[Federal Register Volume 85, Number 15 (Thursday, January 23, 2020)]
[Proposed Rules]
[Pages 3857-3858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00610]
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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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Federal Register / Vol. 85 , No. 15 / Thursday, January 23, 2020 /
Proposed Rules
[[Page 3857]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Parts 1600 and 1605
Simplification of Catch-Up Contribution Process
AGENCY: Federal Retirement Thrift Investment Board
ACTION: Proposed rule.
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SUMMARY: The FRTIB proposes to reduce paperwork burdens on participants
who are eligible to make catch-up contributions, by removing the
regulation that requires them to submit two different contribution
election forms.
DATES: Comments must be received on or before February 24, 2020.
ADDRESSES: You may submit comments using one of the following methods:
Federal Rulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Office of General Counsel, Attn: Megan G. Grumbine,
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: Laurissa Stokes at 202-942-1645.
SUPPLEMENTARY INFORMATION: The FRTIB 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 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)).
Background
A catch-up contribution is a contribution that exceeds a statutory
limit on the amount of contributions a participant can normally make to
the TSP in each calendar year. Congress's reason for permitting these
extra contributions was to allow participants to ``catch up'' for years
when they were not employed or were otherwise unable to contribute
toward their retirement. See Federal Thrift Savings Plan Catch-Up
Contributions Act, Public Law 107-304, H.R. REP. 107-686, 107 Cong. 2d
Sess. (2002).
Normally, a TSP participant's contributions cannot exceed the
statutory limits set forth in Internal Revenue Code (IRC) section
402(g) (limiting the amount of traditional and Roth contributions to
$19,500 for calendar year 2020) and IRC section 415(c) (limiting the
total amount of traditional, Roth, tax-exempt, matching, and automatic
1% contributions to the lesser of 100% of the participant's
compensation or $57,000 for calendar year 2020). Participants who are
age 50 or older are allowed to make catch-up contributions beyond these
statutory limits--up to the dollar amount in IRC section 414(v), which
is $6,500 for calendar year 2020.
Currently, participants who wish to make catch-up contributions are
required to submit an election form called ``TSP-1-C/TSP-U-1-C, Catch-
up Contribution Election'' (or electronic equivalent) to their
employing agency. The catch-up contribution election form is separate,
and in addition to, any other contribution election that a participant
may already have on file. Upon receipt of a catch-up contribution
election form, the participant's employing agency begins submitting
catch-up contributions to the TSP on the participant's behalf, using
special payroll records designed specifically for catch-up
contributions. The payroll records that employing agencies use for
submitting catch-up contributions are separate, and in addition to, the
payroll records that employing agencies use for submitting other types
of contributions.
Proposed Change
The FRTIB proposes to simplify the catch-up contribution process,
by no longer requiring participants to submit separate catch-up
contribution election forms in addition to their other contribution
election forms. Instead, the TSP will simply continue to accept
contributions based on the participant's contribution election that is
already on file, until his/her contributions reach the combined limits
on catch-up contributions and other types of contributions. Employing
agency payroll offices will no longer submit catch-up contributions to
the TSP on special payroll records designed specifically for catch-up
contributions. Instead, payroll offices will submit catch-up
contributions using the same payroll records that they use to submit
other types of contributions.
The TSP recordkeeping system will automatically determine, based on
the participant's date of birth, whether the participant is eligible to
make catch-up contributions. When an employing agency payroll office
submits contributions in excess of the 402(g) limit or the 415(c) limit
on behalf of a catch-up eligible participant, the TSP recordkeeping
system will automatically treat the excess contributions as catch-up
contributions, without requiring any additional paperwork from the
participant or any special payroll records from the payroll office.
Proposed Effective Date
The proposed effective date for this change is January 1, 2021.
Section-by-Section Analysis
Section 1600.23 Catch-Up Contributions
The FRTIB proposes to amend 5 CFR Sec. 1600.23 by removing
paragraph (b), which requires the use of a separate election form for
catch-up contribution elections.
The FRTIB also proposes to remove 5 CFR Sec. 1600.23 paragraph
(h), which says that catch-up contributions cannot be matched. The
FRTIB codified 5 CFR Sec. 1600.23 paragraph (h) through an interim
rule that was published on June 13, 2003. 68 FR 35491. In the preamble
to the interim rule, the FRTIB cited to FERSA section 8432(c)(2) as the
[[Page 3858]]
rationale for why catch-up contributions cannot be matched. FERSA
section 8432(c)(2) says nothing about catch-up contributions--it simply
says that matching contributions cannot exceed a dollar-for-dollar
match on the first 3% of basic pay that a participant contributes plus
50 cents on the dollar match for the next 2% of basic pay that a
participant contributes. Removing the restriction on matching catch-up
contributions will not increase an employing agency's potential outlay
for matching contributions as the 5% limit described in the preceding
sentence still applies. FERSA section 8432(c)(2) can justify a
prohibition on matching catch-up contributions only if we assume that a
participant will necessarily reach the FERSA section 8432(c)(2) limit
on matching contributions before, or at the same time as, he/she
reaches the IRC section 402(g) or 415(c) limit on contributions. To
whatever extent this assumption was accurate in 2003, it is no longer
accurate today. Today, it is not uncommon for a participant to reach
one of the IRC's limits on contributions before he/she reaches FERSA's
limit on matching contributions.
Section 1605.13 Back Pay Awards and Other Retroactive Pay Adjustments
The FRTIB proposes to amend Sec. 1605.13 by making a technical
conforming addition to paragraph (c)(2). This paragraph currently says
that any corrective contributions attributable to prior years must not
exceed the 402(g) limit or the 415(c) limit applicable to those years.
The FRTIB proposes to add language making it clear that such
contributions also cannot exceed the 414(v) catch-up contribution limit
applicable to prior years.
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 employees, members of the uniformed services who
participate in the Thrift Savings Plan, and their beneficiaries. The
TSP is a Federal defined contribution retirement savings plan created
by FERSA and is administered by the Agency.
Paperwork Reduction Act
I certify that these regulations do not require additional
reporting under 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 Sec.
1532 is not required.
List of Subjects
5 CFR Part 1600
Taxes, Claims, Government employees, Pensions, Retirement.
5 CFR Part 1605
Claims, Government employees, Pensions, Retirement.
Ravindra Deo,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons stated in the preamble, the FRTIB proposes to amend
5 CFR chapter VI as follows:
PART 1600--EMPLOYEE CONTRIBUTION ELECTIONS, CONTRIBUTION
ALLOCATIONS, AND AUTOMATIC ENROLLMENT PROGRAM
0
1. The authority citation for part 1600 continues to read as follows:
Authority: 5 U.S.C. 8351, 8432(a), 8432(b), 8432(c), 8432(j),
8432d, 8474(b)(5) and (c)(1), and 8440e.
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2. Amend Sec. 1600.23 by removing and reserving paragraphs (b) and
(h).
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, 8432a, 8432d, 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. 1605.13 to read as follows:
Sec. 1605.13 Back pay awards and other retroactive pay adjustments.
* * * * *
(c) * * *
(1) * * *
(2) Must not cause the participant to exceed the annual
contribution limit(s) contained in sections 402(g), 415(c), or 414(v)
of the I.R.C. (26 U.S.C. 402(g), 415(c), 414(v)) for the year(s) with
respect to which the contributions are being made, taking into
consideration the TSP contributions already made in (or with respect
to) that year; and
* * * * *
[FR Doc. 2020-00610 Filed 1-22-20; 8:45 am]
BILLING CODE 6760-01-P