[Federal Register Volume 64, Number 120 (Wednesday, June 23, 1999)]
[Proposed Rules]
[Pages 33429-33431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15686]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 831 and 841

RIN 3206-AH62


State Income Tax Withholding and Allotments

AGENCY: Office of Personnel Management.

ACTION: Proposed rule.

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SUMMARY: The Office of Personnel Management (OPM) is proposing 
regulations to permit expansion of the State income tax withholding and 
the voluntary allotment program under the Civil Service Retirement 
System (CSRS) and the Federal Employees' Retirement System (FERS). 
These regulations would simplify the current State income tax 
withholding program, continue the currently-authorized programs 
established by regulation, and allow OPM to add additional allotment 
programs for the convenience of annuitants.

DATES: Comments must be received on or before August 23, 1999.

ADDRESSES: Send comments to Mary E. Wilson, Chief, Retirement Policy 
Division; Retirement and Insurance Service; Office of Personnel 
Management; PO Box 57; Washington, DC 20044; or deliver to OPM, Room 
4351, 1900 E Street NW., Washington, DC. Comments may also be submitted 
by electronic mail to [email protected].

FOR FURTHER INFORMATION CONTACT: Patricia A. Rochester, (202) 606-0299.

SUPPLEMENTARY INFORMATION: We propose to amend Title 5, Code of Federal 
Regulations, to allow for expansion of our voluntary allotment program. 
In the past, technological constraints in OPM's automated systems 
limited the range of allotments offered to annuitants and survivors. 
Recent improvements in OPM's automated systems now make a broader range 
of allotments possible. In the future, additional allotments will be 
considered for inclusion in the program. Key considerations will be 
needed improvements in banking technology that will assure that 
allotments are processed and appropriate information provided to the 
allotees concerning the amount to be credited in each individual case, 
as well as the allotees' acceptance of responsibility for timely 
crediting of the allotment to the appropriate account on its records. 
OPM in its sole discretion, will determine if such allotments will be 
processed, pursuant to our statutory authority to make such 
determinations.
    There will be an immediate expansion in our program of State income 
tax withholding and full implementation of our pilot U.S. Savings Bonds 
allotment program. Participation in these programs will be entirely 
voluntary.
    As we have already stated, these regulations will also allow us to 
expand our voluntary allotment program to other areas such as 
allotments to checking and savings accounts. Other types of allotments 
are also under consideration; however, our ability to make some 
allotment programs available to annuitants and survivors will be 
dependent upon advancements in banking technology within the small, 
independent banking communities. Changes have already been proposed by 
the National Automated Clearing House Association (NACHA) to require 
the banking community to accept and pass on addendum information 
necessary to credit allotments to the proper accounts. As these changes 
become effective and more financial institutions are able to handle 
allotment transactions, we will determine which programs we consider 
appropriate for addition to the allotments program.

1. State Income Tax Withholding

    Sections 8345(k) and 8469 of title 5, United States Code, require 
OPM to provide State income tax withholding from Civil Service 
Retirement System (CSRS) and Federal Employees Retirement System (FERS) 
annuities. The statutes provide that the withholding will be made in 
accordance with an agreement between the State and OPM and require 
certain conditions in that agreement, including that the withholding be 
limited to annuitants who voluntarily request such withholding in 
writing, that the amounts withheld be retained in the Fund and 
disbursed to the States quarterly, and other administrative items 
concerning the frequency and timing of State tax changes that an 
annuitant may request. The current implementing regulations, contained 
in subpart S of part 831 (CSRS) and subpart J of part 841 (FERS) of 
Title 5, Code of Federal Regulations, require annuitants who want State 
income tax withholding to contact the State. The State prepares a list 
of taxpayers and amounts to be withheld and submits that list monthly 
to OPM via magnetic tape.
    The expanded State income tax withholding program will streamline 
the current withholding process by allowing our annuitants to 
communicate directly with OPM (instead of the individual States). 
Annuitants will be able to initiate or change State income tax 
withholding by writing or calling OPM. Current participants' State 
income tax withholdings from annuity will continue without 
interruption. OPM has already notified annuitants of the availability 
of the expanded program.
    Under the expanded program, States that wish to receive annuitant 
tax withholdings will no longer have to obtain election forms from 
annuitants and maintain their accounts. States need only execute an 
agreement with OPM. OPM will then assume administrative responsibility 
for the State income tax withholding program and permit annuitants to 
initiate or change their withholding by specifying a specific dollar 
amount.

2. Voluntary Allotments

    Sections 8345(h) and 8465(b) of title 5, United States Code, 
authorize an individual entitled to benefits from the Fund to make 
allotments from an annuity for such purposes as OPM considers 
appropriate. Under subpart O of part 831 of Title 5, Code of Federal 
Regulations, we issued regulations limiting the availability of 
allotments under this authority to payments to large national 
organizations existing primarily for the purpose of representing 
employees or annuitants. Using new technology, we are prepared to offer 
an expanded allotment program without eliminating the program 
applicable to current participants. The current program will be 
continued for participating organizations for 3 years from the date of 
publication of final regulations in order to give the organizations in 
the current program time to make the adjustments necessary to utilize 
the expanded program proposed by these regulations.
    The Savings Bond allotment program offers annuitants, for the first 
time, the opportunity to purchase U.S. Savings Bonds in a manner 
similar to the payroll-savings plan available to employees, except that 
the full purchase price of the bond must be paid each month. Series EE 
bonds are currently available in denominations of $100, $200, and $500. 
We have also added Series I bonds in denominations of $50, $75, $100, 
$500, $1,000, or $5,000. Other options may be added as they become 
available.

[[Page 33430]]

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because the regulation 
only provides information about the increased responsibility OPM will 
assume in providing certain allotment services to annuitants, survivors 
and former spouses.

Lists of Subjects in 5 CFR Parts 831 and 841

    Administrative practice and procedure, Air traffic controllers, 
Alimony, Claims, Disability benefits, Firefighters, Government 
employees, Income taxes, Intergovernmental relations, Law enforcement 
officers, Pensions, Retirement.

    U.S. Office of Personnel Management,
Janice R. LaChance,
Director.

    Accordingly, under 5 U.S.C. 8347, 8461, and as discussed in the 
preamble, OPM proposes to amend Title 5, Code of Federal Regulations 
Parts 831 and 841, as follows:

PART 831--RETIREMENT

    1. The authority citation for part 831 is revised to read as 
follows:

    Authority: 5 U.S.C. 8347; Sec. 831.102 also issued under 5 
U.S.C. 8334; Sec. 831.106 also issued under 5 U.S.C. 552a; 
Sec. 831.108 also issued under 5 U.S.C. 8336(d)(2); 
Sec. 831.201(b)(1) also issued under 5 U.S.C. 8347(g); 
Sec. 831.201(b)(6) also issued under 5 U.S.C. 7701(b)(2); 
Sec. 831.201(g) also issued under sections 11202(f), 11232(e), and 
11246(b) of Pub. L. 105-33, 111 Stat. 251; Sec. 831.204 also issued 
under section 102(e) of Pub. L. 104-8, 109 Stat. 102, as amended by 
section 153 of Pub. L. 104-134, 110 Stat. 1321; Sec. 831.303 also 
issued under 5 U.S.C. 8334(d)(2); Sec. 831.502 also issued under 5 
U.S.C. 8337; Sec. 831.502 also issued under section 1(3), E.O. 
11228, 3 CFR 1964-1965 Comp.; Sec. 831.663 also issued under 5 
U.S.C. 8339(j) and (k)(2); Secs. 831.663 and 831.664 also issued 
under Pub. L. 103-66, 107 Stat. 412; Sec. 831.682 also issued under 
section 201(d) of Pub. L. 99-251, 100 Stat. 23; subpart V also 
issued under 5 U.S.C. 8343a and section 6001 of Pub. L. 100-203, 101 
Stat. 1330-275; Sec. 831.2203 also issued under section 7001(a)(4) 
of Pub. L. 101-508; 104 Stat. 1388-328.


Secs. 831.1501, 831.1511 and 831.1521 (Subpart O)  [Removed and 
reserved]

    2. Subpart O of consisting of Secs. 831.1501, 831.1511, and 
831.1521, of part 831 is removed and reserved.


Secs. 831.1901-831.1907 (Subpart S)  [Removed and reserved]

    3. Subpart S, consisting of Secs. 831.1901 through 831.1907, of 
part 831 is removed and reserved.

PART 841--FEDERAL EMPLOYEES RETIREMENT SYSTEM--GENERAL 
ADMINISTRATION

    4. The authority citation for part 841 is revised to read as 
follows:

    Authority: 5 U.S.C. 8461; Sec. 841.108 also issued under 5 
U.S.C. 552a; subpart D also issued under 5 U.S.C. 8423; Sec. 841.504 
also issued under 5 U.S.C. 8422; Sec. 841.506 also issued under 5 
U.S.C. 7701(b)(2); Sec. 841.507 also issued under section 505 of 
Pub. L. 99-335; Sec. 841.508 also issued under section 505 of Pub. 
L. 99-335; subpart J also issued under 5 U.S.C 8345(k), 8345(h), 
8465(b), and 8469.

    5. Subpart J of part 841 is revised to read as follows:

Subpart J--Voluntary Allotments for State Income Tax Withholding and 
for Other Purposes

Sec.
841.1001  Purpose and scope.
841.1002  Definitions.
841.1003  State income tax withholding.
841.1004  Other voluntary allotments.
841.1005  Limitations.

Subpart J--Voluntary Allotments for State Income Tax Withholding 
and for Other Purposes


Sec. 841.1001  Purpose and scope.

    This subpart consolidates regulations pertaining to the Civil 
Service Retirement System (CSRS) and the Federal Employees Retirement 
System (FERS) on--
    (a) The State income tax withholding program required under 
sections 8345(k) and 8469 of title 5, United States Code; and
    (b) The program that OPM uses to honor annuitant requests for such 
other voluntary allotments as OPM may decide to allow from annuity 
payments under CSRS and FERS pursuant to sections 8345(h) and 8465(b) 
of title 5, United States Code.


Sec. 841.1002  Definitions.

    In this subpart--
    Allotment means a specified amount an annuitant voluntarily 
authorizes to be paid to an allottee.
    Allottee means the institution, organization or individual to which 
the allotment is paid. Annuitant means an individual who is a retiree, 
a former spouse, or a survivor.
    Annuity payment means the net monthly annuity payment due an 
annuitant after all authorized deductions (such as those for health 
benefits, Federal income tax, overpayment of annuity, indebtedness to 
the Government) have been made.
    Former spouse means an individual who is receiving recurring 
payments under CSRS or FERS based on a court order under part 838 of 
this chapter.
    Retiree means a former employee or Member who is receiving 
recurring payments under CSRS or FERS based on his or her service as an 
employee.
    Survivor means a widow, widower, child, former spouse, or person 
with an insurable interest who is receiving recurring payments under 
CSRS or FERS based on the death of an employee, Member, or retiree.


Sec. 841.1003  State income tax withholding.

    (a) Agreements with States. OPM will maintain a program under which 
an annuitant may voluntarily request State income tax withholding for a 
State with which OPM has an agreement for withholding State income 
taxes from CSRS and FERS annuities.
    (b) Agreements between OPM and a State will establish each party's 
responsibilities in the process of withholding for State income taxes 
from CSRS and FERS annuities.
    (c) Agreements for State income tax withholding may be modified or 
terminated--
    (1) By OPM or the State in accordance with the terms of the 
agreement; or
    (2) By OPM in accordance with appropriate rulemaking procedures 
pursuant to title 5 of the United States Code.


Sec. 841.1004  Other voluntary allotments.

    (a) General. An annuitant may make an allotment from annuity 
payments for any purpose OPM deems appropriate.
    (b) Effective dates. A request for an allotment is effective when 
processed by OPM. OPM will process each request no later than the 1st 
day of the second month following the month in which it is received, 
but incurs no liability or indebtedness to the annuitant or allottee by 
its failure to do so.
    (c) Disputes. A dispute regarding any authorized allotment properly 
paid by OPM is a matter between the annuitant and the allotee.


Sec. 841.1005  Limitations.

    (a) The total amount of any allotments may not exceed the annuity 
payment due.
    (b) Allotments--State income tax withholdings excepted-- are paid 
only on the regularly designated paydays of the annuitant.
    (c) Payment of an allotment will be discontinued when annuity 
payments are terminated or suspended by OPM. OPM is not responsible for 
any interest or penalties incurred when allotments are discontinued due 
to the termination or suspension of annuity payments.
    (d)(1) If annuity payments are made beyond the date the annuitant's 
entitlement to annuity ceases, the

[[Page 33431]]

annuitant must repay any allotments paid after the date annuity 
payments should have ceased.
    (2) If annuity payments are made after the annuitant's death, OPM 
will recover from--
    (i) His or her estate; or,
    (ii) In an appropriate case, from any survivor benefits payable 
based on the annuitant's service; or
    (iii) If there is neither an estate nor a survivor annuity payable, 
from the allottee.
    (f) Allotments, except allotments to large organizations under 
agreements established prior to the effective date of these 
regulations, may only be made to a valid electronic-funds-transfer 
address established under part 210 of title 31, Code of Federal 
Regulations.

[FR Doc. 99-15686 Filed 6-22-99; 8:45 am]
BILLING CODE 6325-012-P