[Federal Register Volume 68, Number 65 (Friday, April 4, 2003)]
[Proposed Rules]
[Pages 16449-16450]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8245]


 ========================================================================
 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. 68, No. 65 / Friday, April 4, 2003 / Proposed 
Rules  

[[Page 16449]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1600, 1605, 1606, and 1655


Employee Elections To Contribute to the Thrift Savings Plan, 
Correction of Administrative Errors, Lost Earnings Attributable to 
Employing Agency Errors, Loans

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Notice of proposed rulemaking, and request for comments.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) proposes to revise the Board's regulations to 
permit the making of catch-up contributions by TSP participants who are 
age 50 and over, and to reflect the processes of the Thrift Savings 
Plan's new record keeping system.

DATES: Comments must be received on or before April 25, 2003.

ADDRESSES: Comments may be sent to: Elizabeth S. Woodruff, General 
Counsel, Federal Retirement Thrift Investment Board, 1250 H Street, 
NW., Washington, DC 20005. The Board's FAX is (202) 942-1676.

FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest on (202) 942-1660.

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 civilian 
employees and members of the uniformed services which is similar to 
cash or deferred arrangements established under section 401(k) of the 
Internal Revenue Code (26 U.S.C. 401(k)). Sums in a TSP participant's 
account are held in trust for the participant.
    In 1996, Congress amended FERSA by enacting the Thrift Savings Plan 
Act of 1996, Public Law 104-208, 110 Stat. 3009, which permitted the 
Executive Director to offer, among other things, new withdrawal options 
to TSP participants. In order to accommodate these new withdrawal 
options and to make a number of benefits arising from recent 
technological advances available to TSP participants, the Board 
redesigned its record keeping system.
    On June 25, 2002, the Board published a proposed rule with request 
for comments in the Federal Register (67 FR 42856), proposing to amend 
the TSP regulations that will be affected by the new record keeping 
system.
    The Executive Director proposes further amendments to the Board's 
regulations to implement a recent amendment to FERSA, and to explain 
how the Board will compute lost earnings and administer the TSP loan 
program when the new system is implemented.

Description of Subjects and Issues Involved

    On November 27, 2002, Congress enacted Public Law 107-304. Section 
1 of the Act, which will be codified at 5 U.S.C. 8351(b)(2)(C), 
8432(a)(3), and 8440f, authorizes a program of additional ``catch-up'' 
contributions for TSP participants age 50 and over who are already 
contributing to the TSP the maximum amount or percentage of basic pay 
they are permitted by statute to contribute. The maximum allowable 
amount for catch-up contributions for 2003 is $2,000. This dollar 
limitation will increase in $1,000 yearly increments until it reaches 
$5,000 in 2006. Eligible participants will be able to elect catch-up 
contributions beginning in July 2003 (for 2003), or thereafter (for 
subsequent years). The Executive Director proposes to add a new 
provision to part 1600 of the Board's regulations to explain how 
eligible participants can elect to make these contributions.
    Under 5 U.S.C. 8432a(a)(1) and (b), the Board is required to issue 
regulations to govern how the TSP will credit late contributions, and 
in some cases makeup contributions, with the investment gains and 
losses they would have earned had the contributions been timely made. 
The loss incurred or the gain realized on late or makeup contributions 
is called ``breakage,'' and it is computed under the rules codified at 
5 CFR parts 1605 and 1606. The Board's June 25, 2002, proposed rule 
explains how breakage will be computed after implementation of the new 
record keeping system, with one exception. Specifically, the proposed 
rule states that late contributions (and some makeup contributions) 
will be credited with breakage based on the contributions allocation 
for the participant's account at the time the contributions should have 
been made. However, when the new record keeping system is implemented, 
it will contain only three years of converted contribution allocation 
history and contribution records for each participant. Therefore, if 
the TSP corrects an error that occurred more than three years before 
implementation of the new system, the TSP will compute breakage based 
on a calculated rate of investment return derived by the record keeping 
system, instead of basing breakage on the participant's actual 
investment experience. The calculated rate of return will be either the 
Government Securities Investment Fund (G Fund) rate, or the average of 
the rates of return for all of the TSP investment funds, whichever rate 
is greater. The Executive Director proposes to amend 5 CFR parts 1605 
and 1606 to reflect this practice.
    The Board has developed a loan program, as required by 5 U.S.C. 
8433(g), and the Board's loan regulations are codified at 5 CFR part 
1655. Although retirement plan loans are offered by 401(k) plans, which 
are the private-sector equivalent of the TSP, the Board did not base 
the TSP loan program on the private sector model. However, the Board 
has built its new record keeping system around a widely used 
commercial-off-the-shelf (COTS) software package, and some elements of 
the current TSP loan program are incompatible with the capabilities of 
the COTS program. Specifically, a participant who misses loan payments 
in the current system is given 90 days to recommence loan payment to 
avoid defaulting on the loan. No interest accrues on the missed loan 
payments during that 90 day period, and, when payments recommence, the 
period of missing payments is added onto the length of the loan. In 
contrast, the COTS software package incorporates the requirements of 
Treasury Department regulations by requiring a participant who misses 
loan payments to

[[Page 16450]]

recommence those payments by the end of the next calendar quarter, and 
make up all missed payments (rather than add them to the end of the 
loan term). In addition, interest accrues on missed loan payments. The 
use of the COTS software package will permit the Board to quickly adapt 
the administration of the TSP to the ever-changing legal and 
programmatic requirements affecting the TSP and defined contribution 
plans. Therefore, to more fully benefit from this adaptability and to 
minimize the need for customization of the COTS package, the Executive 
Director proposes to conform the loan program to the private-sector 
model and to amend the Board's regulations to codify these changes.

Authority Under Which the Rule Is Proposed

    The rule proposed in this notice will be issued under the authority 
of 5 U.S.C. 8351(e), 8432(a)(3), 8432a(a)(1), 8432a(b), 8433(g)(2), 
8433(h)(4), 8474(b)(5), and 8474(c)(1).

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 and former 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, Public Law 
104-4, section 201, 109 Stat. 48, 64, 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 202, 109 Stat. 48, 64-65, is not required.

James B. Petrick,
Executive Director (Acting), Federal Retirement Thrift Investment 
Board.
[FR Doc. 03-8245 Filed 4-3-03; 8:45 am]
BILLING CODE 6760-01-P