[Federal Register Volume 84, Number 24 (Tuesday, February 5, 2019)]
[Rules and Regulations]
[Pages 1600-1601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-01060]
[[Page 1600]]
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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1655
TSP Loan Eligibility During Government Shutdowns
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Interim rule.
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SUMMARY: This interim rule amends the Thrift Savings Plan (TSP)
regulations to allow certain TSP participants to request a loan during
government shutdowns without regard to whether they are in pay status.
DATES: This interim rule is effective February 5, 2019. Comments must
be received by March 7, 2019.
FOR FURTHER INFORMATION CONTACT: For press inquiries, contact Kim
Weaver at (202) 942-1641. For information about commenting on this
interim rule, contact Laurissa Stokes at (202) 942-1645. For
information about how to request a TSP loan, contact 1-TSP-YOU-FRST (1-
877-968-3778).
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: Megan G. Grumbine,
Federal Retirement Thrift Investment Board, 77 K Street NE, Suite 1000,
Washington, DC 20002.
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.
SUPPLEMENTARY INFORMATION:
Type of Rulemaking
Generally, Federal regulations are first published in proposed form
to allow the public to make comments before the rule becomes effective.
An interim rule is a way to make a rule effective immediately, without
public comment, when doing so is necessary to respond to an emergency
situation. Interim rules are usually followed by a more permanent
rulemaking which confirms that the interim rule will be adopted as
final. Although this rule is effective immediately, the FRTIB will
consider public comments before publishing the final rule.
Background
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 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 Internal Revenue Code (i.e., the tax code) offers tax subsidies
to people who save for their own retirement. For example, investment
earnings on retirement savings are allowed to accrue tax-free while
they remain in a retirement account. The tax code establishes
restrictions on loans and withdrawals from retirement accounts in order
to ensure that those tax subsidies are used for retirement savings.
TSP's Loan Program Prior to This Interim Rule
Subject to restrictions imposed by the tax code and Internal
Revenue Service (IRS) regulations, the TSP has, for several decades,
offered a loan program that allows participants to borrow from their
retirement accounts. The FRTIB is required to report loans to the IRS
as taxable income subject to a 10% penalty after a certain number of
loan payments are missed. Like many 401(k) plans, the TSP's technology
systems and business processes are designed to accept loan payments
primarily through payroll deductions to ensure that participants do not
suffer the tax consequences of defaulting on their loans. Obviously,
loan payments cannot be made through payroll deduction if the
participant is not receiving a paycheck. For this reason, the FRTIB
regulations contain a provision that makes loan eligibility contingent
on pay status.
Necessity of This Interim Rule
Federal employees recently experienced the longest partial
government shutdown in United States history. Prolonged shutdowns risk
damaging the overall long-term financial well-being of TSP participants
and their families. Congress passed a continuing resolution on January
25, 2019 which temporarily ended the shutdown. The continuing
resolution only provides funding for 3 weeks which places roughly
800,000 Federal employees under the threat of being furloughed again in
the near future.
The FRTIB's loan program was not designed to replace the salaries
of Federal employees. A TSP loan is not a costless alternative to
paying Federal employees for their work. TSP participants who take
loans may miss out on the investment earnings that would have accrued
if that money had remained their retirement accounts. A TSP loan will
still have to be repaid in order to avoid the loan being declared a
taxable distribution. Nevertheless, the FRTIB is publishing this
interim rule in the hopes that it might provide some assistance to TSP
participants in the event of another government shutdown.
Effect of This Interim Rule
This interim rule amends the TSP regulations to allow certain TSP
participants to request a loan during government shutdowns without
regard to whether they are in pay status. To address the risk of loan
payment default, the FRTIB will permit participants to request a
suspension of loan payments to the extent a suspension is permitted
under the IRS's interpretation of the Internal Revenue Code.
This interim rule applies only to participants who are furloughed
or excepted from furlough (i.e., continuing to work and earn pay, but
their pay is delayed until appropriations are authorized) due to a
government shutdown. The FRTIB's staff and contractors have designed
manual workarounds to highly automated business processes in order to
make this interim rule effective immediately so these participants will
have access TSP loans in the event of another government shutdown.
Participants who are not receiving pay for other reasons (e.g.,
administrative furlough, voluntary leave of absence, seasonal work,
sabbatical, disciplinary suspension) remain ineligible to request a
loan. The FRTIB is considering whether to allow these participants to
request loans in nonpay status and will address this subject in the
final rule. The FRTIB invites comments on this subject.
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 Thrift Savings Plan, which
is a Federal defined contribution retirement savings plan created
under the Federal Employees' Retirement System Act of 1986 (FERSA),
Public Law 99-335, 100 Stat. 514, and which is administered by the
FRTIB.
Paperwork Reduction Act
I certify that these regulations do not require additional
reporting under the criteria of the Paperwork Reduction Act.
[[Page 1601]]
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.
Submission to Congress and the General Accounting Office
Pursuant to 5 U.S.C. 810(a)(1)(A), the FRTIB 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. 804(2).
List of Subjects
5 CFR Part 1655
Credit, 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 1655--LOAN PROGRAM
0
1. The authority citation for Part 1655 continues to read as follows:
Authority: 5 U.S.C. 8432d, 8433(g), 8439(a)(3) and 8474.
0
2. Revise Sec. 1655.2 to read as follows:
Sec. 1655.2 Eligibility for loans.
A participant can apply for a TSP general purpose or residential
loan if:
(a) More than 60 calendar days have elapsed since the participant
has repaid in full a TSP loan of the same type.
(b) The participant is in pay status;
(c) The participant is eligible to contribute to the TSP (or would
be eligible to contribute but for the suspension of the participant's
contributions because he or she obtained a financial hardship in-
service withdrawal);
(d) The participant has at least $1,000 in employee contributions
and attributable earnings in his or her account; and
(e) The participant has not had a TSP loan declared a taxable
distribution within the last 12 months for any reason other than a
separation from Government service.
Paragraph (b) of this section shall not apply to loan requests made
during a Government shutdown by participants who are furloughed or
excepted from furlough due to the Government shutdown.
[FR Doc. 2019-01060 Filed 2-4-19; 8:45 am]
BILLING CODE 6760-01-P