Non-Appropriated Fund Instrumentality (NAFI) Program Federal Register: August 9, 1996
[Federal Register: August 9, 1996 (Volume 61, Number 155)]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1620
Nonappropriated Fund Employees
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Interim rule with request for comments.
SUMMARY: The Executive Director of the Federal Retirement
Thrift Investment Board (Board) is publishing interim regulations
governing Thrift Savings Plan (TSP) participation by certain
persons who move between Federal civil service positions and
positions with Nonappropriated Fund (NAF) instrumentalities of the
Department of Defense (DOD) and U.S. Coast Guard (Coast Guard).
These interim regulations implement sections 10, 11, 13 and 14 of
the Portability of Benefits for Nonappropriated Fund Employees Act
of 1990 (1990 Portability Act), as amended by section 1043 of the
National Defense Authorization Act for Fiscal Year 1996 (Defense
Authorization Act).
DATES: These interim rules are effective on August 10, 1996.
Comments must be received on or before October 10, 1996.
ADDRESSES: Comments may be submitted to the Federal
Retirement Thrift Investment Board, 1250 H Street, NW., Washington, DC 20005.
FOR FURTHER INFORMATION CONTACT: Patrick J. Forrest, Federal
Retirement Thrift Investment Board, 1250 H Street, N.W.,
Washington, D.C. 20005. Telephone: (202) 942-1662. Telefacsimile:
(202) 942-1676.
SUPPLEMENTARY INFORMATION: The Board administers the TSP,
which was established by the Federal Employees' Retirement System Act of 1986
(FERSA), Pub. L. 99-335, 101 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 1990 Portability Act, Pub. L. 101-508, 104 Stat. 1388,
1388-335 to 1388-341 (codified largely at 5 U.S.C. 8347(p)(1) and
8461(n)(1)), as amended by section 1043 of the Defense
Authorization Act, Pub. L. 104-106, 110 Stat. 186, 434-439,
provides that certain employees who move from Federal service to
NAF instrumentalities are eligible to participate in the TSP by
virtue of their election to be covered by the Civil Service
Retirement System (CSRS) or the Federal Employees' Retirement
System (FERS). These regulations set forth the rules and
procedures which the NAF instrumentality must follow for its
employees who are eligible to participate in the TSP pursuant to
the 1990 Portability Act, as amended. Different rules apply
depending on whether the employee moved on or after August 10,
1996, and whether he or she elects to be covered by CSRS or FERS.
The regulations also address an employee's eligibility to
participate in the TSP if the employee moves from a NAF
instrumentality to a Federal Government agency.
The 1990 Portability Act permitted CSRS and FERS employees of
the Department of Defense and the U.S. Coast Guard who moved on or
after January 1, 1987, to a NAF instrumentality to elect to
maintain their CSRS or FERS retirement coverage after the move. On
June 10, 1991, the Board published an interim rule with request for
comments in the Federal Register (56 FR 26,722) implementing the
1990 Portability Act as it pertained to the TSP. The Board
received no comments on the interim rule.
Section 1043 of the 1996 Defense Authorization Act amended the
1990 Portability Act by expanding the eligibility requirement for
employees of NAF instrumentalities in two ways. First, all Federal
employees moving to a NAF instrumentality, not just those from the
Department of Defense and U.S. Coast Guard, are eligible to
continue their CSRS or FERS retirement coverage after their move.
Second, the amendment changed the threshold for being eligible for
CSRS or FERS retirement coverage from employees who moved to a NAF
instrumentality after December 31, 1986, to employees who made the
move after December 31, 1965. The Board's NAF regulations are
being revised to implement this amendment to the 1990 Portability
Act. The revised regulations do not change the procedures for
retroactive participation in the TSP by affected employees of NAF
instrumentalities.
Sections 1620.93 (a)(2) and (a)(3) pertain to "an employee who
moved to a NAF instrumentality on or after August 10, 1996, but
after December 31, 1965, elects to be covered by FERS...." The
1990 Portability Act, as amended, does not change the current
Federal law which provides that FERS coverage can only begin on or
after January 1, 1987. However, under Office of Personnel
Management regulations, eligible employees who transferred to a NAF
instrumentality prior to January 1, 1987, may elect FERS coverage
to be retroactively effective on or after January 1, 1987.
Section 1620.93(c) provides that employees who are covered by
a NAF retirement plan are not eligible to participate in the TSP.
Under section 1620.93, some employees who are covered under CSRS or
FERS can elect retroactive NAF retirement coverage. If a TSP
participant elects retroactive NAF retirement coverage, there could
be contributions in his or her account which relate to a period
during which he or she was ineligible to participate in the TSP.
The 1990 Portability Act, as amended, does not provide for the
transfer of funds between the TSP and a NAF defined contribution
plan. Therefore, these contributions must be removed from the TSP
under the Board's error correction regulations at 5 CFR part 1605.
Section 1620.93(d) pertains to employees who elected CSRS or
FERS coverage under the 1990 Portability Act before the effective
date of these regulations. Their TSP elections are valid if they
were properly implemented by the NAF instrumentality under
then-effective regulations. In all other respects, these
regulations apply to those employees. The Board is also making
several changes to the interim regulations which are unrelated to
the Defense Authorization Act amendments. The Board has received
questions from employees moving from NAF.
instrumentalities to Federal civil service positions regarding when
they are eligible to participate in the TSP. The 1990 Portability
Act, as amended, does not change the eligibility requirements set
forth in FERSA. Section 1620.94 is being revised to explain those
requirements. In addition, since this subpart was first published
on June 10, 1991, the Board has changed the manner by which an
employing agency is required to transmit employee separation data
to the TSP recordkeeper. See TSP Bulletin 94-29, Elimination of
Form TSP-18, Validation of Retirement Information, and New
Procedures for Submitting Form TSP-3, Designation of Beneficiary.
Section 1620.97 is being amended to reflect this change.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because
they will apply only to Federal agencies and employees.
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
because section 1043 of the Defense Authorization Act, 110 Stat. at
434-435, requires these regulations to be effective on or before
August 10, 1996.
Unfunded Mandates Reform Act of 1995
Pursuant to the Unfunded Mandates Reform Act of 1995, sec.
201, Pub. L. 104-4, 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.
Submission to Congress and the General Accounting Office
Under section 801(a)(1)(A) of the Administrative Procedure Act
(APA), as amended by the Regulatory Enforcement Fairness Act of
1996, Pub. L. 104-121, tit. II, 110 Stat. 847, 857-875 (5 U.S.C.
801(a)(1)(A)), the Board submitted a report containing this rule
and other required information to the U.S. Senate, the U.S. House
of Representatives and the Comptroller General of the General
Accounting Office prior to the publication of this rule in today's
Federal Register. This rule is not a "major rule" as defined in
section 804(2) of the APA as amended (5 U.S.C. 804(2)).
List of Subjects in 5 CFR Part 1620
Employee benefit plan, Government employees, Pensions,
Retirement.
Federal Retirement Thrift Investment Board
Roger W. Mehle
Executive Director.
For the reasons set out in the preamble, Part 1620 of chapter
VI, Title 5 of the Code of Federal Regulations is amended as
follows:
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. 101-508, 104 Stat. 1388; Pub. L. 104-106, 110 Stat.
186.
2. Subpart G of part 1620 is revised to read as follows:
Subpart G--Nonappropriated Fund Employees
Sec.
1620.90 Scope.
1620.91 Definitions.
1620.92 Employees who move to a NAF instrumentality on or after
August 10, 1996.
1620.93 Employees who moved to a NAF instrumentality prior to
August 10, 1996, but after December 31, 1965.
1620.94 Employees who move from a NAF Instrumentality to a
Federal Government agency.
1620.95 Payment of TSP contributions.
1620.96 Loan payments.
1620.97 Transmission of information.
1620.98 Notices.
1620.99 Other regulations.
Subpart G--Nonappropriated Fund Employees
Sec. 1620.90 Scope.
This subpart applies to any employee of a Nonappropriated Fund
(NAF) instrumentality of the Department of Defense (DOD) or the
U.S. Coast Guard who elects to be covered by the Civil Service
Retirement System (CSRS) or the Federal Employees' Retirement
System (FERS) and to any employee in a CSRS or FERS covered
position who elects to be covered by a retirement plan established
for employees of a NAF instrumentality pursuant to the Portability
of Benefits for Nonappropriated Fund Employees Act of 1990, Pub. L.
101-508, 104 Stat. 1388, 1388-335 to 1388-341 (codified largely at
5 U.S.C. 8347(p)(1) and 8461(n)(1) (1994)), as amended by section
1043 of the National Defense Authorization Act for Fiscal Year
1996, Pub. L. 104-106, 110 Stat. 186, 434-439.
Sec. 1620.91 Definitions.
As used in this subpart, the terms--
Basic pay means the pay from the NAF instrumentality used to
compute the amount the individual is required to contribute to the
Civil Service Retirement and Disability Fund as a condition for
participating in CSRS or FERS, as the case may be. Covered by
means paying contributions to the Civil Service Retirement and
Disability Fund under either CSRS or FERS.
Move means moving from a position covered by CSRS or FERS to
a NAF instrumentality of the DOD or Coast Guard, or vice versa,
without a break in service of more than 1 year.
Thrift Savings Plan (TSP) election means a request by an
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, or to change the allocation of
future TSP contributions among the investment funds and made
effective pursuant to 5 CFR part 1600.
Sec. 1620.92 Employees who move to a NAF instrumentality on or
after August 10, 1996.
(a) Any Thrift Savings Plan (TSP) elections:
(1) Made during a previous employment by an employee who
moves to a NAF instrumentality on or after August 10, 1996, and who
elects to continue to be covered by CSRS or FERS; and
(2) Which is still in effect as of the date of the move shall
be implemented by the NAF instrumentality and shall begin with the
date of the move.
(b) If an employee who moves to a NAF instrumentality on or
after August 10, 1996, does not have a current election to
contribute to the TSP, he or she shall be permitted to make such an
election during the first TSP Open Season, as described in 5 CFR
1600.2, during which he or she is eligible to do so under 5 U.S.C.
8432.
(c) An employee who moves to a NAF instrumentality on or
after August 10, 1996, and who elects to continue to be covered by
CSRS or FERS must be permitted during the appropriate Open Seasons
to elect under 5 U.S.C. 8351(b)(2) or 8432(a), as applicable, to
make future contributions to the Thrift Savings Fund from his or
her basic pay.
(d) For an employee who moves to a NAF instrumentality on or
after August 10, 1996, and who elects to continue to be covered by
FERS, the NAF instrumentality must also contribute each pay period
to the Thrift Savings Fund in accordance with Board procedures on
behalf of such employee any amounts which the employee is eligible
to receive under 5 U.S.C. 8432(c).
(e) In the case of an employee who moves to a NAF
instrumentality on or after August 10, 1996, and who elects to
continue to be covered by CSRS or FERS, any TSP contributions
described in 5 U.S.C. 8351(b)(2) or 8432(a), as applicable, for
which such employee is eligible and which are not made in
accordance with this section because the employee moves to the NAF
instrumentality but does not make an immediate election to be
covered by CSRS or FERS, shall be made up according to the error
correction procedures contained in 5 CFR part 1605.
Sec. 1620.93 Employees who moved to a NAF instrumentality prior to
August 10, 1996, but after December 31, 1965.
(a) Future TSP contributions.
(1) Employee Contributions. An employee who moved to a NAF
instrumentality prior to August 10, 1996, but after December 31,
1965, and who elects to be covered by CSRS or FERS as of the date
of such move may elect to make any future contributions to the TSP
in accordance with 5 U.S.C. 8351(b)(2) or 8432(a), as applicable,
within 30 days of the date of his or her election to be covered by
CSRS or FERS. Such contributions shall begin being deducted from
the employee's pay no later than the pay period following the
election to contribute to the TSP. Any TSP election which may have
been in effect at the time of the employee's move will not be
effective for any future contributions.
(2) Agency Automatic (1%) Contributions. If an employee who
moved to a NAF instrumentality prior to August 10, 1996, but after
December 31, 1965, elects to be covered by FERS, the NAF
instrumentality must also contribute each pay period to the Thrift
Savings Fund on behalf of such employee any amounts which the
employee is eligible to receive under 5 U.S.C. 8432(c)(1),
beginning no later than the pay period following the employee's
election to be covered by FERS.
(3) Agency Matching Contributions. If an employee who moved
to a NAF instrumentality prior to August 10, 1996, but after
December 31, 1965, elects to be covered by FERS and also elects to
make contributions to the TSP pursuant to paragraph (a)(1) of this
section, the NAF instrumentality must also contribute each pay
period to the Thrift Savings Fund on behalf of such employee any
amounts which the employee is eligible to receive under 5 U.S.C.
8432(c)(2), beginning at the same time as the employee's
contributions are made pursuant to paragraph (a)(l) of this
section.
(b) Retroactive TSP Contributions.
(1) Without regard to any election to contribute to the TSP
under paragraph (a)(l) of this section, the NAF instrumentality
shall take the following actions with respect to an employee who
moved to a NAF instrumentality prior to August 10, 1996, but after
December 31, 1965, and who elects to be covered by CSRS or FERS as
of the date of the move:
(i) Agency Automatic (1%) Make-up Contributions. The NAF
instrumentality shall, within 30 days of the date of the employee's
election to be covered by FERS, contribute to the Thrift Savings
Fund an amount representing the Agency Automatic (1%) Contribution
for all pay periods during which the employee would have been
eligible to receive the Agency Automatic (1%) Contribution under 5
U.S.C. 8432, beginning with the date of the move and ending with
the date that Agency Automatic (1%) Contributions begin under
paragraph (a)(2) of this section. Lost earnings will not be paid
on these contributions unless they are not made by the NAF
instrumentality within the time frames required by these
regulations.
(ii) Employee Make-up Contributions.
(A) Within 60 days of the election to be covered by FERS, an
employee who moved to a NAF instrumentality prior to August 10,
1996, but after December 31, 1965, and who elects to be covered by
FERS, may make an election regarding Employee Make-up
Contributions. The employee may elect to contribute all or a
percentage of the amount of Employee Contributions which the
employee would have been eligible to make under 5 U.S.C. 8432
between the date of the move and the date Employee Contributions
begin under paragraph (a)(1) of this section or, if no such
election is made under paragraph (a)(1) of this section, the date
that Agency Automatic (1%) Contributions begin under paragraph
(a)(2) of this section.
(B) Within 60 days of the election to be covered under CSRS,
an employee who moved to an NAF instrumentality prior to August 10,
1996, but after December 31, 1965, and who elects to be covered by
CSRS, may make an election regarding make-up contributions. The
employee may elect to contribute all or a percentage of the amount
of Employee Contributions which the employee would have been
eligible to make under 5 U.S.C. 8351 between the date of the move
and the date Employee Contributions begin under paragraph (a)(1) of
this section or, if no such election is made under paragraph (a)(1)
of this section, the pay period following the date the election to
be covered by CSRS is made.
(C) Deductions made from the employee's pay pursuant to an
employee's election under paragraph (b)(1)(ii) (A) or (B) of this
section, as appropriate, shall be made according to a schedule that
meets the requirements of paragraphs (b) (2) and (3) of this
section.
(iii)Agency Matching Make-up Contributions. The NAF
instrumentality must pay to the Thrift Savings Fund any Matching
Contributions attributable to Employee Contributions made under
paragraph (b)(1)(ii)(A) of this section that the NAF
instrumentality would have been required to make under 5 U.S.C.
8432(c), at the same time that such Employee Contributions are
contributed to the Fund.
(2) The NAF instrumentality may set a ceiling on the number
of pay periods over which the contributions referred to in
paragraph (b)(1)(ii) of this section may be made; however, this
ceiling may not be less than two times the number of pay periods in
which the payments could have been made. The payment schedule must
begin no later than the pay period following the date the employee
elects such schedule and it may not contain more than four times
the number of pay periods in which the payment could have been
made. When setting the number of payments, the employee's
remaining period of employment with the Federal Government should
be considered to ensure that the employee will have sufficient time
to make up these contributions.
(3) If the agreed-upon payment schedule cannot be met because
the employee has insufficient net pay or because the employee has
reached an annual ceiling for tax-deferred contributions under 26
U.S.C. 402(g) or 415, the payment schedule will be suspended until
the employee is again able to make full payments through payroll
deductions. Pay periods for which an employee is unable to make
payments because of insufficient net pay or a ceiling on
tax-deferred contributions, will not be counted against the maximum
number of pay periods applicable to the schedule and the maximum
number of applicable pay periods must be extended accordingly.
(4) If an employee chooses to contribute the make-up amount,
he or she may subsequently terminate that decision at any time and
that termination shall be irrevocable. If an employee separates
from Federal or covered NAF employment, the employee may accelerate
the contribution by lump sum payment from the final salary payment.
If the employee dies, the retroactive contributions of the deceased
employee will be terminated as of the final salary payment.
(5) The make-up payment amount is not subject to the maximum
pay period contribution limitations; however, these amounts must be
included when determining amounts subject to annual ceilings on
contributions under 26 U.S.C. 402(g) or 415.
(6) In the event an employee does not have sufficient net pay
to make all of the TSP deductions, the employee's regular TSP
deduction shall take precedence over the employee's payment
schedule contribution.
(7) Make-up contributions shall be reported for investment by
the NAF instrumentality when contributed, according to the
employee's election for current TSP contributions. If the employee
is not making current contributions, the retroactive contributions
shall be invested according to an election form (TSP-1-NAF) filed
specifically for that purpose.
(c) An employee who is covered by a NAF retirement plan is
not eligible to participate in the TSP. Any TSP contributions
relating to a period for which an employee elects retroactive NAF
retirement coverage shall be removed from the TSP as required by
the regulations at 5 CFR part 1605.
(d) A TSP election made by an employee of a NAF
instrumentality who elected to be covered by CSRS or FERS prior to
August 10, 1996, which was properly implemented by the NAF
instrumentality because it was valid under then-effective
regulations, is effective under the regulations in this subpart.
Sec. 1620.94 Employees who move from a NAF instrumentality to a
Federal Government agency.
(a) An employee of a NAF instrumentality who moves from a NAF
instrumentality to a Federal Government agency and who elects to be
covered by a NAF retirement system is not eligible to participate
in the TSP. Any TSP contributions relating to a period for which
an employee elects retroactive NAF retirement coverage shall be
removed from the TSP as required by the regulations at 5 CFR part
1605.
(b) An employee of a NAF instrumentality who moves from a NAF
instrumentality to a Federal Government agency and who elects to be
covered by CSRS or FERS will become eligible to participate in the
TSP as follows:
(1) If the employee was previously eligible to participate in
the TSP under a prior period of Federal Government service, the
employee will be eligible to participate in the TSP the first Open
Season (as determined in accordance with 5 CFR 1600.3(d)) beginning
after the effective date of the CSRS and FERS coverage.
(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 5 CFR 1600.3(d)) beginning after the effective date of the
CSRS or FERS coverage.
Sec. 1620.95 Payment of TSP contributions.
The NAF instrumentality shall deduct any Employee
Contributions authorized under this section from the pay of the
employee each pay period and shall remit such amounts to the Thrift
Savings Fund in accordance with this subpart and Board procedures.
The NAF instrumentality shall contribute any future Agency
Automatic (1%) Contributions and Agency Matching Contributions to
the Thrift Savings Fund each pay period in accordance with this
subpart and Board procedures. The NAF instrumentality shall
contribute make-up contributions to the Thrift Savings Fund in
accordance with this subpart and Board procedures.
Sec. 1620.96 Loan payments.
NAF instrumentalities shall deduct and transmit TSP loan
payments for employees who elect to be covered by CSRS or FERS to
the recordkeeper in accordance with 5 CFR part 1655 and Board
procedures. Loan payments may not be deducted and transmitted for
employees who elect to be covered by the NAF retirement system.
Such employees will be considered to have separated from Government
service and must prepay their loans or a taxable distribution will
be declared.
Sec. 1620.97 Transmission of information.
Any employee who moves to a NAF instrumentality shall be
reported by the losing Federal Government employing agency to the
TSP recordkeeper as having transferred to a NAF instrumentality of
the DOD or Coast Guard rather than as having separated from
Government service. If the employee subsequently elects not to be
covered by CSRS or FERS, the NAF instrumentality must submit an
Employee Data Record to report the employee as having separated
from Federal Government service as of the date of the move.
Sec. 1620.98 Notices.
All NAF instrumentalities employing any individuals covered by
Sec. 1620.90 must notify affected employees of the application of
the regulations in this subpart as soon as practicable.
Sec. 1620.99 Other regulations.
NAF instrumentalities and individuals covered by Sec. 1620.90
are governed by the regulations in this chapter, to the extent that
the regulations in this chapter are not inconsistent with this
subpart.
[FR Doc. 96-20129 Filed 8-8-96; 8:45 am] BILLING CODE 6760-01-P
[Federal Register: August 9, 1996 (Volume 61, Number 155)]
[Rules and Regulations]
Page 41485-41488