[Federal Register Volume 75, Number 116 (Thursday, June 17, 2010)]
[Proposed Rules]
[Pages 34388-34389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14583]


 ========================================================================
 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. 75, No. 116 / Thursday, June 17, 2010 / 
Proposed Rules  

[[Page 34388]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1600


Employee Contribution Elections and Contribution Allocations

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Proposed rule with request for comments.

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SUMMARY: The Federal Retirement Thrift Investment Board (Agency) 
proposes to amend its regulations at 5 CFR part 1600. These changes 
implement the Agency's automatic enrollment program as authorized by 
the Thrift Savings Plan Enhancement Act of 2009.

DATES: Comments must be received on or before July 19, 2010.

ADDRESSES: You may submit comments using one of the following methods:
     Federal Rulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Office of General Counsel, Attn: Thomas Emswiler, 
Federal Retirement Thrift Investment Board, 1250 H Street, NW., 
Washington, DC 20005.
     Hand Delivery/Courier: The address for sending comments by 
hand delivery or courier is the same as that for submitting comments by 
mail.
     Facsimile: Comments may be submitted by facsimile at (202) 
942-1676.
    The most helpful comments explain the reason for any recommended 
change and include data, information, and the authority that supports 
the recommended change. We will post all substantive comments 
(including any personal information provided) without change (with the 
exception of redaction of SSNs, profanities, et cetera) on http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Megan G. Grumbine at 202-942-1644 or 
Laurissa Stokes at 202-942-1645.

SUPPLEMENTARY INFORMATION: The Agency 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. The TSP 
provisions of FERSA are 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)).
    On June 22, 2009, the President signed the Thrift Savings Plan 
Enhancement Act of 2009 (``the Act''), Public Law 111-31 (123 Stat. 
1776, 1853). The Act authorized the Agency to add an automatic 
enrollment program for all Federal employees eligible for the Thrift 
Savings Plan. Members of the uniformed services were excluded from the 
automatic enrollment program. This proposed rule would conform the 
Agency's regulations to the Act and would set forth the details of the 
program.
    Under the Agency's automatic enrollment program, all newly hired 
Federal employees who are eligible to participate in the TSP and those 
Federal employees who are rehired after a separation in service of 31 
or more calendar days and who are eligible to participate in the TSP 
will automatically have 3 percent of their basic pay contributed to the 
TSP, unless they decline to contribute or decide to contribute at some 
other level by the end of the employee's first pay period (subject to 
the agency's processing standards). Otherwise, payroll offices will 
automatically deduct 3 percent of their basic pay and submit it to the 
TSP. Employees covered by the Federal Employees' Retirement System (and 
equivalent retirement systems) will also receive dollar for dollar 
matching contributions from their employing agencies as well as the 
Agency Automatic (1%) Contributions. Employees always have the option 
to change the percentage or amount of their contributions or terminate 
their contributions to the TSP.
    The Government Securities Investment (G) Fund will remain the 
default investment fund for new employees. The G Fund will also be the 
default investment fund for rehired participants with a zero account 
balance as is currently the case. Therefore, unless an employee makes a 
contribution allocation and/or interfund transfer, all employee and 
agency contributions will be invested in the G Fund. (The contribution 
allocation on file will be used if the rehired employee has retained 
his or her TSP account.)
    A participant may request a refund of his or her contributions made 
under the automatic enrollment program (and associated earnings) as 
long as the request for the refund is received within 90 days after the 
date the first contribution under the automatic enrollment program is 
processed. These refunds are permissible withdrawals as defined by 26 
U.S.C. 414(w)(2). A married participant may request a refund under the 
automatic enrollment program without the Agency providing notice or 
obtaining the consent of his or her spouse. 5 U.S.C. 8351, 8435; 26 CFR 
1.414(w)-1(d)(3).
    A participant will no longer be considered to be participating in 
the automatic enrollment program if the participant files a 
contribution election. Consequently, if a participant makes a 
contribution election during the 90-day period, the participant will 
only be eligible to withdraw those contributions attributable to the 
automatic enrollment program.
    A participant who requests a refund will receive the amount of any 
employee contributions made under the automatic enrollment program 
(adjusted for allocable gains and losses through the date of 
distribution). The Agency will report the amount of a refund as a non-
periodic payment on Form 1099-R for the year in which it was 
distributed, but the amount will not be subject to the 10-percent early 
withdrawal penalty tax. 26 CFR 1.414(w)-1(d)(1). The Agency will 
process and distribute a refund request in accordance with the Agency's 
ordinary procedures for processing and distributing withdrawals. The 
participant's Agency Automatic (1%) Contributions will remain in his or 
her account. However, the matching contributions associated with the 
employee contributions made while the participant was automatically 
enrolled and their associated earnings will be forfeited to the TSP. 26 
CFR 1.414(w)-1(d)(2), 72 FR 63144, 63148.
    After the expiration of the 90-day period, the participant will 
only be able

[[Page 34389]]

to make a withdrawal under the Agency's normal withdrawal program.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities. This regulation will 
affect Federal employees who participate in the Thrift Savings Plan, 
which is a Federal defined contribution retirement savings plan created 
under the Federal Employees' Retirement System Act of 1986, Public Law 
99-335, 100 Stat. 514, and administered by the Agency.

Paperwork Reduction Act

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

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 Sec.  
1532 is not required.

List of Subjects in 5 CFR Part 1600

    Government employees, Pensions, Retirement.

Gregory T. Long,
Executive Director, Federal Retirement Thrift Investment Board.

    For the reasons stated in the preamble, the Agency proposes to 
amend 5 CFR part 1600 as follows:

PART 1600--EMPLOYEE CONTRIBUTION ELECTIONS AND CONTRIBUTION 
ALLOCATIONS

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

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

    2. Revise the heading to part 1600 to read as follows:

PART 1600--EMPLOYEE CONTRIBUTION ELECTIONS, CONTRIBUTION 
ALLOCATIONS, AND AUTOMATIC ENROLLMENT PROGRAM

    3. Add subpart E to read as follows:
Subpart E--Automatic Enrollment Program
1600.34 Automatic enrollment program
1600.35 Refunds of default employee contributions.
1600.36 Matching contributions
1600.37 Employing agency notice

    Authority: Sec. 102, Pub. L. 111-31, div. B. tit. I, 123 Stat. 
1776, 1853 (5 U.S.C. 8432(b)(2)(A)).


Sec.  1600.34  Automatic enrollment program.

    (a) All newly hired Federal employees who are eligible to 
participate in the Thrift Savings Plan and those Federal employees who 
are rehired after a separation in service of 31 or more calendar days 
and who are eligible to participate in the TSP will automatically have 
3 percent of their basic pay contributed to the TSP (default employee 
contribution) unless they elect to not contribute or elect to 
contribute at some other level by the end of the employee's first pay 
period (subject to the agency's processing timeframes).
    (b) After being automatically enrolled, a participant may elect to 
terminate default employee contributions or change his or her 
contribution percentage or amount at any time.


Sec.  1600.35  Refunds of default employee contributions.

    (a) A participant may request a refund of any default employee 
contributions made on his or her behalf (i.e., the contributions made 
while under the automatic enrollment program) provided the request is 
received within 90 days after the date that the first default employee 
contribution was processed. The election must be made on the TSP's 
refund request form and must be received by the TSP's record keeper 
prior to the expiration of the 90-day period.
    (1) The distribution of a refund will be reported as income to the 
participant on IRS Form 1099-R, but it will not be subject to the 
additional tax under 26 U.S.C. 72(t) (the early withdrawal penalty 
tax).
    (2) A participant who requests a refund will receive the amount of 
any default employee contributions (adjusted for allocable gains and 
losses).
    (3) Processing of refunds will be subject to the rules set out at 5 
CFR part 1650.
    (b) A participant will no longer be considered to be covered by the 
automatic enrollment program if the participant files a contribution 
election. Consequently, if a participant makes a contribution election 
during the 90-day period, the participant will only be eligible to 
receive as a refund an amount equal to his or her default employee 
contributions (adjusted for allocable gains and losses).
    (c) After the expiration of the period allowed for the refund, any 
withdrawal must be made pursuant to 5 U.S.C. 8433 and 5 CFR part 1650.
    (d) A married participant may request a refund of default employee 
contributions without obtaining the consent of his or her spouse or 
having the TSP notify the spouse of the request.
    (e) The rules applicable to frozen accounts (5 CFR 1650.3) and 
applicable to deceased participants (5 CFR 1650.6) also apply to 
refunds of the default employee contributions.


Sec.  1600.36  Matching contributions.

    (a) A participant is not entitled to keep the matching 
contributions and their associated earnings that are attributable to 
refunded default employee contributions.
    (b) The matching contributions and associated earnings attributable 
to refunded default employee contributions shall be forfeited to the 
TSP and used to offset administrative expenses.


Sec.  1600.37  Employing agency notice.

    Employing agencies shall furnish all new employees and all rehired 
employees covered by the automatic enrollment program a notice that 
accurately describes:
    (a) That default employee contributions equal to 3 percent of the 
employee's basic pay will be deducted from his or her pay and 
contributed to the TSP on the employee's behalf if the employee does 
not make an affirmative election;
    (b) The employee's right to elect to not have default employee 
contributions made to the TSP on his or her behalf or to elect to have 
a different percentage or amount of basic pay contributed to the TSP;
    (c) That the default employee contributions will be invested in the 
G Fund unless the employee makes a contribution allocation and/or an 
interfund transfer; and
    (d) The employee's ability to request a refund of any default 
employee contributions (adjusted for allocable gains and losses) and 
the procedures to request such a refund.

[FR Doc. 2010-14583 Filed 6-16-10; 8:45 am]
BILLING CODE 6760-01-P