Thrift Savings Plan Participation for Certain Employees of the District of Columbia Financial Responsibility and Management Authority

SUMMARY: The Executive Director of the Federal Retirement Thrift

Investment Board is publishing interim regulations to implement section

102(e) of the District of Columbia Financial Responsibility and

Management Assistance Act of 1995 (Act). Under this Act, persons who

separate from Federal employment and who are employed within two months

by the District of Columbia Financial Responsibility and Management

Authority may elect to participate in the Federal retirement system in

which they last participated before separating from Federal service.

These regulations address participation in the Thrift Savings Plan

(TSP) by eligible employees who elect Federal retirement coverage. They

do not apply to eligibility to participate in retirement programs

administered by the Office of Personnel Management (OPM).

DATES: This interim rule is effective January 29, 1996.Comments must be

received on or before March 29, 1996.

ADDRESSES: Comments may be sent to: Patrick J. Forrest, Federal

Retirement Thrift Investment Board, 1250 H Street, NW., Washington,

D.C. 20005.

FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest, (202) 942-1662.

SUPPLEMENTARY INFORMATION: The Federal Retirement Thrift Investment

Board (Board) administers the Thrift Savings Plan (TSP), which was

established by the Federal Employees' Retirement System Act of 1986

(FERSA), Pub. L. 99-335, 100 Stat. 514 (1986), which has been codified,

as amended, largely at 5 U.S.C. 8401-8479 (1994). The TSP is a tax-

deferred retirement savings plan for Federal employees that is similar

to cash or deferred arrangements established under section 401(k) of

the Internal Revenue Code.

The District of Columbia Financial Responsibility and Management

Assistance Act of 1995 (Act), Pub. L. 104-8, section 101, 109 Stat. 97,

100, established the District of Columbia Financial Responsibility and

Management Assistance Authority (Authority) as an entity within the

Government of the District of Columbia. The Act provides that

individuals who commence employment with the Authority within two

months of separating from Federal service may elect to retain their

participation in the ``retirement system in which the individual last

participated before so separating * * *.'' Id., section 102(e)(1)(A),

109 Stat. at 102. Although this language is not explicit with respect

to the TSP, the Act contemplates TSP participation because the TSP is a

component of the Federal Employees' Retirement System (FERS) and the

Civil Service Retirement System (CSRS).

Section 1653.113 of these interim regulations provides that the

Authority must notify an employee of his or her right to participate in

the TSP at the time the employee is required to be notified of his or

her right to elect Federal retirement coverage. Because the TSP is an

important part of the Federal employee's total retirement package, an

employee should be advised of eligibility for TSP participation in

order to make an educated decision whether to elect Federal retirement

coverage.

Section 1620.114 provides that some employees may be eligible to

contribute to the TSP immediately upon employment with the Authority,

while others would be eligible to participate in the TSP during

subsequent TSP open seasons.

Section 1620.114(a) pertains to employees who leave Federal service

and are employed by the Authority with a break in service of less than

31 full calendar days. These employees are treated as though they

transferred from one Federal agency to another with no break in

service. Therefore, if such an employee had a valid TSP contribution

election in effect on the date the employee separated from the Federal

service, the employee's contributions to the TSP will continue without

interruption pursuant to the election that was in effect upon

separation. If such an employee was eligible to participate in the TSP

prior to separation but did not have a valid TSP election in effect on

the date that he or she separated from the Federal service, the

employee will be eligible to contribute to the TSP during the first

open season beginning after the date he or she commences employment

with the Authority. If such an employee was not previously eligible to

participate in the TSP, the employee will become eligible during the

second open season beginning after the date he or she began to work for

the Federal Government, not with the Authority.

Section 1620.114(b) pertains to employees who were separated from

Federal service for 31 or more full calendar days but less than 2

months before they were employed by the Authority. Section

1620.114(b)(1) provides that if such an employee was previously

eligible to participate in the TSP, he or she will be eligible to

contribute to the TSP during the first open season beginning after the

date he or she is employed by the Authority. Section 1620.114(b)(2)

provides that if the employee was not previously eligible to

participate in the TSP, he or she will be eligible to contribute to the

TSP during the second open season beginning after the date he or she is

employed by the Authority.

Section 1620.114(b)(3) provides that if an employee covered under

section 1620.114(b)(1) or (b)(2) commences employment with the

Authority during an open season but before the election period (the

last month of the open season), that open season is considered the

employee's first open season.

These rules are applied in the following examples:

Example Number 1: Assume an employee leaves Federal service and 40

days later, on December 15, 1995 (which is during an open season),

commences employment with the Authority. Assume also that the employee

elects retirement coverage under CSRS. Assume further that the employee

was eligible to contribute to the TSP at the time she separated from

the Federal agency. Because she commenced employment with the Authority

after 31 or more full calendar days, but within 2 months after

separating from Federal service, section 1620.114(b) applies. Because

she previously was eligible to contribute to the TSP, section

1620.114(b)(1) applies. Therefore, the employee is eligible to

contribute to the TSP during the first open season beginning after the

date the employee commenced employment with the Authority. Furthermore,

because the employee was hired during a TSP open season, but not during

the last month of an open season, section 1620.114(b)(3) provides that

the open season during which she commences employment with the

Authority is her first open season. Accordingly, the employee would be

eligible to contribute to the TSP beginning in the first full pay

period in January 1996. (Note that under section 1620.115(a), if the

employee was covered by FERS, she would be entitled to Agency Automatic

(1%) Contributions beginning in the first full pay period in January

1996, whether or not she elected to contribute to the TSP; and that she

would be entitled to

[[Page 2873]]

matching contributions if she did elect to contribute.)

Example Number 2: Assume an employee begins working for the Federal

Government on February 28, 1995, and is recruited by the Authority to

begin working on October 30, 1995. Assume further that the employee

separates from Federal service one week before commencing service with

the Authority, and that he elects continued retirement coverage under

FERS once he starts working for the Authority. Because he commenced

employment with the Authority with less than a 31 day break in service,

1620.114(a) applies. Because he was not previously eligible to

contribute to the TSP, section 1620.114(a)(3) applies and provides that

he is eligible to contribute to the TSP during the second open season

beginning after the date he first began working for the Federal

Government. The employee's first open season was the May 15, 1995, to

July 31, 1995, open season, during which he was employed by the Federal

Government. His second open season is the November 15, 1995, to January

31, 1996, open season, during which he will be employed by the

Authority. Therefore, the employee can contribute to the TSP in the

first full pay period in January 1996. (Also note that under section

1620.115(a), because the employee is covered by FERS, he would be

entitled to Agency Automatic (1%) Contributions beginning in the first

full pay period in January 1996, whether or not he elected to

contribute; and that he would be entitled to matching contributions if

he did elect to contribute.)

Section 1620.117 provides that an employee of the Authority who

elects Federal retirement coverage must notify the TSP recordkeeper

that he or she has commenced employment with the Authority if the

employee separated from Federal service with an outstanding TSP loan.

It may be possible for such employees to continue their TSP loan

payments and thereby avoid repaying in full or having a taxable

distribution declared, if their loan payments resume before their loan

accounts are closed.

Regulatory Flexibility Act

I certify that these regulations will not have a significant

economic impact on a substantial number of small entities because the

regulations will affect only a small number of former Federal employees

and a single agency of the Government of the District of Columbia.

Paperwork Reduction Act

I certify that these regulations do not require additional

reporting under the criteria of the Paperwork Reduction Act of 1980.

Waiver of Notice of Proposed Rulemaking and 30-Day Delay of Effective

Date

Under 5 U.S.C. 553 (b)(3)(B) and (d)(3), I find that good cause

exists for waiving the general notice of proposed rulemaking and for

making these regulations effective in less than 30 days. Elections made

under these regulations will affect qualifying employees' participation

in the TSP retroactive to their entry on duty with the Authority. The

intent of the legislation is to allow eligible employees to participate

in the TSP as soon as practicable. A delay in the effective date of

these regulations would be contrary to the intent of the legislation

and to the public interest because it would delay the election

opportunity for eligible employees during the initial staffing of the

Authority.

Unfunded Mandates Reform Act of 1995

Pursuant to the Unfunded Mandates Reform Act of 1995, Pub. L. 104-

4, section 201, 109 Stat. 48, 64, the effect of this regulation on

State, local, and tribal governments and on the private sector has been

assessed. This regulation will not compel the expenditure in any one

year of $100 million or more by any State, local, or tribal governments

in the aggregate or by the private sector. Therefore, a statement under

section 202, 109 Stat. 48, 64-65, is not required.

List of Subjects in 5 CFR Part 1620

District of Columbia, Employment benefit plans, Government

employees, Retirement, Pensions.

Federal Retirement Thrift Investment Board.

Roger W. Mehle,

Executive Director.

For the reasons set out in the preamble, 5 CFR Chapter VI is

amended as set forth below:

PART 1620--CONTINUATION OF ELIGIBILITY

1. The authority citation for part 1620 is revised to read as

follows:

Authority: 5 U.S.C. 8474 and 8432b; Pub. L. 99-591, 100 Stat.

3341; Pub. L. 100-238, 101 Stat. 1744; Pub. L. 100-659, 102 Stat.

3910; Pub. L. 104-4, 109 Stat. 48.

2. Subpart I is added to part 1620 to read as follows:

Subpart I--Certain Employees of the District of Columbia Financial

Responsibility and Management Assistance Authority.

Sec.

1620.110 Scope.

1620.111 Definitions.

1620.112 Eligibility requirements.

1620.113 Notice to an employee of his or her right to participate

in the TSP.

1620.114 Employee contributions.

1620.115 Employer contributions.

1620.116 TSP contributions.

1620.117 TSP loan payments.

1620.118 Failure to participate or delay in participation.

1620.119 Other regulations.

Subpart I--Certain Employees of the District of Columbia Financial

Responsibility and Management Assistance Authority

Sec. 1620.110 Scope.

The District of Columbia Financial Responsibility and Management

Assistance Authority (Authority) was established by the District of

Columbia Financial Responsibility and Management Assistance Act of 1995

(the Act), Public Law 104-8, 109 Stat. 97. Although the Authority is an

agency of the District of Columbia Government, any individual who is

employed by the Authority within two months after being separated from

Federal service may elect to retain his or her participation in the

retirement system in which the individual last participated before

separating from Federal service. This subpart governs participation in

the Thrift Savings Plan (TSP) by employees of the Authority who elect

to be covered by FERS or CSRS.

Sec. 1620.111 Definitions.

As used in this subpart:

Authority means the District of Columbia Financial Responsibility

and Management Authority.

Basic pay means basic pay as defined in 5 U.S.C. 8431.

CSRS means the Civil Service Retirement System established by

subchapter III of chapter 83 of title 5, United States Code, or any

equivalent Government retirement plan.

Election period means the last calendar month of an open season and

is the period in which an election to make or change contributions

during that open season can first become effective.

FERS means the Federal Employees' Retirement System established by

chapter 84 of title 5, United States Code, and any equivalent

retirement system.

Open season means the period during which employees may make an

election with respect to their contributions to the Thrift Savings

Plan.

[[Page 2874]]

Recordkeeper means the organization under contract to the Board to

perform recordkeeping services. This currently is the National Finance

Center, United States Department of Agriculture, P.O. Box 61500, New

Orleans, Louisiana 70161- 1500.

Retirement election means an election by an eligible employee of

the Authority to remain covered by either CSRS or FERS.

Thrift Savings Plan (TSP) election means a request by an eligible

employee to start contributing to the TSP, to terminate contributions

to the TSP, to change the amount of contributions made to the TSP each

pay period (including a request to terminate contributions), or to

change the allocation of TSP contributions among the TSP investment

funds, as described at 5 CFR 1600.4. A TSP election must be made on

Form TSP-1, Thrift Savings Plan Election Form.

Sec. 1620.112 Eligibility requirements.

To be eligible to participate in the TSP, an employee of the

Authority must:

(a) Have been separated from the Federal service for not more than

2 months before commencing employment with the Authority;

(b) Have been covered by FERS or CSRS immediately before separating

from Federal service; and

(c) Have elected to be covered by FERS or CSRS within the time

permitted by the United States Office of Personnel Management.

Sec. 1620.113 Notice to an employee of his or her right to participate

in the TSP.

The Authority must notify an employee of his or her right to

participate in the TSP at the time the employee is required to be

notified of his or her right to elect to be covered under FERS or CSRS.

Sec. 1620.114 Employee contributions.

(a) An employee of the Authority who is separated from Federal

service for less than 31 full calendar days before commencing

employment with the Authority and who elects to be covered by FERS or

CSRS within the time period mandated by the United States Office of

Personnel Management will be eligible to contribute to the TSP as

though he or she had transferred to the Authority from the losing

Federal agency, i.e., as though the employee did not have a break in

service as defined by the TSP.

(b) An employee who is employed by the Authority after 31 or more

full calendar days but within 2 months after separating from Federal

service and who elects to be covered by FERS or CSRS within the time

period permitted by the United States Office of Personnel Management

will be eligible to contribute to the TSP as follows:

(1) If the employee was previously eligible to participate in the

TSP, the employee will be eligible to contribute to the TSP in the

first open season (as determined in accordance with paragraph (b)(3) of

this section) beginning after the date the employee commences

employment with the Authority.

(2) If the employee was not previously eligible to participate in

the TSP, the employee will be eligible to contribute to the TSP in the

second open season (as determined in accordance with paragraph (b)(3)

of this section) beginning after the date the employee commences

employment with the Authority.

(3) If an employee of the Authority who is described in paragraphs

(b)(1) and (b)(2) of this section is employed by the Authority during

an open season, but before the election period (the last calendar month

of the open season), the open season during which the employee is

employed will be considered the employee's first open season.

(c) TSP contributions from employees of the Authority must be made

from the employee's basic pay for service with the Authority and are

subject to the limits described at 5 CFR Part 1600, subpart C.

Sec. 1620.115 Employer contributions.

(a) If an eligible employee of the Authority elects to be covered

by FERS, the Authority must contribute on the employee's behalf each

pay period to the Thrift Savings Fund, in accordance with Board

procedures, an amount equal to 1 percent of the employee's basic pay

paid to such employee for that period of service, as required by 5

U.S.C. 8432(c)(1)(A), beginning:

(1) Immediately upon employment with the Authority if the employee

separated from Federal service less than 31 full calendar days before

commencing employment with the Authority and was eligible to

participate in the TSP when he or she separated from Federal service;

or

(2) With the first pay period in which the employee is eligible to

contribute to the TSP (as determined in accordance with Sec. 1620.114

of this subpart) for all other FERS employees of the Authority.

(b) If a FERS employee of the Authority elects to participate in

the TSP under Sec. 1620.114 of this subpart, the Authority must

contribute on behalf of such employee each pay period to the Thrift

Savings Fund, in accordance with Board procedures, any matching

contributions which he or she is eligible to receive under 5 U.S.C.

8432(c).

Sec. 1620.116 TSP contributions.

The Authority is responsible for transmitting, in accordance with

Board procedures, any employee and employer contributions that are

required by this subpart to the Board's Recordkeeper.

Sec. 1620.117 TSP loan payments.

The Authority shall deduct and transmit TSP loan payments for

employees in accordance with 5 CFR part 1655 and Board procedures. An

employee of the Authority who separates from Federal service with an

outstanding TSP loan and who elects to be covered under FERS or CSRS

must notify the recordkeeper that he or she has commenced employment

with the Authority.

Sec. 1620.118 Failure to participate or delay in participation.

If an employee of the Authority who elects to be covered by FERS or

CSRS fails to participate or is delayed in participating in the TSP

because of a delay in the implementation of the Act or in the

promulgation of the regulations in this subpart, the employee may

request that retroactive corrective action be taken in accordance with

5 CFR 1605.2(b)(2), as if the delay were attributable to employing

agency error. Lost earnings shall be payable pursuant to 5 CFR part

1606 due to delay described in this section, as if the delay were

attributable to employing agency error.

Sec. 1620.119 Other regulations.

The Authority and individuals covered by Sec. 1620.110 of this

subpart are governed by the regulations in 5 CFR chapter VI, to the

extent the regulations in 5 CFR chapter VI are not inconsistent with

this subpart.

[FR Doc. 96-1492 Filed 1-26-96; 8:45 am]

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