[Federal Register Volume 62, Number 120 (Monday, June 23, 1997)]
[Rules and Regulations]
[Pages 33968-33969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16379]


      

[[Page 33967]]

_______________________________________________________________________

Part IV





Federal Retirement Thrift Investment Board





_______________________________________________________________________



5 CFR Part 1603



Thrift Savings Plan Vesting; Final Rule

  Federal Register / Vol. 62, No. 120 / Monday, June 23, 1997 / Rules 
and Regulations  

[[Page 33968]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1603


Thrift Savings Plan Vesting

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Final rule.

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

SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) is publishing final regulations governing 
vesting of amounts contributed to the Thrift Savings Plan (TSP) by or 
on behalf of an employee. These regulations conform the Board's vesting 
regulations to the Federal Employees' Retirement System Technical 
Corrections Act of 1988, update the terms used in these regulations to 
match those used throughout 5 CFR chapter VI, and clarify the language 
of several provisions of the interim regulations.

EFFECTIVE DATE: These final rules are effective June 23, 1997.

FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest, (202) 942-1661.

SUPPLEMENTARY INFORMATION: The Board administers the TSP, which was 
established by the Federal Employees' Retirement System Act of 1986 
(FERSA), Pub. L. 99-335, 100 Stat. 514, codified, as amended, largely 
at 5 U.S.C. 8401-8479 (1994). The TSP is a tax-deferred retirement 
savings plan for Federal employees that is similar to cash or deferred 
arrangements established under section 401(k) of the Internal Revenue 
Code. The vesting provisions of FERSA are found at 5 U.S.C. 8432(g) and 
8432b.
    On August 12, 1987, the Board published in the Federal Register (52 
FR 29635) an interim rule with request for comments. The interim rule 
established 5 CFR part 1603 to implement the vesting provisions of 
FERSA. On January 7, 1991, the Board published in the Federal Register 
(56 FR 600) an amendment to the interim rule. The amendment to the 
interim rule revised the definition of ``separation from government 
service'' from a separation of more than three days to a separation of 
more than 30 days. On May 9, 1995, the Board published in the Federal 
Register (60 FR 24535) an interim rule with request for comment. The 
interim rule implemented section 4 of the Uniformed Services Employment 
and Reemployment Rights Act (USERRA), Pub. L. 103-353, 108 Stat. 3149, 
3170-73. Section 4 of USERRA added section 8432b to title 5 of the 
United States Code, providing that certain military service will count 
for TSP vesting purposes. Finally, on May 9, 1997, the Board published 
in the Federal Register (62 FR 25558) these regulations as proposed 
rulemaking with a request for comments. The Board received no comments 
on any of the preceding Federal Register publications.
    Section 1603.2(b) provides that a TSP participant's first 
conversion contributions (which are defined in a new definition at 
proposed section 1603.1) are immediately vested. Under FERSA, first 
conversion contributions have always been excepted from the years-in-
service vesting requirements. 5 U.S.C. 8432(g). However, previous Board 
regulations addressed this issue only by implication; an explicit 
treatment of the first conversion contributions issue could help avoid 
confusion.
    Section 1603.2(d) conforms the TSP vesting regulations to section 
115 of the Federal Employees' Retirement System, Technical Corrections 
Act (FERSTC), Pub. L. 100-238, 101 Stat. 1744, 1751 (1988) (codified at 
5 U.S.C. 8432(g)), which provides that a participant's agency automatic 
(1%) contributions are not forfeited if the participant dies before 
completing the number of years in service that are normally required 
before such contributions are vested. Because the effective date of 
FERSTC was January 8, 1988, proposed section 1603.2(d) explains that 
the agency automatic (1%) contributions of participants who died before 
January 8, 1988, were subject to the years-in-service vesting 
requirements. The Board implemented the change required by section 115 
of FERSTC on January 8, 1988.
    Sections 1603.3 (a) and (b), and the new definitions of 
``separation date'' and ``separation from Government service'' at 
section 1603.1, together explain that a participant does not separate 
from Government service for TSP vesting purposes unless he or she has a 
break in service of more than 30 calendar days. They also explain that 
a participant must have fulfilled the years-of-service requirement at 
the time of separation to avoid the forfeiture of agency automatic (1%) 
contributions and attributable earnings. Section 1603.3 (a) and (b) and 
the new definitions do not create new rules; they rewrite and 
reorganize the Board's regulations to make the current rules which 
govern the computation of years-of-service easier to understand.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
will apply only to Federal agencies and employees.

Paperwork Reduction Act

    I certify that these regulations do not require additional 
reporting under the criteria of the Paperwork Reduction Act of 1980.

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, section 201, 
Pub. L. 104-4, 109 Stat. 48, 64, the effect of these regulations on 
State, local, and tribal governments and on the private sector has been 
assessed. These regulations will not compel the expenditure in any one 
year of $100 million or more by any State, local, and tribal 
governments in the aggregate or by the private sector. Therefore, a 
statement under section 202, 109 Stat. 48, 64-65, is not required.

Submission to Congress and the General Accounting Office

    Under 5 U.S.C. 801(a)(1)(A), the Board 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 prior to the publication of this rule in today's Federal 
Register. This interim rule is not a major rule as defined at 5 U.S.C. 
804(2).

List of Subjects in 5 CFR Part 1603

    Employee benefit plans, Government employees, Pensions, Retirement.

Federal Retirement Thrift Investment Board.
Roger W. Mehle,
Executive Director.

    For the reasons set out in the preamble, 5 CFR Part 1603 is amended 
as follows:

PART 1603--VESTING

    1. The authority citation for part 1603 is revised to read as 
follows:

    Authority: 5 U.S.C. 8432(g), 8432b(h)(1), 8474(b)(5) and (c)(1).

    2. Section 1603.1 is revised to read as follows:


Sec. 1603.1  Definitions.

    Terms used in this part shall have the following meaning:
    Agency automatic (1%) contributions means any contributions made 
under 5 U.S.C. 8432(c)(1);
    CSRS means the Civil Service Retirement System established by 5 
U.S.C. chapter 83, subchapter III, and any equivalent Federal 
Government retirement plan;

[[Page 33969]]

    CSRS employee means any employee, Member, or participant covered by 
CSRS, including employees authorized to contribute to the Thrift 
Savings Plan under 5 U.S.C. 8351, or 5 U.S.C. 8440a to 8440d;
    FERS means the Federal Employees' Retirement System established by 
5 U.S.C. chapter 84, and any equivalent Federal Government retirement 
plan;
    FERS employee means an employee, Member, or participant covered by 
FERS;
    First conversion contributions refers to the retroactive agency 
contributions, including interest on these contributions, made under 5 
U.S.C. 8432(c)(3)(C) to the TSP accounts of employees who were 
automatically converted to the Federal Employees' Retirement System on 
January 1, 1987;
    Individual account means the total of all sums contributed to the 
Thrift Savings Plan by or on behalf of a CSRS employee or FERS 
employee, plus earnings allocated to the employee's account under 5 CFR 
part 1645;
    Separation date means the effective date of an employee's 
separation from Government service;
    Separation from Government service has the same meaning as provided 
in 5 CFR 1650.3;
    Service means:
    (1) Any non-military service that is creditable under either 5 
U.S.C. chapter 83, subchapter III, or 5 U.S.C. 8411, provided however, 
that such service is to be determined without regard to any time 
limitations, any deposit or redeposit requirements contained in those 
statutory provisions after performing the service involved, or any 
requirement that the individual give written notice of that 
individual's desire to become subject to the retirement system 
established by 5 U.S.C. chapters 83 or 84; or
    (2) Any military service creditable under the provisions of 5 
U.S.C. 8432b(h)(1) and the regulations issued at 5 CFR part 1620, 
subpart H;
    Vested means those amounts in an individual account which are 
nonforfeitable; and
    Year of service means one full calendar year of service.
    3. Section 1603.2 is amended by revising the section heading and 
paragraphs (b) and (c) and by adding a new paragraph (d) to read as 
follows:


Sec. 1603.2  Basic vesting rules.

* * * * *
    (b) Except as provided in paragraph (c) of this section, all 
amounts in a FERS employee's individual account (including all first 
conversion contributions) are immediately vested.
    (c) Except as provided in paragraph (d) of this section, upon 
separation from Government service without meeting the applicable 
service requirements of Sec. 1603.3, a FERS employee's agency automatic 
(1%) contributions and attributable earnings will be forfeited.
    (d) If a FERS employee dies (or died) after January 7, 1988, 
without meeting the applicable service requirements set forth in 
Sec. 1603.3, the agency automatic (1%) contributions and attributable 
earnings in his or her individual account are deemed vested and shall 
not be forfeited. If a FERS employee died on or before January 7, 1988, 
without meeting those service requirements, his or her agency automatic 
(1%) contributions and attributable earnings are forfeited to the 
Thrift Savings Plan.
    4. Section 1603.3 is amended by revising paragraph (a) and the 
introductory text of paragraph (b) to read as follows:


Sec. 1603.3  Service requirements.

    (a) Except as provided under paragraph (b) of this section, FERS 
employees will be vested in their agency automatic (1%) contributions 
and attributable earnings upon separating from Government only if, as 
of their separation date, they have completed three years of service.
    (b) FERS employees will be vested in their agency automatic (1%) 
contributions and attributable earnings upon separating from Government 
service if, as of their separation date, they have completed two years 
of service and they are serving in one of the following positions:
* * * * *
[FR Doc. 97-16379 Filed 6-20-97; 8:45 am]
BILLING CODE 6760-01-P