[Federal Register Volume 85, Number 15 (Thursday, January 23, 2020)]
[Proposed Rules]
[Pages 3857-3858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00610]


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 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. 85 , No. 15 / Thursday, January 23, 2020 / 
Proposed Rules  

[[Page 3857]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1600 and 1605


Simplification of Catch-Up Contribution Process

AGENCY: Federal Retirement Thrift Investment Board

ACTION: Proposed rule.

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SUMMARY: The FRTIB proposes to reduce paperwork burdens on participants 
who are eligible to make catch-up contributions, by removing the 
regulation that requires them to submit two different contribution 
election forms.

DATES: Comments must be received on or before February 24, 2020.

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.
     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: Laurissa Stokes at 202-942-1645.

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)).

Background

    A catch-up contribution is a contribution that exceeds a statutory 
limit on the amount of contributions a participant can normally make to 
the TSP in each calendar year. Congress's reason for permitting these 
extra contributions was to allow participants to ``catch up'' for years 
when they were not employed or were otherwise unable to contribute 
toward their retirement. See Federal Thrift Savings Plan Catch-Up 
Contributions Act, Public Law 107-304, H.R. REP. 107-686, 107 Cong. 2d 
Sess. (2002).
    Normally, a TSP participant's contributions cannot exceed the 
statutory limits set forth in Internal Revenue Code (IRC) section 
402(g) (limiting the amount of traditional and Roth contributions to 
$19,500 for calendar year 2020) and IRC section 415(c) (limiting the 
total amount of traditional, Roth, tax-exempt, matching, and automatic 
1% contributions to the lesser of 100% of the participant's 
compensation or $57,000 for calendar year 2020). Participants who are 
age 50 or older are allowed to make catch-up contributions beyond these 
statutory limits--up to the dollar amount in IRC section 414(v), which 
is $6,500 for calendar year 2020.
    Currently, participants who wish to make catch-up contributions are 
required to submit an election form called ``TSP-1-C/TSP-U-1-C, Catch-
up Contribution Election'' (or electronic equivalent) to their 
employing agency. The catch-up contribution election form is separate, 
and in addition to, any other contribution election that a participant 
may already have on file. Upon receipt of a catch-up contribution 
election form, the participant's employing agency begins submitting 
catch-up contributions to the TSP on the participant's behalf, using 
special payroll records designed specifically for catch-up 
contributions. The payroll records that employing agencies use for 
submitting catch-up contributions are separate, and in addition to, the 
payroll records that employing agencies use for submitting other types 
of contributions.

Proposed Change

    The FRTIB proposes to simplify the catch-up contribution process, 
by no longer requiring participants to submit separate catch-up 
contribution election forms in addition to their other contribution 
election forms. Instead, the TSP will simply continue to accept 
contributions based on the participant's contribution election that is 
already on file, until his/her contributions reach the combined limits 
on catch-up contributions and other types of contributions. Employing 
agency payroll offices will no longer submit catch-up contributions to 
the TSP on special payroll records designed specifically for catch-up 
contributions. Instead, payroll offices will submit catch-up 
contributions using the same payroll records that they use to submit 
other types of contributions.
    The TSP recordkeeping system will automatically determine, based on 
the participant's date of birth, whether the participant is eligible to 
make catch-up contributions. When an employing agency payroll office 
submits contributions in excess of the 402(g) limit or the 415(c) limit 
on behalf of a catch-up eligible participant, the TSP recordkeeping 
system will automatically treat the excess contributions as catch-up 
contributions, without requiring any additional paperwork from the 
participant or any special payroll records from the payroll office.

Proposed Effective Date

    The proposed effective date for this change is January 1, 2021.

Section-by-Section Analysis

Section 1600.23 Catch-Up Contributions

    The FRTIB proposes to amend 5 CFR Sec.  1600.23 by removing 
paragraph (b), which requires the use of a separate election form for 
catch-up contribution elections.
    The FRTIB also proposes to remove 5 CFR Sec.  1600.23 paragraph 
(h), which says that catch-up contributions cannot be matched. The 
FRTIB codified 5 CFR Sec.  1600.23 paragraph (h) through an interim 
rule that was published on June 13, 2003. 68 FR 35491. In the preamble 
to the interim rule, the FRTIB cited to FERSA section 8432(c)(2) as the

[[Page 3858]]

rationale for why catch-up contributions cannot be matched. FERSA 
section 8432(c)(2) says nothing about catch-up contributions--it simply 
says that matching contributions cannot exceed a dollar-for-dollar 
match on the first 3% of basic pay that a participant contributes plus 
50 cents on the dollar match for the next 2% of basic pay that a 
participant contributes. Removing the restriction on matching catch-up 
contributions will not increase an employing agency's potential outlay 
for matching contributions as the 5% limit described in the preceding 
sentence still applies. FERSA section 8432(c)(2) can justify a 
prohibition on matching catch-up contributions only if we assume that a 
participant will necessarily reach the FERSA section 8432(c)(2) limit 
on matching contributions before, or at the same time as, he/she 
reaches the IRC section 402(g) or 415(c) limit on contributions. To 
whatever extent this assumption was accurate in 2003, it is no longer 
accurate today. Today, it is not uncommon for a participant to reach 
one of the IRC's limits on contributions before he/she reaches FERSA's 
limit on matching contributions.

Section 1605.13 Back Pay Awards and Other Retroactive Pay Adjustments

    The FRTIB proposes to amend Sec.   1605.13 by making a technical 
conforming addition to paragraph (c)(2). This paragraph currently says 
that any corrective contributions attributable to prior years must not 
exceed the 402(g) limit or the 415(c) limit applicable to those years. 
The FRTIB proposes to add language making it clear that such 
contributions also cannot exceed the 414(v) catch-up contribution limit 
applicable to prior years.

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 
by 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

5 CFR Part 1600

    Taxes, Claims, Government employees, Pensions, Retirement.

5 CFR Part 1605

    Claims, Government employees, Pensions, Retirement.


Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.
    For the reasons stated in the preamble, the FRTIB proposes to amend 
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 continues 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. Amend Sec.  1600.23 by removing and reserving paragraphs (b) and 
(h).

PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS

0
1. 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
2. Amend Sec.  1605.13 to read as follows:


Sec.  1605.13  Back pay awards and other retroactive pay adjustments.

* * * * *
    (c) * * *
    (1) * * *
    (2) Must not cause the participant to exceed the annual 
contribution limit(s) contained in sections 402(g), 415(c), or 414(v) 
of the I.R.C. (26 U.S.C. 402(g), 415(c), 414(v)) for the year(s) with 
respect to which the contributions are being made, taking into 
consideration the TSP contributions already made in (or with respect 
to) that year; and
* * * * *
[FR Doc. 2020-00610 Filed 1-22-20; 8:45 am]
 BILLING CODE 6760-01-P