed by the Executive Director.
    (b)(1)(A) * * *
    (B) The amount to be contributed pursuant to an election 
under subparagraph (A) (or any election allowable by virtue of 
paragraph (4)) shall be the percentage of basic pay or amount 
designated by the employee or Member.

           *       *       *       *       *       *       *

    (3) [Notwithstanding paragraph (2)(A), an] An employee or 
Member who elects to become subject to this chapter under 
section 301 of the Federal Employees' RetirementSystem Act of 
1986 may make the first election for the purpose of subsection (a) 
during the period prescribed for such purpose by the Executive 
Director. The period prescribed by the Executive Director shall 
commence on the date on which the employee or Member makes the election 
to become subject to this chapter.
    [(4)(A) Notwithstanding paragraph (2)(A), an employee or 
Member who is an employee or Member on January 1, 1987, and 
continues as an employee or Member without a break in service 
through April 1, 1987, may make the first election for the 
purpose of subsection (a) during the election period prescribed 
for such purpose by the Executive Director. The Executive 
Director shall prescribe an election period for such purpose 
which shall commence on April 1, 1987. An election by such an 
employee or Member during that election period shall be 
effective on the first day of the employee's or Member's first 
pay period which begins after the date on which the employee or 
Member makes that election.
    [(B) Notwithstanding subsection (a), the maximum amount 
that an employee or Member may contribute during any pay period 
which begins on or after April 1, 1987, and before October 1, 
1987, pursuant to an election made during the election period 
provided under subparagraph (A) is the amount equal to 15 
percent of such individual's basic pay for such period.]
    (4) The Executive Director shall prescribe such regulations 
as may be necessary to carry out the following:
          (A) Notwithstanding subparagraph (A) of paragraph 
        (2), an employee or Member described in such 
        subparagraph shall be afforded a reasonable opportunity 
        to first make an election under this subsection 
        beginning on the date of commencing service or, if that 
        is not administratively feasible, beginning on the 
        earliest date thereafter that such an election becomes 
        administratively feasible, as determined by the 
        Executive Director.
          (B) An employee or Member described in subparagraph 
        (B) of paragraph (2) shall be afforded a reasonable 
        opportunity to first make an election under this 
        subsection (based on the appointment or election 
        described in such subparagraph) beginning on the date 
        of commencing service pursuant to such appointment or 
        election or, if that is not administratively feasible, 
        beginning on the earliest date thereafter that such an 
        election becomes administratively feasible, as 
        determined by the Executive Director.
          (C) Notwithstanding the preceding provisions of this 
        paragraph, contributions under paragraphs (1) and (2) 
        of subsection (c) shall not be payable with respect to 
        any pay period before the earliest pay period for which 
        such contributions would otherwise be allowable under 
        this subsection if this paragraph had not been enacted.
          (D) Sections 8351(a)(2), 8440a(a)(2), 8440b(a)(2), 
        8440c(a)(2), and 8440d(a)(2) shall be applied in a 
        manner consistent with the purposes of subparagraphs 
        (A) and (B), to the extent those subparagraphs can be 
        applied with respect thereto.
          (E) Nothing in this paragraph shall affect paragraph 
        (3).

           *       *       *       *       *       *       *

    (j)(1) For the purpose of this subsection--
          (A) the term ``eligible rollover distribution'' has 
        the meaning given such term by section 402(c)(4) of the 
        Internal Revenue Code of 1986; and
          (B) the term ``qualified trust'' has the meaning 
        given such term by section 402(c)(8) of the Internal 
        Revenue Code of 1986.
    (2) An employee or Member may contribute to the Thrift 
Savings Fund an eligible rollover distribution that a qualified 
trust could accept under the Internal Revenue Code of 1986. A 
contribution made under this subsection shall be made in the 
form described in section 401(a)(31) of the Internal Revenue 
Code of 1986. In the case of an eligible rollover distribution, 
the maximum amount transferred to the Thrift Savings Fund shall 
not exceed the amount which would otherwise have been included 
in the employee's or Member's gross income for Federal income 
tax purposes.
    (3) The Executive Director shall prescribe regulations to 
carry out this subsection.

           *       *       *       *       *       *       *


Sec. 8439. Accounting and information

    (a)(1) The Executive Director shall establish and maintain 
an account for each individual who makes contributions or for 
whom contributions are made under [section 8432(c)(1)] section 
8432 of this title or who makes contributions to the Thrift 
Savings Fund under section 8351 of this title.

           *       *       *       *       *       *       *

    (c)(1) * * *
    (2) Information under this subsection shall be provided at 
least 30 calendar days before the beginning of each election 
period under section 8432(b)(1)(A) of this title, and in a 
manner designed to facilitate informed decision making with 
respect to elections under sections 8432 and 8438 of this 
title. Nothing in this paragraph shall be considered to limit 
the dissemination of information only to the times required 
under the preceding sentence.

           *       *       *       *       *       *       *


Sec. 8440a. Justices and judges

    (a)(1) * * *
    (2) An election may be made under paragraph (1) only during 
a period provided under section 8432(b) for individuals subject 
to [chapter 84 of this title: Provided, however, That a justice 
or judge may make the first such election within 60 days of the 
effective date of this section.] this chapter.

           *       *       *       *       *       *       *


Sec. 8440d. Judges of the United States Court of Appeals for Veterans 
                    Claims

    (a)(1) * * *
    (2) An election may be made under paragraph (1) only during 
a period provided under section 8432(b) of this title for 
individuals subject to [chapter 84 of this title.] this 
chapter.

                                
