[Federal Register Volume 75, Number 144 (Wednesday, July 28, 2010)]
[Rules and Regulations]
[Pages 44065-44066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18436]



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 Rules and Regulations
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  Federal Register / Vol. 75, No. 144 / Wednesday, July 28, 2010 / 
Rules and Regulations  

[[Page 44065]]


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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1604 and 1651


Uniformed Services Accounts and Death Benefits

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Final rule.

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SUMMARY: The Federal Retirement Thrift Investment Board (Agency) is 
making several changes to its death benefits regulations. In 
particular, it is expanding the requirements necessary in order for a 
designation of beneficiary form to be valid. This change will 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 is also 
amending its death benefit regulations to allow participants to 
designate a custodian under the Uniform Transfers to Minors Act as a 
beneficiary, 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 require a 
notary to witness disclaimers of death benefits.

DATES: This rule is effective August 1, 2010.

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)).
    On June 18, 2010, the Agency published a proposed rule with request 
for comments in the Federal Register (75 FR 34654, June 18, 2010). The 
Agency received comments from one Federal employees' union, two 
participants, and three other parties.
    The Federal employees' union endorsed the proposed changes. The 
union expressed concern that the complexity of the Form TSP-3, 
Beneficiary Designation, and the multiplicity of its requirements will 
cause a large number of forms to be rejected as invalid. The union, 
however, noted with approval that the Agency stated in its proposed 
regulation that Agency staff will act quickly to review beneficiary 
designation forms and to alert participants of the need to correct any 
omissions or errors. The Agency intends to keep this commitment by 
assigning sufficient staff to this task.
    The Federal employees' union also specifically noted its approval 
of the Agency's proposal to permit a participant to designate a 
custodian under the Uniform Transfers to Minors Act (UTMA) as the 
beneficiary of his or her TSP account. With respect to the requirement 
that the UTMA custodianship be established under the laws of the 
District of Columbia, the union asked the TSP to provide guidance to 
assure compliance with District of Columbia laws. Finally, the union 
suggested that the Form TSP-3 instructions be revised to explain the 
designation of a custodian under the UTMA and include an example to 
illustrate this fact pattern.
    The Agency considered including an explanation of the designation 
of a custodian under the UTMA in the instructions to the Form TSP-3. 
But due to the complex financial and tax consequences of designating a 
custodian under the UTMA, the Agency wishes to discourage participants 
from making this decision without first obtaining expert advice. 
Moreover, the process of designating a custodian under UTMA requires a 
lengthy explanation, which the Agency believes would make the Form TSP-
3 overly complex. Therefore, in response to this comment, the Agency 
created a special form for designating an UTMA custodian. This form 
will be made available on the TSP website and will include instructions 
to ensure that the designation is valid under the District of Columbia 
Uniform Transfers to Minors Act.
    One participant commented simply to express his support for the 
proposed changes. Another participant commented to express frustration 
with unspecified aspects of the current rules for designating 
beneficiaries, as well as his hope that the revised rules will be less 
frustrating.
    One commenter objected to the requirement to link the contingent 
beneficiary to a primary beneficiary because he believes the 
requirement is not clear. In response to this comment, the Agency is 
clarifying the language proposed for 5 CFR 1651.3(c)(7). The language 
in the proposed rule required a participant to ``Match each contingent 
beneficiary to a primary beneficiary.'' This final rule replaces that 
language with the following: ``For each contingent beneficiary, 
identify the primary beneficiary whose share the contingent beneficiary 
is to receive in the event the primary beneficiary dies before payment 
is made.''
    One commenter suggested that the proposed rule be changed to allow 
participants to designate one or more charities as a primary or 
contingent beneficiary. The Agency's regulations currently allow 
participants to designate one or more charities as a primary or 
contingent beneficiary. 5 CFR 1651.3(b). This proposed rule does not 
affect the participant's ability to designate a charity as a 
beneficiary.
    Two of the commenters also objected to including the beneficiary's 
date of birth or social security number on the Form TSP-3. The proposed 
rule does not specifically require the participant to include the 
beneficiary's date of birth or social security number on the Form TSP-
3. It does, however, require the participant to designate each primary 
and each contingent beneficiary in a manner so that the Agency can 
identify the individual or entity. The preamble to the proposed rule 
gave the date of birth or social security number as examples of 
information that would allow the TSP to identify the participant's 
beneficiary. The TSP needs sufficient information to identify the 
participant's beneficiary to ensure accurate processing and payment and 
to

[[Page 44066]]

reduce the processing time and resources necessary to identify 
beneficiaries.
    One commenter requested clarification on whether the TSP will 
accept the designation of a testamentary trust. This commenter also 
requested that the TSP permit a per stirpital designation. These 
comments are outside the scope of the proposed rule under 
consideration.
    The Agency appreciates the opportunity to review and respond to 
comments from participants who take an active interest in the TSP and 
offer suggestions. The comment process allowed the Agency to address 
any potential misunderstandings about the proposed changes, to consider 
unanticipated legal or policy impediments to the proposed changes, and 
to hear suggestions about how better to implement the proposed changes. 
Although the comments caused the Executive Director to make only one 
change to the text of the proposed rule, he did carefully consider each 
comment and addressed some of the concerns through other Agency 
guidance. Therefore, the Agency is publishing the proposed rule as 
final with a modification to the language proposed for 5 CFR 
1651.3(c)(7).

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 Sec.  
1532 is not required.

Submission to Congress and the Government Accountability Office

    Pursuant to 5 U.S.C. 810(a)(1)(A), the Agency 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 before publication of this rule in the Federal Register. 
This rule is not a major rule as defined at 5 U.S.C. 814(2).

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.

0
For the reasons set forth in the preamble, the Agency amends 5 CFR 
chapter VI as follows:

PART 1604--UNIFORMED SERVICES ACCOUNTS

0
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]

0
2. Amend Sec.  1604.8, by removing the second sentence of paragraph 
(a).

PART 1651--DEATH BENEFITS

0
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).


0
4. Amend Sec.  1651.3, by adding a fourth sentence to paragraph (b), 
and revising paragraph (c) to read as follows:


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 
custodian 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) For each contingent beneficiary, identify the primary 
beneficiary whose share the contingent beneficiary is to receive in the 
event the primary beneficiary dies before payment is made.
* * * * *


0
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. * * *


0
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. 2010-18436 Filed 7-27-10; 8:45 am]
BILLING CODE 6760-01-P