Retroactive Restoration and the TSP Account

A recent appeals court decision grappled with the fine points in restoring an employee’s TSP account when he wins a removal appeal before the Merit Systems Protection Board. (Wilkes v. Department of Veterans Affairs (CAFC No. 2016-1220 (nonprecedential), 4/8/16)

This case involves Travis Wilkes, a 20-year Psychology Technician with the Veterans Administration, who prevailed against VA before the MSBP when he appealed his proposed removal. Wilkes retired rather than face removal, but appealed his proposed removal. He won. The Board ordered the agency to retroactively reinstate Wilkes, which encompasses back pay, interest, benefits, including TSP.

The agency’s actions with regard to Wilkes’ TSP account are the subject of the recent appeals court decision. While the agency made matching contributions to his TSP account retroactively, it referred Wilkes to the Federal Retirement Thrift Investment Board (FRTIB) if he had any questions about his individual account. It’s not clear whether he followed this advice, but what is clear is that Wilkes disagreed with how the retroactive TSP contributions were allocated. He ended up going back to the MSPB to complain that VA had not complied with the Board’s order. He argued the additional contributions had been misallocated to the “G Fund” instead of the “C Fund,” and that the agency failed to reimburse a TSP loan that had been converted to a taxable withdrawal when he was forced to retire. (pp. 3-4)

The agency testified that it had sent the retroactive allocations to the TSP and they were put in the G Fund “per an automatic setting that [Mr. Wilkes] could change by contacting the [FRTIB], as only he could implement such a change.” (p. 4) The Administrative Judge found the agency had acted properly, that VA had made the correct matching contributions to Wilkes’ TSP account, and that the VA had nothing to do with the TSP loan. Since VA had complied fully with the MSPB reinstatement order, the AJ and the full Board declined to order VA to do anything further. (pp. 4-5)

Mr. Wilkes headed to the federal appeals court to argue his case. Shortly thereafter, Wilkes learned the FRTIB had corrected the deposits to allocate them to the C Fund, so this part of his appeal was “abandoned.” (p. 6)

Wilkes additionally contended that VA was required to reinstate his TSP loan and make up for the fact that it had been converted to a taxable withdrawal when he was forced to retire. Not so, rules the court:

“Mr. Wilkes, not the VA, had an obligation to seek reinstatement of his TSP loan….[I]f an agency reinstates a wrongly separated TSP participant, the participant must notify the TSP within ninety days of reinstatement to restore any previously withdrawn amount to the TSP account. …However, the regulations do not require the TSP to automatically restore a participant’s loan, nor do they require the agency to notify the participant of the right to restore a TSP loan previously treated as a taxable distribution.” (pp. 7-8)

Bottom line: Mr. Wilkes has himself to blame for any problems encountered with TSP allocations and loans.

Wilkes v. VA (2016-1220)

© 2016 Susan McGuire Smith. All rights reserved. This article may not be reproduced without express written consent from Susan McGuire Smith.

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About the Author

Susan McGuire Smith spent most of her federal legal career with NASA, serving as Chief Counsel at Marshall Space Flight Center for 14 years. Her expertise is in government contracts, ethics, and personnel law.

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