[Federal Register Volume 66, Number 76 (Thursday, April 19, 2001)]
[Proposed Rules]
[Pages 20090-20099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-9562]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 66, No. 76 / Thursday, April 19, 2001 / 
Proposed Rules  

[[Page 20090]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1605 and 1606


Correction of Administrative Errors; Lost Earnings Attributable 
to Employing Agency Errors 

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Proposed rule with request for comment.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) proposes to amend its regulations describing 
how an administrative error will be corrected to incorporate changes 
required by the Federal Erroneous Retirement Coverage Corrections Act 
(FERCCA). FERCCA permits Federal employees and annuitants who were 
placed in the wrong retirement system to choose between FERS and CSRS 
Offset. These amendments also explain changes in the TSP record keeping 
system which will be implemented on May 1, 2001.

DATES: Comments must be received on or before May 21, 2001.

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

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

SUPPLEMENTARY INFORMATION: The Board administers the Thrift Savings 
Plan (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 (26 U.S.C. 401(k)). Sums in the Thrift Savings 
Plan are held in trust for TSP participants.
    On December 27, 1996, and May 1, 1998, the Board published final 
regulations in the Federal Register concerning the correction of 
administrative errors (61 FR 67472 and 63 FR 24380). Those regulations 
were codified at 5 CFR part 1605. On March 12, 2001, the Board 
published a final regulation in the Federal Register changing the time 
period during which errors must be corrected by an 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 (66 FR 
14448).
    On January 7, 1991, the Board published interim regulations with a 
request for comment in the Federal Register concerning the payment to 
participants' TSP accounts of lost earnings attributable to employing 
agency errors (56 FR 606). Those regulations were codified at 5 CFR 
part 1606.
    On September 19, 2000, Congress enacted the Federal Erroneous 
Retirement Coverage Corrections Act, title II of Public Law 106-265, 
114 Stat. 762, which permits Federal employees and annuitants who were 
placed in the wrong retirement system to choose between FERS and CSRS. 
The Office of Personnel Management (OPM) has primary responsibility for 
implementing FERCCA. On March 19, 2001, OPM published an interim rule 
in the Federal Register (66 FR 15606) implementing its obligations 
under FERCCA.
    This regulation implements the Board's obligations under FERCCA. It 
also amends the existing regulations to incorporate changes in the 
current TSP record keeping system which will become effective on May 1, 
2001. In addition, it incorporates other policy changes as described 
below.

Analysis of Part 1605

    The amendment primarily renumbers and reorganizes the existing 
part. The substantive changes are described below.
    Section 1605.1 contains definitions that apply to error correction, 
such as Board error and late contributions, as does the existing 
regulation. Definitions of some terms that are generally applicable 
throughout the Board's regulations are removed. The definition of 
investment fund election is eliminated because it is obsolete; the 
definition of agency contributions is eliminated because it is the same 
as the definition of employer contributions.
    In subpart B, the Board explains proposed procedures for agencies 
to use in correcting employing agency errors in TSP participants' 
accounts. Section 1605.11 replaces and is substantially the same as 
existing Sec. 1605.2; it explains the process for correcting errors 
which prevent participants from receiving the TSP contributions they 
are entitled to receive. Paragraph (c)(4) explains that the current 
rule prohibiting a participant from making contributions for six months 
following a financial hardship in-service withdrawal also prohibits a 
participant from making up contributions during this period. In 
paragraph (c)(8), the Board proposes to remove the current restriction 
on participants' making partial payments under a schedule for employee 
makeup contributions. The Board proposes to remove this restriction 
because agencies have requested that they be given the flexibility to 
accept such payments.
    Section 1605.12 replaces existing Sec. 1605.3 and explains the 
process for agencies to follow in removing erroneous contributions from 
a participant's account (negative adjustments). To avoid administrative 
complications, the Board proposes to calculate negative adjustments 
without regard to intervening interfund transfers.
    Section 1605.13 replaces existing Sec. 1605.4 and provides rules 
for makeup contributions resulting from back pay awards and other 
retroactive pay adjustments. Currently, Sec. 1605.4(a)(1) provides 
that, on reinstatement, a participant must be given the opportunity to 
submit a contribution election to make current contributions; the 
contribution election is made retroactive to the first day of the first 
full pay period in the most recent TSP election period. The amendment 
eliminates this retroactive effect; instead, the contribution election 
will take effect as soon after it is received as administratively 
possible. The participant also has the opportunity to elect makeup 
contributions under proposed Sec. 1605.13(a)(2); all makeup 
contributions will be invested as provided in paragraph proposed 
Sec. 1605.13(a)(3). The proposed rule incorporates without change the

[[Page 20091]]

provision of the final rule published in the Federal Register on March 
12, 2001 (66 FR 14446), that lost earnings will be calculated based 
upon the G Fund rates of return or otherwise as agreed by the parties 
or ordered by the court or other tribunal with jurisdiction over the 
back pay case.
    Section 1605.14, formerly Sec. 1605.5, is amended to adopt new 
procedures for the correction of errors as provided in FERCCA.
    Section 1605.15 has been reserved.
    Section 1605.16, formerly Sec. 1605.6, explains the procedure and 
time limitations for a participant to file a claim against his or her 
employing agency. The section is renumbered but otherwise incorporates 
without change the procedures published in the Board's final regulation 
on March 12, 2001 (66 FR 14446); the section is published here in its 
entirety for completeness. However, participants should also take note 
of amended Sec. 1606.15, which provides that a participant's claim must 
be filed within six months of the participant's receipt of the earliest 
of a TSP participant statement, TSP loan statement, employing agency 
earnings and leave statement, or any other document that indicates that 
an employing agency error has affected the participant's TSP account.
    Subpart C discusses the correction of Board or TSP record keeper 
errors. Section 1605.21 remains substantially the same as existing 
Sec. 1605.7. The Board proposes to eliminate Sec. 1605.7(a)(3), which 
gives participants the choice of whether or not to have an error 
corrected; instead, the TSP would correct any of its (or its record 
keeper's) errors that are timely discovered or brought to its 
attention. Also, the proposed amendment deletes 1605.7(b) because it is 
redundant; errors in reporting a taxable distribution are processed no 
differently than are other miscellaneous errors under Sec. 1605.21(b).
    Section 1605.22, formerly Sec. 1605.8, discusses the procedures for 
submitting claims for the correction of Board or TSP record keeper 
errors. The section is renumbered but otherwise incorporates without 
change the procedures published in the Board's final regulation on 
March 12, 2001 (66 FR 14446); the section is published here in its 
entirety for completeness.
    In subpart D, the Board proposes to include miscellaneous 
provisions, such as Sec. 1605.31, which addresses retroactive employer 
and employee contributions that are not the result of error, but are 
permitted by the Uniformed Services Employment and Reemployment Rights 
Act (USERRA), 5 U.S.C. 8432b. (Eligibility for retroactive employer and 
employee contributions due to military service is determined under part 
1620, subpart E.) The proposed amendment gives eligible participants 
the right to choose whether lost earnings on makeup employer 
contributions will be computed using the rates of return for the G Fund 
or using the rates of return consistent with the participant's 
contribution allocation that was on file immediately before he or she 
separated for military service.

Analysis of the Amendment to Part 1606

    Only minor changes are made to part 1606 to make it consistent with 
the proposed amendments to part 1605.
    In Sec. 1606.2, the definitions have been changed to conform to 
those in part 1605.
    The amendments to Sec. 1606.5 reflect changes in how participants 
will submit contribution allocations after May 1, 2001. (This change 
was first explained in the Board's proposed amendment to 5 CFR part 
1600, published in the Federal Register on March 26, 2001 (66 FR 
16411).) At present, participants submit contribution allocations to 
their employing agencies, on the same form (Form TSP-1) as their 
contribution elections. After May 1, 2001, participants will continue 
to file contribution elections with their employing agencies but will 
file their contribution allocations using Form TSP-50 with the TSP 
record keeper, or using the TSP Web site or the ThriftLine. Thus, for 
lost earnings on contribution errors occurring on or before April 30, 
2001, the employing agency will continue to report the investment fund 
to which a makeup or late contribution would have been made on the lost 
earnings record. The Board proposes to compute lost earnings on 
contributions to an incorrect investment fund occurring before May 1, 
2001, without regard to intervening interfund transfers. For lost 
earnings on contribution errors occurring on or after May 1, 2001, the 
TSP record keeper will determine the proper fund allocation.
    Finally, in amending Sec. 1606.5, the Board proposes to remove 
references to the investment restrictions applicable to errors that 
occurred prior to December 31, 1990, because there are very few of 
these errors left to be corrected, if any. A similar amendment is made 
to Sec. 1606.7.
    Section 1606.7, describing how agencies correct contribution 
allocation errors, is modified because after April 30, 2001, agencies 
will no longer be able to make contribution allocation errors.
    The Board proposes to amend Sec. 1606.8 to delete paragraph (b), 
which is obsolete, and to include a reference to the change in 
participants' submission of contribution allocations directly to the 
TSP.
    The Board proposes to amend Sec. 1606.9 to allocate lost earnings 
pro rata based upon the participant's most recent valued account 
balance.
    The Board proposes to amend Sec. 1606.11 to reflect modifications 
to agencies' submission of lost earnings records.
    The Board proposes to amend Sec. 1606.13 to reflect changes to the 
lost earnings calculation.
    The Board proposes to amend Sec. 1606.15(a) to incorporate the 
claims filing procedures that were incorporated into 1605.16 by the 
Board's final regulation published in the Federal Register on March 12, 
2001 (66 FR 14446).

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 1605

    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 chapter VI is 
proposed to be amended as set forth below:
    1. Part 1605 is revised to read as follows:

[[Page 20092]]

PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS

Subpart A--General
Sec.
1605.1  Definitions.
Subpart B--Employing Agency Errors
1605.11  Makeup of missed or insufficient contributions.
1605.12  Removal of erroneous contributions.
1605.13  Back pay awards and other retroactive pay adjustments.
1605.14  Misclassified retirement coverage.
1605.15  [Reserved]
1605.16  Claims for correction of employing agency errors; time 
limitations.
Subpart C--Board or TSP Record Keeper Errors
1605.21  Plan-paid lost earnings and other corrections.
1605.22  Claims for correction of Board or TSP record keeper error; 
time limitations.
Subpart D--Miscellaneous provisions
1605.31  Contributions missed as a result of military service.

    Authority: 5 U.S.C. 8351 and 8474. Section 1605.14 also issued 
under Title II, Pub. L. 106-265, 114 Stat. 770.

Subpart A--General


Sec. 1605.1  Definitions.

    As used in this part:
    ``As of'' date means the date on which a TSP contribution or other 
transaction should have taken place.
    Attributable pay date ordinarily means the pay date of an erroneous 
contribution with respect to which a negative adjustment is being made. 
If, however, the erroneous contribution was a makeup or late 
contribution, the attributable pay date is the ``as of'' date 
associated with the erroneous makeup or late contribution.
    Board error means any act or omission by the Board which is not in 
accordance with applicable statutes, regulations, or administrative 
procedures made available to employing agencies and/or TSP 
participants.
    Contribution allocation of record means the last contribution 
allocation on file for the participant's account, which either will 
have been derived pursuant to Sec. 1601.12 of this chapter or will 
result from the participant's filing of an election pursuant to 
Sec. 1601.13 of this chapter.
    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.
    Employing agency error means any act or omission by an employing 
agency that is not in accordance with all applicable statutes, 
regulations, or administrative procedures, including internal 
procedures promulgated by the employing agency and TSP procedures 
provided to employing agencies by the Board.
    FERCCA correction means the correction of a retirement coverage 
error pursuant to the Federal Erroneous Retirement Coverage Corrections 
Act, title II, Public Law 106-265 (2000).
    Late contributions means: Employee contributions that were timely 
deducted from a participant's basic pay but were not timely reported to 
the TSP record keeper for investment; employee contributions that were 
timely reported to the TSP but were not posted to the participant's 
account by the TSP because the payment record on which they were 
submitted contained errors; and attributable agency matching 
contributions and agency automatic (1%) contributions that were not 
timely reported.
    Lost earnings record means a data record containing information 
enabling the TSP system to compute lost earnings.
    Makeup contributions are employee contributions that should have 
been deducted from a participant's basic pay, or employer contributions 
that should have been charged to an employing agency, on an earlier 
date but were not deducted or charged and, consequently, are being 
deducted or charged currently.
    Negative adjustment means the removal of money from a participant's 
TSP account by an employing agency.
    Negative adjustment record means a data record submitted by an 
employing agency to remove from a participant's TSP account money which 
was previously submitted in error.
    Pay date means the date established by an employing agency for 
payment of its employees.
    Payment record means a data record submitted by an employing agency 
to report contributions or loan payments to a participant's TSP 
account.
    Record keeper error means any act or omission by the TSP record 
keeper that is not in accordance with applicable statutes, regulations, 
or administrative procedures made available to employing agencies and/
or TSP participants.
    Source of contributions means employee contributions, agency 
automatic (1%) contributions, or agency matching contributions.
    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.

Subpart B--Employing agency errors


Sec. 1605.11  Makeup of missed or insufficient contributions.

    (a) Applicability. This section applies whenever, as the result of 
an employing agency error, a participant does not receive all of the 
TSP contributions to which he or she is entitled. This includes 
situations in which an employing agency error prevents a participant 
from making an election to contribute to his or her TSP account, in 
which an employing agency fails to implement a contribution election 
properly submitted by a participant, in which an employing agency fails 
to make agency automatic (1%) contributions or agency matching 
contributions that it is required to make, or in which an employing 
agency otherwise erroneously contributes less to the TSP for a 
participant's account than it should have. The corrections required by 
this section must be made in accordance with this part and the 
procedures provided to employing agencies by the Board in bulletins or 
other guidance. It is the responsibility of the employing agency to 
determine whether it has made an error that entitles a participant to 
error correction under this section.
    (b) Employer makeup contributions. If an employing agency has 
failed to make agency automatic (1%) contributions that are required 
under 5 U.S.C. 8432(c)(1)(A), agency matching contributions that are 
required under 5 U.S.C. 8432(c)(2), or conversion contributions that 
are required under 5 U.S.C. 8432(c)(3), the following rules apply:
    (1) The employing agency must promptly submit all missed 
contributions to the TSP record keeper on behalf of the affected 
participant. For each pay date involved, the employing agency must 
submit a separate payment record showing the ``as of'' date for the 
contributions. Employer makeup contributions will be invested in 
accordance with the participant's contribution allocation of record at 
the time the makeup contributions are posted to the account.
    (2) If the participant is entitled to lost earnings on employer 
makeup contributions pursuant to 5 CFR part 1606, the employing agency 
must also submit lost earnings records.
    (c) Employee makeup contributions. Within 30 days of receiving 
information from his or her employing agency indicating that the 
employing agency

[[Page 20093]]

acknowledges that an error has occurred which has caused less in 
employee contributions to be made to the participant's account than 
should have been made, a participant may elect to establish a schedule 
of makeup contributions to replace the missed contributions through 
future payroll deductions. Employee makeup contributions can be made in 
addition to any TSP contributions that the participant is otherwise 
entitled to make. The following rules apply to employee makeup 
contributions:
    (1) The schedule of makeup contributions elected by the participant 
must establish the dollar amount of the contributions to be made each 
pay period over the duration of the schedule. The contribution amount 
per pay period may vary during the course of the schedule, but the 
amounts to be contributed must be established when the schedule is 
created. The schedule may not exceed four times the number of pay 
periods over which the error occurred.
    (2) At its discretion, an employing agency may set a ceiling on the 
length of a schedule of employee makeup contributions which is less 
than four times the number of pay periods over which the error 
occurred. The ceiling may not, however, be less than twice the number 
of pay periods over which the error occurred.
    (3) The employing agency must implement the participant's schedule 
of makeup contributions as soon as practicable.
    (4) For each pay date involved, the employing agency must submit a 
separate payment record showing the ``as of'' date for the employee 
makeup contribution. An employee is not eligible to make up 
contributions with an ``as of'' date occurring within six months after 
a financial hardship in-service withdrawal, as provided in Sec. 1650.33 
of this chapter.
    (5) Employee makeup contributions will be invested in accordance 
with the participant's contribution allocation of record at the time 
the makeup contributions are posted to the account. If no contribution 
allocation is on file, the contributions will be invested in the G 
Fund.
    (6) Employee makeup contributions will not be considered in 
applying the maximum amount per pay period that a participant is 
permitted to contribute to the TSP, but will be included for purposes 
of applying the annual limits contained in sections 402(g) and 415(c) 
of the Internal Revenue Code (I.R.C.) (26 U.S.C. 402(g)(1) and 415(c)). 
For purposes of applying the annual limits of sections 402(g) and 
415(c) of the I.R.C., employee makeup contributions will be applied 
against the limit for the year in which the contributions should have 
been made (i.e., the year of the ``as of'' date).
    (i) Before establishing a schedule of employee 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 for the same year, would exceed 
the annual contribution limit(s) contained in sections 402(g) and 
415(c) of the I.R.C. for the year(s) with respect to which the 
contributions are being made.
    (ii) The employing agency must not permit contributions that, when 
combined with prior contributions, would exceed the applicable annual 
contribution limits contained in sections 402(g) and 415(c) of the 
I.R.C.
    (7) A schedule of employee 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.
    (8) A participant may elect to terminate a schedule of employee 
makeup contributions at any time, but a termination is irrevocable. If 
a participant separates from Government service, the participant may 
elect to accelerate the payment schedule by a lump sum contribution 
from his or her final paycheck.
    (9) At the same time that a participant makes up missed employee 
contributions, the employing agency must make any agency matching 
contributions that would have been made had the error not occurred. 
Agency matching contributions must be submitted pursuant to the rules 
set forth in paragraph (b) of this section. A participant may not 
receive matching contributions associated with any employee 
contributions that are not actually made up. If employee makeup 
contributions are suspended in accordance with paragraph (c)(7) of this 
section, the payment of agency matching contributions must also be 
suspended.
    (10) If a participant transfers to an employing agency different 
from the one at which the participant was employed at the time of the 
missed contributions, it remains the responsibility of the former 
employing agency to determine whether employing agency error was 
responsible for the missed contributions. If it is determined that such 
an error has occurred, the current agency must take any necessary steps 
to correct the error. The current agency may seek reimbursement from 
the former agency of any amount that would have been paid by the former 
agency had the error not occurred.
    (11) Employee makeup contributions may be made only by payroll 
deduction from basic pay. Contributions by check, money order, cash, or 
other form of payment directly from the participant to the TSP, or from 
the participant to the employing agency for deposit to the TSP, are not 
permitted.
    (12) If the participant is entitled to lost earnings on the makeup 
contributions pursuant to 5 CFR part 1606, the employing agency must 
also submit lost earnings records.
    (d) Late contributions. If, as a result of agency error, the TSP 
posts a late contribution to a participant's account more than 30 
calendar days after the ``as of'' date that is reported by the 
employing agency on the payment record, the employing agency must 
submit any lost earnings records pursuant to 5 CFR part 1606. Late 
contributions will be invested in accordance with the participant's 
contribution allocation of record on the posting date.


Sec. 1605.12  Removal of erroneous contributions.

    (a) Applicability. This section applies to negative adjustments. 
These include situations in which, because of an employing agency 
error, employee contributions in excess of the amount elected by a 
participant are contributed to a participant's account, employee 
contributions (and any attributable agency matching contributions) are 
made on behalf of a participant who did not elect to make 
contributions, or excess employer contributions are made to a 
participant's account. Negative adjustments resulting from a FERCCA 
correction are addressed in Sec. 1605.14.
    (b) Method of correction. Negative adjustment records must be 
submitted by employing agencies in accordance with this part and with 
any other procedures provided by the Board.
    (1) To remove money from a participant's account, the employing 
agency must submit, for each attributable pay date involved, a negative 
adjustment record stating the amount of the erroneous contribution 
being removed, the attributable pay date with respect to which the 
erroneous contribution was made, and the source(s) of the 
contributions. The TSP record keeper will derive the investment

[[Page 20094]]

of the negative adjustment from the allocation of any contribution 
which was reported for the attributable pay date. If no contribution 
was submitted for the attributable pay date, the negative adjustment 
will not be processed.
    (2) A negative adjustment record may be for all or a part of the 
contributions made for the attributable pay date and source of 
contributions; however, for each source of contributions, the negative 
adjustment may not exceed the amount of contributions made for that 
date, less any prior negative adjustments for the same date.
    (c) Processing negative adjustments. Negative adjustments will be 
processed in accordance with the following rules:
    (1) Negative adjustment records received and accepted by the TSP 
record keeper by the second-to-last business day of a month will be 
processed effective as of the end of that month. Negative adjustment 
records accepted by the TSP record keeper after the second-to-last 
business day of a month will be processed effective as of the end of 
the following month; and
    (2) For each negative adjustment record, the TSP record keeper will 
determine attributable earnings on the amount of the adjustment by 
source of contribution and investment fund. Thus, earnings and losses 
from different sources will not be netted against each other, and 
earnings and losses from different investment funds will not be netted 
against each other. Further, interfund transfers occurring between the 
attributable pay date of the negative adjustment and the date the 
adjustment is processed by the TSP record keeper will not be 
considered.
    (d) Employee contributions. The following rules apply to negative 
adjustments involving employee contributions:
    (1) If, on the posting date, the amount calculated under paragraph 
(c) of this section is greater than the amount of the proposed negative 
adjustment, the full amount of the adjustment will be returned to the 
employing agency. Subject to paragraph (d)(4) of this section, the 
earnings on the erroneous contribution will remain in the participant's 
account;
    (2) If, on the posting date, the amount calculated under paragraph 
(c) of this section is less than the amount of the proposed negative 
adjustment, the amount of the adjustment, reduced by the investment 
loss, will be returned to the employing agency. However, an investment 
loss will not affect the employing agency's obligation to refund to the 
participant the full amount of the erroneous contribution;
    (3) If an employing agency removes erroneous employee contributions 
from a participant's account, it must also remove, under paragraph (e) 
of this section, any attributable agency matching contributions; and
    (4) If all employee contributions are removed from a participant's 
account under the rules set forth in this section, the participant may 
choose to leave any earnings in the account unless he or she was not 
eligible to have an account in the TSP at the time earnings were 
credited to the account, and remains ineligible. If the participant was 
ineligible for a TSP account (and remains ineligible), the earnings 
will be paid to the participant. If earnings remain in the account, 
upon the participant's separation from Government service, they will be 
subject to the same withdrawal rules as apply to any other funds in a 
participant's account.
    (e) Employer contributions. The following rules apply to negative 
adjustments involving erroneous employer contributions:
    (1) Erroneous employer contributions will be returned to the 
employing agency only if the negative adjustment record is posted by 
the TSP record keeper within one year of the date the erroneous 
contribution was posted. If one year or more has elapsed when the 
negative adjustment record is posted, the amount computed under 
paragraph (c) of this section will be removed from the participant's 
account and used to offset TSP administrative expenses;
    (2) If the erroneous contribution has been in the participant's 
account for less than one year when the negative adjustment record is 
posted and the amount computed under paragraph (c) of this section is 
greater than the amount of the adjustment, the employing agency will 
receive the full amount of the erroneous contribution. Any earnings 
attributable to the erroneous contribution will be removed from the 
participant's account and used to offset TSP administrative expenses;
    (3) If the erroneous contribution has been in the participant's 
account for less than one year when the negative adjustment record is 
posted and the amount computed under paragraph (c) of this section is 
less than the amount of the adjustment, the employing agency will 
receive the amount of the erroneous contribution reduced by the 
investment loss; and
    (4) An employing agency's obligation to submit negative adjustment 
records to remove erroneous contributions from a participant's account 
is not affected by the length of time the contributions have been in 
the account.
    (f) Each negative adjustment to be processed separately. For 
purposes of paragraphs (d) and (e) of this section--
    (1) If multiple negative adjustments for a participant are posted 
on the same business day, the amount removed from the participant's 
account and/or returned to the employing agency will be determined 
separately for each adjustment, for each source of contributions, and 
for each investment fund. Earnings and losses for erroneous 
contributions made on different dates will not be netted against each 
other. Instead, each source of contributions and each fund will be 
treated as separate for purposes of these calculations;
    (2) The amount computed by application of the rules above will be 
removed from the participant's account pro rata from all investment 
funds, by source, based on the allocation of the participant's most 
recent month-end valued account balance; and
    (3) If there is insufficient money in the same source of 
contributions to cover the amount to be removed, the negative 
adjustment record will be rejected.


Sec. 1605.13  Back pay awards and other retroactive pay adjustments.

    (a) Participant not employed. The following rules apply to 
participants who receive a back pay award or other retroactive pay 
adjustment for a period during which the participant was separated from 
Government employment:
    (1) If the participant is reinstated to Government employment, 
immediately upon reinstatement the employing agency must give the 
participant the opportunity to submit a contribution election to make 
current contributions. The contribution election will be effective as 
soon as administratively feasible, but no later than the first day of 
the first full pay period after it is received;
    (2) The employing agency must give the participant the following 
options for electing makeup contributions:
    (i) If the participant had a contribution election on file when he 
or she separated, upon the participant's reinstatement to Government 
employment, that election will be reinstated for purposes of the makeup 
contributions; or
    (ii) Instead of making contributions for the period of separation 
in accordance with the reinstated contribution election, the 
participant may submit a new contribution election for any open 
season(s) that occurred during the period of separation.

[[Page 20095]]

    (3) All makeup contributions under this section will be invested 
based on the participant's contribution allocation of record at the 
time the makeup contributions are posted to the account; and
    (4) The employing agency must submit lost earnings records pursuant 
to 5 CFR part 1606. Lost earnings will be calculated and credited to a 
participant's account in accordance with 5 CFR part 1606 using the 
rates of return for the G Fund 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.
    (b) Participant employed. The following rules apply to participants 
who receive a back pay award or other retroactive pay adjustment for a 
period during which the participant was not separated from Government 
employment:
    (1) The participant will be entitled to make up contributions for 
the period covered by the back pay award or retroactive pay adjustment 
only if for that period--
    (i) The participant had designated a percentage of basic pay to be 
contributed to the TSP; or
    (ii) The participant had designated a dollar amount of 
contributions each pay period which equaled the applicable ceiling 
(FERS or CSRS) on contributions per pay period, and which, therefore, 
was limited as a result of the reduction in pay that is made up by the 
back pay award or other retroactive pay adjustment;
    (2) The employing agency must compute the amount of additional 
employee contributions, agency matching contributions, and agency 
automatic (1%) contributions that would have been contributed to the 
participant's account had the reduction in pay leading to the back pay 
award or other retroactive pay adjustment not occurred; and
    (3) If the participant is entitled to lost earnings pursuant to 5 
CFR part 1606, the employing agency must also submit lost earnings 
records.
    (c) Contributions to be deducted before payment or other 
retroactive pay adjustment. Employee makeup contributions required 
under paragraphs (a) and (b) of this section:
    (1) Must be computed before the back pay award or other retroactive 
pay adjustment is paid, deducted from the back pay or other retroactive 
pay adjustment, and submitted to the TSP record keeper;
    (2) Must not cause the participant to exceed the annual 
contribution limit(s) contained in sections 402(g) and 415(c) of the 
I.R.C. (26 U.S.C. 402(g)(1) and 415 (c)) for the 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; 
and
    (3) Must be accompanied by attributable agency matching 
contributions. In any event, regardless of whether a participant elects 
to make up employee contributions, the employing agency must make all 
appropriate agency automatic (1%) contributions associated with the 
back pay award or other retroactive pay adjustment.
    (d) Prior withdrawal of TSP account. If a participant has withdrawn 
his or her TSP account, other than by purchasing an annuity, and the 
separation from Government employment upon which the withdrawal was 
based is reversed, resulting in reinstatement of the participant 
without a break in service, the participant will have the option to 
restore the amount withdrawn to his or her TSP account. The right to 
restore the withdrawn funds will expire if notice is not provided by 
the participant to the Board within 90 days of reinstatement. If the 
participant returns the funds that were withdrawn, they will be posted 
to the participant's account based on his or her last contribution 
allocation of record. If no contribution allocation is on file, the 
contributions will be invested in the G Fund. No lost earnings will be 
paid on any restored funds.


Sec. 1605.14  Misclassified retirement coverage.

    (a) If a CSRS participant is misclassified by an employing agency 
as a FERS participant, when the misclassification is corrected:
    (1) Employee contributions that exceed the applicable contribution 
percentage for the pay period(s) involved may remain in the 
participant's account. However, the participant may choose to have such 
employee contributions or all of the employee contributions made during 
the period of misclassification removed from his or her account and 
refunded to the participant. If the participant requests a refund of 
employee contributions, the employing agency must submit negative 
adjustment records, under the procedures of Sec. 1605.12, to request 
removal of these funds;
    (2) The employing agency must, under the procedures of 
Sec. 1605.12, remove all employer contributions made to the 
participant's account during the period of misclassification. Employer 
contributions that have been in the account for less than one year will 
be returned to the employing agency; employer contributions that have 
been in the participant's account for one year or more will be removed 
from the account and used to offset TSP administrative expenses; and
    (3) If the employing agency fails to submit a negative adjustment 
record under the procedures of Sec. 1605.12(b) to remove employer 
contributions, after all such contributions have been in the 
participant's account for more than one year the TSP record keeper will 
remove them from the account and use such amounts to offset TSP 
administrative expenses.
    (b) If a FERS participant is misclassified by an employing agency 
as a CSRS participant, when the misclassi-fication is corrected:
    (1) The participant may not elect to have the contributions made 
while classified as CSRS removed from his or her account;
    (2) The participant may, under the rules of Sec. 1605.11, elect to 
make up contributions that he or she would have been eligible to make 
as a FERS participant during the period of misclassification;
    (3) The employing agency must, under the rules of Sec. 1605.11, 
make agency automatic (1%) contributions and agency matching 
contributions on employee contributions that were made while the 
participant was misclassified;
    (4) The employing agency must submit lost earnings records for 
makeup employer contributions pursuant to 5 CFR part 1606; and
    (5) If the retirement coverage correction is a FERCCA correction, 
the participant is entitled to lost earnings on makeup employee 
contributions and the employing agency must submit lost earnings 
records pursuant to 5 CFR part 1606. However, if employee contributions 
were made up before the Office of Personnel Management implements its 
regulations on FERCCA corrections, the amount of lost earnings will be 
calculated by the Office of Personnel Management, pursuant to its 
regulations, and provided to the employing agency for transmission to 
the TSP record keeper.
    (c) If a participant was misclassified as either FERS or CSRS and 
the retirement coverage is corrected to FICA only, the participant is 
no longer eligible to participate in the TSP.
    (1) Employee contributions in the account are subject to the rules 
in paragraph (a)(1) of this section.
    (2) Employer contributions in the account are subject to the rules 
in paragraph (a)(2) of this section.

[[Page 20096]]

    (3) The participant will be deemed to be separated from Federal 
service for all TSP purposes. If the participant has an outstanding 
loan, it will be subject to the provisions of 5 CFR 1655.13. The 
participant may make a TSP post-employment withdrawal election pursuant 
to 5 CFR part 1650, subpart B, and the withdrawal will be subject to 
the provisions of Sec. 1650.60(b).


Sec. 1605.15  [Reserved]


Sec. 1605.16  Claims for correction of employing agency errors; 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 that 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 of the error with his or her employing agency without a time 
limit. 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, 
the error will not 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; and
    (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.

Subpart C--Board or TSP Record Keeper Errors


Sec. 1605.21  Plan-paid lost earnings and other corrections.

    (a) Plan-paid lost earnings. (1) Subject to paragraph (a)(3) of 
this section, if, because of an error committed by the Board or the TSP 
record keeper, a participant's account is not credited or charged with 
the earnings or losses that he or she would have received had the error 
not occurred, the participant's TSP account will be credited (or 
charged) with the difference between the earnings (or losses) it 
actually received and the earnings (or losses) it would have received 
had the error not occurred.
    (2) Errors that warrant the crediting of earnings or charging of 
investment losses under this paragraph include, but are not limited to:
    (i) Delay in crediting contributions or other monies to a 
participant's account;
    (ii) Improper issuance of a loan or withdrawal payment to a 
participant or beneficiary which requires the money to be restored to 
the participant's account; and
    (iii) Investment of all or part of a participant's account in the 
wrong investment fund(s).
    (3) A participant will not be entitled to earnings under paragraph 
(a)(1) of this section if, during the period the participant's account 
received credit for less earnings than it would have received but for 
Board or record keeper error, the participant had the use of the money 
on which the earnings would have accrued.
    (4) If the participant continued to have a TSP account, or would 
have continued to have a TSP account but for the Board or TSP record 
keeper error, earnings or losses under paragraph (a)(1) of this section 
will be computed for the relevant period based upon the investment 
funds in which the affected monies would have been invested had the 
error not occurred. If the participant did not have, and should not 
have had, an account in the TSP during this period, then the earnings 
will be computed using the G Fund rate of return for the relevant 
period and the monies returned to the participant.
    (b) Other corrections. The Executive Director may, in his 
discretion and consistent with the requirements of applicable law, 
correct any other errors not specifically addressed in this section, 
including payment of lost earnings, if the Executive Director 
determines that the correction would serve the interests of justice and 
fairness and equity among all participants of the TSP.

[[Page 20097]]

Sec. 1605.22  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 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 the 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 the 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 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 of the error with the Board or the TSP record keeper without 
time limit. The Board or the 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 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 will be deemed to have 
accepted the TSP record keeper's decision.

Subpart D--Miscellaneous Provisions


Sec. 1605.31  Contributions missed as a result of military service.

    (a) Applicability. This section applies to employees who meet the 
conditions specified at 5 CFR 1620.40 and who are eligible to receive 
or to make up contributions missed as a result of military service.
    (1) Missed employee contributions. Eligibility for making up missed 
employee contributions will be determined in accordance with the rules 
specified at 5 CFR part 1620, subpart E. Missed employee contributions 
will be made up in accordance with the rules specified in 
Sec. 1605.20(c).
    (2) Missed employer contributions. Missed agency automatic (1%) 
contributions will be determined in accordance with the rules specified 
at 5 CFR part 1620, subpart E.
    (i) If an employee makes up missed employee contributions, 
attributable agency matching contributions must be made accordingly.
    (ii) The employing agency must submit lost earnings records for 
missed employer contributions pursuant to 5 CFR part 1606. Lost 
earnings may be calculated using the rates of return based on the 
contribution allocation(s) on file for the participant during the 
period of military service or using the rates of return for the G Fund; 
the participant must make this election at the same time his or her 
makeup schedule is established pursuant to Sec. 1605.11(c).
    (b) [Reserved]

PART 1606--LOST EARNINGS ATTRIBUTABLE TO EMPLOYING AGENCY ERRORS

    2. The authority citation for part 1606 is revised to read as 
follows:

    Authority: 5 U.S.C. 8432a, 8474(b)(3) and (c)(1). Section 1606.5 
also issued under Title II, Pub. L. 106-265, 114 Stat. 770.

    3. Section 1606.2 is revised to read as follows:


Sec. 1606.2  Definitions.

    As used in this part:
    Agency automatic (1%) contributions means any contributions made 
under 5 U.S.C. 8432(c)(1) and (c)(3).
    Agency matching contributions means any contributions made under 5 
U.S.C. 8432(c)(2).
    ``As of'' date means the date on which TSP contributions or other 
transactions should have been made.
    Board error means any act or omission by the Board that is not in 
accordance with applicable statutes, regulations, or administrative 
procedures made available to employing agencies and/or TSP 
participants.
    Employee contributions means any contributions to the Thrift 
Savings Plan made under 5 U.S.C. 8351(a), 8432(a), or 8440a through 
8440e.
    Employer contributions means agency automatic (1%) contributions 
under 5 U.S.C. 8432(c)(1) or 8432(c)(3) and agency matching 
contributions under 5 U.S.C. 8432(c)(2).
    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.
    Employing agency error means any act or omission by an employing 
agency that is not in accordance with all applicable statutes, 
regulations, or administrative procedures, including internal 
procedures promulgated by the employing agency and TSP procedures 
provided to employing agencies by the Board.
    FERCCA correction means the correction of a retirement coverage 
error pursuant to the Federal Erroneous Retirement Coverage Corrections 
Act.
    Late contributions means: employee contributions that were timely 
deducted from a participant's basic pay but were not timely reported to 
the TSP record keeper for investment; employee contributions that were 
timely reported to the TSP but were not posted to the participant's 
account by the TSP

[[Page 20098]]

because the payment record on which they were submitted contained 
errors; and attributable agency matching contributions and agency 
automatic (1%) contributions that were not timely reported.
    Lost earnings record means a data record containing information 
enabling the TSP system to compute lost earnings.
    Makeup contributions are employee contributions that should have 
been deducted from a participant's basic pay, or employer contributions 
that should have been charged to an employing agency, on an earlier 
date but were not deducted or charged and, consequently, are being 
deducted or charged currently.
    Negative adjustment means the removal of money from a participant's 
TSP account by an employing agency.
    Negative adjustment record means a data record submitted by an 
employing agency to remove money from a participant's TSP account 
previously submitted in error.
    Pay date means the date established by an employing agency for 
payment of its employees.
    Payment record means a data record submitted by an employing agency 
to report contributions or loan payments to a participant's TSP 
account.
    Record keeper error means any act or omission by the TSP record 
keeper that is not in accordance with applicable statutes, regulations, 
or administrative procedures made available to employing agencies and/
or TSP participants.
    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.
    4. Section 1606.5 is revised to read as follows:


Sec. 1606.5  Failure to timely make or deduct TSP contributions when 
participant received pay.

    (a) If a participant receives pay, but as the result of an 
employing agency error all or any part of the agency automatic (1%) 
contribution associated with that pay to which the participant is 
entitled is not timely received by the TSP record keeper, then the 
makeup or late contributions will be subject to lost earnings. In such 
cases:
    (1) The employing agency must, for each pay period involved, submit 
to the TSP record keeper a lost earnings record indicating the pay date 
for which the contributions would have been made had the error not 
occurred (i.e., the beginning date), the investment fund to which the 
contributions would have been deposited had the error not occurred if 
the beginning date on the record was before May 1, 2001, the amount of 
the contributions, and the pay date for which the contributions were 
actually made. If the beginning date on the record was on or after May 
1, 2001, the TSP record keeper will use the contribution allocation of 
record for the beginning date and calculate lost earnings;
    (2) The TSP record keeper will compute the amount of lost earnings 
associated with each lost earnings record submitted by the employing 
agency pursuant to paragraph (a)(1) of this section. In performing the 
computation, the TSP record keeper will not take into consideration any 
interfund transfers;
    (3) Where the lost earnings computed in accordance with paragraph 
(a)(2) of this section are positive, the TSP record keeper will charge 
that amount to the appropriate employing agency and will credit the 
participant's TSP account. If the lost earnings are negative, the 
amount computed will be removed from the participant's account and used 
to offset TSP administrative expenses; and
    (4) The lost earnings will be posted to the participant's account 
pro rata to all investment funds within the same source of 
contributions based on the most recent valued account balance.
    (b) If a participant receives pay from which employee contributions 
were properly deducted, but as a result of an employing agency error 
all or any part of the associated agency matching contributions to 
which the participant is entitled were not timely received by the TSP 
record keeper, then the makeup agency contributions will be subject to 
lost earnings. In such cases, the procedures described in paragraphs 
(a)(1) through (a)(4) of this section will apply to the makeup agency 
matching contributions.
    (c) If a participant receives pay from which employee contributions 
were properly deducted, but as the result of an employing agency error 
all or any part of those employee contributions were not timely 
received by the TSP record keeper, or if the employee contributions 
were received in connection with a FERCCA correction, the makeup 
employee contributions will be subject to the procedures described in 
paragraphs (a)(1) through (a)(4) of this section.
    (d) Except for employee contributions received in connection with a 
FERCCA correction, if a participant receives pay from which employee 
contributions should have been deducted but, as the result of employing 
agency error, all or any part of those deductions were not made, the 
makeup employee contributions will not be subject to lost earnings even 
if the participant makes up the employee contributions pursuant to part 
1605 of this chapter. However, where the participant makes up the 
employee contributions pursuant to part 1605, the agency matching 
contributions associated with the makeup employee contributions (which 
must be made in accordance with part 1605) will be subject to lost 
earnings. With respect to such makeup agency matching contributions the 
procedures described in paragraphs (a)(1) through (a)(4) of this 
section will apply.
    5. Section 1606.7 is revised to read as follows:


Sec. 1606.7  Contributions to incorrect investment fund made before May 
1, 2001.

    Where, as the result of an employing agency error, money was 
deposited to a participant's TSP account in an incorrect investment 
fund(s), the erroneous contribution will be subject to lost earnings if 
a claim is submitted within the time limits set forth in 
Sec. 1605.16(a)(2) of this chapter. In such cases:
    (a) The employing agency must submit a lost earnings record 
indicating the amount of the contributions submitted to the incorrect 
investment fund(s), the pay date for which it was submitted, the 
investment fund(s) to which it would have been deposited had the 
employing agency error not occurred, and the investment fund(s) to 
which it was actually deposited;
    (b) The TSP record keeper will compute the amount of lost earnings 
associated with each lost earnings record submitted by the employing 
agency pursuant to paragraph (a)(1) of this section. The TSP record 
keeper will not take into consideration any interfund transfers; and
    (c) Where the lost earnings computed in accordance with paragraph 
(a)(2) of this section are positive, the TSP record keeper will charge 
the amount of lost earnings computed to the appropriate employing 
agency and will credit that amount to the account of the participant 
involved. If the earnings computed are negative, the amount computed 
will be removed from the participant's account and used to offset TSP 
administrative expenses.
    (d) The lost earnings will be posted to the participant's account 
pro rata to all investment funds within the same source of 
contributions based on the most recent valued account balance.
    6. Section 1606.8 is revised to read as follows:

[[Page 20099]]

Sec. 1606.8  Late payroll submissions.

    All contributions on payment records contained in a payroll 
submission received from an employing agency and processed by the TSP 
record keeper more than 30 days after the pay date associated with the 
payroll submission (as reported on Form TSP-2, Certification of 
Transfer of Funds and Journal Voucher) will be subject to lost 
earnings, as follows:
    (a) The TSP record keeper will generate a lost earnings record for 
each payment record contained in the late payroll submission. The lost 
earnings records generated by the TSP record keeper will reflect that 
the contributions on the payment records should have been made on the 
pay date associated with the payroll submission, that the contributions 
should have been deposited to the investment fund(s) indicated on the 
payment records if the pay date was before May 1, 2001, or based on the 
participant's contribution allocation on file as of the pay date if the 
pay date was on or after May 1, 2001, and that the contributions were 
actually made on the date the late payroll submission was processed.
    (b) The procedures applicable to lost earnings records submitted by 
employing agencies which are set forth in paragraphs (a)(2) through 
(a)(4) of Sec. 1606.5 will be applied to lost earnings records 
generated by the TSP record keeper pursuant to paragraph (a)(1) of this 
section.
    7. Section 1606.9 is amended by revising paragraph (a)(3) as 
follows:


Sec. 1606.9  Loan allotments.

    (a) * * *
    (3) The lost earnings will be posted to the participant's account 
pro rata to all investment funds within the same source of 
contributions based on the most recent month-end valued account 
balance.
* * * * *
    8. Section 1606.11 is amended by revising paragraphs (c), (d), and 
(e) and by adding a new paragraph (f) as follows:


Sec. 1606.11  Agency submission of lost earnings records.

* * * * *
    (c) Where this part requires the employing agency to indicate on a 
lost earnings record the investment fund to which a contribution would 
have been deposited had an employing agency error not occurred, that 
determination must be made solely on the basis of a properly completed 
allocation election that was accepted by the employing agency before 
the date the contribution should have been made, and that was still in 
effect as of that date. Where no such allocation election was in effect 
as of the date the contribution would have been made had the error not 
occurred, the lost earnings record submitted by the employing agency 
must indicate that the contributions should have been made to the G 
Fund.
    (d) With respect to employing agency errors that cause money not to 
be invested in the Thrift Savings Fund, lost earnings records may not 
be submitted until the money to which the lost earnings relate has been 
invested in the Thrift Savings Fund. Where the employing agency error 
involved delayed TSP contributions, no lost earnings will be payable 
unless the associated payment records are submitted in accordance with 
the provisions of 5 CFR part 1605. Lost earnings records and the 
delayed payment records to which they relate should be submitted 
simultaneously.
    (e) Where an employing agency erroneously submits a lost earnings 
record that is processed by the TSP record keeper, the employing agency 
must consult with the Board or TSP record keeper to determine the 
method to be used in removing the erroneous lost earnings.
    (f) Lost earnings records that contain contributions for which lost 
earnings must be determined at the G Fund rate of return pursuant to 5 
CFR 1605.22(a)(4) or 1605.41(a)(3) must be accompanied by the special 
Journal Voucher, Form TSP-2-EG.
    9. Section 1606.13 is amended by removing paragraph (g) and by 
revising paragraphs (a), (b), and (c) as follows:


Sec. 1606.13  Calculation and crediting of lost earnings.

    (a) Lost earnings records submitted or generated pursuant to this 
part will be processed by the TSP record keeper monthly.
    (b) Lost earnings records received, edited, and accepted by the TSP 
record keeper by the next-to-last business day of a month will be 
processed in the processing cycle for the month following acceptance. 
Lost earnings records received, edited, and accepted by the TSP record 
keeper on the last business day of a month will be processed in the 
processing cycle for the second month following acceptance.
    (c) In calculating lost earnings attributable to a lost earnings 
record, earnings and losses for different sources of contributions or 
investment funds within a source will not be offset against each other.
* * * * *
    10. Section 1606.15 is amended by revising paragraph (a) as 
follows:


Sec. 1606.15  Time limits on participant claims.

    (a) Participant claims for lost earnings pursuant to Sec. 1606.14 
of this part must be filed within six months of the participant's 
receipt of the earliest of a TSP participant statement, TSP loan 
statement, employing agency earnings and leave statement, or any other 
document that indicates that an employing agency error has affected the 
participant's TSP account.
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[FR Doc. 01-9562 Filed 4-18-01; 8:45 am]
BILLING CODE 6760-01-U