5 C.F.R. PART 1604—UNIFORMED SERVICES ACCOUNTS
Title 5 - Administrative Personnel
Authority: 5 U.S.C. 8440e, 8474(b)(5) and (c)(1).
Source: 66 FR 50713, Oct. 4, 2001, unless otherwise noted.
This part describes the special features of TSP participation applicable to members of the uniformed services. Uniformed services members are also covered by the other regulations of 5 CFR chapter VI to the extent they do not conflict with the regulations of this part. As used in this part: Basic pay means basic pay payable under 37 U.S.C. 204 and compensation received under 37 U.S.C. 206. Bonus contributions means contributions made by participants from a bonus as defined in 37 U.S.C. chapter 5. Civilian account means the TSP account to which contributions have been made by or on behalf of a civilian employee. Civilian employee means a TSP participant covered by the Federal Employees' Retirement System, the Civil Service Retirement System, or equivalent retirement plans. Combat zone compensation means compensation received for active service during a month in which a member of the uniformed services serves in a combat zone. Combat zone contributions means employee contributions that are made from compensation subject to the Federal income tax exclusion at 26 U.S.C. 112 for combat zone compensation. Employee contributions means contributions made by participants from basic pay, incentive pay, and special pay (including bonuses). Employing agency means the organization that employs an individual who is eligible to contribute to the TSP and that has authority to make compensation decisions for that employee. Federal civilian retirement system means the Civil Service Retirement System established by 5 U.S.C. chapter 83, subchapter III, the Federal Employees' Retirement System established by 5 U.S.C. chapter 84, or any equivalent Federal civilian retirement system. Periodic contributions means employee contributions made from recurring incentive pay and special pay (including bonuses) as defined in 37 U.S.C. chapter 5. Ready Reserve means those members of the uniformed services described at 10 U.S.C. 10142. Regular contributions means employee contributions made from basic pay. Separation from service means discharge of a member from active duty or the Ready Reserve or transfer of a member to inactive status or to a retired list pursuant to any provision of title 10, U.S.C. The discharge or transfer may not be followed, before the end of the 31-day period beginning on the day following the effective date of the discharge, by resumption of active duty, an appointment to a civilian position covered by the Federal Employees' Retirement System, the Civil Service Retirement System, or an equivalent retirement system, or continued service in or affiliation with the Ready Reserve. Reserve component members serving on full-time active duty who terminate their active duty status and subsequently participate in the drilling reserve are said to continue in the Ready Reserve. Active component members who are released from active duty and subsequently participate in the drilling reserve are said to affiliate with the Ready Reserve. Service member means a member of the uniformed services on active duty or a member of the Ready Reserve in any pay status. Service member account means the account to which contributions have been made by or on behalf of a member of the uniformed services. Special and incentive pay means pay payable as special or incentive pay under 37 U.S.C. chapter 5. Uniformed services means the Army, Navy, Air Force, Marine Corps, Coast Guard, Public Health Service, and the National Oceanic and Atmospheric Administration. [66 FR 50713, Oct. 4, 2001, as amended at 70 FR 32209, June 1, 2005] A service member may make contribution elections as described in 5 CFR part 1600. A service member may elect to contribute sums to the TSP from basic pay, incentive pay, and special pay (including bonuses). However, the service member must elect to contribute to the TSP from basic pay in order to contribute to the TSP from incentive pay and special pay (including bonuses). A service member may elect to contribute from special pay or incentive pay (including bonuses) in anticipation of receiving such pay (that is, he or she does not have to be receiving the special pay or incentive pay when the contribution election is made); those elections will take effect when the service member receives the special or incentive pay. [70 FR 32209, June 1, 2005] (a) Employee contributions. Subject to the regulations at 5 CFR part 1600 and the following limitations, a service member may make regular contributions to the TSP from basic pay. If the service member makes regular contributions, he or she also may contribute all or a portion of incentive pay and special pay (including bonuses) to the TSP. The maximum TSP regular employee contribution (including contributions from pay earned in a combat zone) which a service member may make for 2005 is 10 percent of basic pay. After 2005 the percentage of basic pay limit will not apply and the maximum contribution will be limited only by the provisions of the Internal Revenue Code (26 U.S.C.). (b) Matching contributions. When matching contributions are authorized for a service member, that service member's regular contributions will be matched dollar-for-dollar on the first three percent of basic pay contributed to the TSP, and 50 cents on the dollar on the next two percent of basic pay contributed. Matching contributions only apply to regular contributions. (c) Deduction and transmittal of contributions. A service member's employing agency will deduct regular contributions from the service member's basic pay each pay period based on his or her contribution election and will transmit the contributions to the TSP. If a service member also elects to make periodic contributions to the TSP, the employing agency must deduct (and transmit to the TSP) these contributions from the service member's incentive pay or special pay (including bonuses), as applicable. [66 FR 50713, Oct. 4, 2001, as amended at 68 FR 35497, June 13, 2003; 70 FR 32209, June 1, 2005] (a) Separate accounts. Service member accounts are maintained separately from civilian accounts. Therefore, service members making both civilian and uniformed services TSP contributions will have two TSP accounts. For those participants, the accounts are treated separately except in the following circumstances: (1) If a participant contributes to a service member account and a civilian account, the contributions to both accounts together cannot exceed the Internal Revenue Code (26 U.S.C.) contribution limits. (2) A member of the uniformed services may obtain a loan from his or her account, as described at §1604.10, and the loan will be disbursed from the uniformed services account. If the TSP maintains a service member account and a civilian account for an individual, the TSP will calculate the Internal Revenue Code maximum loan amount using both account balances, as described in §1604.10(a)(3). (b) Transfers between TSP accounts. Service member and civilian TSP account balances may be combined through a transfer (thus producing one account), and the transferred funds will be treated as employee contributions and otherwise invested as described at 5 CFR part 1600. Transfers under this section are subject to the following rules: (1) An account balance can be transferred once the TSP is informed (by the participant's employing agency) that the participant has separated from either civilian or uniformed services employment. (2) Combat zone contributions may not be transferred from a uniformed services TSP account to a civilian TSP account. (3) Transferred funds will be allocated among the TSP Funds according to the contribution allocation in effect for the account into which the funds are transferred. (4) A service member must obtain the consent of his or her spouse before transferring a uniformed services TSP account balance into a civilian account that is subject to Civil Service Retirement System spousal rights. A request for an exception to the spousal consent requirement will be evaluated under the rules explained in 5 CFR part 1650. (5) Before the transfer can be accomplished, any outstanding loans from the account to be transferred must be closed as described in 5 CFR part 1655. [66 FR 50713, Oct. 4, 2001, as amended at 70 FR 32209, June 1, 2005] (a) General rule. A service member's employing agency must correct the service member's account if, as the result of employing agency error, a service member does not receive the TSP contributions to which he or she is entitled. Except as provided in paragraph (b) of this section, those corrections must be made in accordance with 5 CFR part 1605. (b) Missed bonus contributions. This paragraph (b) applies when an employing agency fails to implement a contribution election that was properly submitted by a service member requesting that a TSP contribution be deducted from bonus pay. Within 30 days of receiving the employing agency's acknowledgment of the error, a service member may establish a schedule of makeup contributions with his or her employing agency to replace the missed contribution through future payroll deductions. These makeup contributions can be made in addition to any TSP contributions that the service member is otherwise entitled to make. (1) The schedule of makeup contributions may not exceed four times the number of months it would take for the service member to earn basic pay equal to the dollar amount of the missed contribution. For example, a service member who earns $29,000 yearly in basic pay and who missed a $2,500 bonus contribution to the TSP can establish a schedule of makeup contributions with a maximum duration of 8 months. This is because it takes the service member 2 months to earn $2,500 in basic pay (at $2,416.67 per month). (2) At its discretion, an employing agency may set a ceiling on the length of a schedule of employee makeup contributions. The ceiling may not, however, be less than twice the number of months it would take for the service member to earn basic pay equal to the dollar amount of the missed contribution. A service member may withdraw all or a portion of his or her account under the rules in 5 CFR part 1650, with the following exceptions: (a) Separate accounts. If the TSP maintains a service member account and a civilian account for an individual, a separate withdrawal request must be made for each account. (b) Spousal rights. The spouse of a service member participant has the same TSP spousal rights as the spouse of a civilian participant covered under the Federal Employees' Retirement System; those spousal rights in the context of a withdrawal (and the process by which a service member may obtain an exception to them) are explained at 5 CFR part 1650. (c) Combat zone contributions. If a service member account contains combat zone contributions, the withdrawal will be distributed pro rata from all sources. If a participant requests the TSP to transfer all, or a portion, of a withdrawal to a traditional IRA or eligible employer plan, the share of the withdrawal attributable to combat zone contributions (if any) can be transferred only if the IRA or plan accepts such funds. (d) Separation. The definition of separation from service at §1604.2 applies when determining a service member's eligibility for a withdrawal. [66 FR 50713, Oct. 4, 2001, as amended at 70 FR 32209, June 1, 2005] The account balance of a deceased service member will be paid as described at 5 CFR part 1651, with the following exceptions: (a) Separate accounts. To designate a beneficiary for a TSP death benefit, a service member must file a valid beneficiary designation form. If the TSP maintains a service member account and a civilian account for an individual, a separate beneficiary designation form must be filed for each account. (b) Combat zone contributions. If a service member account contains combat zone contributions, the death benefit payment will be made pro rata from all sources. (c) Trustee-to-trustee transfers. The surviving spouse of a TSP participant can request the TSP to transfer a death benefit payment to a traditional IRA or eligible employer plan. The share of the death benefit payment that is attributable to combat zone contributions (if any) can be transferred only if the IRA or plan accepts such funds. (d) Transfer to a TSP account. If the TSP maintains an account for a death benefit beneficiary who is the surviving spouse of the participant, the spouse can request the TSP to transfer the death benefit payment to his or her TSP account; the share attributable to combat zone contributions (if any) cannot be transferred into a civilian account. [66 FR 50713, Oct. 4, 2001, as amended at 70 FR 32209, June 1, 2005] A TSP account can be divided in an action for divorce, annulment, or legal separation, and is subject to legal process relating to child support, alimony, or child abuse. The TSP will make a payment from a service member's account under such orders or processes as described at 5 CFR part 1653, with the following exceptions: (a) Separate accounts. To qualify for enforcement against the TSP, a court order or legal process must expressly relate to the TSP. Therefore, if the TSP maintains a service member account and a civilian account for an individual, a qualifying court order or legal process must expressly state from which account payment is to be made. (b) Combat zone contributions. If a service member account contains combat zone contributions, the payment will be made pro rata from all sources, unless the court order or legal process directs otherwise. (c) Trustee-to-trustee transfers. The current or former spouse of a TSP participant can request the TSP to transfer a court-ordered payment to a traditional IRA or eligible employer plan. If the payee requests the TSP to transfer all or a portion of the court-ordered payment to an IRA or plan, the share of the payment attributable to combat zone contributions (if any) can be transferred only if the IRA or plan accepts such funds. (d) Transfer to a TSP account. If the TSP maintains an account for a court order payee who is the current or former spouse of the participant, the payee can request the TSP to transfer the court-ordered payment to the payee's TSP account; the pro rata share attributable to combat zone contributions (if any) cannot be transferred. [66 FR 50713, Oct. 4, 2001, as amended at 70 FR 32209, June 1, 2005] A service member may be eligible for a TSP loan as described at 5 CFR part 1655, with the following exceptions: (a) Separate accounts. If the TSP maintains a service member account and a civilian account for an individual: (1) A separate loan application must be made for each account; (2) A participant may have no more than two loans outstanding from each account at any time; one loan from each account may be a loan for the purchase of a primary residence; (3) The Internal Revenue Code maximum loan amount test, which is described in 5 CFR part 1655, will be applied using the combined balances in both TSP accounts. (b) Spousal rights. Before a loan agreement is approved for a service member account, the participant's spouse must consent to the loan by signing the loan agreement. A request for an exception to the spousal consent requirement will be evaluated under the rules explained in 5 CFR part 1650. (c) Combat zone contributions. The portion of a loan that is attributable to combat zone contributions (if any) will be determined when the loan is declared a taxable distribution, and that portion will not be reported as taxable income to the participant as a result of the declaration. [66 FR 50713, Oct. 4, 2001, as amended at 70 FR 32209, June 1, 2005]
Title 5: Administrative Personnel
PART 1604—UNIFORMED SERVICES ACCOUNTS
Section Contents
§ 1604.1 Applicability.
§ 1604.2 Definitions.
§ 1604.3 Contribution elections.
§ 1604.4 Contributions.
§ 1604.5 Separate service member and civilian accounts.
§ 1604.6 Error correction.
§ 1604.7 Withdrawals.
§ 1604.8 Death benefits.
§ 1604.9 Court orders and legal processes.
§ 1604.10 Loans.
§ 1604.1 Applicability.
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§ 1604.2 Definitions.
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§ 1604.3 Contribution elections.
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§ 1604.4 Contributions.
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§ 1604.5 Separate service member and civilian accounts.
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§ 1604.6 Error correction.
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§ 1604.7 Withdrawals.
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§ 1604.8 Death benefits.
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§ 1604.9 Court orders and legal processes.
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§ 1604.10 Loans.
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