80 FR 49173 - Default Investment Fund Errors

FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

Federal Register Volume 80, Issue 158 (August 17, 2015)

The Federal Retirement Thrift Investment Board (Agency) proposes to amend its regulations to codify procedures for correcting certain default investment fund errors.

[Federal Register Volume 80, Number 158 (Monday, August 17, 2015)]
[Proposed Rules]
[Pages 49173-49175]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-20273]


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FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Part 1605


Default Investment Fund Errors

AGENCY: Federal Retirement Thrift Investment Board

ACTION: Proposed rule with request for comments.

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SUMMARY: The Federal Retirement Thrift Investment Board (Agency) 
proposes to amend its regulations to codify procedures for correcting 
certain default investment fund errors.

DATES: Submit comments on or before September 16, 2015.

ADDRESSES: You may submit comments using one of the following methods:
     Federal Rulemaking Portal: http://www.regulations.gov at 
Docket ID number FRTIB-2015-0003. Follow the instructions for 
submitting comments.
     Mail: Office of General Counsel, Attn: James Petrick, 
Federal Retirement Thrift Investment Board, 77 K Street NE., Suite 
1000, Washington, DC 20002.
     Hand Delivery/Courier: The address for sending comments by 
hand delivery or courier is the same as that for submitting comments by 
mail.
     Facsimile: Comments may be submitted by facsimile at (202) 
942-1676.
    The most helpful comments explain the reason for any recommended 
change and include data, information, and the authority that supports 
the recommended change.

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

SUPPLEMENTARY INFORMATION: The Agency administers the Thrift Savings 
Plan (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 are 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, members of the uniformed services, and 
spouse beneficiaries. 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)).
    On December 18, 2014, the President signed the Smart Savings Act 
(``the Act''), Public Law 113-255 (128 Stat. 2920). The Act directed 
the Agency to invest any sums available for investment in the TSP for 
which an election has not been made in an age-appropriate target date 
asset allocation investment fund. On July 13, 2015, the Agency 
published a proposed rule to change the TSP's default investment fund 
from the TSP's Government Securities Investment Fund to the age-
appropriate TSP Lifecycle Fund (L Fund) for civilian employees. 80 FR 
39974. This proposed regulation would update the TSP's existing error 
correction rules to address the correction of default investment fund 
errors caused by erroneous dates of birth.

Default Investment Fund Errors

    Erroneous dates of birth can result from participant error, 
employing agency error, Agency error, or record-keeper error. A 
participant's date of birth is used to determine his or her age-
appropriate L Fund. An erroneous date of birth might therefore cause a 
participant's TSP account to be invested in an L Fund that is different 
from the L Fund his or her account would have been invested in had the 
participant's correct date of birth been used. This proposed regulation 
provides that the Agency will pay breakage when an erroneous date of 
birth caused by Agency or record-keeper error results in default 
investment in the wrong L Fund.
    In addition, the Agency will charge employing agencies breakage 
when an erroneous date of birth caused by employing agency error 
results in default investment in the wrong L Fund. To initiate a 
breakage calculation for an employee, the employing agency must notify 
the TSP that the participant is entitled to breakage. A date of birth 
change received from an employing agency will not trigger corrective 
action other than to update the date of birth.
    Consistent with the existing error correction procedures at 5 CFR 
1605.22 for contribution allocation and interfund transfer errors, the 
participant

[[Page 49174]]

must file a breakage claim within 30 days of either the date the TSP 
provides the participant with a notice reflecting the error or the date 
the TSP makes available on its Web site a participant statement 
reflecting the error, whichever is earlier.

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 civilian employees and spouse beneficiaries 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 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.

List of Subjects in 5 CFR Part 1605

    Government employees, Pensions, Retirement.

Gregory T. Long,
Executive Director, Federal Retirement Thrift Investment Board.
    For the reasons stated in the preamble, the Agency proposes to 
amend 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, 8432(a), 8432(d), 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.

0
2. Amend Sec.  1605.2 by revising the heading and paragraphs (b)(1)(i) 
and (c) to read as follows:


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

* * * * *
    (b) * * *
    (1) * * *
    (i) Use the participant's contribution allocation on file for the 
``as of'' date to determine how the funds would have been invested. If 
there is no contribution allocation on file, or one cannot be derived 
based on the investment of contributions, the TSP will consider the 
funds to have been invested in the default investment fund in effect 
for the participant on the ``as of'' date.
* * * * *
    (c) Posting contributions and loan payments. Makeup and late 
contributions, late loan payments, and breakage, will be posted to the 
participant's account according to his or her contribution allocation 
on file for the posting date. If there is no contribution allocation on 
file for the posting date, they will be posted to the default 
investment fund in effect for the participant.
* * * * *
0
3. Add Sec.  1605.3 to read as follows:


Sec.  1605.3  Calculating, posting, and charging breakage on errors 
involving investment in the wrong fund.

    (a) The TSP will calculate and post breakage on date of birth 
errors that result in default investment in the wrong L Fund, 
contribution allocation errors, and interfund transfer errors.
    (b) The TSP will charge the employing agency for positive breakage 
on incorrect dates of birth caused by employing agency error that 
result in default investment in the wrong L Fund. A date of birth 
change received from an employing agency will not trigger corrective 
action other than to update the date of birth. To initiate a breakage 
calculation for an employee, the employing agency must notify the TSP 
that the participant is entitled to breakage.
0
4. Amend Sec.  1605.13 by revising paragraph (a)(3) to read as follows:


Sec.  1605.13  Back pay awards and other retroactive pay adjustments.

    (a) * * *
    (3) All contributions made under this paragraph (a) and associated 
breakage will be invested according to the participant's contribution 
allocation on the posting date. Breakage will be calculated using the 
share prices for the default investment fund in effect for the 
participant in accordance with Sec.  1605.2 unless otherwise required 
by the employing agency or the court or other tribunal with 
jurisdiction over the back pay case.
* * * * *
0
5. Amend Sec.  1605.16, by re-designating the text of paragraph (a) as 
paragraph (a)(1), adding paragraph (a)(2), re-designating the text of 
paragraph (b) as paragraph (b)(1), and adding paragraphs (b)(2) and 
(b)(3) to read as follows:


Sec.  1605.16  Claims for correction of employing agency errors; time 
limitations.

    (a) Agency's discovery of error. (1) Upon discovery of an error 
made within the past six months involving the correct or timely 
remittance of payments to the TSP (other than a retirement system 
misclassification error, as covered in paragraph (c) of this section), 
an employing agency must promptly correct the error on its own 
initiative. If the error was made more than six months before it was 
discovered, the agency may exercise sound discretion in deciding 
whether to correct it, but, in any event, the agency must act promptly 
in doing so.
    (2) For errors involving incorrect dates of birth caused by 
employing agency error that result in default investment in the wrong L 
Fund, the employing agency must promptly notify the TSP that the 
participant is entitled to breakage if the error is discovered within 
30 days of either the date the TSP provides the participant with a 
notice reflecting the error or the date the TSP makes available on its 
Web site a participant statement reflecting the error, whichever is 
earlier. If it is discovered after that time, the employing agency may 
use its sound discretion in deciding whether to pay breakage, but, in 
any event, must act promptly in doing so.
    (b) Participant's discovery of error. (1) If an agency fails to 
discover an error of which a participant has knowledge involving the 
correct or timely remittance of a payment to the TSP (other than a 
retirement system misclassification error as covered by paragraph (c) 
of this section), the participant may file a claim with his or her 
employing agency to have the error corrected without a time limit. The 
agency must promptly correct any such error for which the participant 
files a claim within six months of its occurrence; if the participant 
files a claim to correct any such error after that time, the agency may 
do so at its sound discretion.
    (2) For errors involving incorrect dates of birth that result in 
default investment in the wrong L Fund of which a participant or 
beneficiary has knowledge, he or she may file a claim for breakage with 
the employing agency

[[Page 49175]]

no later than 30 days after either the date the TSP provides the 
participant with a notice reflecting the error or the date the TSP 
makes available on its Web site a participant statement reflecting the 
error, whichever is earlier. The employing agency must promptly notify 
the TSP that the participant is entitled to breakage.
    (3) If a participant or beneficiary fails to file a claim for 
breakage for errors involving incorrect dates of birth in a timely 
manner, the employing agency may nevertheless, in its sound discretion, 
pay breakage on any such error that is brought to its attention.
* * * * *
0
6. Amend Sec.  1605.22, by revising paragraphs (b)(2), (c)(2), and 
(c)(3) to read as follows:


Sec.  1605.22  Claims for correction of Board or TSP record keeper 
errors; time limitations.

* * * * *
    (b) * * *
    (1) * * *
    (2) For errors involving an investment in the wrong fund caused by 
Board or TSP record keeper error, the Board or the TSP record keeper 
must promptly pay breakage if it is discovered within 30 days of the 
issuance of the most recent TSP participant (or loan) statement, 
transaction confirmation, or other notice that reflected the error, 
whichever is earlier. If it is discovered after that time, the Board or 
TSP record keeper may use its sound discretion in deciding whether to 
pay breakage, but, in any event, must act promptly in doing so.
    (c) * * *
    (1) * * *
    (2) For errors involving an investment in the wrong fund of which a 
participant or beneficiary has knowledge, he or she may file a claim 
for breakage with the Board or TSP record keeper no later than 30 days 
after the TSP provides the participant with a transaction confirmation 
or other notice reflecting the error, or makes available on its Web 
site a participant statement reflecting the error, whichever is 
earlier. The Board or TSP record keeper must promptly pay breakage for 
such errors.
    (3) If a participant or beneficiary fails to file a claim for 
breakage concerning an error involving an investment in the wrong fund 
in a timely manner, the Board or TSP record keeper may nevertheless, in 
its sound discretion, pay breakage for any such error that is brought 
to its attention.
* * * * *
0
7. Amend Sec.  1605.31 by revising paragraph (d) to read as follows:


Sec.  1605.31  Contributions missed as a result of military service.

* * * * *
    (d) Breakage. The employee is entitled to breakage on agency 
contributions made under paragraph (c) of this section. The employee 
will elect to have the calculation based on either the contribution 
allocation(s) on file for the participant during the period of military 
service or the default investment fund in effect for the participant; 
the participant must make this election at the same time his or her 
makeup schedule is established pursuant to Sec.  1605.11(c).

[FR Doc. 2015-20273 Filed 8-14-15; 8:45 am]
 BILLING CODE 6760-01-P