CFR Subpart B

CFR Subpart B
in effect

5 C.F.R. § 1650.11 Post-employment distribution elections.

(a) Subject to the restrictions in this subpart, participants may elect a distribution of all or a portion of their TSP accounts in a single payment, a series of installment payments, a life annuity, or any combination of these options. (b) If a participant's account balance is less than $5.00 when he or she separates from Government service, the balance will automatically be forfeited to the TSP. The participant can reclaim the money by contacting the TSP record keeper and requesting the amount that was forfeited; however, TSP investment earnings will not be credited to the account after the date of the forfeiture. (c) Provided that the participant has not submitted a post-employment distribution election prior to the date the automatic payment is processed, if a participant's vested account balance is less than $200 when he or she separates from Government service, the TSP record keeper will automatically pay the balance in a single payment to the participant at his or her TSP address of record. The participant will not be eligible for any other payment option or be allowed to remain in the TSP.

5 C.F.R. § 1650.12 Single payment.

Provided that, in the case of a partial distribution, the amount elected is not less than $1,000, a participant can elect a distribution of all or a portion of his or her account balance in a single payment.

5 C.F.R. § 1650.13 Installment payments.

(a) A participant can elect a distribution of all or a portion of the account balance in a series of substantially equal installment payments, to be paid on a monthly, quarterly, or annual basis in one of the following manners: (1) A specific dollar amount. The amount elected must be at least $25 per installment; if the amount elected is less than $25 per installment, the request will be rejected. Payments will be made in the amount requested each installment period. (2) An installment payment amount calculated based on life expectancy. Payments based on life expectancy are determined using the factors set forth in the Internal Revenue Service life expectancy tables codified at 26 CFR 1.401(a)(9)-9(b) and (c). The installment payment amount is calculated by dividing the account balance by the factor from the IRS life expectancy tables based upon the participant's age as of his or her birthday in the year payments are to begin. This amount is then divided by the number of installment payments to be made per calendar year to yield the installment payment amount. In subsequent years, the installment payment amount is recalculated in January by dividing the prior December 31 account balance by the factor in the IRS life expectancy tables based upon the participant's age as of his or her birthday in the year payments will be made. There is no minimum amount for an installment payment calculated based on this method. (b) A participant can make the following changes at any time as described in § 1650.17(c): (1) A participant receiving installment payments calculated based on life expectancy can elect to change to fixed dollar installment payments; (2) A participant receiving installment payments based on a fixed dollar amount can elect to stop these payments and make a new election to receive installment payments calculated based on life expectancy; (3) A participant receiving installment payments based on a fixed dollar amount can elect to change the amount of his or her fixed payments; and (4) A participant receiving fixed dollar installment payments can elect to change the frequency of his or her installment payments. (c) If a participant elects to receive installments pro rata from his or her traditional and Roth balances, installment payments will be made until the participant's entire account balance is expended, unless the participant elects to change or stop installment payments as described in in § 1650.17(c). If a participant elects to receive installment payments from his or her traditional balance only or Roth balance only, installment payments will automatically continue from the non-elected balance once the elected balance has been expended, unless the participant elects to change or stop installment payments as described in § 1650.17(c). (d) A participant receiving installment payments, regardless of the calculation method, can elect at any time to receive the remainder or part of his or her account balance in a single payment. (e) A participant may only have one installment payment series in place at a time. (f) A participant receiving installment payments may change the investment of his or her account balance among the TSP core funds and may invest through the mutual fund window as provided in 5 CFR part 1601. (g) Upon receiving information from an employing agency that a participant receiving installment payments is no longer separated, the TSP record keeper will cancel all pending and future installment payments.

5 C.F.R. § 1650.14 Annuities.

(a) A participant electing a post-employment distribution can use all or a portion of his or her total account balance, traditional balance only, or Roth balance only to purchase a life annuity. (b) If a participant has a traditional balance and a Roth balance and elects to use all or a portion of his or her total account balance to purchase a life annuity, the TSP record keeper must purchase two separate annuity contracts for the participant: One from the portion of the withdrawal distributed from his or her traditional balance and one from the portion of the withdrawal distributed from his or her Roth balance. (c) A participant cannot elect to purchase an annuity contract with less than $3,500. (d) Unless an amount must be paid directly to the participant to satisfy any applicable minimum distribution requirement of the Internal Revenue Code, the TSP record keeper will purchase the annuity contract(s) from the TSP's annuity vendor using the participant's entire account balance or the portion specified. In the event that a minimum distribution is required by section 401(a)(9) of the Internal Revenue Code before the date of the first annuity payment, the TSP record keeper will compute that amount prior to purchasing the annuity contract(s) and pay it directly to the participant. (e) An annuity will provide a payment for life to the participant and, if applicable, to the participant's survivor, in accordance with the type of annuity chosen. The TSP annuity vendor will make the first annuity payment approximately 30 days after the TSP record keeper purchases the annuity. (f) The amount of an annuity payment will depend on the type of annuity chosen, the participant's age when the annuity is purchased (and the age of the joint annuitant, if applicable), the amount used to purchase the annuity, and the interest rate available when the annuity is purchased. (g) Participants may choose among the following types of annuities: (1) A single life annuity with level payments. This annuity provides monthly payments to the participant as long as the participant lives. The amount of the monthly payment remains constant. (2) A joint life annuity for the participant and spouse with level payments. This annuity provides monthly payments to the participant, as long as both the participant and spouse are alive, and monthly payments to the survivor, as long as the survivor is alive. The amount of the monthly payment remains constant, although the amount received will depend on the type of survivor benefit elected. (3) A joint life annuity for the participant and another person with level payments. This annuity provides monthly payments to the participant as long as both the participant and the joint annuitant are alive, and monthly payments to the survivor as long as the survivor is alive. The amount of the monthly payment remains constant. The joint annuitant must be either a former spouse or a person who has an insurable interest in the participant. (i) A person has an “insurable interest in the participant” if the person is financially dependent on the participant and could reasonably expect to derive financial benefit from the participant's continued life. (ii) A relative (either blood or adopted, but not by marriage) who is closer than a first cousin is presumed to have an insurable interest in the participant. (iii) A participant can establish that a person not described in paragraph (g)(3)(ii) of this section has an insurable interest in him or her by submitting, with the annuity request, an affidavit from a person other than the participant or the joint annuitant that demonstrates that the designated joint annuitant has an insurable interest in the participant (as described in paragraph (g)(3)(i) of this section). (4) Either a single life or joint (with spouse) life annuity with increasing payments. This annuity provides monthly payments to the participant only, or to the participant and spouse, as applicable. The monthly payments are increased once each year on the anniversary of the first payment by a fixed rate of 2 percent. If the participant chooses a joint life annuity, the annual 2 percent increase also applies to benefits received by the survivor. (h) For each distribution election in which the participant elects to purchase an annuity with some or all of the amount distributed, if the TSP record keeper must purchase two annuity contracts, the type of annuity, the annuity features, and the joint annuitant (if applicable) selected by the participant will apply to both annuities purchased. For each distribution election, a participant cannot elect more than one type of annuity by which to receive a distribution, or portion thereof, from any one account. (i) A participant who chooses a joint life annuity (with a spouse, a former spouse, or a person with an insurable interest) must choose either a 50 percent or a 100 percent survivor benefit. The survivor benefit applies when either the participant or the joint annuitant dies. (1) A 50 percent survivor benefit provides a monthly payment to the survivor which is 50 percent of the amount of the payment that is made when both the participant and the joint annuitant are alive. (2) A 100 percent survivor benefit provides a monthly payment to the survivor, which is equal to the amount of the payment that is made when both the participant and the joint annuitant are alive. (3) Either the 50 percent or the 100 percent survivor benefit may be combined with any joint life annuity option. However, the 100 percent survivor benefit can only be combined with a joint annuity with a person other than the spouse (or a former spouse, if required by a retirement benefits court order) if the joint annuitant is not more than 10 years younger than the participant. (j) The following features are mutually exclusive, but can be combined with certain types of annuities, as indicated: (1) Cash refund. This feature provides that, if the participant (and joint annuitant, where applicable) dies before an amount equal to the balance used to purchase the annuity has been paid out, the difference between the balance used to purchase the annuity and the sum of monthly payments already made will be paid to the beneficiary(ies) designated by the participant (or by the joint annuitant, where applicable). This feature can be combined with any type of annuity. (2) Ten-year certain. This feature provides that, if the participant dies before annuity payments have been made for 10 years (120 payments), monthly payments will be made to the beneficiary(ies) until 120 payments have been made. This feature can be combined with any single life annuity, but cannot be combined with a joint life annuity. (k) Once an annuity has been purchased, the type of annuity, the annuity features, and the identity of the joint annuitant cannot be changed, and the annuity cannot be terminated.

5 C.F.R. § 1650.16 Required minimum distributions.

(a) A separated participant must receive required minimum distributions from his or her account commencing no later than the required beginning date and, for each year thereafter, no later than December 31. (b) A separated participant may elect to withdraw from his or her account or to begin receiving payments before the required beginning date, but is not required to do so. (c) In the event that a separated participant does not withdraw from his or her account an amount sufficient to satisfy his or her required minimum distribution for the year, the TSP record keeper will automatically distribute the necessary amount on or before the applicable date described in paragraph (a) of this section. (d) [Reserved] (e) The rules set forth in paragraphs (a) through (d) of this section shall apply to a separated participant who reclaims an account balance that was declared abandoned.

5 C.F.R. § 1650.17 Changes and cancellation of a post-employment distribution request.

(a) Before processing. A pending post-employment distribution request can be cancelled if the cancellation is received and can be processed before the TSP record keeper processes the request. However, the TSP record keeper processes post-employment distribution requests each business day and those that are entered into the record keeping system by 12 noon eastern time will ordinarily be processed that night; those entered after 12 noon eastern time will be processed the next business day. Consequently, a cancellation request must be received and entered into the system before the cut-off for the day the request is submitted for processing in order to be effective to cancel the post-employment distribution. (b) After processing. A post-employment distribution election cannot be changed or cancelled after the withdrawal request has been processed. Consequently, funds disbursed cannot be returned to the TSP. (c) Change in installment payments. If a participant is receiving a series of installment payments, with appropriate supporting documentation as required by the TSP record keeper, the participant can change at any time: The payment amount or frequency (including stopping installment payments), the address to which the payments are mailed, the amount of federal tax withholding, whether or not a payment will be rolled over (if permitted) and the portion to be rolled over, the method by which direct payments to the participant are being sent (EFT or check), the identity of the financial institution to which payments are rolled over or sent directly to the participant by EFT, or the identity of the EFT account.

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