[Federal Register Volume 82, Number 242 (Tuesday, December 19, 2017)]
[Rules and Regulations]
[Pages 60099-60106]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27304]



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 Rules and Regulations
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
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 The Code of Federal Regulations is sold by the Superintendent of Documents. 
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  Federal Register / Vol. 82, No. 242 / Tuesday, December 19, 2017 / 
Rules and Regulations  

[[Page 60099]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1600, 1601, 1603, 1605, 1650, 1651 and 1690


Blended Retirement System

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Retirement Thrift Investment Board (``FRTIB'') is 
amending its regulations to implement changes to the uniformed 
services' retirement system that are mandated by the National Defense 
Authorization Act for Fiscal Year 2016.

DATES: This rule is effective January 1, 2018.

FOR FURTHER INFORMATION CONTACT: Brandon Ford, Attorney-Advisor, 
Federal Retirement Thrift Investment Board, Office of General Counsel, 
77 K Street NE, Suite 1000, Washington, DC 20002, 202-864-8734, 
[email protected].

SUPPLEMENTARY INFORMATION: The FRTIB 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)).
    The National Defense Authorization Act for Fiscal Year 2016 (NDAA), 
Public Law 114-92, signed into law November 25, 2015, changed the 
uniformed services' retirement plan from one that relied primarily on a 
cliff-vested defined benefit to one that blends a reduced defined 
benefit with enhanced TSP benefits, continuation pay, and lump-sum 
options. The new retirement system is known as the Blended Retirement 
System (BRS).
    On September 11, 2017, the Agency published a proposed rule with 
request for comments in the Federal Register (82 FR 42613). The Agency 
received one or more comments from four individuals and a Federal 
Agency.
    One individual provided suggestions for improving the Department of 
Defense (DoD) calculator. Although this comment does not affect these 
regulations, the comment was forwarded to DoD for its review. Another 
individual commented supporting the implementation of BRS.
    One individual noted that contributing continuation pay to the TSP 
may potentially limit the amount of Service Matching Contributions 
available if doing so causes the individual to exceed the IRC section 
402(g) elective deferral limit. The commenter suggested that 
continuation pay not count towards that limit. The TSP is subject to 
the same elective deferral limits as private-sector 401(k) plans. 
Therefore, the Agency is bound by the Internal Revenue Code and 
Treasury Regulations which state that elective deferrals from bonuses 
(such as continuation pay) are included in the overall limit along with 
contributions made from basic pay.
    One individual along with the Department of Defense requested that 
affirmative (voluntary) contribution elections made by members of the 
uniformed services who first join a service on or after January 1, 2018 
be effective immediately. The proposed regulations had a 60 day delay 
in automatic enrollment along with a 60 day delay for contributions 
made by an affirmative election. This design made sense because the 
underlying purpose of automatic enrollment in retirement plans is to 
have employees contributing as soon as they are eligible to 
participate, and DoD requested that automatic enrollment occur 60 days 
after the service member's Pay Entry Base Date (PEBD). Additionally, 
these service members would not be eligible to receive the Service 
Automatic (1%) Contributions until after they have reached 60 days of 
service.
    The comment from DoD presented different positions as to why 
affirmative contribution elections in the first 60 days of service 
should be effective immediately and automatic enrollment should remain 
delayed until the first pay period after 60 days from the member's 
PEBD. In particular, DoD noted that if automatic enrollment begins 
immediately upon accession, some service members may not be given ample 
opportunity to request a refund because they will still be in basic 
training. However, in the view of DoD, this is not a concern with 
contributions made through an affirmative election. DoD posits that 
because the ability to request a refund is unique to automatic 
enrollment and not contributions made through an affirmative election, 
it is permissible to delay automatic enrollment for 60 days while 
allowing for contributions made by affirmative election to be effective 
immediately, even if made within the first 60 days of service. DoD 
further suggests that doing so would be beneficial to those service 
members who make an affirmative contribution election within the first 
60 days of service.
    The Agency supports the position put forth by DoD. Therefore, in 
this final rule, the amendments made to section 1600.12 in the proposed 
rule are deleted. However, the Board is publishing the remaining 
provisions of the proposed rule as final without modification.

BRS Eligibility

    BRS covers service members who first enter a uniformed service on 
or after January 1, 2018. It also covers service members who (1) have 
completed fewer than 12 years of service (or, if in the reserve 
component, have fewer than 4,320 retirement points) as of December 31, 
2017, and (2) elect, within a certain timeframe, to transfer from the 
legacy retirement system to BRS (this process is also known as electing 
to ``opt-in'' to BRS). The employing services are responsible for 
making BRS eligibility determinations and reporting each service 
member's retirement coverage status to the TSP.

Service Automatic (1%) Contributions

Timing Restrictions

    The NDAA placed timing restrictions on the receipt of Service 
Automatic 1% Contributions to a service member's TSP account. Service 
members who first enter duty on or after January 1, 2018 cannot receive 
any Service Automatic (1%) Contributions until the first full

[[Page 60100]]

pay period following the date that is 60 days after the member's Pay 
Entry Base Date (PEBD).\1\ For members who elect to transfer to the 
BRS, Service Automatic (1%) Contributions will begin the first full pay 
period following their election to transfer.
---------------------------------------------------------------------------

    \1\ PEBD is the date that denotes how much service a member has 
for the purpose of determining longevity pay rates. The Navy and 
Marine Corps refer to this as the pay entry base date, while the Air 
Force calls it simply the pay date. DoD refers to it as the basic 
pay date. The services are responsible for determining each member's 
PEBD and providing each member's PEBD to the TSP.
---------------------------------------------------------------------------

    Service Automatic (1%) Contributions must stop the first full pay 
period that is 26 years after the service member's PEBD. This rule 
applies to all BRS participants whether they entered duty on or after 
January 1, 2018, or they elected to transfer to BRS. For example, a 
member who has served six years before electing to transfer to BRS can 
receive matching contributions for only 20 years.

Vesting

    The NDAA requires each BRS participant to complete 2 years of 
military service before they are vested in their Service Automatic (1%) 
Contributions. A service member's civil service will not count toward 
the completion of that two years. Therefore, the FRTIB amends section 
1603.1 to have separate definitions for civilian service and military 
service. The definition for civilian service will remain the same as it 
is today. Military service will be defined as service that is 
creditable under 37 U.S.C. 205, which is the provision that defines 
years of service for purposes of computing basic pay. For service 
members who elect to transfer to BRS, all military service completed 
prior to the election will count towards the vesting requirement. For 
example, if a service member has completed 3 years of service prior to 
transferring to BRS, that member will be immediately vested in the 
Service Automatic (1%) Contributions made to his or her TSP account.

Enrollment and Member Contributions

Automatic Enrollment

    The NDAA requires employing services to automatically enroll all 
uniformed service members who first enter service on or after January 
1, 2018. Employing services must also automatically enroll all BRS 
participants (whether they entered duty on or after January 1, 2018, or 
transferred to BRS) who separate from service and later re-enter 
service.
    Automatic Enrollment is deferred for BRS participants until the 
first full pay period following the date that is 60 days after the 
member's PEBD because some service members would be in basic training 
for the entire refund period if automatic enrollment were not delayed. 
This delay will mitigate that concern and place all automatically 
enrolled service members on equal footing.
    The Executive Director has the statutory authority to select a 
default contribution percentage rate for automatically enrolled 
participants that is no less than 2% and no more than 5%. The default 
percentage rate for BRS participants is set at 3%. This is the same 
contribution rate at which civilian participants are automatically 
enrolled. A participant who is automatically enrolled may change the 
amount that he or she is contributing by filing a contribution election 
with his or her payroll office.
    Service members who elect to transfer to BRS, absent a contribution 
election in the alternative, will continue to make contributions at the 
rate that they were making contributions prior to their election to 
transfer. They will not be automatically enrolled. However, if a member 
who transfers to BRS separates from service and later re-enters 
service, that member will be automatically enrolled to contribute 3% of 
his or her basic pay beginning the first full pay period following the 
date that is 60 days after the member's PEBD.
    Service members who are not covered by BRS will not be 
automatically enrolled even if they separate from service and later re-
enter service.

Annual Automatic Re-Enrollment

    NDAA requires employing services to automatically re-enroll, on 
January 1st of each year, BRS participants who have declined automatic 
enrollment for a year. Accordingly, service members subject to 
automatic enrollment who terminate their contributions at any point 
during the year and do not elect to resume them by the last full pay 
period of the year will be automatically re-enrolled at a contribution 
rate of 3% as of January 1st of the following year. The employing 
services are responsible for determining which BRS participants are not 
making contributions in the last full pay period of the year.

Automatic Enrollment Refunds

    Service members who are automatically enrolled in the TSP may 
request a refund of the automatic enrollment contributions deducted 
from their basic pay (including associated earnings) within the first 
90 days of the member's first automatic enrollment contribution. 
Members who stop making contributions are not eligible for refunds of 
contributions deducted when they are automatically re-enrolled on 
January 1st because, under rules mandated by the Internal Revenue 
Service, a new 90-day refund period is not allowed unless one full 
calendar year (January through December) has passed since the member's 
last automatic enrollment contribution.
    There are very few participants who will go an entire plan year 
without any default employee contributions because they will be subject 
to automatic re-enrollment for each plan year. There are significant 
programming limitations to track the small number of members who will 
go an entire plan year without any default employee contributions. For 
these reasons, the Board has decided to disallow refunds of 
contributions associated with automatic re-enrollment.

Hardship Withdrawals and Automatic Enrollment

    Under existing IRS rules, a participant who obtains a financial 
hardship in-service withdrawal may not contribute to the TSP for a 
period of six months after the withdrawal is processed. This final rule 
provides that no BRS participant will be automatically enrolled or re-
enrolled during a six month non-contribution period. For example, a 
service member who is in a non-contribution period at the end of the 
year will not be reenrolled in January. However, if the member does not 
resume contributions after the end of the six month non-contribution 
period and consequently is not making contributions during the last 
full pay period of the year, the member's employing service must 
automatically enroll the member on January 1st of the subsequent year.

Service Matching Contributions

Timing Restrictions

    Service Matching Contributions begin the first full pay period that 
is 2 years after the service member's PEBD. For members who elect to 
transfer to the BRS, Service Matching Contributions begin the first 
full pay period following their election to transfer. For example, a 
member who has served 1 year before electing to transfer to BRS will 
receive Service Matching Contributions beginning the first full pay 
period following their election even though 2 years have not passed 
since their PEBD.
    Service Matching Contributions must stop at the same time Service 
Automatic (1%) Contributions stop, which is the first full pay period 
that is 26 years after the service member's PEBD. This is true

[[Page 60101]]

regardless of how the service member became covered by BRS.

Vesting

    All BRS participants will immediately vest in their Service 
Matching Contributions.

Repeal of Existing Matching Program for Critical Specialties

    The NDAA repeals the service matching program described in 37 
U.S.C. 211(d) as of January 1, 2018. There are no service members 
currently participating in the program. Therefore, this final rule 
deletes all references to 37 U.S.C. 211(d).

Default Investment Fund

    A member who first enters service on or after January 1, 2018, will 
have his or her contributions invested in an age-appropriate L Fund by 
default until the member makes an affirmative contribution allocation 
that directs incoming contributions into a different fund or 
combination of funds. Likewise, if a service member who elects to 
transfer to BRS has not made either an affirmative contribution 
allocation or an interfund transfer, then any contributions made after 
becoming covered by BRS will be invested in an age-appropriate L Fund.
    If a service member who elects to transfer to BRS has made an 
interfund transfer in the past but not a contribution allocation, then 
any contributions made after becoming covered by BRS will be invested 
in the G Fund. If a service member who elects to transfer to BRS has 
made an affirmative contribution allocation in the past, then any 
contributions made after becoming covered by BRS will be invested in 
accordance with the member's contribution allocation. However, if a 
member elects to transfer to BRS and has a zero account balance, 
contributions will be invested in an age-appropriate L Fund regardless 
of any past contribution allocation or interfund transfer. The 
investment of contributions made prior to becoming covered by BRS will 
remain unchanged. Uniformed service members who are not covered by BRS 
will continue to have their contributions defaulted into the G Fund.
    When an employing agency automatically re-enrolls a participant 
because they were not making contributions in the last full pay period 
of the year, the participant's contributions will be invested in the 
same manner as they were prior to re-enrollment (regardless of whether 
it was an affirmative contribution allocation or a default investment). 
Likewise, contributions of a rehired service member will be invested in 
the fund(s) to which they were being invested prior to being rehired 
(regardless of whether the fund(s) were an affirmative contribution 
allocation or a default investment and regardless of how much time has 
passed since the rehired service member separated from service). 
However, if a re-enrolled or re-hired service member has a zero account 
balance, future contributions will be defaulted to an age-appropriate L 
Fund.
    The first time a BRS participant's employing agency automatically 
enrolls him or her, or when he or she first transfers to BRS, or as 
soon as practicable thereafter, the TSP will provide each BRS 
participant who is subject to default investment in an age-appropriate 
L Fund with a notification concerning the risk of investing.

Correction of Administrative Errors

    BRS introduces new potential errors that are not currently 
addressed in regulations. Specifically, employing services may classify 
members of the uniformed services in the wrong retirement system (i.e., 
legacy instead of BRS and vice versa). If this error occurs, it is 
possible that service members will not be automatically enrolled and 
not receive service contributions. Additionally, if this error were to 
occur, service member contributions may be invested in the wrong 
default investment fund which would require breakage calculations. 
Therefore, the FRTIB amends Part 1605 to provide the necessary 
mechanisms to correct errors related to BRS.
    If a BRS participant is misclassified by an employing agency as a 
non-BRS participant, when the misclassification is corrected, the 
participant may, under the rules of Sec.  1605.11, elect to make up 
contributions that he or she would have been eligible to make as a BRS 
participant during the period of misclassification. In addition, the 
employing service must, under the rules of Sec.  1605.11, make up 
Service Automatic (1%) Contributions and Service Matching Contributions 
on employee contributions.
    If a non-BRS participant is misclassified by an employing service 
as a BRS participant, employee contributions may remain in the 
participant's account when the misclassification is corrected. If the 
participant requests a refund of employee contributions, the employing 
service must submit a negative adjustment record to remove the funds 
under the procedure described in Sec.  1605.12. The TSP will forfeit 
all service contributions that were made to a non-BRS participant's 
account, except that an employing service may submit a negative 
adjustment record to request the return of an erroneous contribution 
that has been in the participant's account for less than one year.
    The TSP will charge the employing service for any positive breakage 
that results from an incorrect default investment. To initiate a 
breakage calculation for the uniformed service member, the employing 
service must notify the TSP that the participant is entitled to 
breakage. Notification from the employing service to the TSP that the 
participant has been misclassified will not itself trigger the TSP to 
take corrective action other than to update the participant's 
retirement system coverage.
    Finally, the FRTIB amends section 1605.31 to reduce makeup civilian 
agency contributions by any Service Automatic (1%) Contributions the 
participant receives while in military service. Currently, USERRA 
requires civilian agencies to makeup automatic (1%) and matching 
contributions missed while a member was separated or in a non-pay 
status for military service. The regulations currently reduce the 
agency makeup matching contributions by any matching contributions 
received while performing military service. These amendments will 
extend that reduction to include Service Automatic (1%) Contributions 
received while performing military service. The amendments also provide 
that breakage on agency or service contributions will be based on the 
contribution allocation(s) on file for the participant during the 
period of military service.

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 and members of the uniformed services who 
participate in the TSP.

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, and 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,

[[Page 60102]]

and tribal governments, in the aggregate, or by the private sector. 
Therefore, a statement under 2 U.S.C. 1532 is not required.

Submission to Congress and the General Accounting 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 1600

    Government employees, Pensions, Retirement.

5 CFR Part 1601

    Government employees, Pensions, Retirement.

5 CFR Part 1603

    Government employees, Pensions, Retirement.

5 CFR Part 1605

    Claims, Government employees, Pensions, Retirement.

5 CFR Part 1650

    Alimony, Claims, Government employees, Pensions, Retirement.

5 CFR Part 1651

    Claims, Government employees, Pensions, Retirement.

5 CFR Part 1690

    Government employees, Pensions, Retirement.

Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.
    For the reasons stated in the preamble, the FRTIB amends 5 CFR 
Chapter VI as follows:

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

0
1. The authority citation for part 1600 is revised to read as follows:

    Authority: 5 U.S.C. 8351, 8432(a), 8432(b), 8432(c), 8432(j), 
8432d, 8474(b)(5) and (c)(1), and 8440e.

0
2. Add Sec.  1600.14 to subpart B to read as follows:


Sec.  1600.14  Effect of election to be covered by BRS.

    (a) If a uniformed service member elects to be covered by BRS, the 
member may make a contribution election at any time.
    (b) Eligibility to make employee contributions, and therefore to 
have Agency Matching Contributions made on the member's behalf, is 
subject to the restrictions on making employee contributions after 
receipt of a financial hardship in-service withdrawal described at 5 
CFR part 1650.
    (c) If the member had elected to make TSP contributions while not 
covered by BRS, the election remains effective until the member makes a 
new election.
    (d) Agency Automatic (1%) Contributions for all members covered 
under this section and, if applicable, Agency Matching Contributions 
attributable to employee contributions must begin the first full pay 
period that the transfer to BRS becomes effective.

0
3. Amend Sec.  1600.19 to revise paragraphs (a), (b)(1) introductory 
text, (b)(2) and (c) to read as follows:


Sec.  1600.19   Employing agency contributions.

    (a) Agency Automatic (1%) Contributions. Each pay period, subject 
to the limitations in paragraph (d) of this section, any agency that 
employs an individual covered by FERS or BRS must make a contribution 
to that employee's tax-deferred balance for the benefit of the 
individual equal to 1% of the basic pay paid to such employee for 
service performed during that pay period. The employing agency must 
make Agency Automatic (1%) Contributions without regard to whether the 
employee elects to make employee contributions.
    (b) Agency Matching Contributions. (1) Subject to the limitations 
in paragraph (d) of this section, any agency that employs an individual 
covered by FERS or BRS must make a contribution to the employee's tax-
deferred balance for the benefit of the employee equal to the sum of:
* * * * *
    (2) A uniformed service member is not entitled to matching 
contributions for contributions deducted from special or incentive pay 
(including bonuses).
    (c) Timing of employing agency contributions. (1) An employee 
appointed or reappointed to a position covered by FERS is immediately 
eligible to receive employing agency contributions.
    (2) A uniformed service member covered by BRS will be eligible to 
receive employing agency contributions pursuant to the following rules:
    (i) A uniformed service member who first entered service on or 
after January 1, 2018 is entitled to:
    (A) Agency Automatic (1%) Contributions beginning in the first full 
pay period following the date that is 60 days after the uniformed 
service member's PEBD and ending in the first full pay period following 
the date that is 26 years after the uniformed service member's PEBD.
    (B) Agency Matching Contributions beginning in the first full pay 
period following the date that is 2 years after the uniformed service 
member's PEBD and ending in the first full pay period following the 
date that is 26 years after the uniformed service member's PEBD.
    (ii) A uniformed service member who elects to enroll in BRS is 
entitled to:
    (A) Agency Automatic (1%) Contributions beginning in the first full 
pay period following the date the uniformed service member enrolled in 
BRS and ending in the first full pay period following the date that is 
26 years after the Uniformed service member's PEBD.
    (B) Agency Matching Contributions beginning in the first full pay 
period following the date the uniformed service member enrolled in BRS 
and ending in the first full pay period following the date that is 26 
years after the uniformed service member's PEBD.

0
4. Revise Sec.  1600.34 to read as follows:


Sec.  1600.34  Automatic enrollment program.

    (a) All newly hired civilian employees who are eligible to 
participate in the Thrift Savings Plan and those civilian 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% of their basic pay contributed to the employee's traditional TSP 
balance (default employee contribution) unless, by the end of the 
employee's first pay period (subject to the agency's processing time 
frames), they elect:
    (1) To not contribute;
    (2) To contribute at some other level; or
    (3) To make Roth contributions in addition to, or in lieu of, 
traditional contributions.
    (b) All uniformed service members who either enter service on or 
after January 1, 2018 or re-enter service after a separation in service 
of 31 or more calendar days after having been covered by BRS at the 
time of separation will automatically have 3% of their basic pay 
contributed to the member's traditional TSP balance (default employee 
contribution) beginning the first full pay period following the date

[[Page 60103]]

that is 60 days after the member's PEBD unless they elect by the end of 
that 60 day period:
    (1) To not contribute;
    (2) To contribute at some other level; or
    (3) To make Roth contributions in addition to, or in lieu of, 
traditional contributions.
    (c) If, for any calendar year, a uniformed service member described 
in paragraph (b) of this section does not make a contribution in the 
final full pay period of such calendar year due to the member's 
election to terminate contributions prior to the final full pay period, 
then that member will automatically have 3% of his or her basic pay 
contributed to his or her traditional TSP balance beginning the first 
full pay period of the following calendar year unless he or she makes a 
subsequent election by December 31st:
    (1) To not contribute;
    (2) To contribute at some other level;
    (3) To make Roth contributions in addition to, or in lieu of, 
traditional contributions.

0
5. Amend Sec.  1600.35 by revising the first sentence of paragraph (a) 
and adding paragraph (f) to read as follows:


Sec.  1600.35  Refunds of default employee contributions.

    (a) Subject to the limitations in paragraph (f) of this section, 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. * * *
* * * * *
    (f) A participant may not receive a refund of default employee 
contributions made pursuant to Sec.  1600.34(c).

0
6. Amend Sec.  1600.37 by revising the introductory text and paragraph 
(d) to read as follows:


Sec.  1600.37  Notice.

    The Board shall furnish all new employees and all rehired employees 
covered by the automatic enrollment program, and all employees 
described in paragraph (c) of Sec.  1600.34, covered by the automatic 
enrollment program a notice that accurately describes:
* * * * *
    (d) The employee's ability (or inability) to request a refund of 
any default employee contributions (adjusted for allocable gains and 
losses) and the procedure to request such a refund; and
* * * * *

PART 1601--PARTICIPANTS' CHOICES OF TSP FUNDS

0
7. The authority citation for part 1601 continues to reads as follows:

    Authority: 5 U.S.C. 8351, 8432d, 8438, 8474(b)(5) and (c)(1).


0
8. Revise Sec.  1601.13 to read as follows:


Sec.  1601.13  Elections.

    (a) Contribution allocation. Each participant may indicate his or 
her choice of TSP Funds for the allocation of future deposits by using 
the TSP website or the ThriftLine, or by completing and filing the 
appropriate paper TSP form with the TSP record keeper in accordance 
with the form's instructions. The following rules apply to contribution 
allocations:
    (1) Contribution allocations must be made in one percent 
increments. The sum of the percentages elected for all of the TSP Funds 
must equal 100 percent;
    (2) The percentage elected by a participant for investment of 
future deposits in a TSP Fund will be applied to all sources of 
contributions and transfers (or rollovers) from traditional IRAs and 
eligible employer plans. A participant may not make different 
percentage elections for different sources of contributions;
    (3) The following default investment rules shall apply to civilian 
participants:
    (i) All deposits made on behalf of a civilian participant enrolled 
prior to September 5, 2015 who does not have a contribution allocation 
in effect will be invested in the G Fund. A civilian participant who is 
enrolled prior to September 5, 2015 and subsequently rehired on or 
after September 5, 2015 and has a positive account balance will be 
considered enrolled prior to September 5, 2015 for purposes of this 
paragraph; and
    (ii) All deposits made on behalf of a civilian participant first 
enrolled on or after September 5, 2015 who does not have a contribution 
allocation in effect will be invested in the age-appropriate TSP 
Lifecycle Fund;
    (iii) A civilian participant enrolled prior to September 5, 2015 
who elects for the first time to invest in a TSP Fund other than the G 
Fund must execute an acknowledgement of risk in accordance with Sec.  
1601.33;
    (4) The following default investment rules shall apply to uniformed 
services participants:
    (i) All deposits made on behalf of a uniformed services participant 
who first entered service prior to January 1, 2018, has not elected to 
be covered by BRS, and does not have a contribution allocation in 
effect will be invested in the G Fund;
    (ii) All deposits made on behalf of a uniformed services 
participant who first entered service on or after January 1, 2018 and 
who does not have a contribution allocation in effect will be invested 
in the age-appropriate TSP Lifecycle Fund;
    (iii) If a uniformed services participant makes an election to be 
covered by BRS as described in 5 CFR 1600.14 and does not have a 
contribution allocation in effect at the time of the election, then all 
deposits made after the date of such election will be invested in the 
age-appropriate TSP Lifecycle Fund. Deposits made prior to the date of 
the election will remain invested in the G Fund.
    (iv) A uniformed services participant who first entered service 
prior to January 1, 2018 and has not made an election to be covered by 
the BRS who elects for the first time to invest in a TSP Fund other 
than the G Fund must execute an acknowledgement of risk in accordance 
with Sec.  1601.33;
    (5) Once a contribution allocation becomes effective, it remains in 
effect until it is superseded by a subsequent contribution allocation 
or the participant's account balance is reduced to zero. If a rehired 
participant has a positive account balance and a contribution 
allocation in effect, then the participant's contribution allocation 
will remain in effect until a new allocation is made. If, however, the 
participant (other than a participant described in paragraph (a)(4)(i) 
of this section) has a zero account balance, then the participant's 
contributions will be allocated to the age-appropriate TSP Lifecycle 
Fund until a new allocation is made.
    (b) Effect of rejection of contribution allocation. If a 
participant does not correctly complete a contribution allocation, the 
attempted allocation will have no effect. The TSP will provide the 
participant with a written statement of the reason the transaction was 
rejected.
    (c) Contribution elections. A participant may designate the amount 
or type of employee contributions he or she wishes to make to the TSP 
or may stop contributions only in accordance with 5 CFR part 1600.

0
9. Amend Sec.  1601.33 by revising the first sentence of paragraph (a) 
to read as follows:


Sec.  1601.33  Acknowledgment of risk.

    (a) Uniformed services participants who first entered service prior 
to January 1, 2018 and who have not elected to be covered by BRS and 
civilian participants who enrolled prior to September 5, 2015 must 
execute an acknowledgement of risk in order to

[[Page 60104]]

invest in a TSP Fund other than the G Fund. * * *
* * * * *

PART 1603--VESTING

0
10. The authority citation for part 1603 continues to read as follows:

    Authority: 5 U.S.C. 8432(g), 8432b(h)(1), 8474(b)(5) and (c)(1).


0
11. Amend paragraph (b) of Sec.  1603.1 as follows:
0
a. Amend the definition of ``Service'' by removing ``Service means'' 
and adding in its place ``Civilian service means''; and
0
b. Add a definition of ``Military service'' in alphabetical order to 
read as follows:


Sec.  1603.1  Definitions.

* * * * *
    (b) * * *
    Military service means service that is creditable under 37 U.S.C. 
205.
* * * * *

0
12. Revise Sec.  1603.2 to read as follows:


Sec.  1603.2  Basic vesting rules.

    (a) All amounts in a CSRS employee's individual account are 
immediately vested.
    (b) Except as provided in paragraph (c) of this section, all 
amounts in a FERS employee's or uniformed service member's individual 
account (including all first conversion contributions) are immediately 
vested.
    (c) Except as provided in paragraph (d) of this section, upon 
separation from Government service without meeting the applicable 
service requirements of Sec.  1603.3, a FERS employee's or a BRS 
uniformed service member's Agency Automatic (1%) Contributions and 
attributable earnings will be forfeited.
    (d) If a FERS employee or uniformed service member dies (or died) 
after January 7, 1988, without meeting the applicable service 
requirements set forth in Sec.  1603.3, the Agency Automatic (1%) 
Contributions and attributable earnings in his or her individual 
account are deemed vested and shall not be forfeited. If a FERS 
employee died on or before January 7, 1988, without meeting those 
service requirements, his or her Agency Automatic (1%) Contributions 
and attributable earnings are forfeited to the Thrift Savings Plan.

0
13. Amend Sec.  1603.3 by revising paragraph (a) and the introductory 
text of paragraph (b), and adding paragraph (c) to read as follows:


Sec.  1603.3   Service requirements.

    (a) Except as provided under paragraph (b) of this section, FERS 
employees will be vested in their Agency Automatic (1%) Contributions 
and attributable earnings upon separating from Government only if, as 
of their separation date, they have completed three years of civilian 
service.
    (b) FERS employees will be vested in their Agency Automatic (1%) 
Contributions and attributable earnings upon separating from Government 
service if, as of their separation date, they have completed two years 
of civilian service and they are serving in one of the following 
positions:
* * * * *
    (c) Uniformed service members who are covered by BRS will be vested 
in their Agency Automatic (1%) Contributions and attributable earnings 
upon separation from the uniformed services only if, as of their 
separation date, they have completed two years of military service.

PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS

0
14. The authority citation for part 1605 continues to read as follows:

    Authority: 5 U.S.C. 8351, 8432a, 8432d, 8474(b)(5) and (c)(1). 
Subpart B also issued under section 1043(b) of Public Law 104-106, 
110 Stat. 186 and Sec.  7202(m)(2) of Public Law 101-508, 104 Stat. 
1388.


0
15. Amend paragraph (b) of Sec.  1605.1 by adding definitions of ``BRS 
participant'' and ``Non-BRS participant'' in alphabetical order to read 
as follows:


Sec.  1605.1  Definitions.

* * * * *
    (b) * * *
    BRS participant means any member of the Uniformed Services 
described in 5 U.S.C. 8440e(e)(1).
* * * * *
    Non-BRS participant means any member of the Uniformed Services not 
described in 5 U.S.C. 8440e(e)(1).
* * * * *

0
16. Amend Sec.  1605.3 by adding paragraph (c) to read as follows:


Sec.  1605.3  Calculating, posting, and charging breakage on errors 
involving investment in the wrong fund.

* * * * *
    (c) If a uniformed services participant's retirement system is 
misclassified and the error results in default investment in the wrong 
fund, when the error is corrected pursuant to Sec.  1605.14(f)-(g), the 
TSP will charge the employing agency for any positive breakage that 
results from the incorrect default investment. The retirement 
misclassification correction received from an employing agency will not 
trigger corrective action other than to update the participant's 
retirement system coverage. To initiate a breakage calculation for the 
uniformed service member, the employing agency must notify the TSP that 
the participant is entitled to breakage.

0
17. Amend Sec.  1605.11 by revising the introductory text of paragraph 
(b) to read as follows:


Sec.  1605.11  Makeup of missed or insufficient contributions.

* * * * *
    (b) Employer makeup contributions. If an employing agency has 
failed to make Agency Automatic (1%) Contributions that are required 
under 5 U.S.C. 8432(c)(1)(A) and 5 U.S.C. 8440e(e)(3)(A), or Agency 
Matching Contributions that are required under section 8432(c)(2) and 5 
U.S.C. 8440e(e)(3)(B), the following rules apply:
* * * * *

0
18. Amend Sec.  1605.14 by adding paragraphs (f) and (g) to read as 
follows:


Sec.  1605.14  Misclassified retirement system coverage.

* * * * *
    (f) If a BRS participant is misclassified by an employing agency as 
a non-BRS participant, when the misclassification is corrected:
    (1) The participant may not elect to have the contributions made 
while classified as non-BRS removed from his or her account;
    (2) The participant may, under the rules of Sec.  1605.11, elect to 
make up contributions that he or she would have been eligible to make 
as a BRS participant during the period of misclassification;
    (3) The employing agency must, under the rules of Sec.  1605.11, 
make Agency Automatic (1%) Contributions and Agency Matching 
Contributions on employee contributions that were made while the 
participant was misclassified; and
    (4) The employing agency must submit makeup employee contributions 
on current payment records and service makeup contributions may be 
submitted on either current or late payment records.
    (g) If a non-BRS participant is misclassified by an employing 
agency as a BRS participant, when the misclassification is corrected:
    (1) Employee contributions may remain in the participant's account. 
If the participant requests a refund of employee contributions, the 
employing agency must submit a negative adjustment record to remove 
these

[[Page 60105]]

funds under the procedure described in Sec.  1605.12.
    (2) The TSP will forfeit all agency contributions that were made to 
a non-BRS participant's account. An employing service may submit a 
negative adjustment record to request the return of an erroneous 
contribution that has been in the participant's account for less than 
one year.

0
19. Amend Sec.  1605.31 by revising paragraph (c)(1), adding paragraph 
(c)(5), and revising paragraph (d) to read as follows:


Sec.  1605.31  Contributions missed as a result of military service.

* * * * *
    (c) * * *
    (1) The employee is entitled to receive the Agency Automatic (1%) 
Contributions that he or she would have received had he or she remained 
in civilian service or pay status. Within 60 days of the employee's 
reemployment or restoration to pay status, the employing agency must 
calculate the Agency Automatic (1%) makeup contributions and report 
those contributions to the record keeper, subject to any reduction in 
Automatic (1%) Contributions required by paragraph (c)(5) of this 
section.
* * * * *
    (5) If the employee received uniformed services Automatic (1%) 
Contributions, the Agency Automatic (1%) Contributions will be reduced 
by the amount of the uniformed services Automatic (1%) Contributions.
    (d) Breakage. The employee is entitled to breakage on agency 
contributions made under paragraph (c) of this section. Breakage will 
be calculated based on the contribution allocation(s) on file for the 
participant during the period of military service.

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

0
20. The authority citation for part 1650 continues to read as follows:

    Authority: 5 U.S.C. 8351, 8432d, 8433, 8434, 8435, 8474(b)(5) 
and 8474(c)(1).


0
21. Amend Sec.  1650.33 by revising the second sentence of paragraph 
(b) to read as follows:


Sec.  1650.33  Contributing to the TSP after an in-service withdrawal.

* * * * *
    (b) * * * Therefore, the participant's employing agency will 
discontinue his or her contributions (and any applicable Agency 
Matching Contributions) for six months after the agency is notified by 
the TSP; in the case of a FERS or BRS participant, Agency Automatic 
(1%) Contributions will continue. * * *

PART 1651--DEATH BENEFITS

0
22. The authority citation for part 1651 continues to read as follows:

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


0
23. Amend Sec.  1651.3 by revising paragraph (c)(3) to read as follows:


Sec.  1651.3  Designation of beneficiary.

* * * * *
    (c) * * *
    (3) Be signed and properly dated by the participant and signed and 
properly dated by one witness;
    (i) The participant must either sign the form in the presence of 
the witness or acknowledge his or her signature on the form to the 
witness;
    (ii) All submitted and attached pages of the form must be signed 
and dated by the participant;
    (iii) All submitted and attached pages of the form must be signed 
and dated by the same witness;
    (iv) A witness must be age 21 or older; and
    (v) 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.
* * * * *

PART 1690--THRIFT SAVINGS PLAN

0
24. The authority citation for part 1690 continues to read as follows:

    Authority: 5 U.S.C. 8474.


0
25. Amend Sec.  1690.1 as follows:
0
a. Revise the definitions of Agency Automatic (1%) Contributions, 
Agency Matching Contributions, and Bonus contributions.
0
b. Add definitions of BRS and BRS participant in alphabetical order.
0
c. Revise the definition of Civilian employee.
0
d. Revise the definitions of Employer contributions and Employing 
agency.
0
e. Add a definition of PEBD in alphabetical order.
0
f. Revise the definitions of Uniformed service member and Uniformed 
services.
    The revisions and additions read as follows:


Sec.  1690.1  Definitions.

* * * * *
    Agency Automatic (1%) Contributions means any contributions made 
under 5 U.S.C. 8432(c)(1) and (c)(3). It also includes service 
automatic (1%) contributions made under 5 U.S.C. 8440e(e)(3)(A).
    Agency Matching Contributions means any contributions made under 5 
U.S.C. 8432(c)(2). It also includes service matching contributions 
under 5 U.S.C. 8440e(e)(3)(B).
* * * * *
    Bonus contributions means contributions made by a participant from 
any part of any special or incentive pay that the participant receives 
under chapter 5 of title 37.
    BRS means the blended retirement system as established by the 
National Defense Authorization Act for FY 2016, Public Law 114-92, 
secs. 631-635 (2015).
    BRS participant means a TSP participant covered by BRS.
* * * * *
    Civilian employee or civilian participant means a TSP participant 
covered by the Federal Employees' Retirement System, the Civil Service 
Retirement System, or equivalent retirement plan.
* * * * *
    Employer contributions means Agency Automatic (1%) Contributions 
under 5 U.S.C. 8432(c)(1), 8432(c)(3), or 5 U.S.C. 8440e(e)(3)(A) and 
Agency Matching Contributions under 5 U.S.C. 8432(c)(2) or 5 U.S.C. 
8440e(e)(3)(B).
    Employing agency means the organization (or the payroll office that 
services the organization) that employs an individual eligible to 
contribute to the TSP and that has authority to make personnel 
compensation decisions for the individual. It includes the employing 
service for members of the uniformed services.
* * * * *
    PEBD means the pay entry base date (or pay entry basic date for 
some services), which is determined by each uniformed service and is 
used to calculate how much time in service a member has for the purpose 
of determining longevity pay rates.
* * * * *
    Uniformed service member or uniformed services participant means a 
TSP participant who is a member of the uniformed services on active 
duty or a member of the Ready Reserve in any pay status.
    Uniformed services means the Army, Navy, Air Force, Marine Corps, 
Coast Guard, Public Health Service Commissioned Corps, and the National 
Oceanic and Atmospheric

[[Page 60106]]

Administration Commissioned Officer Corps.
* * * * *
[FR Doc. 2017-27304 Filed 12-18-17; 8:45 am]
BILLING CODE 6760-01-P