[Federal Register Volume 75, Number 117 (Friday, June 18, 2010)]
[Proposed Rules]
[Pages 34654-34656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14741]


 ========================================================================
 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. 117 / Friday, June 18, 2010 / 
Proposed Rules  

[[Page 34654]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1604 and 1651


Uniformed Services Accounts and Death Benefits

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 make several changes to its death benefits regulations. In 
particular, it proposes to expand the requirements necessary in order 
for a designation of beneficiary form to be valid. This change would 
also allow participants holding both a uniformed services and civilian 
account to submit a single designation of beneficiary form which can be 
used to designate beneficiaries for both accounts. The Agency also 
proposes to amend its death benefit regulations to allow participants 
to designate a custodian under the Uniform Transfers to Minors Act as a 
beneficiary, to permit the Agency to defer to State law when a 
potential beneficiary is implicated in the death of a participant and 
is subsequently found not guilty by reason of insanity, and to require 
a notary to witness disclaimers of death benefits.

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

ADDRESSES: Comments may be sent to Thomas K. Emswiler, General Counsel, 
Federal Retirement Thrift Investment Board, 1250 H Street, NW., 
Washington, DC 20005. The Agency's Fax number is (202) 942-1676.

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

SUPPLEMENTARY INFORMATION: The Agency 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 
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)).

Uniformed Services Accounts/Death Benefits--Agency's New Designation of 
Beneficiary Form and Related Requirements

    The Agency proposes to amend its regulations to improve the process 
by which TSP participants designate beneficiaries for their TSP 
accounts.
    In particular, the Agency, which has created a new optical 
character recognition (OCR) Form TSP-3, Designation of Beneficiary, 
proposes to expand its death benefits regulations to enumerate 
additional criteria the Agency requires in order for a designation of 
beneficiary form to be valid and accepted by the Agency. The Agency 
intends that this new form and its related requirements will guide 
participants through the important task of properly designating their 
account beneficiaries and greatly reduce potential ambiguities involved 
in the disposition of a participant's account upon his or her death.
    Currently, the Agency's guiding statute and regulations provide 
that a designation of beneficiary form need only be signed, witnessed, 
and received by the Agency on or before the participant's date of death 
in order to be valid. See 5 U.S.C. 8424(d), 5 CFR 1651.3(c). However, 
the Agency often receives forms which meet these threshold requirements 
but omit critical details such as identifying information for the 
participant or the beneficiaries. In order to reduce the likelihood of 
error in processing the designation of beneficiary forms for its 
approximately 4.3 million participants, the Agency concluded it is 
necessary to expand the criteria required for a designation of 
beneficiary form to be valid.
    Specifically, the Agency proposes to require that, in addition to 
being signed, properly witnessed, and received by the Agency on or 
before a participant's date of death, a designation of beneficiary form 
must also identify the participant in a manner so that the Agency can 
locate the participant's TSP account (e.g., provide the participant's 
full name and the participant's date of birth, TSP account number, or 
Social Security number), identify primary and contingent beneficiaries 
in a manner so that the Agency can identify the individual (e.g., 
provide a beneficiary's Social Security number or date of birth), link 
each contingent beneficiary to a primary beneficiary, provide shares 
for primary beneficiaries which equal 100 percent, and contain no 
substantive alterations.
    In addition to ensuring accurate processing and payment, the new 
regulatory requirements will reduce processing time and save the Agency 
resources as these requirements allow the Agency to quickly and 
accurately match the information on the designation of beneficiary form 
to the proper participant and beneficiaries. Further, by having these 
additional regulatory requirements in place, if a participant submits a 
form with an omission or error, the Agency is poised to quickly reject 
the form and alert the participant via a notification that he or she 
must submit a new, valid form. These up-front, early rejections and 
notifications will save the Agency considerable resources as the Agency 
will no longer be required to conduct as much posthumous research, 
analysis, and legal review.
    Additionally, these new designation requirements (e.g., requiring 
that each page be free of substantive alterations) ensure that the 
Agency is not receiving fraudulent or changed forms. Because a deceased 
participant's TSP account is an important asset to a participant's 
beneficiaries, the Agency believes these new requirements are critical 
to ensuring that the participant's wishes are properly realized.
    The Agency has attempted to balance its new requirements with 
customer service. The new OCR Form TSP-3, for example, provides 
detailed instructions and allows participants with both a uniformed 
services and civilian account to use one form to designate the same 
beneficiaries for both accounts.
    Further, the Agency proposes to add only those requirements it 
views as critical. For example, the Agency would not reject an 
otherwise valid designation if the contingent beneficiary shares do not 
equal 100 percent. Since the Agency infrequently relies on contingent 
beneficiary information to pay an

[[Page 34655]]

account, and because the Agency has a mechanism by which it can 
determine the amount attributable to each beneficiary if the shares do 
not equal 100 percent, the Agency believes it is too onerous to 
invalidate a Form TSP-3 containing proper primary beneficiary 
designations solely due to the contingent beneficiary shares not 
equaling 100 percent.
    All designation of beneficiary forms, including older versions of 
the Form TSP-3, submitted on or after the effective date of this 
regulation must meet these new regulatory requirements in order to be 
valid. This change is not retroactive and will not invalidate those 
forms which the Agency has received prior to the effective date of this 
regulation. The Agency's new designation of beneficiary form is 
available at http://www.tsp.gov.

Death Benefits--Designating a Custodian Under the Uniform Transfers to 
Minors Act

    The Uniform Transfers to Minors Act (UTMA) is a uniform act drafted 
and recommended by the National Conference of Commissioners on Uniform 
State Laws and subsequently enacted by most U.S. states and the 
District of Columbia. It allows an individual to make a financial 
transfer to a minor, but also to prevent the minor from having 
immediate access to the transferred property or funds. The person 
designated as custodian must manage the property or funds for the 
minor's benefit until the minor reaches the age of majority as 
determined by the governing state's law.
    The Agency's proposed regulation would allow a participant to 
designate a custodian under UTMA as the beneficiary of his or her TSP 
account. To achieve consistent administration, the TSP will require the 
UTMA custodianship to be established under the laws of the District of 
Columbia.
    Under the laws of District of Columbia, when the minor reaches 18 
years of age or dies, a UTMA custodianship will automatically 
terminate, and the custodial relationship will cease to exist. 
Accordingly, if the minor reaches 18 years of age before the death 
benefit becomes payable, payment will be made directly to the minor and 
not to the designated custodian. An UTMA designation would only be 
valid if it is designated using the Agency's designation of beneficiary 
form. The Agency has created a sample UTMA designation which is 
available at http://www.tsp.gov.

Death Benefits--Homicide

    Section 1651.12 of Title 5 of the Code of Federal Regulations 
governs the distribution of death benefits when a potential beneficiary 
causes the death of a participant. It currently provides that if a 
beneficiary is convicted of, or pleads guilty to, a crime in connection 
with the participant's death that would preclude the beneficiary from 
inheriting under State law, the beneficiary will not be entitled to 
receive any portion of the participant's account. It further provides 
that the Agency will follow the State law of the participant's domicile 
as that law is set forth in a civil court judgment.
    As section 1651.12 currently reads, a potential beneficiary may be 
deprived of his or her entitlement to death benefits only if (1) he or 
she is convicted of a crime that would bar him or her from inheriting 
under the laws of the State in which the participant is domiciled at 
the time of death or (2) he or she is judged guilty in civil court of a 
crime that would bar him or her from inheriting under the laws of the 
state in which the participant is domiciled. The language of section 
1651.12 is imperfect as applied to a criminal verdict declaring that 
the potential beneficiary is not guilty, by reason of insanity, of 
causing the participant's death. This proposed regulation would allow 
the Agency to defer to state law to determine the effect of a verdict 
of not guilty by reason of insanity on the potential beneficiary's 
entitlement to inherit from the deceased participant, notwithstanding 
that a verdict of not guilty by reason of insanity does not constitute 
a conviction.

Death Benefits--Notarized Signature for Disclaimers

    The beneficiary of a TSP account may disclaim his or her right to 
receive all or part of a TSP death benefit. A valid disclaimer is 
irrevocable and the effect of a disclaimer is that the disclaimed share 
will be paid as though the beneficiary predeceased the participant.
    The disclaimer must expressly state that the beneficiary is 
disclaiming his or her right to receive either all or a stated 
percentage of the death benefit payable from the TSP account of the 
named participant and must be: (1) Submitted in writing; (2) signed by 
the person (or legal representative) disclaiming the benefit; and (3) 
received before the TSP pays the death benefit. This proposed 
regulation would require the signature of the person (or legal 
representative) disclaiming the benefit to be witnessed by a notary. 
Because the effect of a disclaimer is to preclude an otherwise lawful 
beneficiary from taking either a portion or the whole amount of a TSP 
account, this added requirement is necessary to ensure that the Agency 
is receiving non-fraudulent disclaimers.

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.

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 Part 1604

    Military personnel, Pensions, Retirement.

5 CFR Part 1651

    Claims, Government employees, Pensions, Retirement.

Gregory T. Long,
Executive Director, Federal Retirement Thrift Investment Board.
    For the reasons set forth in the preamble, the Agency proposes to 
amend 5 CFR chapter VI as follows:

PART 1604--UNIFORMED SERVICES ACCOUNTS

    1. The authority citation for part 1604 continues to read as 
follows:

    Authority: 5 U.S.C. 8440e, 8474(b)(5) and (c)(1).


Sec.  1604.8  [Amended]

    2. Amend Sec.  1604.8, by removing the second sentence of paragraph 
(a).

PART 1651--DEATH BENEFITS

    3. The authority citation for part 1651 continues to read as 
follows:

    Authority:  5 U.S.C. 8424(d), 8432(j), 8433(e), 8435(c)(2), 
8474(b)(5) and 8474(c)(1).

    4. Amend Sec.  1651.3, by adding a fourth sentence to paragraph 
(b), and revising paragraph (c) to read as follows:

[[Page 34656]]

Sec.  1651.3  Designation of beneficiary.

* * * * *
    (b) * * * A participant may designate a custodian under the Uniform 
Transfers to Minors Act provided that the custodianship is established 
under the laws of the District of Columbia and that the participant 
designates the custodianship using the Agency's designation of 
beneficiary form.
    (c) Validity requirements. To be valid and accepted by the TSP 
record keeper, a TSP designation of beneficiary form must:
    (1) Be received by the TSP record keeper on or before the date of 
the participant's death;
    (2) Identify the participant in such a manner so that the Agency 
can locate his or her TSP account;
    (3) Be signed and properly dated by the participant and signed and 
properly dated by two witnesses;
    (i) The participant must either sign the form in the presence of 
the witnesses or acknowledge his or her signature on the form to the 
witnesses;
    (ii) All submitted and attached pages must be signed by the 
participant, dated by the participant, and witnessed in the same manner 
(by the same witnesses) as the form itself and must follow the format 
of the TSP designation of beneficiary form;
    (iii) A witness must be age 21 or older; and
    (iv) A witness designated as a beneficiary will not be entitled to 
receive a death benefit payment. If a witness is the only named 
beneficiary, the designation of the beneficiary is invalid. If more 
than one beneficiary is named, the share of the witness beneficiary 
will be allocated among the remaining beneficiaries pro rata.
    (4) Designate primary beneficiary shares which when summed equal 
100%;
    (5) Contain no substantive alterations (e.g., struck-through shares 
or scratched-out names of beneficiaries);
    (6) Designate each primary and each contingent beneficiary in such 
a manner so that the Agency can identify the individual or entity; and
    (7) Match each contingent beneficiary to a primary beneficiary.
* * * * *
    5. Amend Sec.  1651.12, by revising the second sentence to read as 
follows:


Sec.  1651.12  Homicide.

    * * * If the beneficiary is implicated in the death of the 
participant and the beneficiary would be precluded from inheriting 
under State law, the beneficiary will not be entitled to receive any 
portion of the participant's account. * * *
    6. Amend Sec.  1651.17, by revising paragraph (b)(2) to read as 
follows:


Sec.  1651.17  Disclaimer of benefits.

* * * * *
    (b) * * *
    (2) Signed or acknowledged, in the presence of a notary, by the 
person (or legal representative) disclaiming the benefit; and
* * * * *
[FR Doc. 2010-14741 Filed 6-17-10; 8:45 am]
BILLING CODE 6760-01-P