[Federal Register Volume 60, Number 192 (Wednesday, October 4, 1995)]
[Rules and Regulations]
[Pages 51881-51885]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24666]
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OFFICE OF PERSONNEL MANAGEMENT
5 CFR Parts 870, 871, 872, and 874
RIN 3206-AG68
Federal Employees' Group Life Insurance Program: Assignment of
Life Insurance
AGENCY: Office of Personnel Management.
ACTION: Interim regulations with request for comments.
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[[Page 51882]]
SUMMARY: The Office of Personnel Management (OPM) is issuing interim
regulations to implement section 4 of Public Law 103-336, which amended
the Federal Employees' Group Life Insurance (FEGLI) law to provide that
all Federal employees and former employees could irrevocably assign
ownership of their life insurance coverage to someone else. Previously,
only judges could assign ownership of their insurance.
DATES: These interim regulations are effective November 3, 1995.
Comments must be received on or before November 3, 1995.
ADDRESSES: Send written comments to Lucretia F. Myers, Assistant
Director for Insurance Programs, Retirement and Insurance Service,
Office of Personnel Management, P.O. Box 57, Washington, DC 20044: or
deliver to OPM, Room 3451, 1900 E Street NW., Washington, DC; or FAX to
(202) 606-0633.
FOR FURTHER INFORMATION CONTACT: Margaret Sears (202) 606-0004.
SUPPLEMENTARY INFORMATION: Public Law 103-336, enacted October 3, 1994,
amended the FEGLI law to provide that all insured Federal employees and
former employees may irrevocably assign ownership of their FEGLI
coverage to someone else. Previously, the right to assign ownership was
limited to judges. These interim regulations amend current regulations
to expand their application to all insured Federal employees,
annuitants, and compensationers. In addition, the interim regulations
address issues that affect employees, annuitants, or compensationers,
but do not affect judges.
Under these interim regulations, insured persons may irrevocably
assign their life insurance coverage, except for accidental
dismemberment insurance and family optional insurance, to one or more
individuals, corporations, or trustees. When a person has more than one
type of assignable insurance (for example, basic life insurance,
standard optional insurance, and additional optional insurance) he or
she must assign all of the insurance, not just a portion of it. The
insured person may assign ownership to more than one individual,
corporation, or trustee. In making an assignment to multiple assignees,
the insured person must specify the percentage of the total value of
the insurance that is to be owned by each assignee.
An insured person who elects a Living Benefit cannot assign the
balance of his or her insurance, nor can an insured person who assigns
his or her insurance elect a Living Benefit.
When the assignment is made, the assignee assumes most of the
rights related to the insurance, including the right to cancel all
insurance, to cancel or reduce optional insurance, to designate
beneficiaries, and to convert the insurance to a private policy when
the FEGLI coverage terminates for a reason other than cancellation. The
insured person retains the right to increase coverage, but cannot
reduce or cancel it.
An assignment automatically cancels any designation of beneficiary
the insured person might have made, and the insured person no longer
has the right to designate a beneficiary. Instead, the assignee assumes
the right to designate beneficiaries. Although the assignee is
automatically the beneficiary if he or she does not designate a
beneficiary, the assignee may designate himself or herself as
beneficiary and name another person as contingent beneficiary to
receive the insurance benefits if the assignee dies before the insured
person. If the assignee does not designate a contingent beneficiary and
dies before the insured person, the life insurance is payable to the
deceased assignee's estate when the insured person dies. Reopening the
deceased assignee's estate years after the assignee's death can cause
difficulties for the heirs. By naming a contingent beneficiary, the
assignee can simplify payment of the life insurance.
Previously, the regulations permitted legally appointed guardians
of assignees to designate beneficiaries on behalf of the assignee. We
have discontinued this provision in the interim regulations in order to
conform to the regulations applicable to designations of beneficiary
made by Federal employees and annuitants (5 CFR 870.902). These
regulations do not provide for designations of beneficiary made by
legally appointed guardians on behalf of Federal employees and
annuitants.
Under the FEGLI law, an employee who retires or receives
compensation from the Office of Workers' Compensation Programs and
meets certain length-of-participation requirements may continue life
insurance coverage as an annuitant or compensationer unless he or she
converts it to a private policy. These interim regulations provide
that, if the employee had assigned the insurance, the assignee assumes
the right to convert the insurance when the insured employee becomes an
annuitant or compensationer. If there are multiple assignees, some may
choose to convert and some may choose to allow the insurance to
continue while the insured person is receiving annuity or compensation
payments. In this case, the amount each assignee can convert is
determined by the assignee's share of the total value of the insurance.
However, the amount of each type of insurance continued is determined
by the total percentage of the shares of the assignees who choose
continued coverage. For example, if two assignees, each having a 25
percent share in the ownership of the total insurance amount consisting
of basic life and standard optional, chose to continue coverage while
the other assignees chose to convert, 50 percent of the value of the
basic life and 50 percent of the value of the standard optional would
be continued. Although the assignees own a share of the total value of
the insurance, it is necessary to distinguish between the types of
insurance in order to apply premiums and reduction factors during
retirement.
An insured person who retires or receives compensation under
circumstances that allow continued life insurance coverage retains the
right, at the time of retirement, to choose to maintain more than the
minimum post-retirement basic life insurance coverage than is provided
through the 75 percent reduction after age 65. That is, when a retiree
reaches age 65, basic life insurance begins to reduce at a rate of 2
percent per month until it reaches 25 percent of its value at the time
the person retired (a 75 percent reduction) unless, at the time of
retirement, the person chose to pay an extra premium for a reduction of
only 50 percent or no reduction at all. Compensationers' basic life
insurance is affected in the same way and they have the same
opportunity to elect more that the minimum post-retirement basic life
insurance coverage. Assignees cannot make the initial election of a
lesser reduction, but if the insured person elects 50 percent or no
reduction, the assignee can later cancel that election. When an
election of 50 percent or no reduction is cancelled, the reduction
percentage reverts to 75 percent.
After making an assignment, the insured person continues to pay the
premiums for the insurance through withholdings from pay, annuity, or
compensation. However, if the insured person is retired under the
Federal Employees Retirement System and the annuity is too small to
cover the premiums, either the insured person or the assignee(s) may
pay the premiums directly to the retirement system.
FEGLI insurance terminates when an employee separates from his or
her position, at the end of 12 months in nonpay status, or when the
employee is transferred to a position in which he or
[[Page 51883]]
she is not eligible for life insurance coverage. The employee then has
a 31-day temporary extension of coverage during which he or she can
convert to an individual policy. If the employee has assigned ownership
of the insurance, the assignee, not the employee, has the right to
convert the insurance to an individual policy on the employee's life.
When there are multiple assignees, each assignee can independently
convert his or her share of the total insurance amount.
The assignment itself terminates 31 days after the insurance
terminates unless the employee returns to a position in which the life
insurance resumes before the 31-day period expires. If the employee
returns to such a position after the 31-day period, the assignment does
not resume. To assign ownership of the life insurance acquired with the
new employment, the employee must again execute an assignment form.
In the FEGLI Program, when an annuitant is reemployed in the
Federal service in a position in which he or she continues to receive
the annuity and is eligible for life insurance coverage, any basic life
insurance, standard optional insurance, and family optional insurance
the person has as an annuitant is suspended and the person becomes
covered as an employee. The additional optional insurance the person
has as an annuitant remains in force unless the person chooses to have
the coverage as an employee instead. The interim regulations provide
that a reemployed annuitant who had previously assigned ownership of
his or her life insurance retains the right to make the election
concerning the additional optional insurance; however, all insurance
the person has, whether as an annuitant or as an employee, is subject
to the existing assignment.
Waiver of Notice of Proposed Rulemaking
Pursuant to section 553(b)(3)(B) of title 5 of the U.S. Code, I
find that good cause exists for waiving the general notice of
rulemaking because these regulations implement Section 4 of Public Law
103-336, which was effective October 3, 1994. Employees and employing
offices need to have these regulations in place as soon as possible.
Therefore, it is in the public interest not to issue proposed
regulations.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because they
primarily affect Federal employees, annuitants, and compensationers.
List of Subjects
5 CFR Part 870
Administrative practice and procedure, Government employees,
Hostages, Iraq, Kuwait, Lebanon, Life insurance, Retirement.
5 CFR Parts 871 and 872
Administrative practice and procedure, Government employees, Life
insurance, Retirement.
5 CFR Part 874
Government employees, Life insurance, Retirement.
Office of Personnel Management.
James B. King,
Director.
Accordingly, OPM is amending 5 CFR parts 870, 871, 872, and 874 as
follows:
PART 870--BASIC LIFE INSURANCE
1. The authority citation for part 870 continues to read as
follows:
Authority: 5 U.S.C. 8716; Sec. 870.202(c) also issued under 5
U.S.C. 7701(b)(2); subpart J also issued under sec. 599C of Pub. L.
101-513, 104 Stat. 2064, as amended.
2. In Sec. 870.601, paragraph (g) is added to read as follows:
Sec. 870.601 Eligibility for life insurance.
* * * * *
(g) Judges retiring under 28 U.S.C. 371 (a) and (b), 28 U.S.C.
372(a), and 26 U.S.C. 7447 are considered employees under the Federal
Employees' Group Life Insurance law. Insurance for these judges
continues without interruption or diminution upon retirement.
3. In Sec. 870.701, paragraph (e) is added to read as follows:
Sec. 870.701 Eligibility for life insurance.
* * * * *
(e) Judges retiring under 28 U.S.C. 371 (a) and (b), 28 U.S.C.
372(a), and 26 U.S.C. 7447 are considered employees under the Federal
Employees' Group Life Insurance law. Insurance for these judges
continues without interruption or diminution upon retirement. The
amount of basic insurance for a judge who elects to receive
compensation in lieu of annuity is computed in accordance with
Sec. 870.702 of this part.
4. In Sec. 870.801, paragraph (a) is revised to read as follows:
Sec. 870.801 Assignments.
(a) An insured individual may irrevocably assign ownership of his
or her life insurance coverage to one or more individuals,
corporations, or trustees. Part 874 of this chapter describes how an
insured individual may assign all incidents of ownership (except family
optional insurance and accidental dismemberment insurance) to another
person, corporation, or trustee. Part 874 also describes the effects of
such assignment, procedures for making an assignment, and related
matters.
* * * * *
PART 871--STANDARD OPTIONAL LIFE INSURANCE
1. The authority citation for part 871 continues to read as
follows:
Authority: 5 U.S.C. 8716.
2. Section 871.701 is revised to read as follows:
Sec. 871.701 Assignments.
An insured individual may irrevocably assign ownership of his or
her life insurance coverage to one or more individuals, corporations,
or trustees. Part 874 of this chapter describes how an insured
individual may assign all incidents of ownership (except family
optional insurance and accidental dismemberment insurance) to another
person, corporation, or trustee. Part 874 also describes the effects of
such assignment, procedures for making an assignment, and related
matters.
PART 872--ADDITIONAL OPTIONAL LIFE INSURANCE
1. The authority citation for part 872 continues to read as
follows:
Authority: 5 U.S.C. 8716.
2. Section Sec. 872.701 is revised to read as follows:
Sec. 872.701 Assignments.
An insured individual may irrevocably assign ownership of his or
her life insurance coverage to one or more individuals, corporations,
or trustees. Part 874 of this chapter describes how an insured
individual may assign all incidents of ownership (except family
optional insurance and accidental dismemberment insurance) to another
person, corporation, or trustee. Part 874 also describes the effects of
such assignment, procedures for making an assignment, and related
matters.
PART 874--ASSIGNMENT OF LIFE INSURANCE
Part 874 is revised to read as follows:
Subpart A--Definitions of Terms
Sec.
874.101 Definitions.
[[Page 51884]]
Subpart B--Coverage
874.201 Assignments permitted.
874.202 Rights of the assignee.
874.203 Rights of the insured individual after assignment.
Subpart C--Assignment Procedures
874.301 Making an assignment.
874.302 Effective date of the assignment.
874.303 Notification of current address.
874.304 Reconsideration.
Subpart D--Amount of Insurance and Withholdings and Contributions
874.401 Amount of Insurance.
874.402 Withholdings and contributions.
Subpart E--Termination and Conversion
874.501 Termination.
874.502 Eligibility to convert.
874.503 Rates for converted insurance.
874.504 Notification of conversion rights.
Subpart F--Designations of Beneficiary
874.601 Designations and changes of beneficiary.
Subpart G--Annuitants and Compensationers
874.701 Annuitants and compensationers.
874.702 Reemployed annuitants.
Authority: 5 U.S.C. 8716.
Subpart A--Definitions of Terms
Sec. 874.101 Definitions.
The terms defined under Sec. 870.104 of this chapter have the same
meanings in this part.
Subpart B--Coverage
Sec. 874.201 Assignments permitted.
(a) An insured individual may irrevocably assign ownership of life
insurance coverage to one or more individuals, corporations, or
trustees. An insured individual may assign ownership of basic life
insurance, standard optional life insurance, and additional optional
life insurance coverage, but may not assign ownership of family
optional insurance or accidental dismemberment coverage. If an insured
individual owns more than one assignable type of insurance, he or she
must assign all the assignable insurance. An insured individual cannot
assign only a portion of assignable insurance.
(b) An insured individual may not name contingent assignees in case
the primary assignee dies before the insured individual.
(c) If the insurance is assigned to two or more individuals,
corporations, or trustees, the insured individual must specify
percentage shares, rather than dollar amounts or types of insurance, to
go to each assignee.
(d) Once assigned, the value of the insurance increases or
decreases according to any automatic increase or decrease in the value
of the coverage as provided for in parts 870, 871, and 872 of this
chapter.
(e) An insured individual who has elected a Living Benefit under
subpart K of part 870 of this chapter may not assign his or her
insurance coverage and an insured individual who has assigned his or
her insurance coverage may not elect a Living Benefit.
Sec. 874.202 Rights of the assignee.
(a) An insured individual who assigns ownership of insurance
continues to be the insured individual, but the assignee assumes the
rights of an insured individual, except as provided in Sec. 874.203 of
this part.
(b) The assignee assumes all rights to waive or decline insurance
under this chapter according to the provisions of Secs. 870.204,
871.204, and 872.204 of this chapter. When the insurance is assigned to
two or more individuals, corporations, or trustees, all assignees must
agree to waive or decline the insurance. A waiver of the basic
insurance in accordance with the provisions of Sec. 870.204 of this
chapter terminates all insurance under this chapter and terminates the
assignment under this part.
(c) The assignee may not elect a Living Benefit under subpart K of
part 870 of this chapter.
(d) The right of the assignee to designate beneficiaries is set
forth in subpart F of this part.
(e) The rights of the assignee when the insured individual retires
or becomes a compensationer are set forth in subpart G of this part.
Sec. 874.203 Rights of the insured individual after assignment.
(a) The right to increase insurance coverage remains with the
insured individual and does not transfer to the assignee. If the
insured individual who has made an assignment later elects increased
insurance under Sec. 871.205 or Sec. 872.205 of this chapter, or during
an open enrollment period, the increased insurance is considered
covered by the existing assignment.
(b) The rights of an insured individual who assigns his or her life
insurance and later retires are set forth in subpart G of this part.
Subpart C--Assignment Procedures
Sec. 874.301 Making an assignment.
To assign insurance, the insured individual must complete and
submit to the employing office a signed and witnessed assignment form
(RI 76-10) indicating the intent to irrevocably assign all assignable
incidents of ownership in the insurance.
Sec. 874.302 Effective date of the assignment.
An assignment under this part is effective on the date the
employing office receives the properly completed, signed, and witnessed
assignment form.
Sec. 874.303 Notification of current address.
Each assignee is responsible for keeping the insured individual's
employing office advised of his or her current address.
Sec. 874.304 Reconsideration.
An insured individual or an assignee may request the employing
agency to reconsider an employing office's initial determination
denying an entitlement related to assignments. The rules and procedures
under Secs. 870.102 and 870.103 are applicable to this part, subject to
the withholdings and contributions under Sec. 874.402 of this part.
Subpart D--Amount of Insurance and Withholdings and Contributions
Sec. 874.401 Amount of insurance.
The amount of insurance is based on the insured individual's basic
pay as specified in subpart C of parts 870, 871, and 872 of this
chapter.
Sec. 874.402 Withholdings and contributions.
(a) Subject to the provisions of subpart D of parts 870, 871, and
872 of this chapter, premium payments for assigned insurance are
withheld from the pay, annuity, or compensation of the covered
individual.
(b) Assignees of insured individuals who are retired under the
Federal Employees Retirement System and whose annuities are too low to
cover the life insurance premiums may make the direct premium payments
described in Secs. 870.401(j), 871.401(i), and 872.401(i) of this
chapter if the annuitant declines to make direct payment. In such
cases, the retirement system must notify the assignees. In the case of
multiple assignees, each assignee who chooses to make direct payment is
responsible for the percentage of the total premium representing his or
her portion of the insurance.
(c) When the amount of insurance continued under Sec. 874.701(d) is
not an even multiple of $1,000, withholding is based on the amount of
insurance rounded to the next lower thousand.
Subpart E--Termination and Conversion
Sec. 874.501 Termination.
(a) Assigned insurance terminates under the conditions stated in
subpart E of parts 870, 871, and 872 of this chapter.
[[Page 51885]]
(b) The assignment terminates 31 days after the insurance
terminates, unless the covered individual is reemployed in or returns
to a position in which he or she is entitled to coverage under this
chapter before the expiration of the 31-day period following
termination of insurance.
Sec. 874.502 Eligibility to convert.
(a) When an insured individual's insurance terminates under the
conditions set forth in subpart E of parts 870, 871, and 872 of this
chapter, an assignee has the right to convert all or a portion of his
or her group life insurance to an individual policy on the insured
individual. The conditions specified in subpart E of those parts apply
to assignees who elect to convert.
(b) When insurance is assigned to more than one assignee, each
assignee has the right to convert all or part of his or her share of
the insurance. Except as provided in Sec. 874.701 of this part, any
assignee who does not convert loses all interest in the insurance.
(c) When multiple assignees convert the assigned insurance to
individual policies on the insured individual in accordance with this
subpart, the maximum amount of insurance each assignee can convert is
determined by the assignee's share of total insurance under this
chapter. If such amount is not a multiple of $1,000, it is rounded up
to the next thousand dollars.
Sec. 874.503 Rates for converted insurance.
Rates for converted life insurance are based on the insured
individual's age and class of risk at the time the conversion policy is
issued.
Sec. 874.504 Notification of conversion rights.
The employing office must notify each assignee of his or her
conversion right at the time the assigned group insurance terminates.
Subpart F--Designations of Beneficiary
Sec. 874.601 Designations and changes of beneficiary.
(a) An assignment automatically cancels an insured individual's
prior designation of beneficiary.
(b) Each assignee may designate a beneficiary or beneficiaries to
receive insurance proceeds upon the death of the insured individual. An
assignee may designate himself or herself as the primary beneficiary
and name some other person(s) as contingent beneficiary(ies) to receive
insurance benefits in the event that the assignee predeceases the
insured individual.
(c) Assigned insurance is paid to an assignee's estate if the
assignee predeceases the insured individual and--
(1) The assignee did not reassign the insurance,
(2) The assignee did not designate a beneficiary, or
(3) The assignee's designated beneficiary predeceased the insured
individual.
(d) The provisions of Sec. 870.902 of this chapter apply to
designations of beneficiary filed by assignees.
Subpart G--Annuitants and Compensationers
Sec. 874.701 Annuitants and compensationers.
(a) If an insured individual assigns basic insurance coverage under
this chapter and later becomes eligible to continue such coverage while
receiving annuity or workers' compensation as provided under
Sec. 870.601(a) or Sec. 870.701(a) of this chapter, the insured
individual may, at the time he or she becomes eligible to continue such
insurance as an annuitant or compensationer, elect increased lifetime
basic insurance coverage as provided in Sec. 870.601(c) (3) and (4) or
Sec. 870.701(c) (3) and (4) of this chapter.
(b) After the insured individual has made an election as described
in paragraph (a) of this section, the assignee (or, in cases of
multiple assignees, all of the assignees acting together) may, at any
time, elect to cancel the annuitant's or compensationer's election of
increased lifetime basic insurance as provided in Sec. 870.601(c) or
Sec. 870.701(c) of this chapter.
(c) When multiple assignees have been named and, at the time the
insured individual becomes eligible for continued coverage as an
annuitant under Secs. 870.601, 871.501, and/or 872.501 of this chapter,
some assignees choose to convert their portions and others choose to
have their portions of insurance continued during the insured
individual's retirement, the amount of each type of continued insurance
is the total percentage of the shares of the assignees who choose to
continue the coverage.
(d) When multiple assignees have been named and, at the time the
insured individual becomes eligible for continued coverage as a
compensationer under Secs. 870.701, 871.501, and/or 872.501 of this
chapter, some assignees choose to convert their portions of the
insurance and others choose to have their portions continued while the
insured individual is receiving compensation, the amount of each type
of continued insurance is determined by the total percentage of the
shares of the assignees who choose to continue the coverage.
Sec. 874.702 Reemployed annuitants.
(a) The right of a reemployed annuitant to elect additional
optional coverage as an employee rather than as an annuitant under
Sec. 872.604 remains with the insured individual and does not transfer
to the assignee.
(b) When an annuitant who has assigned his or her insurance is
reemployed in a position in which he or she is entitled to life
insurance coverage, the coverage he or she acquires as a reemployed
annuitant is subject to the existing assignment.
[FR Doc. 95-24666 Filed 10-3-95; 8:45 am]
BILLING CODE 6325-01-P
