[Code of Federal Regulations]
[Title 5, Volume 3]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 5CFR1605.3]

[Page 190-192]
 
                    TITLE 5--ADMINISTRATIVE PERSONNEL
 
         CHAPTER VI--FEDERAL RETIREMENT THRIFT INVESTMENT BOARD
 
PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS--Table of Contents
 
                   Subpart B--Employing Agency Errors
 
Sec. 1605.3  Removal of erroneous contributions.

    (a) Applicability. This section applies whenever, as a result of an 
employing agency error, a TSP account contains money that should not 
have been contributed to the account and which, therefore, must be 
removed from the

[[Page 191]]

account. This includes, but is not limited to, situations in which, 
because of an employing agency error, employee contributions in excess 
of those elected by a participant are contributed to the participant's 
account, employee contributions (and any associated agency matching 
contributions) are made on behalf of a participant who did not elect to 
have any contributions made, excess employer contributions are made to a 
participant's account, or employee contributions are made in excess of 
the amount permissible because of an improper retirement classification 
that is subsequently corrected (e.g., a CSRS employee is permitted to 
make contributions in excess of 5% of basic pay during a temporary 
misclassification as FERS).
    (b) Negative adjustment records. (1) In order to remove money from a 
participant's account, the employing agency must submit, for each pay 
date involved, a negative adjustment record indicating the amount of the 
contribution being removed, the pay date for which it was made, the 
source(s) of the contributions involved (i.e., employee contributions, 
agency automatic (1%) contributions or agency matching contributions), 
and the investment fund or funds to which the erroneous contribution was 
made. A negative adjustment record may be for all or a part of the 
contributions made for the applicable pay date, investment fund and 
source of contributions, but for each investment fund and source of 
contributions the negative adjustment may not exceed the amount of 
contributions made for that pay date.
    (2) Negative adjustment records must be submitted in accordance with 
this part and with procedures provided to employing agencies from time 
to time by the Board or the TSP recordkeeper in bulletins or other 
guidance. Negative adjustment records must also include any additional 
information required in any such bulletins or other guidance.
    (c) Processing negative adjustment records. Negative adjustment 
records will be processed in accordance with the following rules:
    (1) Negative adjustment records received and accepted by the TSP 
recordkeeper by the second-to-last business day of a month will be 
processed effective as of the end of that month. Negative adjustment 
records accepted by the TSP recordkeeper on the last business day of a 
month will be processed effective as of the end of the following month.
    (2) When negative adjustment records are processed, the TSP 
recordkeeper will determine separately, for each pay date and source of 
contributions involved, the amount of any investment gains or losses on 
the money the agency seeks to remove from the account and the investment 
fund or funds in which that money is currently invested. In making these 
determinations, investment gains and losses from the different TSP 
investment funds will be netted against each other. Investment gains and 
losses for different sources of contributions will be treated 
separately; gains and losses for different sources of contributions will 
not be netted against each other. The TSP recordkeeper will take into 
consideration any interfund transfers made effective on or after the 
date on which the erroneous contribution was processed.
    (3)(i) Multiple negative adjustment records in the same processing 
cycle will be processed in the order of the applicable pay dates, 
starting with the earliest pay date.
    (ii) If the participant's account does not have sufficient funds in 
the applicable source of contributions to pay the amount of a negative 
adjustment, the adjustment to that source of contributions will not be 
processed. Funds may not be taken from another source of contributions 
to cover the negative adjustment. The employing agency may, at a later 
date, resubmit the record that was not processed. It will be processed 
if, at that time, there are sufficient funds for the applicable source 
of contributions.
    (iii) If there are sufficient funds in the applicable source of 
contributions to pay the amount required by a negative adjustment 
record, but any of the investment funds does not have sufficient money 
to pay the portion that is attributable to that investment fund (e.g., 
because of a loan), then the amount required will be removed from the 
other investment fund(s), pro rata,

[[Page 192]]

based on the participant's total account balance in each investment fund 
for that source of contributions.
    (d) Employee contributions. The following rules apply to removal of 
employee contributions from a participant's account:
    (1) If there is a net investment gain on the erroneous employee 
contribution made for a pay date, then the full amount of the erroneous 
contribution will be returned to the employing agency. Subject to 
Sec. 1605.9(a), the investment earnings on the erroneous contribution 
will remain in the participant's account.
    (2) If there is a net investment loss on the erroneous employee 
contribution made for a pay date, then the employing agency will receive 
only the amount of the erroneous contribution reduced by the investment 
loss. However, the investment loss does not affect the employing 
agency's obligation to refund to the participant the full amount of the 
erroneous contribution.
    (3) If an employing agency removes erroneous employee contributions 
from a participant's account, it must also remove, under paragraph (e) 
of this section, any associated agency matching contributions.
    (e) Employer contributions. The following rules apply to removal of 
employer contributions from a participant's account:
    (1) Employer contributions will only be returned to the employing 
agency if the negative adjustment record submitted to remove the 
contributions is processed within one year of the date the contribution 
was processed. If more than one year has elapsed when the negative 
adjustment record is processed, the amount of the employer contribution 
plus (or minus) any investment gains (or losses) will be removed from 
the participant's account and used to offset TSP administrative expenses 
rather than returned to the employing agency. The employing agency's 
obligation to submit negative adjustment records to remove erroneous 
contributions from a participant's account is not affected by whether 
the contribution has been in the account for more or less than one year 
at the time the negative adjustment record is to be processed.
    (2) Subject to paragraph (e)(1) of this section, if there is a net 
investment gain within a source of contributions for an erroneous 
employer contribution, then the employing agency will receive the full 
amount of the negative adjustment submitted. The earnings attributable 
to the erroneous contributions in the applicable source of contributions 
will be removed from the participant's account and used to offset TSP 
administrative expenses.
    (3) Subject to paragraph (e)(1) of this section, if there is a net 
investment loss within a source of contributions for an erroneous 
employer contribution, then the employing agency will receive only the 
amount of the erroneous contribution reduced by the investment loss.