[Federal Register Volume 66, Number 58 (Monday, March 26, 2001)]
[Proposed Rules]
[Pages 16415-16418]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-7233]


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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1601


Participants' Choices of Investment Funds

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Proposed rule.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) proposes to revise the regulations on 
participants' choices of investment funds. This proposed rule 
implements a provision of the Thrift Savings Plan Act of 1996 which 
added two new investment funds to the Thrift Savings Plan (TSP). It 
also implements a decision by the Board to transfer the processing of 
contribution allocations from the employing agencies to the TSP record 
keeper.

DATES: Comments must be received on or before April 25, 2001.

ADDRESSES: Comments may be sent to: Elizabeth S. Woodruff, General 
Counsel, Federal Retirement Thrift Investment Board, 1250 H Street, 
N.W., Washington, D.C. 20005.

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

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. The TSP provisions of FERSA 
have been 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 cash or deferred arrangements 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 July 17, 1995, and September 14, 1995, the Board published in 
the Federal Register (60 FR 47836 and 60 FR 36630) final rules 
concerning participants' choices of investment funds. This proposed 
rule amends those rules.
    The Thrift Savings Plan Act of 1996, Public Law 104-208, 110 Stat. 
3009, authorized the creation of two new investment funds for the TSP. 
The new funds are the Small Capitalization Stock Index Fund (S Fund) 
and the International Stock Index Investment Fund (I Fund). The S Fund 
will comprise a portfolio designed to track the performance of an index 
of common stocks the aggregate market value of which represents the 
United States equity markets, excluding the common stocks held in the 
Common Stock Index Investment Fund (C Fund). The I Fund will comprise a 
portfolio designed to track the performance of common stocks the 
aggregate market value of which is a reasonably complete representation 
of the international equity markets, excluding the Unites States equity 
market. In addition to these new funds, participants will continue to 
have the option to invest in the Government Securities Investment Fund 
(G Fund), the Fixed Income Investment Fund (F Fund), and the Common 
Stock Index Investment Fund (C Fund). Effective May 1, 2001, the Board 
will modify its current record keeping system to incorporate these new 
funds and will also change the way contribution allocations are 
processed.

Analysis

    The proposed rule eliminates Secs. 1601.2(a), (c) and (d), 
1601.4(b), and 1601.6 because those sections are obsolete. Sections 
1601.3 and 1601.7 have been redesignated as Sec. 1602.36; effective May 
1, 2001, error correction will be processed in accordance with part 
1605.
    Proposed subpart A contains definitions relevant to participants' 
choices of investment funds, as it does currently. The definitions of 
allocation election, election form, and election period in the existing 
regulation are deleted as unnecessary. Other definitions, such as Board 
and CSRS, are deleted because they are not specifically applicable to 
participants' choices of investment funds.
    In subpart B of the proposed regulation, the Board explains a new 
process for making a contribution allocation. Contribution allocations 
apply to future TSP contributions and loan payments. Currently, 
participants make a contribution election and a contribution allocation 
at the same time, on Form TSP-1; this form is submitted to the 
participant's employing agency. Participants will continue to use Form 
TSP-1 to make contribution elections and will submit that form to their 
employing agency. However, on May 1, 2001, when the new funds are 
implemented, contribution allocations will be submitted to the TSP 
record keeper following the procedures described in proposed Subpart B.
    Subpart B includes a transition rule that explains how new 
contributions will initially be invested upon implementation of the new 
funds. This transition rule will apply to contributions and loan 
payments posted after April 30, 2001. In particular, Sec. 1601.12 
provides that beginning on May 1, 2001, contributions and loan payments 
for each TSP account will be invested based on the allocation of the 
most recent contribution posted to a participant's account between 
March 15 and April 30, 2001. If there was none, contributions and loan 
payments will be invested based upon any interfund transfer request 
pending for April 30, 2001. If there is no interfund transfer request 
pending for April 30, 2001, contributions and loan payments will be 
allocated based upon the participant's March 31, 2001 month-end account 
balance. If a participant's March month-end account balance is zero, 
his or her contributions and loan payments will be invested in the G 
Fund. This derived allocation will continue until a valid contribution 
allocation is received and processed.

[[Page 16416]]

    For accounts first established on or after May 1, 2001, 
contributions and other deposits received will be invested in the G 
Fund until the participant makes a different contribution allocation. 
The participant may subsequently make a contribution allocation to 
change the investment of future contributions or an interfund transfer 
to change the investment of his or her existing account balance at any 
time after he or she is notified by the TSP record keeper that the 
account has been established. Effective May 1, 2001, all TSP 
participants may elect to invest all or part of their new contributions 
and loan payments in any of the five investment funds.
    Proposed Sec. 1601.13 explains that, effective May 1, 2001, a 
participant may make a contribution allocation by using the TSP Web 
site, the ThriftLine, or by completing a Form TSP-50, Investment 
Allocation. Section 1601.13 explains the requirements for a valid 
contribution allocation, largely incorporating existing Sec. 1601.2(b). 
It also explains that participants will be able to make contribution 
allocations in increments of one percent instead of the current five 
percent.
    Subpart C describes the rules that a participant must follow in 
order to make an interfund transfer of his or her existing TSP account 
balance. Section 1601.22 of the proposed regulation essentially 
incorporates Sec. 1601.5 of the existing regulations and also provides 
that, effective May 1, 2001, a participant may use the TSP Web site, 
the ThriftLine, or a Form TSP-50 to request an interfund transfer.
    Subpart D has been added to part 1601 to consolidate rules that 
apply to participants' choices of investment funds for new 
contributions (contribution allocations) and to redistributing existing 
account balances (interfund transfers). For example, Sec. 1602.32 
describes the timing and posting dates for contribution allocations and 
interfund transfer requests. Section 1602.33 provides that a 
participant who elects to make an interfund transfer to the F Fund, C 
Fund, S Fund, or I Fund must execute an acknowledgment of risk (that 
the investment is made at the participant's risk and the participant 
understands that the TSP does not guarantee investment returns or 
guarantee against a loss in the value of the investment). Section 
1602.34 prescribes the rules for giving effect to a Form TSP-50.

                         Cross-Reference Tables
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              Old section                          New section
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1601.1.................................  1601.1
1601.2(a), (c), (d)....................  Deleted.
1601.2(b)..............................  1601.13
1601.3.................................  1601.36
1601.4(a)..............................  1601.21
1601.4(b)..............................  Deleted.
1601.5.................................  1601.22
1601.6.................................  1601.32
1601.7.................................  1601.36
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------------------------------------------------------------------------
              New section                          Old section
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1601.1.................................  1601.1
1601.11................................  New.
1601.12................................  New.
1601.13................................  1601.2(b)
1601.21................................  New.
1601.22................................  1601.5
1601.31................................  New.
1601.32................................  1601.6
1601.33................................  New
1601.34................................  New.
1601.35................................  New.
1601.36................................  1601.3, 1601.7.
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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.

List of Subjects in 5 CFR Part 1601

    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, the Board proposes to 
revise 5 CFR part 1601 to read as follows:

PART 1601--PARTICIPANTS' CHOICES OF INVESTMENT FUNDS

Subpart A--General
Sec.
1601.1   Definitions.
Subpart B--Investing Future Contributions and Loan Payments
1601.11  Applicability.
1601.12  Investing future contributions and loan payments in the TSP 
investment funds.
1601.13  Elections.
Subpart C--Redistributing Participants' Existing Account Balances
1601.21  Applicability.
1601.22  Methods of requesting an interfund transfer.
Subpart D--Contribution Allocations and Interfund Transfer Requests
1601.31  Applicability.
1601.32  Timing and posting dates.
1601.33  Acknowledgment of risk.
1601.34  Effectiveness of Form TSP-50.
1601.35  Posting of transaction requests.
1601.36  Error correction.

    Authority: 5 U.S.C. 8351, 8438, 7474(b)(5) and (c)(1).

Subpart A--General


Sec. 1601.1  Definitions.

    As used in this part:
    Account balance means the sum of the dollar balances for each 
source of contributions in each investment fund for an individual 
account.
    Acknowledgment of risk means an acknowledgment that any investment 
in the F Fund, C Fund, S Fund, or I Fund is made at the participant's 
risk, that the participant is not protected by the United States 
Government or the Board against any loss on the investment, and that 
neither the United States Government nor the Board guarantees any 
return on the investment.
    C Fund means the Common Stock Index Investment Fund established 
under 5 U.S.C. 8438(b)(1)(C).
    Contribution allocation means the apportionment of a participant's 
future contributions and loan payments among the TSP investment funds.
    Day means calendar day, unless otherwise stated.
    Employing agency means the organization that employs an individual 
eligible to contribute to the TSP and that has authority to make 
personnel compensation decisions for the individual.
    F Fund means the Fixed Income Investment Fund established under 5 
U.S.C. 8438(b)(1)(B).
    G Fund means the Government Securities Investment Fund established 
under 5 U.S.C. 8438(b)(1)(A).

[[Page 16417]]

    I Fund means the International Stock Index Investment Fund 
established under 5 U.S.C. 8438(b)(1)(E).
    Interfund transfer means the reapportionment, under this part, of a 
participant's existing account balance among the various TSP investment 
funds.
    Investment fund means any investment fund authorized under 5 U.S.C. 
8438.
    S Fund means the Small Capitalization Stock Index Fund established 
under 5 U.S.C. 8438(b)(1)(D).
    Source of contributions means employee contributions, agency 
automatic (1%) contributions, or agency matching contributions.
    ThriftLine means the automated voice response system by which TSP 
participants may, among other things, access their accounts by 
telephone. The ThriftLine can be reached at (504) 255-8777.
    TSP record keeper means the entity that is engaged by the Board to 
perform record keeping services for the Thrift Savings Plan. As of the 
date of publication of this part, the TSP record keeper is the National 
Finance Center, United States Department of Agriculture, located in New 
Orleans, Louisiana.
    TSP Web site means the Internet location maintained by the Board, 
which contains information about the TSP and by which TSP participants 
may, among other things, access their accounts by computer. The TSP Web 
site address is http://www.tsp.gov.

Subpart B--Investing Future Contributions and Loan Payments


Sec. 1601.11  Applicability.

    This subpart applies only to the investment of future contributions 
and loan payments in the TSP's investment funds; it does not apply to 
redistributing participants' existing account balances among the 
investment funds, which is covered in subpart C of this part.


Sec. 1601.12  Investing future contributions and loan payments in the 
TSP investment funds.

    (a) Transition rule. Effective May 1, 2001, contributions and loan 
payments will be allocated among the investment funds based on the 
allocation of the most recent contribution posted to the account 
between March 15, 2001, and April 30, 2001. If no contributions have 
been posted to an account between March 15, 2001, and April 30, 2001, 
the allocation will be based on the allocation shown on an interfund 
transfer request pending for April 30, 2001. If there is no interfund 
transfer pending for April 30, 2001, the allocation will be based on 
the allocation of the account as of the March 31, 2001, account 
balance. If the March 31, 2001, account balance is zero, the 
contributions and loan payments will be allocated 100% to the G Fund. 
The allocation derived under this section will be applied to all 
contributions and loan payments posted as of a date after April 30, 
2001, until a new contribution allocation is made by the participant 
pursuant to Sec. 1600.12.
    (b) Investment fund availability. Effective May 1, 2001, all 
participants may elect to invest all or any portion of their future 
contributions and loan payments in any of the TSP's five investment 
funds.


Sec. 1601.13  Elections.

    (a) Contribution allocation. Effective May 1, 2001, each 
participant may indicate his or her choice of investment funds for the 
allocation of future contributions and loan payments by using the TSP 
Web site or the ThriftLine, or completing Form TSP-50, Investment 
Allocation. The following rules apply to contribution allocations:
    (1) Contribution allocations must be made in one percent 
increments. The sum of the percentages elected for all of the 
investment funds must equal 100%;
    (2) The percentage elected by a participant for investment of 
future contributions in an investment fund will be applied to all 
sources of contributions and loan payments. A participant may not make 
different percentage elections for different sources of contributions 
or for loan payments;
    (3) A participant who elects for the first time to invest 
contributions and loan payments in the F Fund, C Fund, S Fund, or I 
Fund must execute an acknowledgment of risk in accordance with 
Sec. 1601.33;
    (4) All contributions and loan payments made on behalf of a 
participant who does not have a contribution allocation in effect will 
be invested in the G Fund;
    (5) Once a contribution allocation becomes effective, it remains in 
effect until it is superseded by a subsequent contribution allocation. 
If a separated participant is rehired, his or her last contribution 
allocation before separation from service will be given effect until a 
new allocation is made.
    (b) Effect of rejection of form. If a Form TSP-50 is rejected, the 
purported contribution allocation made on the form will have no effect. 
The TSP will provide the participant with a written statement of the 
reason the form was rejected.
    (c) Contribution elections. A participant may designate the amount 
of employee contributions he or she wishes to make to the TSP or may 
stop contributions only in accordance with 5 CFR part 1600.

Subpart C--Redistributing Participants' Existing Account Balances


Sec. 1601.21  Applicability.

    This subpart applies only to redistributing participants' existing 
account balances among the TSP's investment funds; it does not apply to 
the investment of future contributions and loan payments, which is 
covered in subpart B of this part.


Sec. 1601.22  Methods of requesting an interfund transfer.

    (a) Effective May 1, 2001, participants may make an interfund 
transfer using the TSP Web site or the ThriftLine, or by completing a 
Form TSP-50, Investment Allocation. The following rules apply to an 
interfund transfer request:
    (1) Interfund transfer requests must be made in one percent 
increments. The sum of the percentages elected for all of the 
investment funds must equal 100%;
    (2) The percentages elected by the participant will be applied to 
the balances from each source of contributions that make up the 
participant's total account balance on the effective date of the 
interfund transfer;
    (3) Any participant who elects to invest in the F Fund, C Fund, S 
Fund, or I Fund for the first time must execute an acknowledgment of 
risk in accordance with Sec. 1601.33.
    (b) An interfund transfer request has no effect on contributions 
and loan payments made after the effective date of the interfund 
transfer request; subsequent contributions and loan payments will 
continue to be allocated among the investment funds in accordance with 
the participant's contribution allocation made under subpart B of this 
part.

Subpart D--Contribution Allocations and Interfund Transfer Requests


Sec. 1601.31  Applicability.

    This subpart applies both to contribution allocations made under 
subpart B of this part and interfund transfers made under subpart C of 
this part.

[[Page 16418]]

Sec. 1601.32  Timing and posting dates.

    (a) Posting dates. (1) A contribution allocation will ordinarily be 
posted within 2 business days after it is received.
    (2) An interfund transfer request received by midnight (central 
time) on the 15th of the month will be posted to a participant's 
account as of the last day of the month. (If the 15th of the months 
falls on a weekend, holiday, or other nonbusiness day, the deadline 
will be the next business day.) Requests received after the deadline 
will be posted to a participant's account as of the last day of the 
following month.
    (b) Limit. There is no limit on the number of contribution 
allocations or interfund transfer requests that may be made by a 
participant; however, only one interfund transfer will be processed per 
month.
    (c) Multiple contribution allocations or interfund transfer 
requests. (1) If two or more contribution allocations or two or more 
interfund transfer requests with different dates are received for a 
participant and would be posted on the same day under the rules set 
forth in paragraph (a) of this section, only the last contribution 
allocation or interfund transfer request with the latest date will be 
posted.
    (2) If two or more contribution allocations or two or more 
interfund transfer requests with the same date are received for a 
participant and would be posted on the same day, the following rules 
will apply:
    (i) If one or more of the contribution allocations or interfund 
transfer requests are submitted through the TSP Web site or the 
ThriftLine and one or more are made on a Form TSP-50 and would be 
posted on the same day, only the latest contribution allocation or 
interfund transfer request made through the TSP Web site or the 
ThriftLine will be posted;
    (ii) If one or more of the contribution allocations or interfund 
transfer requests are made through the TSP Web site or the ThriftLine, 
only the contribution allocation or interfund transfer request entered 
at the latest time will be posted; and
    (iii) If the contribution allocations or interfund transfer 
requests are submitted using Form TSP-50, all of the forms will be 
rejected unless the percentage allocations among the investment funds 
are identical, in which case one will be accepted.
    (3) For purposes of determining the date and time of a contribution 
allocation or an interfund transfer request, the following rules apply:
    (i) The date of a contribution allocation or interfund transfer 
request made through the TSP Web site or the ThriftLine, is the date 
the participant enters the investment percentages;
    (ii) The date of a contribution allocation or interfund transfer 
request made on Form TSP-50 is the date the form is signed by the 
participant; and
    (iii) Central time is used for determining the date and time on 
which a transaction is entered and confirmed through the TSP Web site 
or the ThriftLine.
    (d) Cancellation of contribution allocation or interfund transfer 
request. (1) A contribution allocation or an interfund transfer request 
may be canceled only through the TSP Web site, the ThriftLine, or 
through written correspondence.
    (2) Cancellation on the TSP Web site or ThriftLine. A contribution 
allocation or an interfund transfer request may be canceled by entering 
the cancellation on the TSP Web site or the ThriftLine only up to the 
deadline, described in paragraph (a) of this section, that is 
applicable to the original request. If a change or cancellation is 
received after the deadline, the original request will be processed as 
scheduled. The second request will then be processed in turn.
    (3) Cancellation by correspondence. A participant may also cancel a 
contribution allocation or an interfund transfer request by submitting 
a letter to the TSP record keeper requesting cancellation. To be 
accepted, the cancellation letter must be signed and dated and must 
contain the participant's name, Social Security number, and date of 
birth. To be effective, the cancellation must be received by the 
deadline described in paragraph (a) of this section. Unless the letter 
states unambiguously the specific contribution allocation or interfund 
transfer request it seeks to cancel, the written cancellation will 
apply to any contribution allocation or interfund transfer request with 
a date (as determined under paragraph (c)(3) of this section) before 
the date of the cancellation letter. If the date of a cancellation 
letter is the same as the date of a contribution allocation or an 
interfund transfer request and the request was made on Form TSP-50, the 
form will be canceled. If the request was made on the TSP Web site or 
ThriftLine, it will only be canceled if the written cancellation 
specifies the date of the TSP Web site or ThriftLine request to be 
canceled.


Sec. 1601.33  Acknowledgment of risk.

    (a) A participant who wants to invest in any investment fund other 
than the G Fund must execute an acknowledgment of risk for that fund. 
If a required acknowledgment of risk has not been executed, no 
transactions involving the fund(s) for which the acknowledgment is 
required will be accepted.
    (b) The acknowledgment of risk may be executed in association with 
a contribution allocation or an interfund transfer using the TSP Web 
site, the ThriftLine, or Form TSP-50.


Sec. 1601.34  Effectiveness of Form TSP-50.

    (a) A Form TSP-50 will not be effective if:
    (1) It is not signed and dated;
    (2) It is missing a Social Security number or date of birth;
    (3) The contribution allocation or interfund transfer percentages 
do not total 100%; or
    (4) The form is otherwise not properly completed in accordance with 
the instructions on the form.
    (b) If a Form TSP-50 is rejected, the TSP will provide the 
participant with a written statement of the reason the form was 
rejected.


Sec. 1601.35  Posting of transaction requests.

    The Board fully expects to meet the standards of Sec. 1602.32. 
However, the Board cannot and does not guarantee that the TSP Web site 
or the ThriftLine will always be available to accept and process 
transaction requests.


Sec. 1601.36  Error correction.

    Errors in processing contribution allocations and interfund 
transfer requests, or errors that otherwise cause money to be invested 
in the wrong investment fund, will be corrected in accordance with the 
error correction regulations found at 5 CFR part 1605.

[FR Doc. 01-7233 Filed 3-23-01; 8:45 am]
BILLING CODE 6760-01-P