[Federal Register Volume 85, Number 130 (Tuesday, July 7, 2020)]
[Rules and Regulations]
[Pages 40569-40571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13683]



 ========================================================================
 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. 85, No. 130 / Tuesday, July 7, 2020 / Rules 
and Regulations  

[[Page 40569]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1605, 1650 and 1651


Correction of Administrative Errors; Required Minimum 
Distributions

AGENCY: Federal Retirement Thrift Investment Board.

ACTION: Direct final rule.

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SUMMARY: The Federal Retirement Thrift Investment Board (FRTIB) is 
amending its regulations to make a non-substantive change to the 
constructed share price formula for a retired Lifecycle (L) Fund. The 
FRTIB uses a constructed share price to make error corrections 
involving a retired L Fund. In addition, due to a recent change in the 
Internal Revenue Code (Code), the FRTIB is amending its regulations to 
change the age by which TSP participants must begin receiving 
distributions from their TSP accounts from 70\1/2\ to 72.

DATES: Effective July 7, 2020. The change to the constructed share 
price formula is applicable June 30, 2020, without further action, 
unless adverse comment is received by August 6, 2020. If adverse 
comment is received, FRTIB will publish a timely withdrawal of the rule 
in the Federal Register. As required by the Code, the change to the age 
by which TSP participants must begin receiving distributions from their 
accounts is effective for distributions required to be made after 
December 31, 2019, with respect to individuals who will reach age 70\1/
2\ after that date.

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.
    Since March 23, 2020, the FRTIB has been operating under a 
mandatory telework status due to the coronavirus pandemic which has 
severely limited the ability to timely monitor mail and facsimiles. 
Therefore, we strongly encourage using the Federal Rulemaking Portal to 
submit comments.

FOR FURTHER INFORMATION CONTACT: Austen Townsend, (202) 864-8647.

SUPPLEMENTARY INFORMATION: The FRTIB 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 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)).

Lifecycle Funds

    In addition to its five core funds (the G, F, C, S, and I Funds) 
the TSP offers multiple L Funds, each of which is made up entirely of 
the five core funds in different, professionally determined, 
proportions based on a particular time horizon, or target retirement 
date. Each L fund is ``retired'' when it reaches its target date.
    Currently, the TSP offers L Funds based on a 10-year asset 
allocation. A 10-year L Fund must, by design, be retired on December 
31st of year in which it reaches its target date. For example, the L 
2010 reached its target date in 2010 and was retired on December 31, 
2010.
    Beginning July 1, 2020, the TSP will instead offer L Funds based on 
a 5-year asset allocation to give TSP participants a more targeted 
window of time to match their intended retirement date with their asset 
allocation. As a result of the shift from 10-year to 5-year L Funds, L 
Funds beginning with the L 2020 fund will be retired on June 30th of 
the year in which they reach their respective retirement dates.

Correcting Errors Involving Retired L Funds

    Once an L Fund is retired, TSP participants are no longer able to 
make contributions to that fund. However, the FRTIB is sometimes 
required to calculate lost earnings (i.e., breakage) on errors 
involving these retired L Funds. Breakage is the loss incurred 
(negative earnings) or the gain realized (positive earnings) on late 
and makeup contributions. Similarly, the FRTIB must sometimes process 
the removal of erroneous contributions (i.e., a negative adjustment) 
previously made to a now-retired L Fund. The value of a negative 
adjustment equals the amount of the erroneous contributions plus 
earnings (positive or negative) on that amount.
    Generally, the FRTIB uses the current share price of the applicable 
investment fund when calculating breakage or the value of a negative 
adjustment. Because a retired L Fund no longer exists, the FRTIB 
instead uses a constructed share price in order to calculate breakage 
or the value of negative adjustments on errors involving these funds.
    The constructed share price for a retired L Fund is calculated 
using the final posted share price of that L Fund (i.e., the share 
price posted on the date the L Fund was retired). When the constructed 
share price formula was created, all L Funds were based on a 10-year 
asset allocation. Therefore, rather than referring to the L Fund's 
final posted share price, the FRTIB's existing regulations provide that 
the constructed share price for a retired Lifecycle fund is calculated 
using the share price of the L Fund on December 31 of its retirement 
year.
    To account for the fact that L Funds will no longer be retired on 
December 31st as a result of the shift from 10-year to 5-year L Funds, 
the FRTIB is updating its regulations to remove the references to 
December 31st in the constructed share price formula. Instead, 
consistent with the FRTIB's original intent, the regulations will 
simply refer to the final posted share price. The substance of the 
formula remains unchanged.

Required Minimum Distributions

    On December 20, 2019, the President signed into law the Setting 
Every Community Up for Retirement Enhancement (SECURE) Act (Division O 
pg. H.R. 1865-604), as part of the Further Consolidated Appropriations 
Act of 2020 (Pub. L. 116-94). The SECURE Act amended the Code to change 
the age by which TSP participants must begin receiving distributions 
(referred to as required

[[Page 40570]]

minimum distributions (RMDs)) from their accounts from 70\1/2\ to 72.
    The RMD rules under the Code, which apply to both separated TSP 
participants and TSP beneficiary participants,\1\ set forth the date by 
which participants must receive RMDs (i.e., the required beginning 
date). Prior to the passage of the SECURE Act, the Code required 
separated TSP participants to receive RMDs beginning on April 1 of the 
year following the year in which the participant reached age 70\1/2\ 
and annually thereafter. TSP beneficiary participants were required to 
receive RMDs beginning on the later of the end of the year following 
the year in which the participant died, or the end of the year in which 
the participant would have reached age 70\1/2\. TSP participants who 
turned 70\1/2\ on or before December 31, 2019 remain subject to these 
pre-SECURE Act required beginning date rules.
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    \1\ A beneficiary participant is a spouse beneficiary of a 
deceased TSP participant who has a TSP beneficiary participant 
account established in his or her name. In the case of a beneficiary 
participant, the age of the deceased participant is used when 
determining the date by which RMDs must commence.
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    Participants who had not reached age 70\1/2\ before January 1, 2020 
are subject to the new required beginning date rules. Specifically, the 
Code, as amended by the SECURE Act, requires a separated TSP 
participant to receive RMDs beginning on April 1 of the year following 
the year in which he or she reaches age 72 and is separated from 
service and annually thereafter. TSP beneficiary participants must 
receive RMDs beginning on the later of the end of the year following 
the year in which the participant died, or the end of the year in which 
the participant would have reached age 72.
    The FRTIB is updating its regulations by removing the references to 
age 70\1/2\ in the definition of ``required beginning date.'' The 
updated regulations will instead define this term by incorporating by 
reference the Code's definition of required beginning date. This 
ensures that FRTIB regulations regarding RMDs will always be consistent 
with the Code's requirements so that future amendments on short notice 
may be avoided.

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 Agency.

Paperwork Reduction Act

    I certify that this regulation does 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 
section 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. 804(2).

List of Subjects

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.

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 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 section 7202(m)(2) of Public Law 101-508, 104 
Stat. 1388.


0
2. Amend Sec.  1605.2 by revising paragraph (b)(1)(iii) to read as 
follows:


Sec.  1605.2  Calculating, posting, and charging breakage on late 
contributions and loan payments.

* * * * *
    (b) * * *
    (1) * * *
    (iii) Determine the dollar value on the posting date of the number 
of shares the participant would have received had the contributions or 
loan payments been made on time. If the contributions or loan payments 
would have been invested in a Lifecycle fund that is retired on the 
posting date, the constructed share price shall equal the final posted 
share price of the retired Lifecycle fund, multiplied by the current L 
Income Fund share price, divided by the L Income Fund share price on 
the same date that the retired Lifecycle fund posted its final share 
price. The dollar value shall be the number of shares the participant 
would have received had the contributions or loan payments been made on 
time multiplied by the constructed share price.
* * * * *

0
3. Amend Sec.  1605.12 by revising paragraph (c)(2)(ii) to read as 
follows:


Sec.  1605.12  Removal of erroneous contributions.

* * * * *
    (c) * * *
    (2) * * *
    (ii) Multiply the price per share on the date the adjustment is 
posted by the number of shares calculated in paragraph (c)(2)(i) of 
this section. If the contribution was erroneously contributed to a 
Lifecycle fund that is retired on the date the adjustment is posted, 
the price per share shall equal the final posted share price of the 
retired Lifecycle fund, multiplied by the current L Income Fund share 
price, divided by the L Income Fund share price on the same date that 
the retired Lifecycle fund posted its final share price.
* * * * *

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

0
4. The authority citation for Part 1650 continues to read as follows:

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


0
5. Amend Sec.  1650.1(b) by revising the definition for ``Required 
beginning date'' to read as follows:

[[Page 40571]]

Sec.  1650.1  Definitions.

* * * * *
    (b) * * *
    Required beginning date means the required beginning date as 
defined in Internal Revenue Code section 401(a)(9) and the regulations 
and guidance promulgated thereunder.
* * * * *

PART 1651--DEATH BENEFITS

0
6. 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
7. Amend Sec.  1651.1(b) by revising the definition for ``Required 
beginning date'' to read as follows:


Sec.  1651.1  Definitions.

* * * * *
    (b) * * *
    Required beginning date means the required beginning date as 
defined in Internal Revenue Code section 401(a)(9) and the regulations 
and guidance promulgated thereunder.
* * * * *
[FR Doc. 2020-13683 Filed 7-2-20; 8:45 am]
BILLING CODE 6760-01-P