[Federal Register: January 16, 2003 (Volume 68, Number 11)]
[Rules and Regulations]
[Page 2175-2182]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16ja03-1]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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[[Page 2175]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Parts 831, 837, 842, 843, 844, and 847
RIN 3206-AJ72
Retirement Coverage and Service Credit Elections Available to
Current and Former Nonappropriated Fund Employees
AGENCY: Office of Personnel Management.
ACTION: Interim rule.
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SUMMARY: The Office of Personnel Management (OPM) is issuing interim
regulations to implement the civilian retirement provisions of the
National Defense Authorization Act for Fiscal Year 2002. These
regulations establish procedures whereby Federal employees may elect to
use service they performed for a Nonappropriated Fund Instrumentality
(NAFI) of the Department of Defense or Coast Guard to qualify for an
immediate retirement under the Civil Service Retirement System (CSRS)
or the Federal Employees Retirement System (FERS). These regulations
also establish the methodology for computing the CSRS or FERS annuity
when employees elect to use NAFI service to qualify for immediate CSRS
or FERS retirement.
DATES: Interim rules effective December 28, 2001, comments must be
received on or before March 17, 2003.
ADDRESSES: Send or deliver comments to Mary Ellen Wilson, Chief,
Retirement Policy Center; Retirement and Insurance Service; Office of
Personnel Management; 1900 E Street NW., Washington DC 20415-3200, FAX
(202) 606-0990, or e-mail them to combox@opm.gov.
FOR FURTHER INFORMATION CONTACT: Jim Giuseppe, (202) 606-0299.
SUPPLEMENTARY INFORMATION:
1. Overview
The President signed into law the National Defense Authorization
Act for Fiscal Year 2002, Public Law 107-107, on December 28, 2001.
Sections 1131 and 1132 of that law amend existing provisions of the
Civil Service Retirement System (CSRS) and the Federal Employees
Retirement System (FERS) relating to service with a Department of
Defense (DoD) or Coast Guard Nonappropriated Fund Instrumentality
(NAFI). Section 1131 amends rules relating to portability of retirement
coverage when employees move from NAFI positions to civil service
positions and vice versa. Section 1132 amends rules relating to service
credit for NAFI service under CSRS and FERS.
These interim regulations amend current regulations that define a
qualifying move from DoD or Coast Guard NAFI positions to civil service
positions and vice versa. In addition, these interim regulations add
two subparts to 5 CFR part 847. Subpart H describes how employees may
elect to credit NAFI service to qualify for immediate CSRS or FERS
retirement. Subpart I describes how such an election will affect the
computation of the CSRS or FERS annuity benefit.
A qualifying move from a DoD or Coast Guard NAFI position to a
civil service position allows an employee to elect to continue NAFI
retirement coverage in the civil service position. Similarly, a
qualifying move from a civil service position to a DoD or Coast Guard
NAFI position allows an employee to elect to continue civil service
retirement coverage in the NAFI position. As originally defined, for a
move to be considered qualifying, among other requirements, employees
had to be vested in the retirement plan of the position they were
leaving. Section 1131 of Public Law 107-107 eliminates that vesting
requirement for moves that occur on or after December 28, 2001.
Section 1132 of Public Law 107-107 allows CSRS and FERS employees
to use NAFI service to qualify for immediate retirement. However,
crediting NAFI service under Public Law 107-107 will not result in
higher annuity benefits. The annuities of employees electing to use
NAFI service to qualify for immediate retirement must be reduced to
ensure that there will be no long-term cost to the Retirement Fund. The
annuities payable after this reduction will be actuarially equivalent
to the present value of the deferred annuities employees would receive
if they simply left Government service and didn't use the NAFI time to
qualify for an immediate retirement.
Section 1132 has no effect on previous laws that allow credit for
certain NAFI service. Public Law 104-106, approved February 10, 1996,
allowed certain FERS employees to elect retirement credit for their
NAFI service. Public Law 99-638, enacted on November 10, 1986, allowed
CSRS employees to credit certain NAFI service performed between June
19, 1952, and December 31, 1965. NAFI service creditable under either
of those laws remains creditable under the provisions of those laws.
2. Qualifying Moves
We have amended 5 CFR 847.202 to reflect the new definition of a
qualifying move. An employment move on or after December 28, 2001, from
a covered NAFI position to a covered civil service position is a
qualifying move allowing the employee to elect to continue the NAFI
retirement coverage if:
[sbull] The employee has not had a prior opportunity to elect to
continue NAFI retirement coverage;
[sbull] The employee has moved from a covered NAFI position within
DoD or the Coast Guard to any covered civil service position; and
[sbull] The employee has moved to the covered civil service
position not more than 1 year after separating from the covered NAFI
position.
Likewise, an employment move on or after December 28, 2001, from a
covered civil service position to a covered NAFI position is a
qualifying move allowing the employee to elect to continue CSRS, CSRS
Offset, or FERS retirement coverage if:
[sbull] The employee has not had a prior opportunity to elect to
continue CSRS, CSRS Offset, or FERS retirement;
[sbull] The employee has moved from any covered civil service
position to a covered NAFI position within DoD or the Coast Guard; and
[sbull] The employee has moved to the covered NAFI position not
more than 1 year after separating from the covered civil service
position.
[[Page 2176]]
3. Electing NAFI Credit for Retirement Eligibility
A new subpart H in 5 CFR part 847 outlines the rules relating to
electing NAFI credit to qualify for immediate CSRS or FERS retirement.
CSRS or FERS employees leaving Federal service on or after December
28, 2001, who have DoD or Coast Guard NAFI service not otherwise
creditable under CSRS or FERS, may use that service to qualify for
immediate retirement. To be able to use their NAFI service in this way,
employees must already be eligible for CSRS or FERS deferred retirement
benefits based on their non-NAFI service. Employees already eligible
for immediate retirement benefits based on their non-NAFI service
cannot make an election under 5 CFR part 847, subpart H, to credit
their NAFI service for CSRS or FERS retirement purposes.
Employees may elect to credit any service they performed as an
employee paid from nonappropriated funds of an instrumentality of DoD
or Coast Guard. This includes NAFI service that was covered by an NAFI
retirement plan as well as NAFI service that was not covered by an NAFI
plan. FERS employees may even elect to credit NAFI service performed
after 1988. Employees cannot pay CSRS or FERS deposits to cover the
NAFI service, and NAFI retirement deductions withheld for any of the
NAFI service cannot be transferred to the CSRS or FERS retirement fund.
There is one limitation affecting elections to credit NAFI service
to qualify for immediate CSRS or FERS retirement. NAFI service used to
qualify for CSRS or FERS immediate retirement cannot also be used under
an NAFI retirement system for any purpose.
Employees must elect complete periods of service with an NAFI
employer. For example, a CSRS employee who worked 6 years under a
covered appointment for a DoD NAFI must elect to credit the entire 6
years even if the employee only needs 2 years of service to qualify for
an immediate CSRS retirement.
A complete period of service with an NAFI employer is the period
from the date of appointment to the date of separation. If an employee
moves directly from an NAFI appointment excluded from NAFI retirement
coverage to an appointment subject to NAFI retirement coverage with the
same NAFI employer, the move from non-covered employment to covered
employment is considered to be a separation. For example, a CSRS
employee needs 2 years of service to qualify for an immediate CSRS
retirement. The employee has 6 consecutive years of NAFI service--2
years under an appointment excluded from NAFI retirement coverage and 4
years under an appointment covered by an NAFI retirement plan. The 2
years of NAFI service not subject to NAFI retirement coverage is
considered a complete period of service, and the employee may elect to
credit only that 2 years of NAFI service for CSRS retirement purposes.
Employees wanting to elect to credit NAFI service to qualify for
immediate CSRS or FERS retirement must do so when they retire. They
need to submit their election, on a form specified by OPM, to their
employing agency before their actual retirement date. They must also
notify the appropriate NAFI retirement plan of their election and
obtain verification of their NAFI employment from the NAFI retirement
system.
4. Computing the Annuity When NAFI Service Is Used for Retirement
Eligibility
A new subpart I in 5 CFR part 847 outlines the rules OPM will use
to compute the annuity of employees who elect to use NAFI service to
qualify for immediate CSRS or FERS retirement.
Electing to credit NAFI service to qualify for immediate CSRS or
FERS retirement will not increase the amount of the annuity. The amount
of annuity including NAFI service must be reduced by the amount
necessary to ensure that the present value of the annuity payable to
the employee is actuarially equivalent to the present value of the
deferred annuity that would be payable to the employee assuming the
employee:
[sbull] Separated from service on the actual date of retirement;
and
[sbull] Elected not to credit the NAFI service to qualify for
immediate retirement.
Present value is a financial term. As used in retirement, present
value is the sum of money required at the present time to fund a future
stream of payments. It is computed using an actuarial model that
incorporates appropriate assumptions as to inflation and interest
rates.
To ensure that the present value of the immediate annuity with
credit for NAFI service equals the present value of the deferred
annuity without credit for NAFI service, the gross monthly rate of the
immediate annuity must be reduced by an amount derived using the
following formula:
(the present value of the immediate annuity minus the present value
of the deferred annuity) divided by the present value factor
corresponding to the employee's age at retirement.
The present value of an immediate annuity is the sum of money
required at the commencing date of the annuity to fund the annuity. It
is calculated by multiplying the monthly rate of annuity by the present
value factor corresponding to the employee's age as of the commencing
date of the annuity. A present value factor is a factor calculated by
OPM's actuary using generally accepted actuarial standards and on the
basis of assumptions used by the Board of Actuaries of the Civil
Service Retirement System.
The present value of a deferred annuity is the sum of money
required at the commencing date of the immediate annuity to fund the
future deferred annuity. It is calculated by multiplying the monthly
rate of the deferred annuity by the present value factor corresponding
to the employee's age as of the commencing date of the deferred
annuity, and then multiplying the result by a discount factor. The
discount factor is a factor derived from the assumed rate of investment
return earned by the Civil Service Retirement and Disability Fund, and
the amount of time between the commencing dates of the immediate and
deferred annuities.
(Currently, the rate of investment return on the Civil Service
Retirement and Disability Fund is 7 percent. However, on May 9, 2002,
OPM published a notice in the Federal Register announcing a change in
the FERS normal cost percentages. In that notice, OPM also announced
that the rate of investment return on the Civil Service Retirement and
Disability Fund will change to 6.75 percent beginning October 1, 2002.)
The gross monthly rates of annuity used in the present value
calculations are computed under the appropriate annuity formula
applying the proper reductions for age, survivor elections, unpaid
deposits and redeposits, and alternative annuity elections. In
computing the gross monthly rate of the deferred annuity, interest on
any deposit or redeposit balances does not accrue beyond the commencing
date of the immediate annuity. In addition, the present value factors
used in the reductions for unpaid redeposit and alternative annuity
election correspond to the employee's age as of the commencing date of
the deferred annuity.
If a FERS employee has at least 10 years of creditable (non-NAFI)
service, the gross monthly rate of the deferred annuity is computed as
of the first day of the month after the employee reaches
[[Page 2177]]
the minimum retirement age. Using that commencing date for the deferred
annuity maximizes the present value of the deferred annuity.
5. FERS Annuity Supplement
An FERS annuity supplement is not payable to FERS employees who
elect to use NAFI service to qualify for an immediate FERS retirement.
6. Reemployment
If a retiree who elected to credit NAFI service to qualify for an
immediate retirement returns to work for the Government, the following
rules will apply to any benefit earned as the result of the
reemployment.
[sbull] If the retiree qualifies for a supplemental annuity under 5
CFR part 837, the supplemental annuity will not be subject to the
reduction outlined in 5 CFR part 847, subpart I.
[sbull] If the retiree qualifies for a redetermined annuity under 5
CFR part 837, the redetermined annuity will be computed with the
reduction outlined in 5 CFR part 847, subpart I, if the retiree needs
to credit NAFI service to qualify for the redetermined annuity. The
reduction under 5 CFR part 847, subpart I, will be recomputed based on
the retiree's age as of the commencing date of the redetermined
annuity. The retiree does not need to make a new election to credit
NAFI service under 5 CFR part 847, subpart H. The original election
will remain in effect.
[sbull] If the retiree qualifies for a redetermined annuity under 5
CFR part 837, the redetermined annuity will not be subject to the
reduction outlined in 5 CFR part 847, subpart I, if the retiree
qualifies for the redetermined annuity without crediting the NAFI
service. If the retiree elects the redetermined annuity, the election
the retiree made to credit the NAFI service under 5 CFR part 847,
subpart H, when the retiree originally retired will not remain in
effect.
[sbull] If the retiree's annuity terminated upon reemployment, and
if the retiree qualifies for a new immediate annuity when the
reemployment ends, the new annuity will be computed with the reduction
outlined in 5 CFR part 847, subpart I, if the retiree needs to credit
NAFI service to qualify for the new annuity. The retiree must submit a
new election to credit the NAFI service in accordance with 5 CFR part
847, subpart H.
[sbull] If the retiree's annuity terminated upon reemployment, and
if the retiree qualifies for a new immediate annuity when the
reemployment ends, the new annuity will not be subject to the reduction
outlined in 5 CFR part 847, subpart I, if the retiree qualifies for the
new annuity without crediting the NAFI service. The election the
retiree made to credit the NAFI service under 5 CFR part 847, subpart
H, when the retiree originally retired will not remain in effect.
[sbull] If the retiree's annuity terminated upon reemployment, and
if the retiree qualifies for a deferred annuity, but not a new
immediate annuity when the reemployment ends, the deferred annuity will
not be subject to the reduction outlined in 5 CFR part 847, subpart I.
The election the retiree made to credit the NAFI service under 5 CFR
part 847, subpart H, when the retiree originally retired, will not
remain in effect.
[sbull] If the retiree's annuity terminated upon reemployment, and
if the retiree does not qualify for either a new immediate annuity or a
deferred annuity when the reemployment ends, the old annuity will be
reinstated. The retiree does not need to make a new election to credit
NAFI service under 5 CFR part 847, subpart H. The original election
will remain in effect.
7. Survivor Annuity Rate
The amount of the survivor annuity provided by a retiring employee
who elects to credit NAFI service under 5 CFR part 847, subpart H, to
qualify for immediate CSRS or FERS retirement is also subject to
reduction. The reduction is computed in the same way that the reduction
to the employee's annuity rate is computed. The present value of the
initial survivor rate generated by the immediate annuity computation
(with credit for NAFI service) equals the initial survivor rate
multiplied by the present value factor corresponding to the employee's
age as of the commencing date of the immediate annuity. The present
value of the initial survivor rate generated by the deferred annuity
computation (without credit for NAFI service) equals the initial
survivor rate multiplied by the present value factor corresponding to
the employee's age as of the deferred annuity date, multiplied by the
discount factor corresponding to the amount of time between the
immediate annuity commencing date and the deferred annuity date. The
difference between the two present values is then divided by the
present value factor corresponding to the employee's age as of the
immediate annuity commencing date. The result, rounded up to the higher
dollar, equals the reduction that applies to the initial survivor rate
generated by the immediate annuity computation.
Waiver of Notice of Proposed Rulemaking
Under section 553(b)(3)(B) and (d)(3) of title 5, United States
Code, I find that good cause exists for waiving the general notice of
proposed rulemaking and to make these rules effective in less than 30
days. The regulations are effective December 28, 2001, the date the
President signed the statute. The statute requires OPM to establish by
regulation the procedure for computing an annuity when NAFI service is
used to qualify for an immediate retirement. Delaying implementation of
these regulations would unnecessarily delay the availability of the
benefits of the new law.
Regulatory Flexibility Act
I certify that this regulation will not have a significant economic
impact on a substantial number of small entities because it affects
only certain Federal employees.
Executive Order 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with Executive Order 12866.
Lists of Subjects in 5 CFR Parts 831, 837, 842, 843, 844, and 847
Administrative practice and procedure, Air traffic controllers,
Alimony, Claims, Disability benefits, Firefighters, Government
employees, Income taxes, Intergovernmental relations, Law enforcement
officers, Pensions, Reporting and recordkeeping requirements,
Retirement.
Office of Personnel Management.
Kay Coles James,
Director.
Accordingly, OPM is amending 5 CFR parts 831, 837, 842, 843, 844
and 847 as follows:
PART 831--RETIREMENT
1. The authority citation for part 831 continues to read as
follows:
Authority: 5 U.S.C. 8347; Sec. 831.102 also issued under 5
U.S.C. 8334; Sec. 831.106 also issued under 5 U.S.C. 552a; Sec.
831.108 also issued under 5 U.S.C. 8336(d)(2); Sec. 831.114 also
issued under 5 U.S.C. 8336(d)(2) and section 7001 of Pub. L. 105-
174, 112 Stat. 58; Sec. 831.201(b)(1) also issued under 5 U.S.C.
8347(g); Sec. 831.201(b)(6) also issued under 5 U.S.C. 7701(b)(2);
Sec. 831.201(g) also issued under sections 11202(f), 11232(e), and
11246(b) of Pub. L. 105-33, 111 Stat. 251; Sec. 831.201(g) also
issued under sections 7(b) and 7(e) of Pub. L. 105-274, 112 Stat.
2419; Sec. 831.201(i) also issued under sections 3 and 7(c) of Pub.
L. 105-274, 112 Stat. 2419; Sec. 831.204 also issued under section
102(e) of Pub. L. 104-
[[Page 2178]]
8, 109 Stat. 102, as amended by section 153 of Pub. L. 104-134, 110
Stat. 1321; Sec. 831.205 also issued under section 2207 of Pub. L.
106-265, 114 Stat. 784; Sec. 831.301 also issued under section 2203
of Pub. L. 106-265, 114 Stat. 780; Sec. 831.303 also issued under 5
U.S.C. 8334(d)(2) and section 2203 of Pub. L. 106-235, 114 Stat.
780; Sec. 831.502 also issued under 5 U.S.C. 8337; Sec. 831.502 also
issued under section 1(3), E.O. 11228, 3 CFR 1964-1965 Comp. p. 317;
Sec. 831.663 also issued under 5 U.S.C. 8339(j) and (k)(2); Secs.
831.663 and 831.664 also issued under section 11004 (c)(2) of Pub.
L. 103-66, 107 Stat. 412; Sec. 831.682 also issued under section
201(d) of Pub. L. 99-251, 100 Stat. 23; Sec. 831.912 also issued
under section 636 of H.R. 5658, incorporated by reference in Pub. L.
106-554, 114 Stat. 2763, and published as Appendix C to Pub. L. 106-
554 at 114 Stat. 2763A-125; subpart V also issued under 5 U.S.C.
8343a and section 6001 of Pub. L. 100-203, 101 Stat. 1330-275; Sec.
831.2203 also issued under section 7001(a)(4) of Pub. L. 101-508,
104 Stat. 1388-328.
Subpart C--Credit for Service
2. In Sec. 831.305, paragraph (d) is added to read as follows:
Sec. 831.305 Service with a nonappropriated fund instrumentality
after June 18, 1952, but before January 1, 1966.
* * * * *
(d) Crediting other service in a nonappropriated fund
instrumentality. Service not creditable under this section may become
creditable for retirement eligibility purposes under the provisions
outlined in 5 CFR part 847, subpart H.
Subpart G--Computation of Annuities
3. Section 831.704 is revised to read as follows:
Sec. 831.704 Annuities including credit for service with a
nonappropriated fund instrumentality.
(a) An annuity that includes credit for service with a
nonappropriated fund instrumentality performed after December 31, 1965,
based on an election under 5 CFR part 847, subpart D, is computed under
5 CFR part 847, subpart F.
(b) An annuity that includes credit for service with a
nonappropriated fund instrumentality based on an election under 5 CFR
part 847, subpart H, is computed under 5 CFR part 847, subpart I.
PART 837--REEMPLOYMENT OF ANNUITANTS
4. The authority citation for part 837 continues to read as
follows:
Authority: 5 U.S.C. 8337, 8344, 8347, 8455, 8456, 8461, and 8468
and section 302 of Pub. L. 99-335, June 6, 1986, as amended.
Subpart E--Retirement Benefits on Separation
5. Section 837.506 is revised to read as follows:
Sec. 837.506 Computation of redetermined annuity for former employees
of nonappropriated fund instrumentalities.
(a) The redetermined annuity of a former employee of a
nonappropriated fund instrumentality who elected CSRS or FERS coverage
under 5 CFR part 847, subpart D, is recomputed under 5 CFR part 847,
subpart F.
(b) The redetermined annuity of a former employee of a
nonappropriated fund instrumentality who elected CSRS or FERS
retirement credit under 5 CFR part 847, subpart H, is recomputed under
5 CFR part 847, subpart I.
PART 842--FEDERAL EMPLOYEES RETIREMENT SYSTEM--BASIC ANNUITY
6. The authority citation for part 842 continues to read as
follows:
Authority: 5 U.S.C. 8461(g); Secs. 842.104 and 842.106 also
issued under 5 U.S.C. 8461(n); Sec. 842.104 also issued under
sections 3 and 7(c) of Pub. L. 105-274, 112 Stat. 2419; Sec. 842.105
also issued under 5 U.S.C. 8402(c)(1) and 7701(b)(2); Sec. 842.106
also issued under section 102(e) of Pub. L. 104-8, 109 Stat. 102, as
amended by section 153 of Pub. L. 104-134, 110 Stat. 1321; Sec.
842.107 also issued under sections 11202(f), 11232(e), and 11246(b)
of Pub. L. 105-33, 111 Stat. 251; Sec. 842.107 also issued under
section 7(b) of Pub. L. 105-274, 112 Stat. 2419; Sec. 842.108 also
issued under section 7(e) of Pub. L. 105-274, 112 Stat. 2419; Sec.
842.213 also issued under 5 U.S.C. 8414(b)(1)(B) and section 7001 of
Pub. L. 105-174, 112 Stat. 58, as amended by section 651 of Pub. L.
106-58, 113 Stat. 430; Secs. 842.604 and 842.611 also issued under 5
U.S.C. 8417; Sec. 842.607 also issued under 5 U.S.C. 8416 and 8417;
Sec. 842.614 also issued under 5 U.S.C. 8419; Sec. 842.615 also
issued under 5 U.S.C. 8418; Sec. 842.703 also issued under section
7001(a)(4) of Pub. L. 101-508, 104 Stat. 1388; Sec. 842.707 also
issued under section 6001 of Pub. L. 100-203, 101 Stat. 1300; Sec.
842.708 also issued under section 4005 of Pub. L. 101-239, 103 Stat.
2106 and section 7001 of Pub. L. 101-508, 104 Stat. 1388; subpart H
also issued under 5 U.S.C. 1104; Sec. 842.810 also issued under
section 636 of H.R. 5658, incorporated by reference in Pub. L. 106-
554, 114 Stat. 2763, and published as Appendix C to Pub. L. 106-554
at 114 Stat. 2763A-125.
Subpart C--Credit for Service
7. In Sec. 842.304, paragraph (d) is revised to read as follows:
Sec. 842.304 Civilian service.
* * * * *
(d) Credit for service performed as an employee of a
nonappropriated fund instrumentality. (1) Credit for service with a
nonappropriated fund instrumentality is allowed in accordance with an
election under 5 CFR part 847, subpart D or H.
(2) Service under FERS for which the employee withdrew all
deductions is creditable in accordance with an election made under 5
CFR part 847, subpart D.
(3) An annuity that includes credit for service with a
nonappropriated fund instrumentality under 5 CFR part 847, subpart D,
or refunded service under paragraph (d)(2) of this section is computed
under 5 CFR part 847, subpart F.
(4) An annuity that includes credit for service with a
nonappropriated fund instrumentality under 5 CFR part 847, subpart H,
is computed under 5 CFR part 847, subpart I.
PART 843--FEDERAL EMPLOYEES RETIREMENT SYSTEM--DEATH BENEFITS AND
EMPLOYEE REFUNDS
8. The authority citation for part 843 continues to read as
follows:
Authority: 5 U.S.C. 8461; Sec. Sec. 843.205, 843.208, and
843.209 also issued under 5 U.S.C. 8424; Sec. 843.309 also issued
under 5 U.S.C. 8442; Sec. 843.406 also issued under 5 U.S.C. 8441.
Subpart C--Current and Former Spouse Benefits
9. Section 843.314 is revised to read as follows:
Sec. 843.314 Amount of survivor annuity where service includes credit
for service with a nonappropriated fund instrumentality.
(a) The survivor annuity based on service that includes service
with a nonappropriated fund instrumentality made creditable by an
election under 5 CFR part 847, subpart D, is computed under 5 CFR part
847, subpart F.
(b) The survivor annuity based on service that includes service
with a nonappropriated fund instrumentality made creditable by an
election under 5 CFR part 847, subpart H, is computed under 5 CFR part
847, subpart I.
PART 844--FEDERAL EMPLOYEES RETIREMENT SYSTEM--DISABILITY
RETIREMENT
10. The authority citation for part 844 continues to read as
follows:
Authority: 5 U.S.C. 8461; Sec. 844.201 also issued under 5
U.S.C. 1104.
Subpart A--General Provisions
11. Section 844.106 is revised to read as follows:
[[Page 2179]]
Sec. 844.106 Disability annuities which include credit for service
with a nonappropriated fund instrumentality.
A disability annuity that includes credit for service with a
nonappropriated fund instrumentality performed after December 31, 1965,
based on an election under 5 CFR part 847, subpart D, is computed under
5 CFR part 847, subpart F.
PART 847--ELECTIONS OF RETIREMENT COVERAGE BY CURRENT AND FORMER
EMPLOYEES OF NONAPPROPRIATED FUND INSTRUMENTALITIES
12. The authority citation for part 847 is revised to read as
follows:
Authority: 5 U.S.C. 8332(b)(17) and 8411(b)(6) and sections 1131
and 1132 of Pub. L. 107-107, December 28, 2001, 115 Stat 1242; 5
U.S.C. 8347(a) and 8461(g) and section 1043(b) of Pub. L. 104-106,
Div. A, Title X, Feb.10, 1996, 110 Stat. 434. Subpart B also issued
under 5 U.S.C. 8347(q) and 8461(n).
Subpart A--General Provisions
13. In Sec. 847.101, paragraph (a) is revised to read as follows:
Sec. 847.101 Purpose and scope.
(a) This part contains the regulations issued by the Office of
Personnel Management (OPM) to implement the statutory election rights
of certain current and former NAFI employees under the Portability of
Benefits for Nonappropriated Fund Employees Act of 1990, section 1043
of the National Defense Authorization Act for Fiscal Year 1996, and
sections 1131 and 1132 of the National Defense Authorization Act for
Fiscal Year 2002.
14.-15. In Sec. 847.102, new paragraphs (a)(8) and (a)(9) are
added and paragraph (c)(4) is revised to read as follows:
Sec. 847.102 Regulatory structure.
(a) * * *
(8) Subpart H of this part contains information about elections to
credit NAFI service to qualify for immediate retirement under section
1132 of Public Law 107-107, the National Defense Authorization Act for
Fiscal Year 2002.
(9) Subpart I of this part contains information about how benefits
are computed when employees elect to credit NAFI service to qualify for
immediate retirement under section 1132 of Public Law 107-107, the
National Defense Authorization Act for Fiscal Year 2002.
* * * * *
(c) * * *
(4) Part 870 of this chapter contains information about the Federal
Employees' Group Life Insurance Program.
* * * * *
16. In Sec. 847.103, paragraph (b), the definition of Deficiency
is revised to read as follows:
Sec. 847.103 Definitions.
* * * * *
(b) * * *
Deficiency means the remainder of the actuarial present value of
crediting NAFI service, after subtracting the amount credited to the
employee from a transfer to the Fund under subpart E of this part, and
earnings under Sec. 847.507 on the transferred amount.
* * * * *
17. In Sec. 847.104, paragraph (c) is added to read as follows:
Sec. 847.104 OPM responsibilities.
* * * * *
(c) OPM will determine if an employee who wishes to make an
election under 5 CFR part 847, subpart H, is eligible to make such an
election, and OPM's determination is subject to reconsideration under 5
CFR part 831, subpart A, or 5 CFR part 841, subpart C.
18. Section 847.105 is revised to read as follows:
Sec. 847.105 Agency responsibilities.
(a) Each agency is responsible for notifying its employees of the
opportunity to make an election under this part and for determining if
an employee who wishes to make an election under subparts B and D of
this part is qualified to do so, and for counseling employees in
accordance with guidance issued by OPM.
(b) If an agency determines that an employee is not eligible to
make an election under subparts B and D of this part, the agency shall
issue a final decision to the employee that meets the requirements of
Sec. 847.106, including notice of the right to appeal under Sec.
847.107.
19. In Sec. 847.106, paragraph (a) is revised to read as follows:
Sec. 847.106 Agency decision concerning eligibility.
(a) If the agency determines that the employee is not eligible to
make an election under subpart B or D of this part, it must issue a
final decision to the employee.
* * * * *
20. In Sec. 847.107, paragraph (b) is revised to read as follows:
Sec. 847.107 Appeals to MSPB.
* * * * *
(b) Paragraph (a) of this section is the exclusive remedy for
review of agency decisions concerning eligibility to make an election
under subparts B and D of this part. An agency decision must not allow
review under any employee grievance procedures, including those
established by 5 U.S.C. chapter 71, and 5 CFR part 771.
Subpart B--Election To Continue Retirement Coverage After a
Qualifying Move
21. Section 847.202 is revised to read as follows:
Sec. 847.202 Definition of qualifying move.
(a) A qualifying move occurring on or after December 28, 2001, that
would allow an opportunity to elect to continue retirement coverage
under CSRS and FERS must meet all of the following criteria:
(1) The employee must not have had a prior opportunity to elect to
continue CSRS or FERS retirement coverage.
(2) The employee must have moved from a position covered by CSRS or
FERS to a retirement-covered position in an NAFI, and
(3) The employee must begin employment in a retirement-covered
position in an NAFI no later than 1 year after separation from CSRS- or
FERS-covered employment.
(b) A qualifying move occurring on or after December 28, 2001, that
would allow an opportunity to elect to continue retirement coverage
under an NAFI retirement system must meet all the following criteria:
(1) The employee must not have had a prior opportunity to elect to
continue NAFI retirement system coverage;
(2) The employee must have moved from an NAFI to a civil service
position subject to CSRS or FERS coverage; and
(3) The employee must be appointed to a CSRS- or FERS-covered
position no later than 1 year after separation from retirement-covered
NAFI employment.
(c) A qualifying move occurring on or after August 10, 1996, and
before December 28, 2001, that would allow an opportunity to elect to
continue retirement coverage under CSRS and FERS must meet all the
following criteria:
(1) The employee must not have had a prior opportunity to elect to
continue CSRS or FERS retirement coverage;
(2) The employee must have been vested in CSRS or FERS prior to the
move to an NAFI;
(3) The employee must have moved from a position covered by CSRS or
FERS to a retirement-covered position in an NAFI; and
[[Page 2180]]
(4) The employee must begin employment in a retirement-covered
position in an NAFI no later than 1 year after separation from CSRS- or
FERS-covered employment.
(d) A qualifying move occurring on or after August 10, 1996, and
before December 28, 2001, that would allow an opportunity to elect to
continue retirement coverage under an NAFI retirement system must meet
all the following criteria:
(1) The employee must not have had a prior opportunity to elect to
continue NAFI retirement system coverage;
(2) The employee must have been a vested participant in the NAFI
retirement system (as the term ``vested participant'' is defined by
that retirement system) prior to the move to a CSRS- or FERS-covered
position;
(3) The employee must have moved from an NAFI to a civil service
position subject to CSRS or FERS coverage; and
(4) The employee must be appointed to a CSRS- or FERS-covered
position no later than 1 year after separation from retirement-covered
NAFI employment.
(e) A qualifying move occurring between January 1, 1987, and August
9, 1996, that would allow an opportunity to elect to continue
retirement coverage under CSRS or FERS must meet all the following
criteria:
(1) The employee must not have had a prior opportunity to elect to
continue CSRS or FERS retirement coverage;
(2) The employee must have been vested in CSRS or FERS prior to the
move to an NAFI;
(3) The employee must have moved from a CSRS- or FERS-covered
position within the Department of Defense or the U.S. Coast Guard to a
retirement-covered position with an NAFI; and
(4) The employee must begin employment in a retirement-covered
position in an NAFI no later than 4 days after separation from CSRS- or
FERS-covered employment.
(f) A qualifying move occurring between January 1, 1987, and August
9, 1996, that would allow an opportunity to elect to continue
retirement coverage under an NAFI retirement system must meet all the
following criteria:
(1) The employee must not have had a prior opportunity to elect to
continue NAFI retirement system coverage;
(2) The employee must have been a vested participant in the NAFI
retirement system (as the term ``vested participant'' is defined by
that retirement system) prior to the move to the civil service;
(3) The employee must have moved from an NAFI to a CSRS- or FERS-
covered position within the Department of Defense or the U.S. Coast
Guard; and
(4) The employee must be appointed to a CSRS- or FERS-covered
position no later than 4 days after separation from retirement-covered
NAFI employment.
(g) A qualifying move under paragraphs (a), (b), (c), and (d) of
this section is considered to occur on the date the individual enters
into the new position, not at the time of separation from the prior
position.
(h) A retroactive election opportunity under subpart D of this part
(pertaining to elections of CSRS, FERS, or NAFI retirement coverage) is
not considered a prior opportunity to elect retirement coverage under
this section.
22. In Sec. 847.203, paragraph (a) is revised to read as follows:
Sec. 847.203 Election of CSRS coverage.
(a) An employee who completes a qualifying move (under Sec.
847.202(a), (c), or (e)) from a CSRS-covered position to an NAFI may
elect to continue CSRS coverage.
* * * * *
23. In Sec. 847.204, paragraph (a) is revised to read as follows:
Sec. 847.204 Election of FERS coverage.
(a) An employee who completes a qualifying move under Sec.
847.202(a), (c) or (e) from an FERS-covered position to an NAFI may
elect to continue FERS coverage.
* * * * *
24. In Sec. 847.205, paragraph (a) is revised to read as follows:
Sec. 847.205 Elections of NAFI retirement system coverage.
(a) An employee who completes a qualifying move under Sec.
847.202(b), (d), or (f), from an NAFI position to a CSRS- or FERS-
covered position may elect to continue coverage under the NAFI
retirement system.
* * * * *
Subpart D--Elections of Coverage Under the Retroactive Provisions
25. In Sec. 847.402, paragraphs (a)(1) and (b)(1) are revised to
read as follows:
Sec. 847.402 Definition of qualifying move.
(a) * * *
(1)(i) For moves occurring before February 10, 1996, the employee
must not have had a prior opportunity to elect to continue CSRS, FERS,
or NAFI retirement coverage under Sec. 847.202(e) or (f);
(ii) For moves occurring on or after February 10, 1996, the
employee must not have made an election under Sec. 847.202(e) or (f);
* * * * *
(b) * * *
(1)(i) For moves occurring before February 10, 1996, the employee
must not have had a prior opportunity to elect to continue CSRS, FERS,
or NAFI retirement coverage under Sec. 847.202(e) or (f);
(ii) For moves occurring on or after February 10, 1996, the
employee must not have made an election under Sec. 847.202(e) or (f);
* * * * *
26. In Sec. 847.421, paragraph (a)(2) is revised to read as
follows:
Sec. 847.421 Election requirements.
(a) * * *
(2) A FERS employee who has had a previous opportunity to elect
retirement coverage under Sec. 847.202(e) or (f) is not excluded from
making this election.
* * * * *
27. In Sec. 847.431, paragraph (a)(2) is revised to read as
follows:
Sec. 847.431 Election requirements.
(a) * * *
(2) An NAFI employee who has had a previous opportunity to elect
retirement coverage under Sec. 847.202(e) or (f) is not excluded from
making this election.
* * * * *
28. Add subpart H to read as follows:
Subpart H--Electing To Credit NAFI Service for CSRS and FERS Retirement
Eligibility
Sec.
847.801 What information is in this subpart?
847.802 Who may elect to use NAFI service to qualify for immediate
retirement under CSRS or FERS?
847.803 When do employees make the election to use their NAFI
service to qualify for an immediate retirement under CSRS or FERS?
847.804 How do employees make an election to use their NAFI service
to qualify for an immediate retirement under CSRS or FERS?
847.805 What NAFI service can employees elect to credit toward
retirement eligibility under CSRS or FERS?
847.806 How much NAFI service must employees elect to use to qualify
for an immediate CSRS or FERS retirement?
847.807 Do employees have to pay CSRS or FERS deposits for the NAFI
service they use to qualify for immediate retirement under CSRS or
FERS?
847.808 Is money in the NAFI retirement fund covering NAFI service
that an employee elects to use for immediate retirement under CSRS
or FERS, transferred to the Civil Service Retirement and Disability
Fund?
847.809 What effect will NAFI service used to qualify for an
immediate retirement have on the amount of the CSRS or FERS annuity?
[[Page 2181]]
Subpart H--Electing to Credit NAFI Service for CSRS and FERS
Retirement Eligibility
Sec. 847.801 What information is in this subpart?
This subpart contains OPM's regulations on the procedures,
eligibility requirements, and time limits for elections under 5 U.S.C.
8332(b)(17) and 5 U.S.C. 8411(b)(6).
Sec. 847.802 Who may elect to use NAFI service to qualify for
immediate retirement under CSRS or FERS?
CSRS and FERS employees may elect to credit NAFI service for
retirement purposes under this subpart if:
(a) They separate for retirement on or after December 28, 2001;
(b) They do not otherwise qualify for immediate retirement; and
(c) They have enough otherwise creditable civilian service to
qualify for deferred retirement.
Sec. 847.803 When do employees make the election to use their NAFI
service to qualify for an immediate retirement under CSRS or FERS?
Employees about to retire must make their election to credit NAFI
service under this subpart no later than the date of separation on
which their retirement is based.
Sec. 847.804 How do employees make an election to use their NAFI
service to qualify for an immediate retirement under CSRS or FERS?
Employees electing to credit NAFI service under this subpart must:
(a) Inform the NAFI retirement plan that they are electing to
credit NAFI service for CSRS or FERS retirement eligibility;
(b) Document the election on a form prescribed by OPM; and
(c) Submit the election with their application for immediate
retirement.
Sec. 847.805 What NAFI service can employees elect to credit toward
retirement eligibility under CSRS or FERS?
(a) Employees may elect to credit under this subpart any NAFI
service that isn't already creditable under 5 U.S.C. 8332(b)(16), or
under 5 CFR part 847, subpart D.
(b) NAFI service used to qualify for an immediate annuity based on
an election in paragraph (a) of this section cannot be credited in a
NAFI retirement plan for any purpose including eligibility and
calculations of NAFI benefits.
Sec. 847.806 How much NAFI service must employees elect to use to
qualify for an immediate CSRS or FERS retirement?
(a) Employees must elect complete periods of NAFI service under
this subpart.
(b) A complete period of NAFI service in paragraph (a) of this
section consists of the period from the date of appointment with an
NAFI employer to the date of termination.
Sec. 847.807 Do employees have to pay CSRS or FERS deposits for the
NAFI service they use to qualify for immediate retirement under CSRS or
FERS?
Employees are not required to pay CSRS or FERS deposits for the
NAFI service they use to qualify for immediate retirement under CSRS or
FERS. In fact, deposits cannot be made for any NAFI service employees
elect to credit for immediate retirement under this subpart.
Sec. 847.808 Is money in the NAFI retirement fund covering NAFI
service that an employee elects to use for immediate retirement under
CSRS or FERS, transferred to the Civil Service Retirement and
Disability Fund?
Money in the NAFI retirement fund covering NAFI service that an
employee elects to use for immediate retirement under CSRS or FERS
under this subpart cannot be transferred to the Civil Service
Retirement and Disability Fund.
Sec. 847.809 What effect will NAFI service used to qualify for an
immediate retirement have on the amount of the CSRS or FERS annuity?
The annuity of a CSRS or FERS employee who elects to credit NAFI
service under this subpart will be reduced under the provisions
outlined in subpart I of this part.
29. Add subpart I to read as follows:
Subpart I--Computing the Retirement Annuity for Employees Who Elect To
Use NAFI Service to Qualify for an Immediate CSRS or FERS Retirement
Sec.
847.901 What information is in this subpart?
847.902 How does an election to credit NAFI service for immediate
CSRS or FERS retirement under subpart H of this part affect the
computation of the CSRS or FERS retirement annuity?
847.903 How is the monthly reduction to the retirement annuity
computed?
847.904 What are Present Value Factors?
847.905 How is the present value of an immediate annuity with credit
for NAFI service computed?
847.906 How is the present value of a deferred annuity without
credit for NAFI service computed?
847.907 How is the monthly annuity rate used to compute the present
value of the deferred annuity without credit for NAFI service
determined?
847.908 If a retiree who elected to credit NAFI service under
subpart H of this part earns a supplemental annuity under 5 CFR part
837, how will that supplemental annuity be computed?
847.909 If a retiree who elected to credit NAFI service under
subpart H of this part earns a right to a redetermined annuity under
5 CFR part 837, how will the redetermined annuity be computed?
847.910 If a retiree who elected to credit NAFI service for CSRS
immediate retirement returns to work for the Government under
conditions that terminate the annuity, how will the retirement
annuity be computed when the employee's service with the Government
ends?
847.911 Is an employee who elects to credit NAFI service to qualify
for an immediate FERS retirement under subpart H of this part
eligible for an FERS annuity supplement under 5 CFR 842 subpart E?
847.912 If an employee who elects to credit NAFI service under
subpart H of this part elects a survivor annuity will the monthly
survivor annuity rate be subject to reduction?
Subpart I--Computing the Retirement Annuity for Employees Who Elect
To Use NAFI Service To Qualify for an Immediate CSRS or FERS
Retirement
Sec. 847.901 What information is in this subpart?
This subpart contains OPM's regulations describing the computation
of a CSRS or FERS retirement annuity when an employee elects to use
NAFI service to qualify for immediate retirement under subpart H of
this part.
Sec. 847.902 How does an election to credit NAFI service for
immediate CSRS or FERS retirement under subpart H of this part affect
the computation of the CSRS or FERS retirement annuity?
The retirement annuity of an employee who elects to use NAFI
service to qualify for an immediate CSRS or FERS retirement benefit
will be reduced to ensure the present value of the benefits payable
will be actuarially equivalent to those that would have been payable if
the employee had separated on the same date, but without credit for the
NAFI service.
Sec. 847.903 How is the monthly reduction to the retirement annuity
computed?
(a) The reduction equals:
(1) The difference in the present value of the immediate annuity
with credit for NAFI service and the deferred annuity without credit
for NAFI service, divided by
(2) The present value factor for the retiree's attained age (in
full years) at the time of retirement.
(b) The reduction computed in paragraph (a) of this section is
rounded to the next higher dollar.
Sec. 847.904 What are Present Value Factors
Present value factors have the same meaning in this subpart as they
do in 5 CFR 847.602.
[[Page 2182]]
Sec. 847.905 How is the present value of an immediate annuity with
credit for NAFI service computed?
(a) OPM will determine the present value of the immediate annuity
including service credit for NAFI service by multiplying the monthly
annuity rate as of the commencing date of the annuity by the present
value factor for the retiree's age on that date.
(b) The monthly annuity rate under paragraph (a) of this section
for CSRS and CSRS Offset retirees equals the monthly rate of annuity
otherwise payable under 5 U.S.C. chapter 83, subchapter III, including
all reductions provided under that subchapter.
(c) The monthly annuity rate under paragraph (a) of this section
for FERS retirees equals the monthly rate of annuity otherwise payable
under 5 U.S.C. chapter 84, subchapter II, including all reductions
provided under that subchapter.
Sec. 847.906 How is the present value of a deferred annuity without
credit for NAFI service computed?
(a) The present value of a deferred annuity equals the present
value of the deferred annuity without credit for the NAFI service as of
the deferred annuity date discounted for interest to that date.
(b) The present value of the deferred annuity without credit for
the NAFI service as of the deferred annuity date equals the retiree's
monthly annuity without credit for the NAFI service as of the deferred
annuity date times the present value factor for the retiree's age on
that date.
(c) The present value under paragraph (b) of this section is
discounted for interest by dividing that amount by a factor equal to
the value of the exponential function in which--
(1) The base is one plus the assumed interest rate under 5 CFR part
841, subpart D, on the commencing date of the retiree's immediate
annuity, and
(2) The exponent is one-twelfth of the number of months between the
commencing date of the retiree's immediate annuity and the deferred
annuity date.
Sec. 847.907 How is the monthly annuity rate used to compute the
present value of the deferred annuity without credit for NAFI service
determined?
(a) The monthly annuity rate used to compute the present value of
the deferred annuity under Sec. 847.906 of this subpart for CSRS
retirees equals the monthly annuity otherwise payable under 5 U.S.C.
chapter 83, subchapter III, including all reductions provided under
that subchapter.
(b) The monthly annuity rate used to compute the present value of
the deferred annuity under Sec. 847.906 of this subpart for CSRS
Offset retirees is computed as described in paragraph (a) of this
section, except that the reduction under section 5 U.S.C. 8349 does not
apply.
(c) The monthly annuity rate used to compute the present value of
the deferred annuity under Sec. 847.906 of this subpart for FERS
retirees equals the monthly rate of annuity otherwise payable under 5
U.S.C. chapter 84, subchapter II, including all reductions provided
under that subchapter.
Sec. 847.908 If a retiree who elected to credit NAFI service under
subpart H of this part earns a supplemental annuity under 5 CFR part
837, how will that supplemental annuity be computed?
This subpart does not affect supplemental annuities under 5 CFR
part 837. Supplemental annuities will be computed in accordance with
the provisions of that part.
Sec. 847.909 If a retiree who elected to credit NAFI service under
subpart H of this part earns a right to a redetermined annuity under 5
CFR part 837, how will the redetermined annuity be computed?
(a) A redetermined annuity will not be subject to a reduction under
this subpart if, on the date reemployment with the Government ends, the
retiree qualifies for an immediate retirement without credit for the
NAFI service.
(b) A redetermined annuity will be subject to a reduction under
this subpart if, on the date reemployment with the Government ends, the
retiree does not qualify for immediate retirement without credit for
the NAFI service.
(c) The reduction in paragraph (b) of this section is computed as
in accordance with Sec. 847.903 of this subpart as if the individual
was retiring for the first time.
Sec. 847.910 If a retiree who elected to credit NAFI service for CSRS
immediate retirement returns to work for the Government under
conditions that terminate the annuity, how will the retirement annuity
be computed when the employee's service with the Government ends?
(a) If an individual whose annuity terminates upon reemployment
with the Government elects to credit NAFI service under subpart B of
this part to qualify for a new immediate retirement when the
reemployment ends, the annuity will be subject to a reduction under
this subpart.
(b) If an individual whose annuity terminates upon reemployment
with the Government qualifies for a new immediate retirement when the
reemployment ends without crediting NAFI service, the new annuity will
not be subject to a reduction under this subpart.
(c) If an individual whose annuity terminates upon reemployment
with the Government qualifies for a deferred annuity when the
reemployment ends, the deferred annuity will not be subject to a
reduction under this subpart.
(d) The reduction in paragraph (a) of this section is computed in
accordance with Sec. 847.903 of this subpart as if the individual was
retiring for the first time.
Sec. 847.911 Is an employee who elects to credit NAFI service to
qualify for an immediate FERS retirement under subpart H of this part
eligible for an FERS annuity supplement under 5 CFR 842 subpart E?
An FERS Annuity Supplement is not payable to a retiree who elects
to credit NAFI service under subpart H of this part.
Sec. 847.912 If an employee who elects to credit NAFI service under
subpart H of this part elects a survivor annuity will the monthly
survivor annuity rate be subject to reduction?
(a) The monthly survivor annuity benefit of an employee who elects
to credit NAFI service under subpart H of this part will be subject to
reduction.
(b) The reduction under paragraph (a) of this section equals:
(1) The difference in the present value of the initial survivor
annuity generated from the immediate annuity computation with credit
for NAFI service and the initial survivor annuity generated from the
deferred annuity computation without credit for NAFI service, divided
by
(2) The present value factor for the retiree's age (in full years)
at the time of retirement.
(c) The present value of the survivor annuity generated from the
immediate annuity with credit for NAFI service in paragraph (b)(1) of
this section is computed under the provisions of Sec. 847.905 of this
subpart.
(d) The present value of the initial survivor annuity generated
from the deferred annuity without credit for NAFI service in paragraph
(b)(1) of this section is computed under the provisions of Sec.
847.906 of this subpart.
(e) The ages of the employee as of the commencing date of the
immediate retirement and the commencing date of the deferred retirement
are used to compute the present value of the survivor benefits under
paragraphs (c) and (d) of this section.
[FR Doc. 03-819 Filed 1-15-03; 8:45 am]
BILLING CODE 6325-50-P