2025-19538: Roth In-Plan Conversions

Federal Register, Volume 90 Issue 197 (Wednesday, October 15, 2025) [Federal Register Volume 90, Number 197 (Wednesday, October 15, 2025)] [Proposed Rules] [Pages 48267-48268] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2025-19538] ======================================================================== Proposed Rules Federal Register ________________________________________________________________________ This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. ======================================================================== Federal Register / Vol. 90, No. 197 / Wednesday, October 15, 2025 / Proposed Rules [[Page 48267]] FEDERAL RETIREMENT THRIFT INVESTMENT BOARD 5 CFR Part 1650 RIN 3222-AA00 Roth In-Plan Conversions

Agency

Federal Retirement Thrift Investment Board.

Action

Proposed rule. -----------------------------------------------------------------------

Summary

The Federal Retirement Thrift Investment Board (FRTIB) proposes to amend its regulations to permit participants in the Thrift Savings Plan (TSP) to convert amounts in their traditional TSP account balances to amounts in their Roth TSP account balances, subject to applicable tax consequences.

Dates

Comments must be received on or before November 14, 2025.

Addresses

You may submit comments using one of the following methods: Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments. Mail: Office of General Counsel, Attn: Dharmesh Vashee, Federal Retirement Thrift Investment Board, 77 K Street NE, Suite 1000, Washington, DC 20002. Comments will be made available to the public online at https://www.regulations.gov. Do not include any personally identifiable or confidential information that you do not want publicly disclosed. Anonymous comments are acceptable.

For Further Information Contact

For press inquiries: Jim Kaplan at (202) 864-7150. For information about how to comment on this proposed rule: Laurissa Stokes at (202) 308-7707.

Supplementary Information

The FRTIB administers the TSP, which was established by the Federal Employees' Retirement System Act of 1986 (FERSA), Public Law 99-335, 100 Stat. 514. The TSP is a retirement savings plan for Federal civilian employees and members of the uniformed services. It is similar to cash or deferred arrangements established for private-sector employees under section 401(k) of the Internal Revenue Code (26 U.S.C. 401(k)). The provisions of FERSA that govern the TSP are codified, as amended, largely at 5 U.S.C 8351 and 8401-80. Since the introduction of Roth TSP contributions in 2012, participants have expressed interest in converting traditional balances to Roth balances within the plan. The 2024 TSP Participant Satisfaction Survey asked participants about their interest in a Roth in-plan conversion feature. Thirty-five percent of respondents replied that they are ``likely'' or ``extremely likely'' to use an in-plan conversion feature if offered in the TSP. This proposed rule would permit all TSP participants (active and separated), as well spouse beneficiaries, to convert amounts in their traditional balance to amounts their Roth balance. In accordance with the Internal Revenue Code, the converted amount would be treated as a distribution from the traditional account that is taxable in the year the conversion is done. Under the proposed rule, in-plan conversion requests would be subject to conditions designed to discourage frequent, small transactions and simplify administrative operations. For example, each conversion must be at least $500, and the number of conversions per calendar year would be capped by the TSP record keeper. The FRTIB believes that offering Roth in-plan conversions will improve participant satisfaction and provide valuable retirement planning flexibility while maintaining the TSP's low administrative costs. Regulatory Flexibility Act This proposed regulation will not have a significant economic impact on a substantial number of small entities. This regulation will affect Federal employees, members of the uniformed services, and spouse beneficiaries who participate in the TSP. Paperwork Reduction Act This proposed regulation does not require additional reporting under the criteria of the Paperwork Reduction Act. Unfunded Mandates Reform Act of 1995 Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 632, 653, and 1501-1571, the effects of this regulation on State, local, and Tribal governments and the private sector have been assessed. This regulation will not compel the expenditure in any one year of $100 million or more by State, local, and Tribal governments, in the aggregate, or by the private sector. Therefore, a statement under 2 U.S.C. 1532 is not required. List of Subjects in 5 CFR Part 1650 Alimony, Claims, Government employees, Pensions, Retirement. Ravindra Deo, Executive Director, Federal Retirement Thrift Investment Board. The FRTIB proposes to amend 5 CFR chapter VI as follows: PART 1650--METHODS OF WITHDRAWING FUNDS FROM THE THRIFT SAVINGS PLAN 0