[Federal Register Volume 75, Number 117 (Friday, June 18, 2010)]
[Proposed Rules]
[Pages 34654-34656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14741]
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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. 75, No. 117 / Friday, June 18, 2010 /
Proposed Rules
[[Page 34654]]
FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
5 CFR Parts 1604 and 1651
Uniformed Services Accounts and Death Benefits
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 make several changes to its death benefits regulations. In
particular, it proposes to expand the requirements necessary in order
for a designation of beneficiary form to be valid. This change would
also allow participants holding both a uniformed services and civilian
account to submit a single designation of beneficiary form which can be
used to designate beneficiaries for both accounts. The Agency also
proposes to amend its death benefit regulations to allow participants
to designate a custodian under the Uniform Transfers to Minors Act as a
beneficiary, to permit the Agency to defer to State law when a
potential beneficiary is implicated in the death of a participant and
is subsequently found not guilty by reason of insanity, and to require
a notary to witness disclaimers of death benefits.
DATES: Comments must be received on or before July 19, 2010.
ADDRESSES: Comments may be sent to Thomas K. Emswiler, General Counsel,
Federal Retirement Thrift Investment Board, 1250 H Street, NW.,
Washington, DC 20005. The Agency's Fax number is (202) 942-1676.
FOR FURTHER INFORMATION CONTACT: Megan G. Grumbine at (202) 942-1644 or
Laurissa Stokes at (202) 942-1645.
SUPPLEMENTARY INFORMATION: The Agency 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 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)).
Uniformed Services Accounts/Death Benefits--Agency's New Designation of
Beneficiary Form and Related Requirements
The Agency proposes to amend its regulations to improve the process
by which TSP participants designate beneficiaries for their TSP
accounts.
In particular, the Agency, which has created a new optical
character recognition (OCR) Form TSP-3, Designation of Beneficiary,
proposes to expand its death benefits regulations to enumerate
additional criteria the Agency requires in order for a designation of
beneficiary form to be valid and accepted by the Agency. The Agency
intends that this new form and its related requirements will guide
participants through the important task of properly designating their
account beneficiaries and greatly reduce potential ambiguities involved
in the disposition of a participant's account upon his or her death.
Currently, the Agency's guiding statute and regulations provide
that a designation of beneficiary form need only be signed, witnessed,
and received by the Agency on or before the participant's date of death
in order to be valid. See 5 U.S.C. 8424(d), 5 CFR 1651.3(c). However,
the Agency often receives forms which meet these threshold requirements
but omit critical details such as identifying information for the
participant or the beneficiaries. In order to reduce the likelihood of
error in processing the designation of beneficiary forms for its
approximately 4.3 million participants, the Agency concluded it is
necessary to expand the criteria required for a designation of
beneficiary form to be valid.
Specifically, the Agency proposes to require that, in addition to
being signed, properly witnessed, and received by the Agency on or
before a participant's date of death, a designation of beneficiary form
must also identify the participant in a manner so that the Agency can
locate the participant's TSP account (e.g., provide the participant's
full name and the participant's date of birth, TSP account number, or
Social Security number), identify primary and contingent beneficiaries
in a manner so that the Agency can identify the individual (e.g.,
provide a beneficiary's Social Security number or date of birth), link
each contingent beneficiary to a primary beneficiary, provide shares
for primary beneficiaries which equal 100 percent, and contain no
substantive alterations.
In addition to ensuring accurate processing and payment, the new
regulatory requirements will reduce processing time and save the Agency
resources as these requirements allow the Agency to quickly and
accurately match the information on the designation of beneficiary form
to the proper participant and beneficiaries. Further, by having these
additional regulatory requirements in place, if a participant submits a
form with an omission or error, the Agency is poised to quickly reject
the form and alert the participant via a notification that he or she
must submit a new, valid form. These up-front, early rejections and
notifications will save the Agency considerable resources as the Agency
will no longer be required to conduct as much posthumous research,
analysis, and legal review.
Additionally, these new designation requirements (e.g., requiring
that each page be free of substantive alterations) ensure that the
Agency is not receiving fraudulent or changed forms. Because a deceased
participant's TSP account is an important asset to a participant's
beneficiaries, the Agency believes these new requirements are critical
to ensuring that the participant's wishes are properly realized.
The Agency has attempted to balance its new requirements with
customer service. The new OCR Form TSP-3, for example, provides
detailed instructions and allows participants with both a uniformed
services and civilian account to use one form to designate the same
beneficiaries for both accounts.
Further, the Agency proposes to add only those requirements it
views as critical. For example, the Agency would not reject an
otherwise valid designation if the contingent beneficiary shares do not
equal 100 percent. Since the Agency infrequently relies on contingent
beneficiary information to pay an
[[Page 34655]]
account, and because the Agency has a mechanism by which it can
determine the amount attributable to each beneficiary if the shares do
not equal 100 percent, the Agency believes it is too onerous to
invalidate a Form TSP-3 containing proper primary beneficiary
designations solely due to the contingent beneficiary shares not
equaling 100 percent.
All designation of beneficiary forms, including older versions of
the Form TSP-3, submitted on or after the effective date of this
regulation must meet these new regulatory requirements in order to be
valid. This change is not retroactive and will not invalidate those
forms which the Agency has received prior to the effective date of this
regulation. The Agency's new designation of beneficiary form is
available at http://www.tsp.gov.
Death Benefits--Designating a Custodian Under the Uniform Transfers to
Minors Act
The Uniform Transfers to Minors Act (UTMA) is a uniform act drafted
and recommended by the National Conference of Commissioners on Uniform
State Laws and subsequently enacted by most U.S. states and the
District of Columbia. It allows an individual to make a financial
transfer to a minor, but also to prevent the minor from having
immediate access to the transferred property or funds. The person
designated as custodian must manage the property or funds for the
minor's benefit until the minor reaches the age of majority as
determined by the governing state's law.
The Agency's proposed regulation would allow a participant to
designate a custodian under UTMA as the beneficiary of his or her TSP
account. To achieve consistent administration, the TSP will require the
UTMA custodianship to be established under the laws of the District of
Columbia.
Under the laws of District of Columbia, when the minor reaches 18
years of age or dies, a UTMA custodianship will automatically
terminate, and the custodial relationship will cease to exist.
Accordingly, if the minor reaches 18 years of age before the death
benefit becomes payable, payment will be made directly to the minor and
not to the designated custodian. An UTMA designation would only be
valid if it is designated using the Agency's designation of beneficiary
form. The Agency has created a sample UTMA designation which is
available at http://www.tsp.gov.
Death Benefits--Homicide
Section 1651.12 of Title 5 of the Code of Federal Regulations
governs the distribution of death benefits when a potential beneficiary
causes the death of a participant. It currently provides that if a
beneficiary is convicted of, or pleads guilty to, a crime in connection
with the participant's death that would preclude the beneficiary from
inheriting under State law, the beneficiary will not be entitled to
receive any portion of the participant's account. It further provides
that the Agency will follow the State law of the participant's domicile
as that law is set forth in a civil court judgment.
As section 1651.12 currently reads, a potential beneficiary may be
deprived of his or her entitlement to death benefits only if (1) he or
she is convicted of a crime that would bar him or her from inheriting
under the laws of the State in which the participant is domiciled at
the time of death or (2) he or she is judged guilty in civil court of a
crime that would bar him or her from inheriting under the laws of the
state in which the participant is domiciled. The language of section
1651.12 is imperfect as applied to a criminal verdict declaring that
the potential beneficiary is not guilty, by reason of insanity, of
causing the participant's death. This proposed regulation would allow
the Agency to defer to state law to determine the effect of a verdict
of not guilty by reason of insanity on the potential beneficiary's
entitlement to inherit from the deceased participant, notwithstanding
that a verdict of not guilty by reason of insanity does not constitute
a conviction.
Death Benefits--Notarized Signature for Disclaimers
The beneficiary of a TSP account may disclaim his or her right to
receive all or part of a TSP death benefit. A valid disclaimer is
irrevocable and the effect of a disclaimer is that the disclaimed share
will be paid as though the beneficiary predeceased the participant.
The disclaimer must expressly state that the beneficiary is
disclaiming his or her right to receive either all or a stated
percentage of the death benefit payable from the TSP account of the
named participant and must be: (1) Submitted in writing; (2) signed by
the person (or legal representative) disclaiming the benefit; and (3)
received before the TSP pays the death benefit. This proposed
regulation would require the signature of the person (or legal
representative) disclaiming the benefit to be witnessed by a notary.
Because the effect of a disclaimer is to preclude an otherwise lawful
beneficiary from taking either a portion or the whole amount of a TSP
account, this added requirement is necessary to ensure that the Agency
is receiving non-fraudulent disclaimers.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities. They will
affect only employees of the Federal Government.
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
5 CFR Part 1604
Military personnel, Pensions, Retirement.
5 CFR Part 1651
Claims, Government employees, Pensions, Retirement.
Gregory T. Long,
Executive Director, Federal Retirement Thrift Investment Board.
For the reasons set forth in the preamble, the Agency proposes to
amend 5 CFR chapter VI as follows:
PART 1604--UNIFORMED SERVICES ACCOUNTS
1. The authority citation for part 1604 continues to read as
follows:
Authority: 5 U.S.C. 8440e, 8474(b)(5) and (c)(1).
Sec. 1604.8 [Amended]
2. Amend Sec. 1604.8, by removing the second sentence of paragraph
(a).
PART 1651--DEATH BENEFITS
3. The authority citation for part 1651 continues to read as
follows:
Authority: 5 U.S.C. 8424(d), 8432(j), 8433(e), 8435(c)(2),
8474(b)(5) and 8474(c)(1).
4. Amend Sec. 1651.3, by adding a fourth sentence to paragraph
(b), and revising paragraph (c) to read as follows:
[[Page 34656]]
Sec. 1651.3 Designation of beneficiary.
* * * * *
(b) * * * A participant may designate a custodian under the Uniform
Transfers to Minors Act provided that the custodianship is established
under the laws of the District of Columbia and that the participant
designates the custodianship using the Agency's designation of
beneficiary form.
(c) Validity requirements. To be valid and accepted by the TSP
record keeper, a TSP designation of beneficiary form must:
(1) Be received by the TSP record keeper on or before the date of
the participant's death;
(2) Identify the participant in such a manner so that the Agency
can locate his or her TSP account;
(3) Be signed and properly dated by the participant and signed and
properly dated by two witnesses;
(i) The participant must either sign the form in the presence of
the witnesses or acknowledge his or her signature on the form to the
witnesses;
(ii) All submitted and attached pages must be signed by the
participant, dated by the participant, and witnessed in the same manner
(by the same witnesses) as the form itself and must follow the format
of the TSP designation of beneficiary form;
(iii) A witness must be age 21 or older; and
(iv) A witness designated as a beneficiary will not be entitled to
receive a death benefit payment. If a witness is the only named
beneficiary, the designation of the beneficiary is invalid. If more
than one beneficiary is named, the share of the witness beneficiary
will be allocated among the remaining beneficiaries pro rata.
(4) Designate primary beneficiary shares which when summed equal
100%;
(5) Contain no substantive alterations (e.g., struck-through shares
or scratched-out names of beneficiaries);
(6) Designate each primary and each contingent beneficiary in such
a manner so that the Agency can identify the individual or entity; and
(7) Match each contingent beneficiary to a primary beneficiary.
* * * * *
5. Amend Sec. 1651.12, by revising the second sentence to read as
follows:
Sec. 1651.12 Homicide.
* * * If the beneficiary is implicated in the death of the
participant and the beneficiary would be precluded from inheriting
under State law, the beneficiary will not be entitled to receive any
portion of the participant's account. * * *
6. Amend Sec. 1651.17, by revising paragraph (b)(2) to read as
follows:
Sec. 1651.17 Disclaimer of benefits.
* * * * *
(b) * * *
(2) Signed or acknowledged, in the presence of a notary, by the
person (or legal representative) disclaiming the benefit; and
* * * * *
[FR Doc. 2010-14741 Filed 6-17-10; 8:45 am]
BILLING CODE 6760-01-P