[Congressional Record Volume 151, Number 78 (Tuesday, June 14, 2005)]
[Senate]
[Pages S6484-S6486]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CRAIG:
  S. 1235. A bill to amend chapters 19 and 37 of title 38, United 
States Code, to extend the availability of $400,000 in coverage under 
the servicemembers' life insurance and veterans' group life insurance 
programs, and for other purposes; to the Committee on Veterans' 
Affairs.
  Mr. CRAIG. Mr. President, I have sought recognition to comment on 
legislation that I have introduced today that will improve insurance 
and housing benefits available for our Nation's servicemembers and 
veterans. The ``Veterans Benefits Improvement Act of 2005'' would 
increase the maximum amount of Servicemembers' Group Life Insurance, 
SGLI, and Veterans' Group Life Insurance, VGLI, coverage from $250,000 
to $400,000; would require the Secretary of Defense to notify spouses 
of insured servicemembers when those servicemembers elect an SGLI 
beneficiary other than their spouse or when they elect to reduce SGLI 
coverage amounts; would provide a two-year, post-discharge window 
within which totally disabled veterans might elect to convert their 
insurance coverage from SGLI to VGLI; and would provide flexibility to 
VA's hybrid adjustable rate mortgage program so that servicemembers and 
veterans might use their VA home loan benefits in conjunction with this 
popular type of mortgage financing.
  There already has been a great deal of discussion in the 109th 
Congress about the adequacy of benefits for the survivors of those who 
have lost their lives in service. There has also been a great deal of 
action. Section 1012 of Public Law 109-13, the ``Emergency Supplemental 
Appropriation Act for Defense, the Global War on Terror, and Tsunami 
Relief, 2005,'' made improvements to the SGLI program. However, section 
1012 also specified that the SGLI improvements made in the act be 
terminated effective September 30, 2005, and that the law as it existed 
prior to the enactment of Public Law 109-13 be revived on that date. As 
I understand it, the purpose of the termination language was to give 
the committee of jurisdiction--in this case, the Veterans' Affairs 
Committee, which I

[[Page S6485]]

chair in the Senate--the opportunity to proceed with proposals that 
would put a more permanent stamp on changes to the SGLI program.
  Towards that end, and consistent with the changes enacted in Public 
Law 109-13, section 2(a) of my legislation would increase the maximum 
amount of SGLI and VGLI coverage from $250,000 to $400,000 effective 
October 1, 2005. SGLI coverage meets the insurance needs of 
servicemembers and Reserve members; VGLI coverage is available to meet 
the insurance needs of veterans as they transition out of military or 
naval service. The higher amount of coverage in my bill, in combination 
with other Federal assistance provided by VA, the Department of 
Defense, and the Social Security Administration, would provide for a 
more appropriate level of financial assistance for survivors of insured 
servicemembers and veterans. For example, the surviving spouse of an 
Army Sergeant killed in action who has two dependent children would 
have eligibility for up to $625,186 in lump-sum benefit assistance from 
the Federal government.
  In addition, section 2(a) of the legislation I have introduced today 
would require the Secretary of Defense to notify, in writing, the 
spouses of servicemembers who elect either to name beneficiaries other 
than their spouses, or who elect to reduce their SGLI coverage. Under 
existing law, servicemembers have the right to name the insurance 
beneficiary of their choice. There are, however, some incidences of 
spouses of married servicemembers being left without adequate insurance 
for themselves or their children because they were unaware of the 
insurance decisions the servicemembers had made. I believe the spousal 
notification requirement in my bill strikes an appropriate balance 
between the long-standing rights of servicemembers to make their own, 
unfettered insurance choices, and the rights of spouses to be informed 
of matters that may impact on their future financial stability.
  Turning to the insurance needs of severely disabled servicemembers, 
section 2(b) of this bill would extend for 1 year the period within 
which totally disabled veterans discharged from service might apply to 
convert their SGLI coverage to VGLI coverage. Under current law, 
servicemembers discharged from service have a 120-day grace period 
within which they are provided premium-free coverage under SGLI and may 
convert to VGLI coverage without needing to meet underwriting 
requirements. Servicemembers separated from service who are totally 
disabled may apply for an extension of the free SGLI coverage and VGLI 
conversion benefit that lasts up to one year after military discharge. 
There are two benefits of applying for the 1 year extension. The first 
is that SGLI coverage during the 1 year period is provided at no cost 
to the servicemember. The second is that the application for extension 
also serves as an application for automatic conversion from SGLI to 
VGLI. The opportunity to convert life insurance coverage to VGLI is 
essential for totally disabled veterans, many of whom have no hope of 
obtaining commercial insurance coverage.
  VA's Insurance Service conducts targeted outreach to severely 
disabled veterans in an attempt to encourage them to apply for the 1 
year extension of SGLI and conversion to VGLI benefit. However, 
information obtained from this outreach effort reveals that many 
severely disabled veterans are not taking advantage of the extension 
because they are precluded from post-separation financial planning by 
the effects of their disabilities and their need to focus on 
rehabilitation. Preliminary data obtained from VA suggest only 45 
percent of totally disabled servicemembers apply for the extension 
despite VA's outreach effort. My legislation will provide 1 additional 
year within which severely disabled veterans may apply. The extra year 
will give VA more time--a total of 2 years after their discharge from 
the military--to reach veterans when they are perhaps more able to 
focus on their financial planning needs.
  Finally, section 3 of the legislation I have introduced today would 
provide VA with greater flexibility to set appropriate interest rate 
cap protections on hybrid ARM loans it guarantees. Under existing law, 
VA has the authority to guaranty hybrid ARM loans through fiscal year 
2008. Hybrid ARM loans are a new, and popular, financing option for 
borrowers that features a fixed period of interest on a loan for 
between 3 and 10 years followed by a period of annual adjustments 
thereafter. For VA hybrid ARM loans with an initial fixed rate of 5 or 
more years, VA may prescribe the maximum increase of the initial 
adjustment and the maximum adjustment permitted over the life of the 
loan. These interest rate ``caps'' are common in the mortgage financing 
industry, and serve to protect borrowers against wild upward swings in 
interest rates that might make a borrower more likely to default. 
However, unlike the flexibility given to VA to set caps for the initial 
adjustment and for the aggregate adjustment for the life of a loan, the 
law specifically limits annual interest rate adjustments after the 
initial adjustment to one percentage point. I am informed by industry 
and VA experts that without providing VA with greater flexibility to 
set an appropriate interest rate cap for annual adjustments, lenders 
will either be reluctant to make VA hybrid ARM loans available to 
veterans, or will require that veterans pay higher interest rates than 
otherwise would be required. My legislation would provide VA with the 
flexibility it needs to fix this problem.
  Mr. President, the provisions of this legislation are important for 
veterans and their loved ones. We must give greater peace of mind to 
the families of those serving in the military, especially during a 
wartime period, that their Government has made available to them life 
insurance coverage to meet their basic financial needs in the event of 
death. We must give every opportunity for severely wounded 
servicemembers, many with war wounds, to remain insured under a 
government life insurance policy if their injuries might preclude them 
from being covered at reasonable cost under a private policy. And we 
must ensure that we remain flexible with mortgage industry standards so 
that veterans have the greatest array of financing options available to 
them when seeking to partake in the American dream of home ownership. 
My bill will accomplish all of these things and I ask my colleagues for 
their support of it.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1235

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Veterans' Benefits 
     Improvement Act of 2005''.

     SEC. 2. GROUP LIFE INSURANCE.

       (a) Servicemembers' Group Life Insurance.--Section 1967 of 
     title 38, United States Code, as in effect on October 1, 
     2005, is amended--
       (1) in subsection (a)--
       (A) in paragraph (2), by adding at the end the following:
       ``(C) With respect to a policy of insurance covering an 
     insured member, the Secretary of Defense shall make a good-
     faith effort to notify the spouse of a member if the member 
     elects, at any time, to--
       ``(i) reduce amounts of insurance coverage of an insured 
     member; or
       ``(ii) name a beneficiary other than the insured member's 
     spouse.
       ``(D) The failure of the Secretary of Defense to provide 
     timely notification under subparagraph (C) shall not affect 
     the validity of an election by the member.
       ``(E) If a servicemember marries or remarries after making 
     an election under subparagraph (C), the Secretary of Defense 
     is not required to notify the spouse of such election. 
     Elections made after marriage or remarriage are subject to 
     the notice requirement under subparagraph (C).''; and
       (B) in paragraph (3)--
       (i) in subparagraph (A), by striking clause (i) and 
     inserting the following:
       ``(i) In the case of a member, $400,000.''; and
       (ii) in subparagraph (B), by striking ``member or spouse'' 
     and inserting ``member, be evenly divisible by $50,000 and, 
     in the case of a member's spouse''; and
       (2) in subsection (d), by striking ``$250,000'' and 
     inserting ``$400,000''.
       (b) Duration of Coverage.--Section 1968(a) of title 38, 
     United States Code, is amended--
       (1) in paragraph (1)(A), by striking ``one year'' and 
     inserting ``2 years''; and
       (2) in paragraph (4), by striking ``one year'' and 
     inserting ``2 years''.
       (c) Veterans' Group Life Insurance.--Section 1977(a) of 
     title 38, United States Code, as in effect on October 1, 
     2005, is amended by striking ``$250,000'' each place it 
     appears and inserting ``$400,000''.

[[Page S6486]]

     SEC. 3. ADJUSTABLE RATE MORTGAGES.

       Section 3707(c)(4) of title 38, United States Code, is 
     amended by striking ``1 percentage point'' and inserting 
     ``such percentage as the Secretary may prescribe''.

     SEC. 4. EFFECTIVE DATE.

       The amendments made by this Act shall take effect on 
     October 1, 2005, immediately after the execution of section 
     1012(i) of Public Law 109-13.
                                 ______