[Federal Register Volume 66, Number 48 (Monday, March 12, 2001)]
[Rules and Regulations]
[Pages 14446-14449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6042]



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Part II





Federal Retirement Thrift Investment Board





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5 CFR Part 1605



Correction of Administrative Errors; Final Rule

  Federal Register / Vol. 66, No. 48 / Monday, March 12, 2001 / Rules 
and Regulations  

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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1605


Correction of Administrative Errors

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Final rule.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) is amending the Board's regulations on 
correction of administrative errors to change the period of time for 
submission of claims for the correction of errors in a participant's 
Thrift Savings Plan (TSP) account. As presently written, certain 
sections of the regulations impose conflicting duties upon participants 
to file claims for correction of errors in their TSP accounts within 
one year of receipt of notice of an error, and also upon employing 
agencies or the Board to correct an error without regard to when the 
error is discovered. The amended regulation resolves this conflict by 
specifying when errors must be corrected by the employing agency, the 
Board, or the TSP record keeper, as the case may be, and when they may 
be corrected in the sound discretion of these parties.
    In addition, the amended regulation provides that lost earnings in 
back pay cases involving separations from service will be calculated 
based upon the G Fund rates of return, as the regulation presently 
provides, or as otherwise requested by the parties or ordered by a 
court or other tribunal with jurisdiction over the back pay case.

EFFECTIVE DATE: March 12, 2001.

FOR FURTHER INFORMATION CONTACT: Salomon Gomez on (202) 942-1661, 
Patrick J. Forrest on (202) 942-1659, FAX (202) 942-1676, or Merritt A. 
Willing on (202) 942-1666.

SUPPLEMENTARY INFORMATION: The Board administers the TSP, which was 
established by the Federal Employees' Retirement System Act of 1986 
(FERSA), Public Law 99-335, 100 Stat. 514, codified, as amended, 
largely at 5 U.S.C. 8351 and 8401-8479. The TSP is a tax-deferred 
retirement savings plan for Federal employees, similar to a cash or 
deferred arrangement established under section 401(k) of the Internal 
Revenue Code. Sums in a TSP participant's account are held in trust for 
that participant.
    On December 27, 1996, and May 1, 1998, the Board published final 
rules in the Federal Register concerning the correction of 
administrative errors (61 FR 67472 and 63 FR 24380). These rules were 
codified at 5 CFR part 1605 and explain how employing agencies, the TSP 
record keeper, and the Board identify and correct administrative errors 
in TSP contributions or account balances. The Board published an 
amendment to part 1605 in proposed form in the Federal Register on 
April 13, 2000 (65 FR 19862). The Board received five comments, three 
from Federal agencies and two from individuals.
    One agency endorsed the idea of holding participants accountable 
for ensuring that their transactions are completed correctly, pointing 
out that it was often difficult for an agency to correct an error after 
an extended period of time. Another agency asked what types of errors 
would warrant the exercise of sound discretion in deciding whether to 
correct them and who would be responsible for making such decisions.
    The regulation provides that an agency may exercise its sound 
discretion to correct any error that it discovers or is brought to its 
attention after the time period has passed for mandatory correction. 
See Sec. 1605.6(b). Each agency will have to decide how to handle these 
issues. The document in which the agency describes its claims process 
(whether a regulation or internal directive) should also identify those 
persons responsible for making the decision. The Board expects that 
agencies will decide to give responsibility for exercising the agency's 
discretion to the same persons that presently have responsibility for 
considering participant claims for TSP error correction.
    The Board expects that, in designing the claims procedures that are 
required by this part, agencies will describe the types of errors which 
might warrant correction even if notice was untimely. Examples of 
situations where an agency might exercise its discretion to correct an 
error that it is not otherwise required to correct are situations in 
which the employee has a reasonable explanation for failing to identify 
the error in a timely fashion.
    One agency pointed out that an employee might be out of the country 
for months at a time or may have had a long illness. Where such an 
absence or illness has prevented the participant from reviewing his or 
her participant statement, the agency may exercise its discretion to 
correct the error. On the other hand, where the participant simply has 
neglected to look at his or her participant statement in a timely 
fashion, the agency may decline to exercise its discretion to correct 
the error.
    A third agency was concerned with the proposed change to the method 
by which earnings would be calculated in back pay cases involving 
separation from service. The agency pointed out that some back pay 
cases involving separation are resolved by an appeal within the agency, 
without the intervention of a court or other tribunal. In the proper 
case, the agency might agree that, but for the separation, the 
participant would have continued to contribute to the TSP in accordance 
with his or her contribution allocation on file at the time of the 
separation. The agency therefore suggested that the TSP also accept an 
agreement by the parties that lost earnings on such TSP contributions 
should be calculated based on the returns of the funds to which the 
employee was contributing at the time of separation.
    It was the Board's intent to include cases in which the back pay 
issue was settled by the parties before it reached the courts. However, 
the Board recognizes that the proposed language might not be 
interpreted to permit that result. Therefore, the Board has changed the 
language of Sec. 1605.4 to permit explicitly the payment of earnings at 
a rate other than at the G Fund rate upon agreement of the parties in 
back pay cases that do not reach the courts.
    The other two commenters objected to the amendment. The first 
suggested that the Board give a participant 60 days, rather than 30, 
after receipt of a TSP participant statement to file a claim for 
correction. The commenter asserted that in other situations, such as 
errors in bank statements or credit card statements, an account holder 
generally has 60 days to bring the error to the attention of the 
financial institution. One of the agency commenters also suggested that 
30 days may not always be sufficient time for a participant to seek 
correction. (This agency offered the examples given above, such as 
absence or illness, which the Board believes would be appropriate for 
the exercise of agency discretion.)
    In light of these comments, the Board again reviewed the types of 
errors that can be made by an employing agency, the Board, or the TSP 
record keeper to determine the applicability of the 30-day claim 
period. Effective May 1, 2001, the TSP will modify its current record 
keeping system to introduce two new investment funds. Also at this 
time, participants will submit contribution allocation elections 
directly to the TSP, not to their employing agencies. Following these 
changes, the Board can identify only two TSP transactions that will be 
performed by employing agencies that can directly affect the

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value of participants' accounts, both generically involving payment: 
remitting contributions and remitting loan repayments. The Board can 
discern no reason to differentiate the time for correction of errors 
made with respect to these payments. Thus, the Board has amended 
Sec. 1605.6(a) to provide that an employing agency must correct any 
error in a TSP payment, whenever the error is discovered (by either the 
agency or by the participant) within six months of its occurrence.
    Presently, employing agencies also perform a third type of 
transaction, i.e., effecting participant's chosen contribution 
allocation. A contribution allocation error affects the investment of 
future contributions and, when the current record keeping system is 
modified, loan payments. Thus, a contribution allocation error does not 
entail an incorrect remittance; it entails the erroneous investment of 
a correct remittance. To provide too long a time period to file a claim 
for an erroneous investment would allow a participant to use hindsight 
to make an investment decision.
    After May 1, 2001, agencies will no longer report the allocation of 
contributions among the investment funds (and, thus, agency errors in 
contribution allocations will not be possible). Instead, participants 
will submit contribution allocations directly to the TSP record keeper, 
and the TSP will use these allocations to invest the contributions 
remitted by their agencies. Although participants will then be able to 
change their contribution allocations at any time (which will affect 
the investment of future contributions), it will be difficult to 
correct contribution allocation errors made by agencies after the TSP 
begins processing contribution allocations. For these reasons, the 
Board has retained the 30-day claim period, but has limited its 
applicability to errors involving contribution allocations processed by 
agencies before May 1, 2001.
    The proposed regulation concerning correction of Board and TSP 
record keeper errors (Sec. 1605.8) requires correction of an error made 
within six months of its discovery if the error involves the withdrawal 
of an account, the change of a withdrawal election, or the distribution 
of a death benefit. ``Other'' errors would be corrected only if 
discovered within 30 days after issuance of a TSP participant statement 
or a transaction confirmation. ``Other'' errors may occur in the 
posting of a loan repayment, the restoration of a forfeited account, 
the issuance of a court-ordered payment, the disbursement of a loan, or 
the processing of a contribution allocation or an interfund transfer. 
With the exception of contribution allocations or interfund transfers, 
each of these potential errors concerns the TSP's processing of a 
receipt or disbursement. The Board has decided that there is no reason 
to differentiate the time for correction among the explicitly 
enumerated errors and the foregoing ``other'' errors (except for 
contribution allocations and interfund transfers). Thus, the Board has 
amended Sec. 1605.8 to provide that the TSP must correct any error 
involving a receipt or disbursement if the error is discovered within 6 
months of its occurrence.
    In contrast, contribution allocations and interfund transfers 
involve neither a receipt nor a disbursement. As indicated above, a 
contribution allocation affects the investment allocation of a 
participant's future contributions and loan payments among the TSP 
investment funds; an interfund transfer is initiated by a participant 
to shift monies among different investment funds. At the time the 
contribution allocation or interfund transfer request is processed, the 
TSP mails the participant a confirmation notice. Application of a 30-
day time limit for (mandatory) correction will require a participant to 
be vigilant in assuring his or her instructions have been carried out 
correctly; it will also prevent a participant from using extended 
hindsight to decide whether to request a correction.
    The Board had considered whether a different time limitation might 
be more appropriate for the correction of contribution allocations or 
interfund transfers. For example, the Uniform Commercial Code (Sec. 8-
319) provides that, where a sale or purchase of a security is confirmed 
in writing, the transaction is enforceable if no written objection is 
made to it within 10 days after receipt of the confirmation. The Board 
believes that this error correction period is relevant to both 
contribution allocations and interfund transfers, which entail an 
explicit written confirmation. However, the Board also believes that 10 
days is too short and that 30 days is more reasonable. For these 
reasons, the Board has retained the 30-day period in the final 
regulation, but for contribution allocations and interfund transfers 
only.
    The second individual commenter objected because the Board's 
regulations require that participants take an active role in correcting 
errors in their accounts. The commenter stated that participants should 
be relieved of any responsibility because employing agencies, and not 
participants, have the information necessary to discover and correct an 
error. However, participants do have access to relevant TSP 
information. Participants know the amount of their basic pay from the 
pay and leave statements that they receive from their employing 
agencies every pay period. Participants know the amount of employee 
contributions they have elected to make to the TSP, and can determine 
from the pay and leave statement whether the proper amount is being 
deducted. Participants know how they elected to have their 
contributions allocated among the TSP's investment funds, and can 
determine from the participant statements issued by the TSP whether 
their contributions have been deposited in the correct fund. 
Participants can also determine from their participant statements 
whether agency contributions have been made to their TSP accounts at 
the correct time and in the correct amount. Further information, such 
as the rates of return for each fund, is available from the TSP Web 
site. Thus, just as users of commercial services are expected to review 
statements recording transactions in their accounts and to assert their 
rights in the event of an error, so are TSP participants.
    The commenter also stated that employing agencies and the Board 
fail to provide information to participants concerning the payment of 
lost earnings or the deposit of makeup contributions. However, lost 
earnings are shown on the participant statement and makeup 
contributions are shown on both the pay and leave statement and the 
participant statement. Furthermore, before makeup contributions can be 
made, participants must prepare, with their agencies, a schedule of 
makeup contributions against which participants can compare the 
activity in their accounts. See 5 CFR 1605.2(c). Thus, participants 
have sufficient information available to determine whether makeup 
contributions and lost earnings are being properly credited to their 
accounts.
    The commenter objected at length about the problems arising out of 
retirement system misclassification. The Office of Personnel Management 
and the employing agencies, not the Board, are responsible for 
retirement system classification. However, the Federal Erroneous 
Retirement Coverage Corrections Act, Public Law 106-265, signed on 
September 19, 2000, addresses the commenter's concerns. The Office of 
Personnel Management is responsible for its implementation.
    Finally, the commenter objected to the Board's lack of authority to 
penalize agencies that fail to follow its regulations concerning error 
correction.

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However, the Board is unaware of an agency that has refused to follow 
its error correction regulations to correct an error.
    For these reasons, the Board is adopting the proposed regulation, 
but with the changes as discussed above.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities. They will 
affect only employees of the Federal Government.

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, 2 U.S.C. 602, 
632, 653, and 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.

Submission to Congress and the General Accounting Office

    Pursuant to 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 publication of this rule in today's 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 1605

    Claims, Employment benefit plans, Government employees, Pensions, 
Retirement.

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

    For the reasons set out in the preamble, 5 CFR part 1605 is amended 
as set forth below:

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.


Sec. 1605.4  [Amended]

    2. Section 1605.4 is amended by adding after the word ``account'' 
at the end of paragraph (a)(3) the words ``unless otherwise requested 
by the agency (with the concurrence of the participant) or as ordered 
by a court or other tribunal with jurisdiction over the participant's 
back pay case''.

    3. Section 1605.6 is revised to read as follows:


Sec. 1605.6  Procedures for claims against employing agencies; time 
limitations.

    (a) Agency's discovery of error. (1) Upon discovery of an error 
made within the past six months involving the correct or timely 
remittance of payments to the TSP (other than a contribution allocation 
error as covered in paragraph (a)(2) of this section or a retirement 
system misclassification error, as covered in paragraph (c) of this 
section), an employing agency must promptly correct the error on its 
own initiative. If the error was made more than six months before its 
discovery, the agency may exercise sound discretion in deciding whether 
to correct it, but, in any event, the agency must act promptly in doing 
so.
    (2) An employing agency must promptly correct a contribution 
allocation error that occurred before May 1, 2001, on its own 
initiative if it is discovered within 30 days of its first occurrence. 
No contribution allocation error which occurred before May 1, 2001 may 
be corrected if it is not the subject of a timely discovery.
    (b) Participant's discovery of error. (1) If an agency fails to 
discover an error of which a participant has knowledge involving the 
correct or timely remittance of a payment to the TSP (other than a 
contribution allocation error as covered by paragraph (b)(2) of this 
section, or a retirement system misclassification error as covered by 
paragraph (c) of this section), the participant may file a claim for 
correction thereof with his or her employing agency without limitation 
of time. The agency must promptly correct any such error for which the 
participant files a claim within six months of its occurrence; the 
correction of any such error for which the participant files a claim 
after that time is in the agency's sound discretion.
    (2) A participant may file a claim for correction of a contribution 
allocation error made before May 1, 2001, with his or her employing 
agency no later than 30 days after the participant receives a TSP 
participant statement first reflecting the error. The agency must 
promptly correct such errors.
    (3) If a participant fails to file a claim for correction of an 
error described in paragraph (b)(2) of this section in a timely manner, 
no such error may be corrected.
    (c) Retirement system misclassification error. Errors arising from 
retirement system misclassification must be corrected no matter when 
they are discovered, whether by an agency or a participant.
    (d) Agency procedures. Each employing agency must establish 
procedures for participants to submit claims for correction under this 
subpart. Each employing agency's procedures must include the following:
    (1) The employing agency must provide the participant with a 
decision on any claim within 30 days of its receipt, unless the 
employing agency provides the participant with good cause for requiring 
a longer period to decide the claim. A decision to deny a claim in 
whole or in part must be in writing and must include the reasons for 
the denial, citations to any applicable statutes, regulations, or 
procedures, a description of any additional material that would enable 
the participant to perfect the claim, and a statement of the steps 
necessary to appeal the denial.
    (2) The employing agency must permit a participant at least 30 days 
to appeal the employing agency's denial of all or any part of a claim 
for correction under this subpart. The appeal must be in writing and 
addressed to the agency official designated in the initial decision or 
in procedures promulgated by the agency. The participant may include 
with his or her appeal any documentation or comments that the 
participant deems relevant to the claim.
    (3) The employing agency must issue a written decision on a timely 
appeal within 30 days of receipt of the appeal, unless the employing 
agency provides the participant with good cause for requiring a longer 
period to decide the appeal. The employing agency decision must include 
the reasons for the decision, as well as citations to any applicable 
statutes, regulations, or procedures.
    (4) If the agency decision on the appeal is not issued in a timely 
manner, or if the appeal is denied in whole or in part, the participant 
will be deemed to have exhausted his or her administrative remedies and 
will be eligible to file suit against the employing agency under 5 
U.S.C. 8477. There is no administrative appeal to the Board of a final 
agency decision.

    4. Section 1605.8 is revised to read as follows:


Sec. 1605.8  Claims for correction of Board or TSP record keeper 
errors; time limitations.

    (a) Filing claims. Claims for correction of Board or TSP record 
keeper errors

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under this subpart may be submitted initially either to the TSP record 
keeper or the Board. The claim must be in writing and may be from the 
affected participant or beneficiary.
    (b) Board's or TSP record keeper's discovery of error. (1) Upon 
discovery of an error made within the past six months involving a 
receipt or a disbursement, the Board or TSP record keeper must promptly 
correct the error on its own initiative. If the error was made more 
than six months before its discovery, the Board or TSP record keeper 
may exercise sound discretion in deciding whether to correct the error, 
but, in any event, must act promptly in doing so.
    (2) For errors concerning contribution allocations or interfund 
transfers, the Board or TSP record keeper must promptly correct the 
error if it is discovered before 30 days after the issuance of the 
earlier of the most recent TSP participant (or loan) statement or 
transaction confirmation that reflected (or would reflect) the error. 
If it is discovered after that time, the Board or TSP record keeper may 
use its sound discretion in deciding whether to correct it, but, in any 
event, must act promptly in doing so.
    (c) Participant's or beneficiary's discovery of error. (1) If the 
Board or TSP record keeper fails to discover an error of which a 
participant or beneficiary has knowledge involving a receipt or a 
disbursement, the participant or beneficiary may file a claim for 
correction thereof with the Board or TSP record keeper without 
limitation of time. The Board or TSP record keeper must promptly 
correct any such error for which the participant or beneficiary filed a 
claim within six months of its occurrence; the correction of any such 
error for which the participant or beneficiary filed a claim after that 
time is in the sound discretion of the Board or TSP record keeper.
    (2) For errors involving contribution allocations or interfund 
transfers of which a participant or beneficiary has knowledge, he or 
she may file a claim for correction thereof with the Board or TSP 
record keeper no later than 30 days after receipt of the earlier of a 
TSP participant (or loan) statement or transaction confirmation 
reflecting the error. The Board or TSP record keeper must promptly 
correct such errors.
    (3) If a participant or beneficiary fails to file a claim for 
correction of contribution allocations or interfund transfers in a 
timely manner, the Board or TSP record keeper may nevertheless, in its 
sound discretion, correct any such error that is brought to its 
attention.
    (d) Processing claims. (1) If the initial claim is submitted to the 
TSP record keeper, the TSP record keeper may either respond directly to 
the claimant, or may forward the claim to the Board for response. If 
the TSP record keeper responds to a claim, and all or any part of the 
claim is denied, the claimant may request review by the Board within 90 
days of the date of the record keeper's response.
    (2) If the Board denies all or any part of a claim (whether upon 
review of a TSP record keeper denial or upon an initial review by the 
Board), the claimant will be deemed to have exhausted his or her 
administrative remedy and may file suit under 5 U.S.C. 8477. If the 
claimant does not submit a request to the Board for review of a claim 
denial by the TSP record keeper within the 90 days permitted under 
paragraph (d)(1) of this section, the claimant shall be deemed to have 
accepted the TSP record keeper's decision.

[FR Doc. 01-6042 Filed 3-9-01; 8:45 am]
BILLING CODE 6760-01-P