[Federal Register Volume 90, Number 129 (Wednesday, July 9, 2025)]
[Rules and Regulations]
[Pages 30203-30204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-12698]
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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.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 90, No. 129 / Wednesday, July 9, 2025 / Rules
and Regulations
[[Page 30203]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1655
Procedures for Applying Payments to Principal and Interest Upon
Loan Reamortization
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Final rule.
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SUMMARY: The Federal Retirement Thrift Investment Board (FRTIB) is
amending a regulation to require the Thrift Savings Plan (TSP) record
keeper to combine the accrued interest with the outstanding principal
when reamortizing a loan.
DATES: The effective date is July 9, 2025.
FOR FURTHER INFORMATION CONTACT: For press inquiries: James Kaplan at
(202) 465-5220. For other inquiries: Jessica Bradford at (202) 942-
1600.
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 retirement
savings plan for Federal civilian employees and members of the
uniformed services. It 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 provisions of FERSA that
govern the TSP are codified, as amended, largely at 5 U.S.C. 8351 and
8401-80.
I. Background
FERSA permits participants to borrow from their TSP accounts if
they meet certain conditions. Two types of loans are available to TSP
participants: general purpose and primary residence loans, the maximum
repayment periods of which are five and 15 years, respectively.
Prior to the TSP's transition to a new record keeper in 2022,
participants could voluntarily reamortize their loans at any time and
for any reason under 5 CFR 1655.16. On March 1, 2022, the FRTIB
proposed to amend the rule to permit loan reamortization only if a
participant's pay cycle changed (i.e., a participant goes from a
biweekly to a monthly pay cycle). No public comments were received on
the proposed change, and the FRTIB finalized the rule on May 24, 2022
(87 FR 31674). In addition, under 5 CFR 1620.45, participant loans can
be reamortized if a participant enters nonpay status.
II. Proposed Rule
On April 18, 2025, the FRTIB published a proposed rule with request
for public comments in the Federal Register (90 FR 16469, April 18,
2025). Section 1655.16 of the Code of Federal Regulations defines
certain required procedures to reamortize a TSP loan. Previously, under
section 1655.16(b), the outstanding principal balance of a
participant's loan remained the same upon reamortization, and any
accrued interest would be paid first before payments were applied to
principal and current interest.
The FRTIB proposed to require the TSP record keeper to combine the
accrued interest with the outstanding principal when reamortizing a
loan. Combining the accrued interest with the outstanding principal
would align the TSP's procedures with the TSP record keeper's
procedures for processing reamortized loan repayments. The difference
between the legacy and proposed methods results in a negligible
increase of the total cost of the loan. This change impacts
approximately one percent of all TSP participant loans.
III. Response to Public Comments
We received six comments, all of which opposed the proposal.
Several commenters expressed concern that the TSP record keeper would
financially benefit from the change at the cost of TSP participants.
One commenter expressed concern that the compounding of interest would
result in significantly increased long-term costs for participants and
a diminishment of the value of their retirement. We believe we can
alleviate these concerns with clarification about the nature of TSP
loans.
While the interest paid on the loan will increase due to the
compounding of interest, 100 percent of a participant's repayment,
which includes both the principal and interest, is paid to his or her
TSP account. Also, participants pay no additional loan fees for a
reamortization. The TSP record keeper is paid no interest and receives
no monetary benefit from a loan reamortization.
Another commenter expressed concern that a participant loan with a
low interest rate could be reamortized at a higher interest rate.
Pursuant to regulation section 1655.16(c), the interest rate on the
reamortized loan does not change from the original terms of the loan.
This amendment does not change that.
A commenter also expressed the view that participants who
reamortize under this regulation are doing so because they have
encountered financial hardship, and that combining the outstanding
principal with the accrued interest would increase the amount of their
loan repayment at a time of a participant's financial vulnerability.
Implied in this view is that participants can voluntarily reamortize at
any time, for any reason, and would only do so because they are in
financial straits. However, participants cannot reamortize at any time.
Rather, they can only reamortize after one of two triggers has
occurred: their pay cycle changed, or they entered nonpay status. This
rule does not change that.
Another commenter requested the TSP to revert to pre-transition
rules that would permit voluntary reamortization of TSP loans at any
time for any reason. This is beyond the scope of this regulation. As
explained, a rule was proposed in 2022 to permit reamortization only in
certain circumstances. The FRTIB received no comments in response to
the proposed change and finalized the regulation in May 2022. That
change became effective on June 1, 2022.
For the reasons described above, the FRTIB is adopting the proposed
rule as final, without any substantive changes. Although the comments
received did not cause us to make changes to the proposed rule, we
carefully considered all comments received and appreciated the
opportunity to understand participants' concerns.
Regulatory Flexibility Act
This final regulation will not have a significant economic impact
on a substantial number of small entities. This regulation will affect
Federal
[[Page 30204]]
employees and members of the uniformed services who participate in the
TSP and who take out a loan from their TSP account and later have their
loan reamortized. The change impacts approximately one percent of all
participant loans in the TSP.
Paperwork Reduction Act
This final regulation does not require additional reporting under
the criteria of the Paperwork Reduction Act.
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 its publication in the Federal Register. This rule is not
a major rule as defined at 5 U.S.C. 804(2).
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, and Tribal governments,
in the aggregate, or by the private sector. Therefore, a statement
under 2 U.S.C. 1532 is not required.
List of Subjects in 5 CFR Part 1655
Government employees, Loan programs, Pensions, Retirement.
Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons stated in the preamble, the FRTIB amends 5 CFR part
1655 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. Amend Sec. 1655.16 by revising paragraph (b) to read as follows:
Sec. 1655.16 Reamortization.
* * * * *
(b) Upon reamortization, the new principal balance of the loan will
equal the outstanding principal on the date of reamortization, plus any
accrued interest.
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[FR Doc. 2025-12698 Filed 7-8-25; 8:45 am]
BILLING CODE 6760-01-P