[Federal Register Volume 63, Number 19 (Thursday, January 29, 1998)]
[Rules and Regulations]
[Pages 4365-4366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2166]



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 Rules and Regulations
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  Federal Register / Vol. 63, No. 19 / Thursday, January 29, 1998 / 
Rules and Regulations  

[[Page 4365]]


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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1605


Correction of Administrative Errors

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Interim rule with request for comments.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) is publishing an amendment to its final rules 
on correction of administrative errors affecting Thrift Savings Plan 
(TSP) accounts. The amendment provides for attribution of makeup 
contributions from a participant to the appropriate prior year in which 
the contributions should have been made. Such makeup contributions are 
permitted only if aggregation with other contributions made in (or with 
respect to) the appropriate prior year would not result in 
contributions in excess of the limits imposed by sections 402(g) and 
415(c) of the Internal Revenue Code (I.R.C.).

DATES: Effective date: January 29, 1998. Comment date: March 30, 1998.

ADDRESSES: Send comments to Elizabeth S. Woodruff, Associate General 
Counsel, Federal Retirement Thrift Investment Board, 1250 H Street, 
NW., Washington, DC 20005.

FOR FURTHER INFORMATION CONTACT:
Elizabeth S. Woodruff, (202) 942-1661.

SUPPLEMENTARY INFORMATION: A final rule governing the correction of 
administrative errors was published in the Federal Register on December 
24, 1996 (61 FR 68464). That rule revised the final regulations that 
were published in the Federal Register on December 4, 1987 (52 FR 
46314). Both sets of regulations required a limitation on TSP makeup 
contributions when a retroactive adjustment to an employee's pay 
included a correction for the employee's inability to have made TSP 
contributions during the period of retroactivity. At the time these 
regulations were issued, the Board interpreted I.R.C. 402(g) and its 
discussions with the Internal Revenue Service (IRS) as requiring that 
such makeup contributions always be counted against the IRS deferral 
limit of the year in which they were actually made, rather than the 
limit of the year to which they were attributable.
    On June 25, 1997, a decision was issued in the matter of Kahmann v. 
Reno, 967 F. Supp. 731 (N.D.N.Y.), holding that application of the 
current IRS deferral limit to makeup contributions for prior years was 
contrary to the purpose of a make-whole award. The court required the 
participant's employing agency to calculate contributions for each pay 
period for which the employee could have made a TSP contribution and to 
deposit the appropriate contributions (and lost earnings) to the 
employee's account without regard to the current deferral limit.
    Because this holding involved the Board's interpretation of I.R.C. 
402(g), the Board requested guidance from the IRS on whether a 
participant's makeup contributions to the TSP in the current year could 
be attributed to the years in which the contributions should have been 
made for purposes of the limit on annual contributions found in I.R.C. 
402(g). The IRS advised the Board that such makeup contributions could 
indeed be so attributed.
    For this reason, Sec. 1605.4(c)(1) of the Board's error correction 
regulations is being amended to provide that makeup contributions to 
the TSP will be attributed to the year in which the contributions 
should have been made to determine compliance with the (applicable) IRS 
deferral limit. The board intends to apply this rule to all situations 
in which contributions should have been made in an earlier year, 
regardless of the reason the employee was improperly not permitted to 
contribute to the TSP. Because this change could affect the ongoing 
makeup contributions of some participants, it is being given immediate 
effect.

Regulatory Flexibility Act

    I certify that this amendment will not have a significant economic 
impact on a substantial number of small entities. It will only affect 
TSP participants.

Paperwork Reduction Act

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

Waiver of Notice of Proposed Rulemaking and 30-day Delay of Effective 
Date

    Under 5 U.S.C. 553(b)(B) and (d)(3), I find that good cause exists 
for waiving the general notice of proposed rulemaking and for making 
these regulations effective in less than 30 days. These regulations 
facilitate correction of errors in the amount of contributions made to 
Thrift Savings Plan accounts. Prompt implementation of the regulations 
will provide necessary guidance to employing agencies and TSP 
participants.

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, section 201, 
Public Law 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. This regulation 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 before the publication of this rule in today's Federal 
Register. This rule is not a major rule as defined in section 804(2) of 
title 5, United States Code.

List of Subjects in 5 CFR Part 1605

    Claims, Government employees, Pensions, Retirement.
Roger W. Mehle,
Executive Director.

Federal Retirement Thrift Investment Board

    For the reasons set forth in the preamble, part 1605 of chapter VI 
of title

[[Page 4366]]

5 of the Code of Federal Regulations is amended as follows:

PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS

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

    Authority: 5 U.S.C. 8351 and 8474.

    2. Section 1605.2 is amended by revising paragraph (c)(5) to read 
as follows:


Sec. 1605.2  Makeup of missed or insufficient contributions.

* * * * *
    (c) * * *
    (5) When establishing a schedule of makeup contributions, the 
employing agency must review any schedule proposed by the affected 
participant, as well as the participant's prior TSP contributions, if 
any, to determine whether the makeup contributions, when combined with 
prior contributions, would exceed the annual contribution limit(s) 
contained in sections 402(g) and 415 of the Internal Revenue Code 
(I.R.C.) (26 U.S.C. 402(g) and 415) for the prior year(s) with respect 
to which the contributions are being made.
    (i) The employing agency must not permit contributions that, when 
combined with prior contributions, would exceed the applicable annual 
contribution limit(s) contained in I.R.C. 402(g) and 415.
    (ii) A schedule of makeup contributions may be suspended if a 
participant has insufficient net pay to permit the makeup 
contributions. If this happens, the period of suspension should not be 
counted against the maximum number of pay periods to which the 
participant is entitled in order to complete the schedule of makeup 
contributions.
* * * * *
    3. Section 1605.4 is amended by revising paragraph (c)(1) to read 
as follows:


Sec. 1605.4  Back pay awards and other retroactive pay adjustments.

* * * * *
    (c)(1) Makeup employee contributions required under paragraphs (a) 
and (b) of this section must be computed before the back pay or other 
retroactive pay adjustment is made. The makeup employee contributions 
must be deducted from the back pay or other retroactive pay adjustment 
and contributed to the TSP. However, contributions must not be made 
that would cause the participant to exceed the annual contribution 
limit(s) contained in sections 402(g) and 415 of the Internal Revenue 
Code (I.R.C.) (26 U.S.C. 402(g) and 415) for the prior 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.
* * * * *
[FR Doc. 98-2166 Filed 1-28-98; 8:45 am]
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