[Federal Register Volume 69, Number 67 (Wednesday, April 7, 2004)]
[Proposed Rules]
[Pages 18294-18296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7610]


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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. 69, No. 67 / Wednesday, April 7, 2004 / 
Proposed Rules  

[[Page 18294]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1650, 1653, 1655 and 1690


Methods of Withdrawing Funds From the Thrift Savings Plan; Court 
Orders and Legal Processes Affecting Thrift Savings Plan Accounts; Loan 
Program; Thrift Savings Plan

AGENCY: Federal Retirement Thrift Investment Board

ACTION: Proposed rule with request for comments.

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SUMMARY: The Executive Director of the Federal Retirement Thrift 
Investment Board (Board) proposes to amend the court order regulations 
to remove attorneys from the list of permissible court order payees, 
and to require non-English court orders to be accompanied by a 
certified English translation. The Executive Director proposes to 
revise the TSP loan regulations to assess a $50.00 fee on new TSP 
loans, permit a participant to have a single general purpose loan at 
any one time, and implement a 60-day waiting period between the date a 
loan is repaid and a new loan application for a loan of the same type 
will be accepted. Finally, the Executive Director proposes to clarify 
the TSP regulations pertaining to powers of attorney documents, 
guardianship orders, and conservatorship orders.

DATES: Comments must be received on or before May 7, 2004.

ADDRESSES: Comments may be sent to Patrick J. Forrest, Federal 
Retirement Thrift Investment Board, 1250 H Street, NW., Washington, DC 
20005. The Board's Fax number is (202) 942-1676.

FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest on (202) 942-1661.

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 8401-79. 
The TSP is a tax-deferred retirement savings plan for Federal civilian 
employees and members of the uniformed services. The TSP is similar to 
cash or deferred arrangements established for private-sector employees 
under section 401(k) of the Internal Revenue Code (26 U.S.C. 401(k)).

Court Orders

    A state domestic relations court can award a portion of a 
participant's TSP account ``to another person'' in an action for 
divorce, annulment or legal separation. 5 U.S.C. 8467(a). TSP court 
order regulations interpret this provision to permit a payment to the 
spouse, former spouse, child, or dependent of the participant, or to an 
attorney for the spouse, former spouse, child, or dependent of the 
participant. 5 CFR 1653.2(a)(4).
    Section 401(k) plans are the private-sector equivalents of the TSP 
and they can be divided by qualified domestic relations orders (QDRO) 
in domestic relations actions. 26 U.S.C. 414(p); 29 U.S.C. 1056(d). 
Congress enacted the QDRO provisions in the Retirement Equity Act of 
1984 (REA) ``to safeguard the security of the employee's immediate 
family members in the case of divorce or separation.'' Ablamis v. 
Roper, 937 F.2d 1450, 1456-7 (9th Cir. 1991). In keeping with this 
purpose, a QDRO can make an award only to a ``spouse, former spouse, 
child or dependent of a participant,'' not to an attorney. 26 U.S.C. 
414(p)(8).
    The court order provisions of FERSA serve the same purpose as the 
QDRO provisions of REA. When the Board first promulgated the court 
order regulations on March 13, 1995 (60 FR 13604), section 1653.2(b)(4) 
permitted a court-ordered payment to an attorney for a participant's 
spouse or dependent because such a payment is tantamount to paying the 
spouse or dependent. See 60 FR 13605. While this is true, the Executive 
Director has reevaluated this policy and determined that the security 
of a participant's immediate family is better preserved by conforming 
the TSP to the private-sector practice of limiting court order payees 
to the participant's immediate family members, not by making tax-
deferred retirement savings available for the payment of legal fees. 
Proposed section 1653.4(b)(4) would codify this policy change.
    The TSP honors retirement benefits court orders from the 
Commonwealth of Puerto Rico if they meet the requirements of FERSA and 
TSP regulations. See 5 U.S.C. 8401(7) (``court'' for TSP purposes 
includes a court of the Commonwealth of Puerto Rico). Those court 
orders are routinely written in Spanish, although the litigants can 
obtain a certified English translation of the order from the court. 
When the TSP receives a Puerto Rican court order that is not 
accompanied by a certified English translation, the TSP must pay for 
translation services before it can determine whether the court order is 
enforceable against the TSP.
    TSP administrative expenses are borne by all of the participants. 
The Executive Director has determined that it is appropriate for the 
parties to the court order, not the TSP participants, to bear the cost 
of the translation. Therefore, proposed section 1653.3(b) provides that 
the TSP will reject a court order as incomplete if it is in a language 
other than English, unless it is also accompanied by a certified 
English language translation.

TSP Loans

    A participant can gain temporary access to a portion of his TSP 
retirement savings through the TSP loan program. TSP loans are subject 
to the requirements of FERSA (5 U.S.C. 8433(g)), the Internal Revenue 
Code (26 U.S.C. 72(p)), and the TSP loan regulations (5 CFR part 1655). 
These provisions require the TSP to charge interest on loans and to 
establish a repayment schedule.
    The loan program offers an important benefit. It encourages 
participants to contribute more to the TSP because they know they will 
have access to some of the money in their accounts to help purchase a 
home or pay unexpected bills. However, the TSP is not a checking or 
savings account; it is a long-term investment intended for retirement. 
Removing money from a TSP account--even when it is paid back--may 
diminish the amount available to the participant for retirement.
    Nevertheless, the number of TSP loans outstanding has been 
increasing rapidly in recent years. A review of loans issued shows that 
many participants are paying off a loan and immediately taking another 
loan. Also, a significant percentage of TSP

[[Page 18295]]

participants maintain two loans outstanding. The Executive Director has 
determined that it is inappropriate for participants to maintain 
constant loan balances, thus treating the loan program as a source of 
ready cash, rather than a lender of last resort.
    The administrative expenses of the TSP loan program are 
considerable and they are borne by all of the participants as a general 
administrative expense. The Executive Director has determined that it 
is appropriate for the participants who take advantage of the loan 
program to bear its cost, rather than 2.7 million participants who do 
not use the program.
    The Executive Director proposes three TSP policy changes to 
reinforce the importance of borrowing from the TSP only as a last 
resort, to ensure that the administrative expenses of the loan program 
are reasonable for a retirement savings plan, and to ensure that the 
costs of the TSP loan program are paid by the participants who use it. 
First, in section 1655.2, the Board proposes to establish a 60-day 
waiting period between paying off one loan and receiving another loan 
of the same type. Second, in sections 1655.4 and 1655.11, the Executive 
Director proposes to limit participants to having a single general 
purpose loan outstanding at any one time. Third, in a new section 
1655.21, the Executive Director proposes to charge a $50.00 loan fee 
when a TSP loan is disbursed.

Powers of Attorney, and Guardianship and Conservatorship Orders

    A participant can make TSP transactions through an agent by 
appointing an attorney-in-fact with a power of attorney (POA). In 
addition, a court order can appoint a guardian or conservator for an 
incapacitated participant to act as his or her agent for TSP purposes. 
Current sections 1690.12 and 1690.13 state that the TSP must approve 
the POA or the court order before the agent can sign a form on the 
participant's behalf. The Executive Director proposes to amend sections 
1690.12 and 1690.13 to state that the TSP will accept a document that 
was signed by an agent before the date on which the TSP approved the 
POA or the court order, as long as the agent was authorized under the 
conditions of his or her appointment to sign the document.

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, 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

5 CFR Parts 1650, 1653 and 1690

    Employee benefit plans, Government employees, Pensions, Retirement.

5 CFR Part 1655

    Employee benefit plans, Government employees, Military Personnel, 
Pensions, Retirement.

Gary A. Amelio,
Executive Director, Federal Retirement Thrift Investment Board.
    For the reasons set forth in the preamble, the Board proposes to 
amend 5 CFR chapter VI as follows:

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

    1. 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).

Subpart G--Spousal Rights


Sec.  1650.61  [Amended]

    2. Amend Sec.  1650.61 by removing ``Sec.  1650.64'' from paragraph 
(b) and ``Sec.  1650.65'' from paragraph (c)(1), and adding in their 
places ``this Subpart''.


Sec.  1650.62  [Amended]

    3. Amend Sec.  1650.62 by removing ``Sec.  1650.64'' from paragraph 
(b) and ``Sec.  1650.65'' from paragraph (c), and adding in their 
places ``this Subpart''.


Sec.  1650.64  [Amended]

    4. Amend Sec.  1650.64 by removing ``Sec.  1650.64'' from paragraph 
(a)(1) and adding in its place ``this Subpart''.

PART 1653--COURT ORDERS AND LEGAL PROCESSES AFFECTING THRIFT 
SAVINGS PLAN ACCOUNTS

    5. The authority citation for part 1653 is revised to read as 
follows:

    Authority: 5 U.S.C. 8435, 8436(b), 8437(e), 8439(a)(3), 8467, 
8474(b)(5) and 8474(c)(1).

Subpart A--Retirement Benefits Court Orders

    6. Amend Sec.  1653.2 by revising paragraph (a)(4) to read as 
follows:


Sec.  1653.2  Qualifying retirement benefits court orders.

    (a) * * *
    (4) A court order can require a payment only to a spouse, former 
spouse, child or dependent of a participant.
    7. Amend Sec.  1653.3 by revising the last sentence of paragraph 
(b) introductory text to read as follows:


Sec.  1653.3  Processing retirement benefits court orders.

* * * * *
    (b) * * * To be complete, a court order must be written in English 
or be accompanied by a certified English translation and contain all 
pages and attachments; it must also provide (or be accompanied by a 
document that provides):
* * * * *

PART 1655--LOAN PROGRAM

    8. The authority citation for part 1655 is revised to read as 
follows:

    Authority: 5 U.S.C. 8433(g), 8439(a)(3) and 8474.

    9. Revise Sec.  1655.2 to read as follows:


Sec.  1655.2  Eligibility for loans.

    A participant can apply for a TSP general purpose or residential 
loan if:
    (a) More than 60 calendar days have elapsed since the participant 
has repaid in full a TSP loan of the same type.
    (b) The participant is in pay status;
    (c) The participant is eligible to contribute to the TSP (or would 
be eligible to contribute but for the suspension of the participant's 
contributions because he or she obtained a hardship in-service 
withdrawal);
    (d) The participant has at least $1,000 in employee contributions 
and attributable earnings in his or her account; and
    (e) The participant has not had a TSP loan declared a taxable 
distribution within the last 12 months for any reason other than a 
separation from Government service; and
    10. Amend Sec.  1655.4 by revising the second sentence to read as 
follows:

[[Page 18296]]

Sec.  1655.4  Number of loans.

    * * * One of the two outstanding loans may be a residential loan 
and the other one may be a general purpose loan. * * *
    11-12. Revise paragraph (b) of Sec.  1655.11 to read as follows:


Sec.  1655.11  Loan acceptance.

* * * * *
    (b) The participant has the maximum number of loans outstanding 
under Sec.  1655.4;
* * * * *
    13. Add a new Sec.  1655.21 to read as follows:


Sec.  1655.21   Loan fee.

    A participant will be charged a $50.00 loan fee when a TSP loan is 
disbursed, which will be deducted from the proceeds of the loan.

PART 1690--THRIFT SAVINGS PLAN

    14. The authority citation for Part 1690 continues to read as 
follows:

    Authority: 5 U.S.C. 8474.

    15. Revise Sec.  1690.12 to read as follows:


Sec.  1690.12  Power of attorney.

    A TSP participant or beneficiary can authorize an individual to 
conduct business with the TSP on his or her behalf by appointing an 
agent (i.e., an attorney-in-fact). Before the TSP will allow an agent 
to conduct business for the participant, the TSP must approve the power 
of attorney (POA) granting such authority. The TSP will accept a 
general POA that authorizes the agent to act on behalf of the 
participant with respect to the participant's personal property, 
Federal Government retirement benefits, or business transactions. A 
general POA will give the agent unlimited authority with the TSP, 
including the authority to sign any TSP-related document. The TSP will 
also accept a specific POA authorizing the agent to effect TSP 
transactions. If the participant or beneficiary desires to limit the 
agent's authority to specified TSP transactions, the POA must expressly 
state the limitation on the agency's authority. To be accepted by the 
TSP, a POA must be authenticated, attested, acknowledged, or certified 
by the principal before a notary public or other official authorized by 
law to administer oaths or affirmations. The TSP will advise the person 
submitting the POA whether it is valid to effect TSP transactions.
    16. Revise Sec.  1690.13 to read as follows:


Sec.  1690.13  Guardianship and conservatorship orders.

    A court can authorize an agent to conduct business with the TSP on 
behalf of an incapacitated TSP participant or beneficiary by appointing 
a guardian or conservator. Before the TSP will allow a guardian or 
conservator to conduct business with the TSP, the TSP must approve the 
guardianship or conservatorship order issued by a court of competent 
jurisdiction as defined in Sec.  1690.1. The TSP will accept a general 
appointment of guardianship or conservatorship that authorizes the 
agent to act on behalf of the participant with respect to the 
participant's personal property, Federal Government retirement 
benefits, or business transactions. A general appointment will give the 
agent unlimited authority with the TSP, including the authority to sign 
any TSP-related document. The TSP will also accept a specific 
appointment of guardianship or conservatorship authorizing the agent to 
effect TSP transactions. If the court desires to limit the agent's 
authority to specific TSP transactions, the court order must expressly 
state the limitation on the agent's authority. In addition, before the 
TSP will accept a guardianship or conservatorship order, the agent must 
establish to the satisfaction of the TSP that any bonding requirement 
or other preconditions specified in the court order have been 
satisfied. The TSP will advise the guardian or conservator whether the 
order is valid to effect transactions in the TSP.
[FR Doc. 04-7610 Filed 4-6-04; 8:45 am]
BILLING CODE 6760-01-P