Proposed Rule2024-27484
Methodology for Calculating Earnings on Court-Ordered Payments
Primary source
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Published
November 26, 2024
Issuing agencies
Federal Retirement Thrift Investment Board
Abstract
The Federal Retirement Thrift Investment Board (FRTIB) proposes to change its regulations regarding the methodology used to calculate earnings and losses in connection with court-ordered payments to spouses, former spouses, children, or dependents (i.e., payees) of Thrift Savings Plan (TSP) participants.
Full Text
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<title>Federal Register, Volume 89 Issue 228 (Tuesday, November 26, 2024)</title>
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[Federal Register Volume 89, Number 228 (Tuesday, November 26, 2024)]
[Proposed Rules]
[Pages 93223-93224]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-27484]
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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. 89, No. 228 / Tuesday, November 26, 2024 /
Proposed Rules
[[Page 93223]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Part 1653
Methodology for Calculating Earnings on Court-Ordered Payments
AGENCY: Federal Retirement Thrift Investment Board.
ACTION: Proposed rule.
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SUMMARY: The Federal Retirement Thrift Investment Board (FRTIB)
proposes to change its regulations regarding the methodology used to
calculate earnings and losses in connection with court-ordered payments
to spouses, former spouses, children, or dependents (i.e., payees) of
Thrift Savings Plan (TSP) participants.
DATES: Comments must be received on or before December 26, 2024.
ADDRESSES: You may submit comments using one of the following methods:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions for submitting comments.
<bullet> Mail: Office of General Counsel, Attn: Dharmesh Vashee,
Federal Retirement Thrift Investment Board, 77 K Street NE, Suite 1000,
Washington, DC 20002.
Comments will be made available to the public online at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Do not include any personally identifiable or
confidential information that you do not want publicly disclosed.
Anonymous comments are acceptable.
FOR FURTHER INFORMATION CONTACT:
For press inquiries: Kim Weaver at (202) 465-5220.
For information about how to comment on this proposed rule:
Laurissa Stokes at (202) 308-7707.
SUPPLEMENTARY INFORMATION: The FRTIB 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 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)). The provisions
of FERSA that govern the TSP are codified, as amended, largely at 5
U.S.C. 8351 and 8401-79.
Section 8435(c) of FERSA requires the FRTIB to obey certain
domestic relations court orders requiring payments from a TSP
participant's account to the participant's spouse, former spouse,
child, or dependent. A TSP account can be divided by means of a court
decree of divorce, annulment, or legal separation; or a court order or
court-approved property settlement agreement resulting from such a
decree. A court order to divide a TSP account may be issued at any
stage of a divorce, annulment, or legal separation proceeding.
Court orders sometimes award the participant's spouse, former
spouse, child, or dependent (i.e., the payee) earnings that accrue
between the date used to calculate the payee's entitlement and the date
payment is made. Currently, when a court order awards earnings, the
FRTIB calculates the amount to which the payee is entitled by
determining the payee's award amount (e.g., the percentage or fraction
of the participant's account awarded by the court) and, based on the
participant's investment allocation as of the date used to calculate
the payee's entitlement, the number and composition of shares that the
payee's award amount would have purchased as of that date. The FRTIB
then multiplies the price per share as of the payment date by the
calculated number and composition of shares to determine the payee's
entitlement.
The FRTIB contracts with Accenture Federal Services to provide,
maintain, and operate the technology platforms necessary to deliver
retirement plan record keeping services to TSP participants. These
services include processing retirement benefits court orders. The FRTIB
proposes to update its methodology for calculating court ordered
earnings to align with the methodology used by Accenture Federal
Services. Accenture Federal Services calculates earnings by using a
money-weighted return commonly referred to in the financial industry as
the internal rate of return. This methodology considers the influence
of cash flows (for example, contributions, withdrawals, loans, and loan
payments) on asset allocation, and the resulting effect on investment
performance.
Specifically, the FRTIB proposes to calculate earnings by (i)
identifying the beginning balance, ending balance, and the cash flows
between the two balances over the period of time between the
entitlement date and the payment date, (ii) calculating the rate of
return that increases (or reduces in the case of a loss) the balance at
the beginning of the period, accounting for all cash flows, to equal
the balance at the end of the period; and then (iii) multiplying the
payee's award amount by the resulting rate of return.
The proposed methodology would ensure that the payee's entitlement
consists of an award component and an earnings component that each
reflects the percentage or fraction specified in the court order. The
award component reflects the percentage or fraction of the
participant's account on the entitlement date as specified in the
order. The earnings component is based on the rate of return
experienced on the participant's account during the period from the
entitlement date to the payment date.
Regulatory Flexibility Act
This proposed 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 TSP, and beneficiary participants.
Paperwork Reduction Act
This proposed regulation does 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, and 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 2 U.S.C. 1532 is not required.
[[Page 93224]]
List of Subjects in 5 CFR Part 1653
Alimony, Child support, 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 1653--COURT ORDERS AND LEGAL PROCESSES AFFECTING THRIFT
SAVINGS PLAN ACCOUNTS
0
1. The authority citation for part 1653 continues to read as follows:
Authority: 5 U.S.C. 8432d, 8435, 8436(b), 8437(e), 8439(a)(3),
8467, 8474(b)(5) and 8474(c)(1).
0
2. In Sec. 1653.1, amend paragraph (b) by adding the definition of
``Entitlement date'' in alphabetical order, and revising the definition
of ``Payment date'' to read as follows:
Sec. 1653.1 Definitions.
* * * * *
(b) * * *
* * * * *
Entitlement date means the date determined in accordance with
paragraphs (b) and (c) of section 1653.4.
Payment date refers to the date on which a temporary account is
established for the payee in the TSP.
* * * * *
0
3. Amend Sec. 1653.3 by revising paragraph (f)(4)(ii) to read as
follows:
Sec. 1653.3 Processing retirement benefits court orders.
* * * * *
(f) * * *
(4) * * *
(ii) The anticipated payment date;
* * * * *
0
4. Amend Sec. 1653.4 by revising paragraphs (a), (c), (d)(2), and (f)
to read as follows:
Sec. 1653.4 Calculating entitlements.
(a) For purposes of computing the amount of a payee's entitlement
under this section, a participant's TSP account balance will include
any loan balance outstanding as of the entitlement date unless the
court order provides otherwise.
* * * * *
(c) If the court order awards a percentage of an account but does
not contain a specific date as of which to apply that percentage, the
TSP record keeper will use the effective date of the court order.
(d) * * *
(1) * * *
(2) The vested account balance on the payment date.
* * * * *
(f) The payee's entitlement will be credited with TSP investment
earnings as described:
(1) The entitlement calculated under this section will not be
credited with TSP investment earnings unless the court order
specifically provides otherwise. The court order may not specify a rate
for earnings.
(2) If earnings are awarded, the TSP record keeper will calculate
earnings by:
(i) Identifying the beginning balance, ending balance, and the cash
flows between the two balances over the period of time between the
entitlement date and the payment date;
(ii) Calculating the rate of return that increases (or reduces in
the case of a loss) the balance at the beginning of the period,
accounting for all cash flows, to equal the balance at the end of the
period; and
(iii) Multiplying the payee's award amount by the resulting rate of
return.
* * * * *
0
5. Amend Sec. 1653.5 by revising paragraphs (d) and (h) to read as
follows:
Sec. 1653.5 Payment.
* * * * *
(d) Payment will be made pro rata from the participant's
traditional and Roth balances. The distribution from the traditional
balance will be further pro rated between the tax-deferred balance and
tax-exempt balance. The payment from the Roth balance will be further
pro rated between contributions in the Roth balance and earnings in the
Roth balance. In addition, all payments will be distributed pro rata
from all TSP core funds in which the participant's account is invested.
All pro rated amounts will be based on the balances in each fund or
source of contributions on the payment date. The TSP record keeper will
not honor provisions of a court order that require payment to be made
from a specific TSP core fund, source of contributions, or balance.
* * * * *
(h) If the payee dies before a payment is disbursed from the TSP,
payment will be made to the estate of the payee, unless otherwise
specified by the court order. A distribution to the estate of a
deceased court order payee will be reported as income to the decedent's
estate. If the participant dies before the payment date, the order will
be honored so long as it is submitted to the TSP record keeper before
the TSP account has been closed.
* * * * *
0
6. Revise Sec. 1653.14 to read as follows:
Sec. 1653.14 Calculating entitlements.
A qualifying legal process can only require the payment of a
specified dollar amount from the TSP. Payment pursuant to a qualifying
legal process will be calculated in accordance with Sec. 1653.4(a),
(d), (f) and (g), except that the term ``payment date'' shall mean to
the date the payment is disbursed from the TSP.
0
7. Revise Sec. 1653.15 to read as follows:
Sec. 1653.15 Payment.
Payment pursuant to a qualifying legal process will be made in
accordance with Sec. 1653.5, except the term ``payment date'' shall
mean to the date the payment is disbursed from the TSP.
0
8. Amend Sec. 1653.34 by revising paragraph (d)(4)(ii) to read as
follows:
Sec. 1653.34 Processing Federal tax levies and criminal restitution
orders.
* * * * *
(d) * * *
(4) * * *
(ii) The anticipated date of disbursement.
[FR Doc. 2024-27484 Filed 11-25-24; 8:45 am]
BILLING CODE 6760-01-P
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</html>Indexed from Federal Register on November 26, 2024.
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