[Federal Register Volume 79, Number 124 (Friday, June 27, 2014)]
[Proposed Rules]
[Pages 36438-36440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14937]


 ========================================================================
 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. 79, No. 124 / Friday, June 27, 2014 / 
Proposed Rules  

[[Page 36438]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1653


Legal Process for the Enforcement of a Tax Levy or Criminal 
Restitution Order Against a Participant Account

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 to explain the Board's procedures for 
responding to tax levies and criminal restitution orders that comply 
with statutory requirements.

DATES: Comments must be received on or before August 26, 2014.

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: James Petrick, 
Federal Retirement Thrift Investment Board, 77 K Street NE., Suite 
1000, Washington, DC 20002.
     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.

FOR FURTHER INFORMATION CONTACT: Erin Graham at 202-942-1605.

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)).

Legal Process for the Enforcement of Internal Revenue Service Levies or 
Restitution Pursuant to the Mandatory Victims Restitution Act

    The TSP's governing statute includes an anti-alienation provision 
that protects funds from execution, levy, attachment, garnishment, or 
other legal process, except for certain enumerated exceptions that, 
until recently, did not include federal tax levies. On January 14, 2013 
the President signed into law Public Law 112-267, 126 Stat. 2440 
(2013), entitled ``To amend title 5, United States Code, to make clear 
that accounts in the Thrift Savings Fund are subject to certain Federal 
tax levies.'' The legislation amends 5 U.S.C. 8437(e)(3) to state, 
``Moneys due or payable from the Thrift Savings Fund to any individual 
and, in the case of an individual who is an employee or Member (or 
former employee or Member), the balance in the account of the employee 
or Member (or former employee or Member) . . . shall be subject to a 
Federal tax levy under section 6331 of the Internal Revenue Code of 
1986.'' In enacting the amendment to 5 U.S.C. 8437, Congress placed IRS 
levies in a small company of exceptions which include child support 
obligations, alimony obligations, and restitution pursuant to the 
Mandatory Victims Restitution Act (MVRA). Congress has deemed these 
instances as the only permissible reasons for funds to be diverted from 
a participant's account. The Agency has previously promulgated 
regulations governing the payments from accounts in each of these 
situations. The proposed regulations for levies and criminal 
restitution will be similar to those previously issued.
    The Agency proposes to add a new section, Subpart D, to Part 1653, 
to explain the Agency's procedures for responding to legal process for 
the enforcement of a participant's levy or criminal restitution order.

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, members of the uniformed services who 
participate in the Thrift Savings Plan, and their beneficiaries. The 
TSP is a Federal defined contribution retirement savings plan created 
FERSA and is administered by the Agency.

Paperwork Reduction Act

    I certify that these regulations do not require additional 
reporting under 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 1653

    Taxes, Claims, 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 1653 as follows:

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

0
1. The authority citation for part 1653 continues to read as follows:

    Authority: 5 U.S.C. 8432d, 8435, 8436(b), 8437(e), 8439(a)(3), 
8467, 8474(b)(5) and 8474(c)(1).

0
2. Subpart D is added to read as follows:
Subpart D--Process for the Enforcement of a Participant's Legal 
Obligation To Pay a Federal Tax Levy or Criminal Restitution Order
Sec.
1653.31 Definitions.
1653.32 Qualifying Federal tax levy.
1653.33 Qualifying criminal restitution order.
1653.34 Processing Federal tax levies and criminal restitution 
orders.

[[Page 36439]]

1653.35 Calculating entitlement.
1653.36 Payment.

Subpart D--Process for the Enforcement of a Participant's Legal 
Obligation To Pay a Federal Tax Levy or Criminal Restitution Order


Sec.  1653.31  Definitions.

    (a) Definitions generally applicable to the Thrift Savings Plan are 
set forth at 5 CFR 1690.1
    (b) As used in this subpart:
    Criminal restitution order means a complete copy of the judgment in 
a criminal case issued by a federal court ordering restitution for a 
crime described in 18 U.S.C. 3663A.
    Tax levy means a signed form 668-A served by the IRS for the 
satisfaction of a federal tax debt.


Sec.  1653.32  Qualifying Federal tax levy.

    (a) The TSP will only honor the terms of a tax levy that is 
qualifying under paragraph (b) of this section.
    (b) A tax levy must meet each of the following requirements to be 
considered qualifying:
    (1) The Internal Revenue Service issued the levy.
    (2) The levy includes a signature certifying that it attaches to a 
retirement plan.
    (3) The levy requires the TSP to pay a stated dollar amount from a 
TSP participant's account.
    (4) The levy is dated no earlier than thirty (30) days before 
receipt.
    (5) The levy is issued in the name of the participant only.
    (6) The levy expressly refers to the ``Thrift Savings Plan'' or 
describes the TSP in such a way that it cannot be confused with other 
Federal Government retirement benefits or non-Federal retirement 
benefits.
    (c) The following levies will not be considered qualifying:
    (1) A levy relating to a TSP account with a zero dollar account 
balance;
    (2) A levy relating to a TSP account that contains only nonvested 
money, unless the money will become vested within 30 days of the date 
the TSP receives the order if the participant were to remain in 
Government service;
    (3) A levy requiring the TSP to make a payment at a specified date 
in the future;
    (4) A levy that does not contain a signature certifying that it 
applies to retirement plans;
    (5) A levy requiring a series of payments;
    (6) A levy that designates the specific TSP Fund, source of 
contributions, or balance from which the payment or portions of the 
payment shall be made.


Sec.  1653.33  Qualifying criminal restitution order.

    (a) The TSP will only honor the terms of a criminal restitution 
order that is qualifying under paragraph (b) of this section.
    (b) A criminal restitution order must meet each of the following 
requirements to be considered qualifying:
    (1) The restitution must be ordered in the sentencing of the 
participant as required by 18 U.S.C. 3663A and 18 U.S.C. 3664.
    (2) The restitution order and accompanying documentation must 
require the TSP to:
    (i) Pay a stated dollar amount from a participant's TSP account; or
    (ii) Freeze the participant's TSP account in anticipation of an 
order to pay from the account.
    (c) The following orders will not be considered qualifying:
    (1) A restitution order relating to a TSP account with a zero 
dollar account balance;
    (2) A restitution order relating to a TSP account that contains 
only nonvested money, unless the money will become vested within 30 
days of the date the TSP receives the order if the participant were to 
remain in Government service;
    (3) A restitution order requiring the TSP to make a payment in the 
future;
    (4) A forfeiture order related to a monetary garnishment of funds;
    (5) A restitution order requiring a series of payments from the TSP 
account;
    (6) A restitution order that designates the specific TSP Fund, 
source of contributions, or balance from which the payment or portions 
of the payment shall be made.


Sec.  1653.34  Processing tax levies and criminal restitution orders.

    (a) The payment of tax levies and criminal restitution orders from 
the TSP is governed solely by the Federal Employees' Retirement Systems 
Act, 5 U.S.C. chapter 84, and by the terms of this subpart. Although 
the TSP will honor tax levies or criminal restitution orders properly 
issued, those entities have no jurisdiction over the TSP and the TSP 
cannot be made a party to the underlying proceedings.
    (b) The TSP will review a tax levy or criminal restitution order to 
determine whether it is enforceable against the TSP only after it has 
received a complete copy of the document. Receipt by an employing 
agency or any other agency of the Government does not constitute 
receipt by the TSP. Tax levies and criminal restitution orders should 
be submitted to the TSP record keeper at the current address as 
provided at http://www.tsp.gov. Receipt by the TSP record keeper is 
considered receipt by the TSP. To be complete, a tax levy or criminal 
restitution order must meet all the requirements of Sec.  1653.32 or 
Sec.  1653.33; it must also provide (or be accompanied by a document 
that provides):
    (1) The participant's TSP account number or Social Security number 
(SSN); and
    (2) The name and mailing address of the payee.
    (c) As soon as practicable after the TSP receives a document that 
purports to be a qualifying tax levy or criminal restitution order, the 
participant's account will be frozen. After the participant's account 
is frozen, no withdrawal or loan disbursements will be allowed until 
the account is unfrozen. All other account activity will be permitted, 
including contributions, loan repayments, adjustments, contribution 
allocations and interfund transfers. Once a disbursement from the 
account is made in accordance with the restitution order or levy, the 
hold will be removed from the participant's account.
    (d) As soon as practicable after receipt of a complete copy of a 
tax levy or criminal restitution order, the TSP will review it to 
determine whether it is qualifying as described in Sec.  1653.32 or 
Sec.  1653.33. The TSP will mail a decision letter to all parties 
containing the following information:
    (1) A determination regarding whether the restitution order or levy 
is qualifying;
    (2) A statement of the applicable statutes and regulations;
    (3) An explanation of the effect the restitution order or levy has 
on the participant's TSP account; and
    (4) If the qualifying restitution order or levy requires payment, 
the letter will provide:
    (i) An explanation of how the payment will be calculated and an 
estimated amount of payment;
    (ii) The anticipated date of payment.
    (e) The TSP decision letter is final. There is no administrative 
appeal from the TSP decision.


Sec.  1653.35  Calculating entitlement.

    (a) A levy or criminal restitution order can only require the 
payment of a specified dollar amount from the TSP.
    (b) If the restitution order or levy awards a specific dollar 
amount, the payee's entitlement will be the lesser of:
    (1) The dollar amount stated in the levy or restitution order; or
    (2) The vested account balance on the date of disbursement, minus 
any outstanding loan balance.

[[Page 36440]]

Sec.  1653.36  Payment.

    (a) Payment pursuant to a qualifying levy or criminal restitution 
order will be made 30 days after the TSP decision letter.
    (b) In no case will payment exceed the participant's calculated 
entitlement.
    (c) The entire amount of a restitution order or levy entitlement 
must be disbursed at one time. A series of payments will not be made. A 
payment pursuant to a restitution order or levy extinguishes all rights 
to any further payment under that order or levy, even if the entire 
amount of the entitlement cannot be paid. Any further award must be 
contained in a separate restitution order or levy.
    (d) If a participant has funds in more than one type of account, 
payment will be made from each account in the following order, until 
the amount of the levy or restitution order is reached:
    (1) Civilian account;
    (2) Uniformed services account;
    (3) Beneficiary participant account.
    (e) Payment will be made pro rata from the participant's 
traditional and Roth balances. The distribution from the traditional 
balance will be further pro-rated between the tax-deferred balance and 
tax-exempt balance. The payment from the Roth balance will be further 
pro-rated between contributions in the Roth balance and earnings in the 
Roth balance. In addition, all payments will be distributed pro rata 
from all TSP Funds in which the participant's account is invested. All 
pro-rated amounts will be based on the balances in each fund or source 
of contributions on the day the disbursement is made.
    (f) The payment is taxable to the participant and is subject to ten 
percent Federal income tax withholding. The tax withholding will be 
taken from the payee's entitlement and the gross amount of the payment 
(i.e., the net payment distributed to the payee plus the amount 
withheld from the payment for taxes) will be reported to the IRS as 
income to the participant.
    (g) A properly paid levy or restitution order cannot be returned to 
the TSP.

[FR Doc. 2014-14937 Filed 6-26-14; 8:45 am]
BILLING CODE 6760-01-P