[Federal Register Volume 90, Number 118 (Monday, June 23, 2025)]
[Rules and Regulations]
[Pages 26423-26424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-11471]
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Rules and Regulations
Federal Register
________________________________________________________________________
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.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 90, No. 118 / Monday, June 23, 2025 / Rules
and Regulations
[[Page 26423]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1605
Method of Correcting Errors Involving Retired Lifecycle Funds
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Final rule.
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SUMMARY: The Federal Retirement Thrift Investment Board (FRTIB) amends
its regulation regarding the method for correcting errors involving
Lifecycle Funds that no longer exist. Specifically, it reverts to the
use of a constructed share price to calculate breakage and the value of
negative adjustments for errors involving Lifecycle Funds that no
longer exist as of June 1, 2022.
DATES: The effective date is June 23, 2025.
FOR FURTHER INFORMATION CONTACT:
For press inquiries: Jim Kaplan, Office of External Affairs, (202)
864-7150.
For information about this final rule: Charles Stone, Office of
General Counsel, (202) 253-9006.
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-advantaged
retirement savings plan for Federal civilian employees and members of
the uniformed services. The TSP is similar to cash or advantaged
arrangements established for private-sector employees under section
401(k) of the Internal Revenue Code (26 U.S.C. 401(k)). The provisions
of FERSA that govern the TSP are codified, as amended, largely at 5
U.S.C. 8351 and 8401-79.
On May 8, 2025, the FRTIB proposed to amend its regulation
regarding the method for correcting errors involving Lifecycle Funds
that no longer exist. (90 FR 19431). Interested parties were invited to
participate in this rulemaking effort by submitting written comments on
the proposal to the FRTIB by June 9, 2025. The FRTIB received only one
comment. The commentor only requested clarification on the formulas
being adopted in the rule. Specifically, the commentor indicated that
certain terms in the rule were vague and proposed language to clear up
ambiguity for: ``final posted share price,'' ``current L Income fund
share price,'' and ``relevant share price modifier.'' This comment was
considered, and changes were incorporated into the final rule below.
TSP Lifecycle Funds
The TSP offers five core funds (the G, F, C, S, and I Funds). In
addition, the TSP offers eleven Lifecycle Funds, which consist of a
diversified mix of the five core funds. The Lifecycle Funds are
designed to align with the investing participant's target retirement
date. Most of the Lifecycle Funds are labeled with a year (L 2025, L
2030, L 2035, L 2040., etc.) that represents the target retirement
date. One of the Lifecycle Funds--the L Income Fund--is not associated
with a target retirement date. The L Income Fund has a conservative
investment strategy--it is designed to preserve assets, and to generate
income rather than investment growth.
Every quarter (three months), the asset allocations of all the
Lifecycle Funds except the L Income Fund are automatically adjusted,
gradually shifting them from higher risk and reward to lower risk and
reward as they get closer to their target dates. In the year a
Lifecycle Fund reaches its target date and is retired--and goes out of
existence--any money still in the fund automatically becomes part of
the L Income Fund. For example, this year, the L 2025 Fund will be
rolled into the L Income Fund. A Lifecycle Fund that no longer exists
is referred to as a ``retired'' Lifecycle Fund.
Correction of Errors Involving Retired Lifecycle Funds
Once a Lifecycle Fund is retired, TSP participants are no longer
able to invest their contributions in that fund. However, the FRTIB is
sometimes required to calculate lost earnings (i.e., breakage) for
errors involving a retired Lifecycle Fund. 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 Lifecycle Fund. The value
of a negative adjustment equals the amount of the erroneous
contributions plus earnings (positive or negative) on that amount.
Section 1605.2 contains a formula for calculating breakage, and
section 1605.12 contains a formula for calculating the value of
negative adjustments. The current share price of the relevant
investment fund is a variable in each of these formulas. Because a
retired Lifecycle Fund no longer exists, there is no current share
price. In the past, the FRTIB used a constructed share price to
calculate breakage and the value of negative adjustments for errors
involving retired Lifecycle Funds.
The first TSP Lifecycle Fund to ever be retired was the L 2010
Fund. On October 14, 2010, the FRTIB published a proposed rule
explaining the FRTIB's anticipated use of a constructed share price to
calculate breakage and the value of negative adjustments for errors
involving retired Lifecycle Funds. (75 FR 63106). Under that proposed
rule, the constructed share price for a retired Lifecycle Fund would be
determined as follows: The retired Lifecycle Fund's share price on the
date it was retired, multiplied by the current L Income Fund share
price, divided by the L Income Fund shared price on the date the
Lifecycle fund was retired. The FRTIB received no public comments. On
December 1, 2010, the FRTIB published the proposed rule as final
without modification. (75 FR 74607).
Impact of the Transition to a New Recordkeeper
In November 2020, the FRTIB awarded a contract to a new service
provider (called a recordkeeper) that maintains and operates the
technology platforms necessary to process TSP transactions. The
transition from the prior TSP recordkeeper to the new TSP recordkeeper
was an enormous technological project that occurred over the course of
18 months. During that transition period, the new TSP recordkeeper
informed the FRTIB that the new TSP recordkeeper was unable to
calculate a constructed share price for retired Lifecycle Funds.
Accordingly, the FRTIB amended its regulations to provide that the
share price of the L
[[Page 26424]]
Income Fund would be used instead. (87 FR 31670).
Final Rule
The new TSP recordkeeper has since informed the FRTIB that the new
TSP recordkeeper can use a constructed share price to calculate
breakage and the value of negative adjustments for errors involving
Lifecycle Funds retired on or after June 1, 2022--the date the new TSP
recordkeeper began processing TSP transactions.\1\ Accordingly, the
FRTIB proposes to revert to the use of a constructed share price to
calculate breakage and the value of negative adjustments for errors
involving Lifecycle Funds that are retired on or after June 1, 2022.
This will provide the participant with a composite of the return of the
Lifecycle Fund before it was retired, and the return of the L Income
Fund after the Lifecycle Fund was retired. The TSP recordkeeper will
continue to use the share price of the L Income Fund to calculate
breakage and the value of negative adjustments for errors involving
Lifecycle Funds retired before June 1, 2022.
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\1\ No Lifecycle Funds have been retired since June 1, 2022. But
the L 2025 Fund will retire this summer.
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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.
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 Accountability Office
Pursuant to 5 U.S.C. 801(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 Government Accountability
Office 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 in 5 CFR Part 1605
Employee benefit plans, Government employees, Pensions, Reporting
and recordkeeping requirements, Retirement.
Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons stated in the preamble, the FRTIB amends 5 CFR part
1605 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 Sec. 7202(m)(2) of Public Law 101-508, 104 Stat.
1388.
Subpart A--General
0
2. Amend Sec. 1605.2 by revising paragraph (b)(3) to read as follows:
Sec. 1605.2 Calculating, posting, and charging breakage on late
contributions and loan payments.
* * * * *
(b) * * *
(3) 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 contribution or loan payments
would have been invested in a Lifecycle Fund that retired prior to June
1, 2022, then the share price of the L Income Fund will be used; but if
the Lifecycle Fund retired on or after June 1, 2022, then a constructed
share price for the retired Lifecycle Fund will be used. The
constructed share price shall equal the final posted share price of the
Lifecycle Fund on the business day the fund is retired, multiplied by
the current L Income Fund share price at the time the correction is
made, divided by the final posted share price of the L Income Fund on
the business day the fund is retired. 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 either by
the share price of the L Income Fund or the constructed share price, as
determined by the posting date; and
* * * * *
Subpart B--Employing Agency Errors
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 and
the Lifecycle Fund retired prior to June 1, 2022, then the share price
of the L Income Fund will be used; or if the Lifecycle Fund retired on
or after June 1, 2022, then a constructed share price for the retired
Lifecycle Fund will be used. The constructed share price shall equal
the final posted share price of the retired Lifecycle Fund on the
business day the fund is retired, multiplied by the current L Income
Fund share price at the time the correction is made, divided by the
final posted share price of the L Income Fund on the business day the
fund is retired.
* * * * *
[FR Doc. 2025-11471 Filed 6-20-25; 8:45 am]
BILLING CODE 6760-01-P