[Federal Register Volume 67, Number 70 (Thursday, April 11, 2002)]
[Rules and Regulations]
[Pages 17603-17605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8606]



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  Federal Register / Vol. 67, No. 70 / Thursday, April 11, 2002 / Rules 
and Regulations  

[[Page 17603]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1600 and 1650


Employee Elections To Contribute to the Thrift Savings Plan and 
Methods of Withdrawing Funds From the Thrift Savings Plan

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Final rule.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) is amending the regulations on employee 
elections to contribute to the Thrift Savings Plan (TSP) to permit 
participants to transfer into their TSP accounts tax-deferred balances 
from an expanded group of eligible retirement plans. The Executive 
Director is also amending the regulations on loans and withdrawals from 
the TSP to specify that a participant who is seeking an exception to 
the spousal signature and notification requirements on the ground that 
the spouse's whereabouts are unknown must demonstrate that he or she 
made a good faith effort to locate the spouse in the 90 days preceding 
submission of the request to the TSP.

EFFECTIVE DATE: April 11, 2002.

FOR FURTHER INFORMATION CONTACT: Thomas L. Gray on (202) 942-1662; 
Merritt Willing on (202) 942-1666; or Patrick J. Forrest on (202) 942-
1659. The Board's Fax number is (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, which has 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, which is 
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.

Analysis of the Amendment to Part 1600

    The Board's rules concerning the procedures governing employee 
contributions to the TSP were first published in the Federal Register 
(52 FR 45802) as interim rules on December 2, 1987. The final rule was 
published in the Federal Register (59 FR 55331) on November 4, 1994. On 
October 27, 2000, Congress passed Public Law 106-361, which amended 
FERSA to permit the TSP to accept into the Plan any eligible rollover 
distribution, as that term is defined in section 402(c)(8) of the 
Internal Revenue Code (I.R.C.), that a qualified trust could accept. 5 
U.S.C. 8432(j). Accordingly, on May 2, 2001 (66 FR 22088), the Board 
amended the final rule to permit participants to transfer into their 
TSP accounts funds from certain qualified retirement plans and conduit 
individual retirement accounts (IRAs). On February 27, 2002, the 
Executive Director published in the Federal Register (67 FR 8908) a 
proposed rule that, in general, expanded the types of plans into and 
from which an eligible TSP distribution can be made.
    The amendment permits the transfer into existing TSP accounts of 
certain distributions from eligible retirement plans. The rule, 
consistent with the Internal Revenue Code (I.R.C.) and the changes made 
by the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 
2001, defines eligible retirement plans broadly, to include an 
individual retirement account described at I.R.C. section 408(a); an 
individual retirement annuity described at I.R.C. section 408(b); a 
qualified trust; an I.R.C. section 403(a) annuity plan; an I.R.C. 
section 403(b) tax-sheltered annuity; and an eligible I.R.C. section 
457(b) plan maintained by a governmental employer.
    In discussing EGTRRA's changes to the Code, the IRS divides these 
types of plans into ``traditional IRAs'' (i.e., individual retirement 
accounts described at I.R.C. section 408(a) and individual retirement 
annuities described at I.R.C. section 408(b)) and ``eligible employer 
plans'' (i.e., qualified trusts, I.R.C. section 403(a) annuity plans, 
I.R.C. section 403(b) tax-sheltered annuities, and eligible I.R.C. 
section 457(b) plans). The Executive Director has revised Secs. 1600.1 
and 1600.31(a) by redefining eligible retirement plan to take these 
definitions into account and by including definitions of eligible 
employer plan and traditional IRA.
    In order to be eligible for transfer, distributions from a 
traditional IRA must meet the requirements for a rollover contribution, 
set forth at I.R.C. section 408(d)(3) (26 U.S.C. 408(d)(3)). 
Distributions from an eligible employer plan must meet the requirements 
for an eligible rollover distribution, set forth at I.R.C. section 
402(c)(4) (26 U.S.C. 402(c)(4)). The distinctions between these 
requirements were not set forth in the proposed regulation. Therefore, 
in the final rule, the Executive Director has revised Sec. 1600.32(c) 
to make clear the different requirements that distributions from 
eligible employer plans and traditional IRAs must meet in order to be 
accepted by the TSP. Participants will have to certify that their 
transfers meet these requirements before the funds will be accepted by 
the TSP.
    The Executive Director also revised Sec. 1600.31(b) to clarify that 
the TSP will not transfer any tax-exempt balances from a uniformed 
services TSP account into a civilian TSP account. Tax-exempt balances 
arise from contributions from combat zone pay and are not subject to 
taxation.
    The Board received one comment on the proposed rule. The commenter 
questioned whether a distribution of the tax-deferred portion of the 
Voluntary Contributory Program (VCP) available to CSRS employees (5 
U.S.C. 8343) can be transferred to the TSP. Contributions to the VCP 
are made from after-tax money; however, the earnings (interest) on 
those contributions are tax-deferred until they are paid to the 
employee. The IRS has stated that that portion of a distribution from 
the VCP that represents earnings is eligible for transfer and thus, 
under this final rule, may be transferred to the TSP.
    With the changes discussed above, the Executive Director is 
adopting the proposed rule as final.

Analysis of the Amendment to Part 1650

    The Board's rules concerning withdrawals are set forth in 5 CFR 
part 1650. Those rules require that the spouse of a FERS participant or

[[Page 17604]]

uniformed services member consent to an in-service withdrawal and waive 
his or her entitlement to a joint and survivor annuity in the case of a 
different post-employment withdrawal election; the spouse of a CSRS 
participant is entitled to be given notice when the participant applies 
for a withdrawal. The requirements can be waived by the Executive 
Director if a participant can establish that the spouse's whereabouts 
cannot be determined. On February 27, 2002, the Executive Director 
published in the Federal Register (67 FR 8908) a proposed rule that 
requires a participant's efforts to locate the spouse must have been 
made within the 90 days preceding submission to the TSP of a request 
for an exception to the spousal signature or notice requirements.
    The Board received no comments on the proposed rule. Accordingly, 
the Executive Director adopts the provisions of the proposed rule as 
the final rule.

Regulatory Flexibility Act

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

Paperwork Reduction Act

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

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 
632, 653, and 1501-1571, the effects of this regulation on State, 
local, and tribal governments and the private sector have been 
assessed. This regulation will not compel the expenditure in any one 
year of $100 million or more by State, local, and tribal governments, 
in the aggregate, or by the private sector. Therefore, a statement 
under section 1532 is not required.

Submission to Congress and the General Accounting Office

    Pursuant to 5 U.S.C. 801(a)(1)(A), the Board submitted a report 
containing this rule and other required information to the U.S. Senate, 
the U.S. House of Representatives, and the Comptroller General of the 
United States prior to publication of this rule in today's Federal 
Register. This rule is not a major rule as defined at 5 U.S.C. 804(2).

List of Subjects

5 CFR Part 1600

    Employment benefit plans, Government employees, Pensions, 
Retirement.

5 CFR Part 1650

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

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

    For the reasons set out in the preamble, title 5, chapter VI, Code 
of Federal Regulations, is amended as set forth below:

PART 1600--EMPLOYEE ELECTIONS TO CONTRIBUTE TO THE THRIFT SAVINGS 
PLAN

    1. The authority citation for part 1600 is revised to read as 
follows:

    Authority: 5 U.S.C. 8351, 8432(b)(1)(A), 8432(j), 8474(b)(5) and 
(c)(1).


    2. Section 1600.1 is amended by adding in alphabetical order new 
definitions to read as follows:


Sec. 1600.1  Definitions.

* * * * *
    Eligible employer plan means a qualified trust; an annuity plan 
described in I.R.C. section 403(a) (26 U.S.C. 403(a)); an annuity 
contract described in I.R.C. section 403(b) (26 U.S.C. 403(b)); and an 
eligible deferred compensation plan described in I.R.C. section 457(b) 
(26 U.S.C. 457(b)) which is maintained by an eligible employer 
described in I.R.C. section 457(e)(1)(A) (26 U.S.C. 457(e)(1)(A)).
    Eligible retirement plan means an eligible employer plan or a 
traditional IRA.
* * * * *
    Traditional IRA means an individual retirement account described in 
I.R.C. section 408(a) (26 U.S.C. 408(a)) and an individual retirement 
annuity described in I.R.C. section 408(b) (26 U.S.C. 408(b)) (other 
than an endowment contract).
* * * * *

    3. Section 1600.31 is revised to read as follows:


Sec. 1600.31  Accounts eligible for transfer.

    (a) A participant who is entitled to receive (or receives) an 
eligible rollover distribution, within the meaning of I.R.C. section 
402(c)(4) (26 U.S.C. 402(c)(4)), from an eligible employer plan or a 
rollover contribution, within the meaning of I.R.C. section 408(d)(3) 
(26 U.S.C. 408(d)(3)), from a traditional IRA may cause to be 
transferred (or transfer) that distribution into his or her existing 
TSP account. This option is not available to participants who have 
already made a full withdrawal of their TSP account after separation 
from service or who are receiving monthly payments.
    (b) The only balances that the TSP will accept are balances that 
would otherwise be includible in gross income if the distribution were 
paid to the participant. The TSP will not accept any balances that have 
already been subjected to Federal income tax (after-tax monies) or 
balances from a uniformed services TSP account that will not be subject 
to Federal income tax (tax-exempt monies).

    4. Section 1600.32 is revised to read as follows:


Sec. 1600.32  Methods for transferring eligible rollover distribution 
to TSP.

    (a) Trustee-to-trustee transfer. Participants may request that the 
administrator or trustee of their eligible retirement plan transfer any 
or all of their account directly to the TSP by executing and submitting 
a Form TSP-60 or TSP-U-60, Request for a Transfer Into the TSP, to the 
administrator or trustee. The administrator or trustee must complete 
the appropriate section of the form and forward the completed form and 
the distribution to the TSP record keeper.
    (b) Rollover by participant. Participants who have already received 
a distribution from an eligible retirement plan may roll over all or 
part of the distribution into the TSP in accordance with the following 
requirements:
    (1) The participant must complete Form TSP-60 or TSP-U-60, Request 
for a Transfer Into the TSP.
    (2) The administrator or trustee of the eligible retirement plan 
must certify on the Form TSP-60 or TSP-U-60 the amount and date of the 
distribution.
    (3) The participant must submit the completed Form TSP-60 or TSP-U-
60, together with a certified check, cashier's check, cashier's draft, 
money order, or treasurer's check from a credit union, made out to the 
``Thrift Savings Plan,'' for the entire amount of the rollover. A 
participant may roll over the full amount of the distribution by making 
up, from his or her own funds, the amount that was withheld from the 
distribution for the payment of Federal taxes.
    (4) The transaction must be completed within 60 days of the 
participant's receipt of the distribution from his or her eligible 
retirement plan. The transaction is not complete until the

[[Page 17605]]

TSP record keeper receives the Form TSP-60 or TSP-U-60, executed by 
both the participant and administrator, trustee, or custodian, together 
with the guaranteed funds for the amount to be rolled over.
    (c) Participant's certification. When transferring a distribution 
to the TSP by either a trustee-to-trustee transfer or a rollover, the 
participant must certify that the distribution is eligible for transfer 
into the TSP, as follows:
    (1) Distribution from an eligible employer plan. The participant 
must certify that the distribution:
    (i) Is not one of a series of substantially equal periodic payments 
made over the life expectancy of the participant (or the joint lives of 
the participant and designated beneficiary, if applicable) or for a 
period of 10 years or more;
    (ii) Is not a minimum distribution required by I.R.C. section 
401(a)(9) (26 U.S.C. 401(a)(9));
    (iii) Is not a hardship distribution;
    (iv) Is not a plan loan that is deemed to be a taxable distribution 
because of default;
    (v) Is not a return of excess elective deferrals; and
    (vi) If not transferred or rolled over, would be includible in 
gross income for the tax year in which the distribution is paid.
    (2) Distribution from a traditional IRA. The participant must 
certify that the distribution:
    (i) Is not a minimum distribution required under I.R.C. section 
401(a)(9) (26 U.S.C. 401(a)(9)); and
    (ii) If not transferred or rolled over, would be includible in 
gross income for the tax year in which the distribution is paid.

PART 1650--METHODS OF WITHDRAWING FUNDS FROM THE THRIFT SAVINGS 
PLAN

    5. The authority citation for part 1650 continues to read as 
follows:

    Authority: 5 U.S.C. 8351, 8433, 8434, 8435, 8474(b)(5), and 
8474(c)(1).


Secs. 1650.60, 1650.61 and 1650.62  [Amended]

    6. Sections 1650.60(b), 1650.61(b) and (c)(1)(ii), and 1650.62(b) 
and (c) are amended by removing the words ``one year'' and adding in 
their place the words ``90 days'.

    7. Section 1650.63(a)(3) and (b) are revised to read as follows:


Sec. 1650.63  Executive Director's exception to the spousal 
notification requirement.

    (a) * * *
    (3) Statements by the participant and two other persons that meet 
the following requirements:
    (i) The participant's statement must give the full name of the 
spouse, declare the participant's inability to locate the spouse, state 
the last time the spouse's location was known, explain why the spouse's 
location is not known currently, and describe the good faith efforts 
the participant has made to locate the spouse in the 90 days preceding 
submission to the TSP of the request for an exception. Examples of 
attempting to locate the spouse include, but are not limited to, 
checking with relatives and mutual friends or using telephone 
directories and directory assistance for the city of the spouse's last 
known address. Negative statements, such as, ``I have not seen nor 
heard from him'' or, ``I have not had contact with her'', are not 
sufficient.
    (ii) The statements from two other persons must support the 
participant's statement that the participant has made attempts within 
the preceding 90 days to locate the spouse and that the participant 
does not know the spouse's whereabouts.
    (iii) All statements must be signed and dated and must include the 
following certification: ``I understand that a false statement or 
willful misrepresentation is punishable under Federal law (18 U.S.C. 
1001) by a fine or imprisonment or both.''.
    (b) A withdrawal election received within 90 days of an approved 
exception may be processed so long as the spouse named on the form is 
the spouse for whom the exception has been approved.


Sec. 1650.64  [Amended]

    8. Section 1650.64(c) is amended by removing the words ``one-year 
period'' and adding in their place the words ``90-day period''.
[FR Doc. 02-8606 Filed 4-10-02; 8:45 am]
BILLING CODE 6760-01-P