[Federal Register: April 7, 2004 (Volume 69, Number 67)]
[Proposed Rules]
[Page 18294-18296]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ap04-12]
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Proposed Rules
Federal Register
________________________________________________________________________
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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[[Page 18294]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Parts 1650, 1653, 1655 and 1690
Methods of Withdrawing Funds From the Thrift Savings Plan; Court
Orders and Legal Processes Affecting Thrift Savings Plan Accounts; Loan
Program; Thrift Savings Plan
AGENCY: Federal Retirement Thrift Investment Board
ACTION: Proposed rule with request for comments.
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SUMMARY: The Executive Director of the Federal Retirement Thrift
Investment Board (Board) proposes to amend the court order regulations
to remove attorneys from the list of permissible court order payees,
and to require non-English court orders to be accompanied by a
certified English translation. The Executive Director proposes to
revise the TSP loan regulations to assess a $50.00 fee on new TSP
loans, permit a participant to have a single general purpose loan at
any one time, and implement a 60-day waiting period between the date a
loan is repaid and a new loan application for a loan of the same type
will be accepted. Finally, the Executive Director proposes to clarify
the TSP regulations pertaining to powers of attorney documents,
guardianship orders, and conservatorship orders.
DATES: Comments must be received on or before May 7, 2004.
ADDRESSES: Comments may be sent to Patrick J. Forrest, Federal
Retirement Thrift Investment Board, 1250 H Street, NW., Washington, DC
20005. The Board's Fax number is (202) 942-1676.
FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest on (202) 942-1661.
SUPPLEMENTARY INFORMATION: The Board 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 provisions of FERSA
have been 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)).
Court Orders
A state domestic relations court can award a portion of a
participant's TSP account ``to another person'' in an action for
divorce, annulment or legal separation. 5 U.S.C. 8467(a). TSP court
order regulations interpret this provision to permit a payment to the
spouse, former spouse, child, or dependent of the participant, or to an
attorney for the spouse, former spouse, child, or dependent of the
participant. 5 CFR 1653.2(a)(4).
Section 401(k) plans are the private-sector equivalents of the TSP
and they can be divided by qualified domestic relations orders (QDRO)
in domestic relations actions. 26 U.S.C. 414(p); 29 U.S.C. 1056(d).
Congress enacted the QDRO provisions in the Retirement Equity Act of
1984 (REA) ``to safeguard the security of the employee's immediate
family members in the case of divorce or separation.'' Ablamis v.
Roper, 937 F.2d 1450, 1456-7 (9th Cir. 1991). In keeping with this
purpose, a QDRO can make an award only to a ``spouse, former spouse,
child or dependent of a participant,'' not to an attorney. 26 U.S.C.
414(p)(8).
The court order provisions of FERSA serve the same purpose as the
QDRO provisions of REA. When the Board first promulgated the court
order regulations on March 13, 1995 (60 FR 13604), section 1653.2(b)(4)
permitted a court-ordered payment to an attorney for a participant's
spouse or dependent because such a payment is tantamount to paying the
spouse or dependent. See 60 FR 13605. While this is true, the Executive
Director has reevaluated this policy and determined that the security
of a participant's immediate family is better preserved by conforming
the TSP to the private-sector practice of limiting court order payees
to the participant's immediate family members, not by making tax-
deferred retirement savings available for the payment of legal fees.
Proposed section 1653.4(b)(4) would codify this policy change.
The TSP honors retirement benefits court orders from the
Commonwealth of Puerto Rico if they meet the requirements of FERSA and
TSP regulations. See 5 U.S.C. 8401(7) (``court'' for TSP purposes
includes a court of the Commonwealth of Puerto Rico). Those court
orders are routinely written in Spanish, although the litigants can
obtain a certified English translation of the order from the court.
When the TSP receives a Puerto Rican court order that is not
accompanied by a certified English translation, the TSP must pay for
translation services before it can determine whether the court order is
enforceable against the TSP.
TSP administrative expenses are borne by all of the participants.
The Executive Director has determined that it is appropriate for the
parties to the court order, not the TSP participants, to bear the cost
of the translation. Therefore, proposed section 1653.3(b) provides that
the TSP will reject a court order as incomplete if it is in a language
other than English, unless it is also accompanied by a certified
English language translation.
TSP Loans
A participant can gain temporary access to a portion of his TSP
retirement savings through the TSP loan program. TSP loans are subject
to the requirements of FERSA (5 U.S.C. 8433(g)), the Internal Revenue
Code (26 U.S.C. 72(p)), and the TSP loan regulations (5 CFR part 1655).
These provisions require the TSP to charge interest on loans and to
establish a repayment schedule.
The loan program offers an important benefit. It encourages
participants to contribute more to the TSP because they know they will
have access to some of the money in their accounts to help purchase a
home or pay unexpected bills. However, the TSP is not a checking or
savings account; it is a long-term investment intended for retirement.
Removing money from a TSP account--even when it is paid back--may
diminish the amount available to the participant for retirement.
Nevertheless, the number of TSP loans outstanding has been
increasing rapidly in recent years. A review of loans issued shows that
many participants are paying off a loan and immediately taking another
loan. Also, a significant percentage of TSP
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participants maintain two loans outstanding. The Executive Director has
determined that it is inappropriate for participants to maintain
constant loan balances, thus treating the loan program as a source of
ready cash, rather than a lender of last resort.
The administrative expenses of the TSP loan program are
considerable and they are borne by all of the participants as a general
administrative expense. The Executive Director has determined that it
is appropriate for the participants who take advantage of the loan
program to bear its cost, rather than 2.7 million participants who do
not use the program.
The Executive Director proposes three TSP policy changes to
reinforce the importance of borrowing from the TSP only as a last
resort, to ensure that the administrative expenses of the loan program
are reasonable for a retirement savings plan, and to ensure that the
costs of the TSP loan program are paid by the participants who use it.
First, in section 1655.2, the Board proposes to establish a 60-day
waiting period between paying off one loan and receiving another loan
of the same type. Second, in sections 1655.4 and 1655.11, the Executive
Director proposes to limit participants to having a single general
purpose loan outstanding at any one time. Third, in a new section
1655.21, the Executive Director proposes to charge a $50.00 loan fee
when a TSP loan is disbursed.
Powers of Attorney, and Guardianship and Conservatorship Orders
A participant can make TSP transactions through an agent by
appointing an attorney-in-fact with a power of attorney (POA). In
addition, a court order can appoint a guardian or conservator for an
incapacitated participant to act as his or her agent for TSP purposes.
Current sections 1690.12 and 1690.13 state that the TSP must approve
the POA or the court order before the agent can sign a form on the
participant's behalf. The Executive Director proposes to amend sections
1690.12 and 1690.13 to state that the TSP will accept a document that
was signed by an agent before the date on which the TSP approved the
POA or the court order, as long as the agent was authorized under the
conditions of his or her appointment to sign the document.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities. They will
affect only employees of the Federal Government.
Paperwork Reduction Act
I certify that these regulations do not require additional
reporting under the criteria of the Paperwork Reduction Act of 1980.
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.
List of Subjects
5 CFR Parts 1650, 1653 and 1690
Employee benefit plans, Government employees, Pensions, Retirement.
5 CFR Part 1655
Employee benefit plans, Government employees, Military Personnel,
Pensions, Retirement.
Gary A. Amelio,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons set forth in the preamble, the Board proposes to
amend 5 CFR chapter VI as follows:
PART 1650--METHODS OF WITHDRAWING FUNDS FROM THE THRIFT SAVINGS
PLAN
1. The authority citation for Part 1650 continues to read as
follows:
Authority: 5 U.S.C. 8351, 8433, 8434, 8435, 8474(b)(5), and
8474(c)(1).
Subpart G--Spousal Rights
Sec. 1650.61 [Amended]
2. Amend Sec. 1650.61 by removing ``Sec. 1650.64'' from paragraph
(b) and ``Sec. 1650.65'' from paragraph (c)(1), and adding in their
places ``this Subpart''.
Sec. 1650.62 [Amended]
3. Amend Sec. 1650.62 by removing ``Sec. 1650.64'' from paragraph
(b) and ``Sec. 1650.65'' from paragraph (c), and adding in their
places ``this Subpart''.
Sec. 1650.64 [Amended]
4. Amend Sec. 1650.64 by removing ``Sec. 1650.64'' from paragraph
(a)(1) and adding in its place ``this Subpart''.
PART 1653--COURT ORDERS AND LEGAL PROCESSES AFFECTING THRIFT
SAVINGS PLAN ACCOUNTS
5. The authority citation for part 1653 is revised to read as
follows:
Authority: 5 U.S.C. 8435, 8436(b), 8437(e), 8439(a)(3), 8467,
8474(b)(5) and 8474(c)(1).
Subpart A--Retirement Benefits Court Orders
6. Amend Sec. 1653.2 by revising paragraph (a)(4) to read as
follows:
Sec. 1653.2 Qualifying retirement benefits court orders.
(a) * * *
(4) A court order can require a payment only to a spouse, former
spouse, child or dependent of a participant.
7. Amend Sec. 1653.3 by revising the last sentence of paragraph
(b) introductory text to read as follows:
Sec. 1653.3 Processing retirement benefits court orders.
* * * * *
(b) * * * To be complete, a court order must be written in English
or be accompanied by a certified English translation and contain all
pages and attachments; it must also provide (or be accompanied by a
document that provides):
* * * * *
PART 1655--LOAN PROGRAM
8. The authority citation for part 1655 is revised to read as
follows:
Authority: 5 U.S.C. 8433(g), 8439(a)(3) and 8474.
9. 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 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; and
10. Amend Sec. 1655.4 by revising the second sentence to read as
follows:
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Sec. 1655.4 Number of loans.
* * * One of the two outstanding loans may be a residential loan
and the other one may be a general purpose loan. * * *
11-12. Revise paragraph (b) of Sec. 1655.11 to read as follows:
Sec. 1655.11 Loan acceptance.
* * * * *
(b) The participant has the maximum number of loans outstanding
under Sec. 1655.4;
* * * * *
13. Add a new Sec. 1655.21 to read as follows:
Sec. 1655.21 Loan fee.
A participant will be charged a $50.00 loan fee when a TSP loan is
disbursed, which will be deducted from the proceeds of the loan.
PART 1690--THRIFT SAVINGS PLAN
14. The authority citation for Part 1690 continues to read as
follows:
Authority: 5 U.S.C. 8474.
15. Revise Sec. 1690.12 to read as follows:
Sec. 1690.12 Power of attorney.
A TSP participant or beneficiary can authorize an individual to
conduct business with the TSP on his or her behalf by appointing an
agent (i.e., an attorney-in-fact). Before the TSP will allow an agent
to conduct business for the participant, the TSP must approve the power
of attorney (POA) granting such authority. The TSP will accept a
general POA that authorizes the agent to act on behalf of the
participant with respect to the participant's personal property,
Federal Government retirement benefits, or business transactions. A
general POA will give the agent unlimited authority with the TSP,
including the authority to sign any TSP-related document. The TSP will
also accept a specific POA authorizing the agent to effect TSP
transactions. If the participant or beneficiary desires to limit the
agent's authority to specified TSP transactions, the POA must expressly
state the limitation on the agency's authority. To be accepted by the
TSP, a POA must be authenticated, attested, acknowledged, or certified
by the principal before a notary public or other official authorized by
law to administer oaths or affirmations. The TSP will advise the person
submitting the POA whether it is valid to effect TSP transactions.
16. Revise Sec. 1690.13 to read as follows:
Sec. 1690.13 Guardianship and conservatorship orders.
A court can authorize an agent to conduct business with the TSP on
behalf of an incapacitated TSP participant or beneficiary by appointing
a guardian or conservator. Before the TSP will allow a guardian or
conservator to conduct business with the TSP, the TSP must approve the
guardianship or conservatorship order issued by a court of competent
jurisdiction as defined in Sec. 1690.1. The TSP will accept a general
appointment of guardianship or conservatorship that authorizes the
agent to act on behalf of the participant with respect to the
participant's personal property, Federal Government retirement
benefits, or business transactions. A general appointment will give the
agent unlimited authority with the TSP, including the authority to sign
any TSP-related document. The TSP will also accept a specific
appointment of guardianship or conservatorship authorizing the agent to
effect TSP transactions. If the court desires to limit the agent's
authority to specific TSP transactions, the court order must expressly
state the limitation on the agent's authority. In addition, before the
TSP will accept a guardianship or conservatorship order, the agent must
establish to the satisfaction of the TSP that any bonding requirement
or other preconditions specified in the court order have been
satisfied. The TSP will advise the guardian or conservator whether the
order is valid to effect transactions in the TSP.
[FR Doc. 04-7610 Filed 4-6-04; 8:45 am]
BILLING CODE 6760-01-P