[Federal Register Volume 59, Number 169 (Thursday, September 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21651]
[[Page Unknown]]
[Federal Register: September 1, 1994]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 8
RIN 2900-AH03
National Service Life Insurance
AGENCY: Department of Veterans Affairs.
ACTION: Proposed regulation.
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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its
National Service Life Insurance (NSLI) policy loan regulation to
provide that when an interest rate change is required on an NSLI
variable rate loan the effective date of the new interest rate will be
on or after the first day of October on the date the change is
implemented through the insurance Automatic Data Processing (ADP)
system. This action is being taken to allow sufficient time to make all
necessary modifications to the Insurance ADP system without any adverse
impact on NSLI policyholders or VA.
DATES: Comments must be received on or before October 3, 1994.
ADDRESSES: Interested persons are invited to submit written comments,
suggestions, or objections regarding the proposed regulation to the
Secretary of Veterans Affairs (271A), Department of Veterans Affairs,
810 Vermont Avenue, NW., Washington, DC 20420. All written comments
will be available for public inspection in the Veterans Services Unit,
Room 119 of the above address, between the hours of 8 a.m. and 4:30
p.m., Monday through Friday (except holidays).
FOR FURTHER INFORMATION CONTACT:
Mr. Gregory Hosmer, Senior Insurance Specialist/Attorney, Department of
Veterans Affairs Regional Office and Insurance Center, P.O. Box 8079,
Philadelphia, Pennsylvania 19101, (215) 951-5710.
SUPPLEMENTARY INFORMATION: Sice 1987 the loan interest rate on all new
NSLI policy loans has been a variable rate that is tied to an economic
indicator. The indicator is the Ten-Year Constant Maturities Index of
U.S. Treasury Securities for the month of June of each year. Current
regulations require rate changes to be effective October 1. 38 CFR
8.28(c). The June 1, 1994, indicator has resulted in a need to increase
the loan interest rate by two percentage points from 5% to 7%.
From an administrative standpoint, in all likelihood it appears
that VA's computer resource staff will not be able to provide the
necessary programming support to implement this change on October 1
without adversely affecting two major insurance ADP projects. The first
critical project involves the expansion of the insurance master record,
which is scheduled to be implemented in October of this year. Because
of the current limitation of the system, the insurance personnel have
been forced to split policies into two and in some cases three or four
policies in order to process loans in excess of funds over $9,999.99.
This results in the issuance of multiple policies, with separate
billings for loan interest and premiums and separate annual statements.
A similar situation arises when the amount payable on an insurance
death claim exceeds $9,999.99 and the policy must be split. These split
policies adversely affect customer service and require a substantial
amount of clerical intervention in order to process the desired
actions.
The second project which would in all likelihood be delayed is the
``rehosting'' project which will consolidate insurance ADP processing
onto one mainframe system. Today, the insurance system runs on two
parallel systems, and IBM mainframe which does all of the batch
processing and a Honeywell system that handles all of the data entry
transactions. In running parallel systems VA incurs additional
maintenance fees as well as redundant program costs to keep two systems
synchronized.
In addition to our administrative concerns, the failure to program
the ADP system by October 1 to reflect the rate change could have an
adverse impact on certain NSLI policyholders. Implementing the interest
rate change on October 1 without programming the ADP system to bill
policyholders on that date would require us to bill policyholders for
back interest, which could put some policyholders in immediate jeopardy
of having their policies automatically cancelled. This would occur if
the outstanding debt on the policy (the loan principal plus interest)
exceeds the policy cash value. Amending the regulations in the manner
proposed would allow us sufficient time to make all necessary ADP
modifications without any adverse impact on our policyholders.
The Secretary of Veterans Affairs hereby certifies that this
proposed regulation will not have a significant economic impact on a
substantial number of small entities as they are defined in the
Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612. Pursuant to 5
U.S.C. 605(b), this proposed regulation is, therefore, exempt from the
initial and final regulatory flexibility analyses requirements of
section 603 and 604. The reason for this certification is that this
proposed regulation will effect only certain Government life insurance
policyholders. It will, therefore, have no significant direct impact on
small entities in the terms of compliance costs, paperwork requirement
or effects on competition.
The comment period for this proposed rule has been shortened from
sixty days to thirty days. It has been determined that this is
necessary in order to establish a final rule prior to October 1, 1994,
when the next rate change is effective.
The catalog of Federal Domestic Assistance Program number for
this regulation is 64.103.
List of Subjects 38 CFR Part 8
Life Insurance, Loan programs--veterans, Veterans.
Approved August 23, 1994.
Jesse Brown,
Secretary of Veterans Affairs.
For the reasons set out in the preamble, 38 CFR part 8 is proposed
to be amended as set forth below.
PART 8--NATIONAL SERVICE LIFE INSURANCE
1. The authority citation for part 8 continues to read as follows:
Authority: 38 U.S.C. 502, 1901-1924, 1981-1988, unless otherwise
noted.
2. In Sec. 8.28(c) the second sentence is removed and the following
is added in place thereof:
Sec. 8.28 Policy loans.
* * * * *
(c) * * * Such loan rate shall be effective on the date on or after
the first day of October on which the rate change is made in the
insurance automatic data processing system, and shall remain in effect
for not less than one year after the date of establishment. * * *
[FR Doc. 94-21651 Filed 8-31-94; 8:45 am]
BILLING CODE 8320-01-M
