[Senate Report 105-337]
[From the U.S. Government Publishing Office]
Calendar No. 590
105th Congress Report
SENATE
2d Session 105-337
_______________________________________________________________________
FEDERAL EMPLOYEES LIFE INSURANCE IMPROVEMENT ACT
__________
R E P O R T
OF THE
COMMITTEE ON GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
to accompany
H.R. 2675
TO REQUIRE THAT THE OFFICE OF PERSONNEL MANAGEMENT SUBMIT PROPOSED
LEGISLATION UNDER WHICH GROUP UNIVERSAL LIFE INSURANCE AND GROUP
VARIABLE UNIVERSAL LIFE INSURANCE WOULD BE AVAILABLE UNDER CHAPTER 87
OF TITLE 5, UNITED STATES CODE, AND FOR OTHER PURPOSES
September 21, 1998.--Ordered to be printed
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN COLLINS, Maine JOSEPH I. LIEBERMAN, Connecticut
SAM BROWNBACK, Kansas DANIEL K. AKAKA, Hawaii
PETE V. DOMENICI, New Mexico RICHARD J. DURBIN, Illinois
THAD COCHRAN, Mississippi ROBERT G. TORRICELLI, New Jersey
DON NICKLES, Oklahoma MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania
Hannah S. Sistare, Staff Director and Chief Counsel
Dan Blair, Senior Counsel
Ann C. Rehfuss, Professional Staff Member
Subcommittee on International Security, Proliferation and Federal
Services
Leonard Weiss, Minority Staff Director
Lynn L. Baker, Chief Clerk
C O N T E N T S
Page
I. Purpose..........................................................1
II. Background.......................................................1
III. Legislative history..............................................4
IV. Section-by-section analysis......................................4
V. Regulatory impact statement......................................6
VI. CBO cost estimate................................................6
VII. Changes in existing law.........................................10
Calendar No. 590
105th Congress Report
SENATE
2d Session 105-337
_______________________________________________________________________
FEDERAL EMPLOYEES LIFE INSURANCE IMPROVEMENT ACT
_______
September 21, 1998.--Ordered to be printed
_______________________________________________________________________
Mr. Thompson, from the Committee on Governmental Affairs, submitted the
following
R E P O R T
[To accompany H.R. 2675, as amended]
The Committee on Governmental Affairs, to which was
referred the bill (H.R. 2675) to provide for the Office of
Personnel Management (OPM) to conduct a study and submit a
report to Congress on the provision of certain options for
universal life insurance coverage and additional death and
dismemberment insurance under chapter 87 of title 5, United
States Code, and for other purposes, having considered the
same, reports favorably thereon with amendments and recommends
that the bill as amended do pass.
I. Purpose
H.R. 2675, the Federal Employees Life Insurance Improvement
Act, is designed to improve the structure and administration of
the life insurance program provided by the Federal Government
for its civilian employees and retirees under chapter 87 of
title 5, United States Code, and for other purposes.
II. Background
The Federal Employees Group Life Insurance Program (FEGLI)
was established by the Federal Employees Group Life Insurance
Act of 1954, P.L. 83-598 and is codified in chapter 87, title
5, United States Code. The program provides employees,
retirees, and their family members with group life insurance
coverage. The program is managed by the Office of Personnel
Management and has been administered through a contract with
Metropolitan Life Insurance Company.
H.R. 2675 was introduced by Representative John Mica to
improve the administration and structure of the FEGLI program.
Following its approval by the House of Representatives, the
legislation was referred to the Committee on Governmental
Affairs. During consideration of the legislation by the
Committee, Senator Cochran introduced an amendment in the
nature of a substitute. Further, Senator Levin introduced an
amendment to the substitute amendment offered by Senator
Cochran. Both amendments were adopted by the Committee.
Current law
Under current law, as codified in 5 U.S.C. Sec. Sec. 8701-
8716, federal employees are allowed to purchase basic term life
insurance coverage equal to their actual annual basic pay
(rounded up to the next $1,000) plus $2,000. The maximum basic
insurance amount is the actual rate of annual basic pay payable
for positions at Level II of the Executive Schedule plus
$2,000. In addition, employees may supplement their basic life
insurance with three forms of optional insurance. Option A
allows employees to buy $10,000 of additional life insurance as
well as additional accidental death and dismemberment
insurance. Under Option B, federal employees may buy additional
life insurance equal to one, two, three, four, or five times
their annual basic pay. Under Option C, employees may purchase
life insurance for their family members at the fixed amount of
$5,000 (for a spouse) or $2,500 (for each dependent child).
Except for the Postal Service, which pays the full cost of
FEGLI basic insurance for its employees, federal agencies pay
one-third of the basic insurance cost, and their employees pay
the other two-thirds. The cost of optional life insurance is
borne fully by the employees electing such coverage. Beginning
at age 65, employees are no longer required to pay for the
insurance, but its face value declines at the rate of two
percent a month until depleted.
The FEGLI program offers an accelerated death benefit, or
``living benefit'' option, which allows terminally ill
employees with a life expectancy of no longer than nine months
to elect to receive a lump-sum payment. Employees may also
assign their insurance to any person or persons they choose by
way of a viatical settlement. Both the living benefit election
and thereassignment of policy are irrevocable.
Overview of amendment
H.R. 2675, as amended by Senator Cochran's amendment in the
nature of a substitute, would require the Office of Personnel
Management to conduct a study on federal employees'' interest
in being offered group universal life insurance, group variable
universal life insurance, and additional voluntary accidental
death and dismemberment insurance coverage. Universal life
insurance generally refers to a whole life policy with flexible
premiums, adjustable death protection, and a cash value
accumulated at current rates of interest. Universal life
insurance offers both insurance protection (in effect, term
insurance) and savings, i.e., the ability to accumulate a cash
value in the policy by making contributions in excess of the
level required to provide the term insurance death benefit.
Variable universal life insurance refers to the premium
flexibility and policy adjustment features of the universal
life policy with the policy owner-directed investment aspects
of variable life insurance. Variable universal life policies
are technically classified as securities, and are subject to
regulation by the Securities and Exchange Commission.
In addition, H.R. 2675, as reported, would change FEGLI in
several other ways. The bill would repeal the maximum
limitation on base pay used for insurance calculation (5 U.S.C
Sec. 8710(c) and Sec. 8714(b)). It is expected that this change
would affect about 200 senior level executives, congressional,
and judicial employees whose pay is not limited to level II of
the Executive Schedule. Medium to large employers today
typically offer group life insurance reflecting an earnings
multiple of at least one time base salary. This change will
make FEGLI benefits more comparable with accepted employer
practice and more equitable to all FEGLI participants.
This legislation would change the definition of ``family
member'' for life insurance purposes to include foster
children. Currently, the definition for a family member
includes a spouse and any unmarried dependent children under 22
years of age, or a child over 22 if the child became incapable
of self-support because of mental or physical disability prior
to his or her twenty-second birthday (5 U.S.C.
Sec. 8701(d)(1)(B)). This change would facilitate consistency
with existing health insurance policies available to federal
employees.
Further, with respect to ``family insurance,'' H.R. 2675,
as reported, would increase the amount of optional life
insurance for spouses and children that federal employees may
purchase through FEGLI (5 U.S.C. Sec. 8714c(b)). Employees
would be able to purchase insurance on a spouse up to $25,000
and $10,000 per child. OPM must establish an eight week open
enrollment opportunity to allow employees to elect optional
insurance coverage without submitting evidence of insurability.
In addition, this open season would allow employees to begin,
resume, or increase their life insurance without submitting
evidence of insurability.
This legislation provides that employees who had purchased
life insurance erroneously would be offered the opportunity to
retain it if the coverage and applicable withholdings have been
in force for 2 years (5 U.S.C. Sec. 8706). Contractual
incontestability clauses are standard practice in the insurance
industry, but currently are not uniformly effective for FEGLI
purposes if a conflict with statutory requirements arises.
There is no statutory bar to allowing active employees to
continue whatever coverage they have reasonably come to rely on
after discovery of an error. However, FEGLI law requires a
five-year participation requirement for continuing insurance
into retirement and insurance that is erroneously continued in
these cases must be terminated whenever the error is
discovered. A statutory incontestability provision will
establish consistent treatment for all enrollees.
The legislation further provides that employees whose pay,
annuity, or compensation is insufficient to cover their life
insurance premiums could have the option to continue their
insurance coverage by electing to make direct payment through
the agency or retirement system which administers pay or a
benefit entitlement (5 U.S.C. Sec. Sec. 8707, 8714(d), 8714b(d)
and 8714c(d)).
H.R. 2675, as reported, also would allow employees the
option to continue full additional optional life insurance at
their own expense beyond age 65. Further, the bill makes, on a
temporary basis not to exceed three years, group additional
optional life insurance portable when an employee leaves the
federal service.
Finally, provisions are made to increase from 30 days to 60
days the period employees and OPM have to appeal a Merit System
Protection Board appeal to the U.S. Court of Appeals for the
Federal Circuit (5 U.S.C. Sec. 7703).
III. Legislative History
H.R. 2675 was introduced on October 21, 1997 by
Representative John Mica (R-FL). The bill was referred to the
Committee on Government Reform and Oversight and to the
Subcommittee on Civil Service on October 22, 1997. The
legislation was marked up, with an amendment, by the
Subcommittee on October 22, 1997 and by the full Committee on
October 31, 1997. No hearings were held, nor written testimony
received. H.R. 2675 was considered by the full House under
suspension of the rules and was approved by voice vote on Nov.
4, 1997.
H.R. 2675 was received in the Senate and referred to the
Committee on Governmental Affairs on November 5, 1997. On June
17, the Committee on Governmental Affairs considered H.R. 2675.
Senator Cochran offered an amendment in the nature of a
substitute to H.R. 2675. Senator Levin offered an amendment to
Senator Cochran's substitute amendment to increase the period
from 30 to 60 days that an employee has to file an appeal of a
Merit Systems Protection Board (MSPB) decision to the United
States Court of Appeals for the Federal Circuit. The Committee
favorably considered the bill and amendments en bloc and
ordered the bill, as amended, to be reported by voice vote.
IV. Section-by-Section Analysis
SEC. 1. SHORT TITLE
This Act may be cited as the ``Federal Employees Life
Insurance Improvement Act''.
SEC. 2. STUDY AND REPORT ON CERTAIN LIFE INSURANCE OPTIONS OFFERED TO
FEDERAL EMPLOYEES
The original House bill required the Office of Personnel
Management (OPM) to submit proposed legislation within 6 months
to make group universal life insurance, group variable
universal life insurance, and additional voluntary accidental
death and dismemberment insurance available to Federal
employees. The Committee amendment requires OPM to conduct a
study to gauge employees'' interest in these additional forms
of insurance.
SEC. 3. REPEAL OF MAXIMUM LIMITATION ON EMPLOYEE INSURANCE
Section 3 of the House bill allows employees the option to
continue full additional optional life insurance beyond age 65.
This provision was incorporated into the new section 8 of the
Committee amendment described below. Section 3 of the Committee
amendment would repeal the maximum limitation on base pay used
for insurance calculations thereby allowing these federal
employees the benefit of life insurance coverage based on their
full salary. This affects about 200 senior level executive,
congressional, and judicial employees whose pay is not limited
to level II of the Executive Schedule.
SEC. 4. FOSTER CHILD COVERAGE
Section 4 of the original House bill provided improved
optional life insurance for family members. This section has
been moved to section 9 of the Committee amendment. The new
language in section 4 adds foster children to the definition of
``family member'' in section 8701(d)(1). This would make the
definition of family member for life insurance purposes
consistent with the definition of family member for health
insurance purposes in section 8901(5).
SEC. 5. INCONTESTABILITY OF ERRONEOUS COVERAGE
This section was added by the Committee amendment. It gives
employees who were allowed to purchase life insurance
erroneously the option to retain it if the insurance and
applicable withholdings have been in force for two years.
SEC. 6. DIRECT PAYMENT OF INSURANCE CONTRIBUTIONS
This section allows employees whose pay, annuity, or
compensation is insufficient to cover the life insurance
premiums the option to continue their insurance coverage by
paying the difference through their agency or retirement
system.
SEC. 7. ADDITIONAL OPTIONAL LIFE INSURANCE CONTINUATION AND PORTABILITY
This section incorporates provisions from section 3 of the
original House bill. It allows employees at age 65 the option
to continue their additional optional insurance, without
reduction, at their own cost. This section also includes a
portability provision allowing employees the option to continue
group additional optional life coverage upon leaving the
Federal service.
SEC. 8. IMPROVED OPTIONAL LIFE INSURANCE ON FAMILY MEMBERS
This new section incorporates section 4 of the original
House bill. It would increase the amount of life insurance
employees may purchase on spouses from 5,000 to $25,000 and on
children from $2,500 to 10,000. It also contains the technical
and conforming provisions from the former section 4.
SEC. 9. OPEN SEASON
This new section incorporates an expanded open enrollment
period from section 4 of the original House bill. It would
require OPM to hold an open enrollment window for a period of
at least 8 weeks to allow employees to begin, resume, or
increase group life insurance without submitting evidence of
insurability. Section 4 of the original House bill only
provided for an open enrollment window to increase insurance on
family members.
SEC. 10. MERIT SYSTEM JUDICIAL REVIEW
This new section was added by Senator Levin's amendment to
Senator Cochran's substitute amendment. This provision
increases from 30 days to 60 days the period of time employees
and OPM have to appeal a Merit Systems Protection Board (MSPB)
decision to the United States Court of Appeals for the Federal
Circuit.
SEC. 11. EFFECTIVE DATES
This new section contains the effective dates for the new
life insurance provisions. It also requires OPM to prescribe
regulations under which existing retirees may elect to continue
their remaining additional optional insurance.
V. Regulatory Impact Statement
Pursuant to the requirement of paragraph 11(b) of rule XXVI
of the Standing Rules of the Senate, the Committee has
considered the regulatory and paperwork impact of H.R. 2675, as
amended by the United States Senate. The Committee reports that
H.R. 2675, as amended, will not result in any new regulation of
individuals or businesses; will have no economic impact on
individuals, consumers, or businesses affected except for
additional insurance coverage; will have no impact on personal
privacy; will have minor one-time impact on paperwork for the
Office of Personnel Management to prepare a report required by
section 2 on the provision of certain options for universal
life insurance coverage and additional death and dismemberment
insurance; and may have some impact on the number of appeals
filed with the United States Court of Appeals for the Federal
Circuit as a result of section 10 which increases the time from
30 days to 60 days that employees and OPM have to appeal a
Merit Systems Protection Board (MSPB) decision. H.R. 2675, as
amended, contains no intergovernmental or private sector
mandates as defined in the Unfunded Mandates Reform Act of 1995
(UMRA) and would have no impact on the budgets of state, local,
or tribal governments.
VI. CBO Cost Estimate
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 14, 1998.
Hon. Fred Thompson,
Chairman, Committee on Governmental Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2675, the Federal
Employees Life Insurance Improvement Act of 1998.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Eric Rollins.
Sincerely,
June E. O'Neill, Director.
Enclosure.
H.R. 2675--Federal Employees Life Insurance Improvement Act
Summary: H.R. 2675 would make a number of changes to the
Federal Employees' Group Life Insurance (FEGLI) program. The
bill would allow retired federal employees who carry additional
optional life insurance or optional life insurance on family
members to continue paying premiums after turning 65 and avoid
having their coverage phased out. The bill would also increase
the amount of optional life insurance that employees may
purchase on family members and would allow separated federal
employees to continue purchasing additional optional life
insurance at group rates.
CBO estimates that this bill would reduce direct spending
by $69 million during the 1999-2003 period and increase
discretionary spending by a minor amount. Direct spending would
decrease because additional FEGLI premiums would be larger than
additional claims over this period. CBO estimates that employee
premium payments to FEGLI, which are treated as offsetting
collections, would rise by $292 million over the 1999-2003
period and premium payments would increase by $223 million.
This bill would affect direct spending and therefore be
subject to pay-as-you-go procedures. H.R. 2675 contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act of 1995 (UMRA) and would have no
impact on the budgets of state, local, or tribal governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 2675 is shown in the following table.
[By fiscal year, outlays in millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
--------------------------------------------------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION
Agency share of FEGLI premiums..................................... ( \1\
) ( \1\
) ( \1\
) ( \1\
) ( \1\
) ( \1\ ) ( \1\ ) ( \1\ ) ( \1\ ) ( \1\ )
CHANGES IN DIRECT SPENDING
Increased FEGLI premiums........................................... -8 -40 -68 -81 -95 -113 -133 -156 -181 -209
Increased FEGLI claims............................................. 1 29 56 64 73 90 111 134 161 192
------------------------------------------------------------------------------------
Total.......................................................... -7 -11 -12 -17 -21 -22 -22 -22 -20 -17
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000.
Note: Components may not sum to totals because of rounding.
The mandatory costs of this legislation fall within budget
function 600, Income Security.
Basis of estimate: Discretionary spending--H.R. 2675 would
remove the cap on the amount of FEGLI coverage available to
employees with basic pay at or above Level II of the Executive
Schedule (currently $136,500). According to the Office of
Personnel Management (OPM), fewer than 200 people would be
affected by this change. Discretionary spending would increase
by about $5,000 annually due to higher agency payments for part
of these employees' premiums.
Direct spending--Federal employees may supplement their
basic FEGLI life insurance with three forms of optional
insurance. Option A allows employees to buy $10,000 of
additional life insurance as well as additional accidental
death and dismemberment insurance. Under Option B, federal
employees may buy additional life insurance with 1, 2, 3, 4, or
5 times their annual basic pay. Under Option C, employees may
purchase life insurance for their family members at the fixed
amounts of $5,000 for a spouse and $2,500 for each dependent
child.
Unlike basic FEGLI life insurance, which requires a
matching employer contribution, employees pay the full cost of
any optional FEGLI insurance. If an employee has Option B or C
coverage for the entire five years prior to retiring or
receiving worker's compensation, he or she may keep the
additional insurance after retirement. However, the retiree no
longer pays premiums after reaching age 65, and the amount of
coverage decreases by 2 percentage points a month over 50
months until no coverage is left. Employees who are ineligible
to continue their FEGLI coverage after leaving government
service must convert their coverage to an individual policy.
H.R. 2675 would amend Options B and C in three ways. First,
employees who continue their Option B or C coverage during
retirement would be able to continue paying premiums after age
65 and avoid having the coverage phased out. Second, employees
would be allowed to select 1, 2, 3, 4, or 5 times the current
$5,000 and $2,500 coverage amounts under Option C. These
changes would take effect 180 days after enactment and, with
one exception, apply only to current and future employees. The
bill would allow retired employees who are still enrolled in
Option B to maintain their existing Option B coverage.
Finally, the bill would make FEGLI benefits more portable
by allowing federal employees who separate from service and are
currently ineligible to stay in FEGLI to continue their Option
B coverage at group rates. This provision would become
effective 180 days after the bill's enactment and would be in
effect only for the following three years. After that, coverage
for the now-ineligible employees still enrolled in Option B
would end, and those employees would have to convert their
coverage to individual policies. The bill would also require
OPM to recommend within three years of the bill's enactment
whether this insurance should be extended, made permanent, or
terminated.
Increased FEGLI premium payments.--A significant number of
current and retired federal workers have Option B or C
coverage. Approximately 126,000 retirees carry Option B
coverage, and 1 million workers and 314,000 retirees have
Option C coverage. CBO used data from OPM to project the number
of people who would enroll in Options B and C coverage over the
next ten years. These projections included the number of
retirees with Option B or C coverage, the number of retirees
over age 65, and the average amount of coverage.
CBO assumed that enrollees in Option C would increase their
coverage to an average of 3 times the current level. For
employees enrolled in Option C, this amount is the midpoint of
the new coverage amounts that would be available. Employees
currently pay a fixed premium for Option C coverage, and OPM
has indicated that Option C premiums would increase to reflect
the rise in available coverage envisioned under H.R. 2675. CBO
assumed that premiums for Option C would rise in proportion to
the amount of coverage selected. For example, an employee who
pays $18.20 for $5,000 of coverage for their spouse would pay
$54.60 for $15,000 of coverage. Finally, CBO assumed that half
of the retirees with Option B or C coverage would decide to
keep their coverage after turning 65.
For the bill's portability provisions for Option B
coverage, CBO assumed that about 120,000 employees would
separate from federal service annually, and that about 43
percent of them would be enrolled in Option B, which is the
participation rate for all federal employees. Based on
information from the Employee Benefit Research Institute, about
75 percent of private-sector employees participate in employer-
provided life insurance. CBO assumed that 75 percent of the
employees separating from federal service would get life
insurance through their new employer, and that two-thirds of
the remaining 25 percent would stay enrolled in Option B.
Based on these assumptions, CBO estimated that premium
payments from retirees with Option B coverage would increase by
$183 million over the 1999-2003 period. Premiums from current
employees and retirees with Option C coverage would rise by $84
million and $14 million, respectively. Premiums from separated
employees who would continue their Option B coverage would be
$11 million.
Increased FEGLI claims payments.--Because federal employees
and retirees would purchase more FEGLI coverage, payments of
claims would increase under H.R. 2675. Using data from OPM, CBO
estimated the number of claims that would be made under Options
B and C and the average amount of each claim. Separate
projections were made for current employees, separated
employees, and retirees.
Claims payments to retirees with Option B coverage would
rise by $108 million during the 1999-2003 period as some
retirees keep their coverage past age 65. CBO estimates that
claims for separated employees in Option B would be $14
million. Claims payments for current employees enrolled in
Option C would increase by $95 million, while claims for
retirees with Option C would increase by $6 million.
Other provisions.--H.R. 2675 contains a number of other
provisions that CBO estimates would not have a significant
budgetary impact. These provisions include requiring OPM to
conduct a study on expanding the types of insurance available
under FEGLI, including foster children under the FEGLI
definition of ``family member,'' and allowing FEGLI enrollees
to pay their premiums directly if their pay or annuity is too
small to pay premiums through withholding. The bill would also
lengthen the time that a federal employee has to seek judicial
review of a decision of the Merit Systems Protection Board from
30 days to 60 days.
Pay-as-you-go considerations: The provisions of this bill
would affect direct spending and therefore be subject to pay-
as-you-go procedures. The pay-as-you-go procedures cover only
the current year, budget year, and the succeeding four years.
[By Fiscal Year, in Millions of Dollars]
----------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------------------------
Change in outlays............... -7 -11 -12 -17 -21 -22 -22 -22 -20 -17
Change in receipts.............. 0 0 0 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------------------------
Intergovernmental and private-sector impact: H.R. 2675
contains no intergovernmental or private-sector mandates as
defined in the Unfunded Mandates Reform Act of 1995 (UMRA) and
would have no impact on the budgets of state, local, or tribal
governments.
Comparision with other estimates: On November 4, 1997, CBO
issued an estimate for H.R. 2675 as reported by the House
Committee on Government Reform and Oversight. That version of
H.R. 2675 was estimated to reduce direct spending by $72
million between 1998 and 2002. Like the more recent version of
H.R. 2675, the Government Reform bill would allow retirees with
Option B or C coverage to continue paying premiums after age 65
and maintain their coverage, and would increase the amounts of
coverage available under Option C. However, the Government
Reform version of H.R. 2675 did not contain any provision for
continued Option B coverage for separated employees.
Estimate prepared by: Federal cost: Eric Rollins. Impact on
State, local, and tribal governments: Leo Lex. Impact on the
private sector: Matthew Eyles.
Estimate approved by: Paul N. Van de Water, Assistant
Director for Budget Analysis.
VII. Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
H.R. 2675, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
material is printed in italic, existing law in which no change
is proposed is shown as roman):
UNITED STATES CODE
TITLE 5--GOVERNMENT ORGANIZATION AND EMPLOYEES
* * * * * * *
CHAPTER 77--APPEALS
* * * * * * *
Sec. 7703. Judicial review of decisions of the Merit Systems Protection
Board
(a) * * *
(b)(1) Except as provided in paragraph (2) of this
subsection, a petition to review a final order or final
decision of the Board shall be filed in the United States Court
of Appeals for the Federal Circuit. Notwithstanding any other
provision of law, any petition for review must be filed [within
30 days] within 60 days after the date the petitioner received
notice of the final order or decision of the Board.
* * * * * * *
(d) The Director of the Office of Personnel Management may
obtain review of any final order or decision of the Board by
filing, within 60 days after the date the Director received
notice of the final order or decision of the Board, a petition
for review in the United States Court of Appeals for the
Federal Circuit if the Director determines, in his discretion,
that the Board erred in interpreting a civil service law, rule,
or regulation affecting personnel management and that the
Board's decision will have a substantial impact on a civil
service law, rule, regulation, or policy directive. If the
Director did not intervene in a matter before the Board, the
Director may not petition for review of a Board decision under
this section unless the Director first petitions the Board for
a reconsideration of its decision, and such petition is denied.
In addition to the named respondent, the Board and all other
parties to the proceedings before the Board shall have the
right to appear in the proceeding before the Court of Appeals.
The granting of the petition for judicial review shall be at
the discretion of the Court of Appeals.
* * * * * * *
CHAPTER 87--LIFE INSURANCE
* * * * * * *
Sec. 8701. Definitions
(a) * * *
* * * * * * *
(c) For the purpose of this chapter, ``basic insurance
amount'' means, in the case of any employee under this chapter,
an amount equal to the greater of--
(1) the annual rate of basic pay payable to the
employee, rounded to the next higher multiple of
$1,000, plus $2,000, or
(2) $10,000[,
except that the amount of insurance may not exceed the annual
rate of basic pay payable for positions at level II of the
Executive Schedule under section 5313 of this title, rounded to
the next higher multiple of $1,000, plus $2,000.]. In the case
of any former employee entitled to coverage under this chapter,
the term means the basic insurance amount applicable for the
employee at the time the insurance to which the employee is
entitled as an employee under this chapter stops pursuant to
section 8706(a) of this title.
* * * * * * *
(d)(1) For the purpose of this chapter, ``family member'',
when used with respect to any individual, means--
(A) the spouse of the individual; and
(B) an unmarried dependent child of the individual
(other than a stillborn child), including an adopted
child, stepchild or foster child (but only if the
stepchild or foster child lived with the individual in
a regular parent-child relationship), or recognized
natural child--
(i) who is less than 22 years of age, or
(ii) who is 22 years of age or older and is
incapable of self support because of a mental
or physical disability which existed before the
child became 22 years of age.
* * * * * * *
Sec. 8706. Termination of insurance; assignment of ownership
(a) * * *
* * * * * * *
(g) The insurance of an employee under a policy purchased
under section 8709 shall not be invalidated based on a finding
that the employee erroneously became insured, or erroneously
continued insurance upon retirement or entitlement to
compensation under subchapter I of chapter 81 of this title, if
such finding occurs after the erroneous insurance and
applicable withholdings have been in force for 2 years during
the employee's lifetime.
Sec. 8707. Employee deductions; withholding
[(a) During] (a) Subject to subsection (c)(2), during each
period in which an employee is insured under a policy purchased
by the Office of Personnel Management under section 8709 of
this title, there shall be withheld from the employee's pay a
share of the cost of the group life insurance and accidental
death and dismemberment insurance.
[(b)(1) Whenever] (b)(1) Subject to subsection (c)(2),
whenever life insurance continues after an employee retires on
an immediate annuity of while the employee is receiving
compensation under subchapter I of chapter 81 of this title
because of disease or injury to the employee, as provided in
section 8706(b) of this title, deductions for insurance shall
be withheld from the employee's annuity of compensation, except
that, in any case in which the insurance is continued as
provided in section 8706(b)(3)(A) of this title, the deductions
shall not be made for months after the calendar month in which
the employee becomes 65 years of age.
* * * * * * *
(c)(1) The amount withheld from the pay, annuity, or
compensation of each employee subject to insurance deductions
shall be at the rate, adjusted to the nearest half-cent, of
66\2/3\ percent of the level cost as determined by the Office
for each $1,000 of the employee's basic insurance.
(2) An employee who is subject to withholdings under this
section and whose pay, annuity, or compensation is insufficient
to cover such withholdings may nevertheless continue insurance
if the employee arranges to pay currently into the Employees'
Life Insurance Fund, through the agency or retirement system
that administers pay, annuity, or compensation, an amount equal
to the withholdings that would otherwise be required under this
section.
* * * * * * *
Sec. 8714a. Optional insurance
(a) * * *
* * * * * * *
(d)(1) * * *
* * * * * * *
(3) Notwithstanding paragraph (1), an employee who is
subject to withholdings under this subsection and whose pay,
annuity, or compensation is insufficient to cover such
withholdings may nevertheless continue optional insurance if
the employee arranges to pay currently into the Employees' Life
Insurance Fund, through the agency that administers pay,
annuity, or compensation, an amount equal to the withholdings
that would otherwise be required under this subsection.
* * * * * * *
Sec. 8714b. Additional optional life insurance
(a) * * *
(b) The additional life insurance provided under this
section shall be made available to each eligible employee who
has elected coverage under this section, under conditions the
Office shall prescribe, in multiples, at the employee's
election, of 1, 2, 3, 4, or 5 times the annual rate of basic
pay payable to the employee (rounded to the next higher
multiple of $1,000) [except that coverage may not exceed an
amount equal to 5 times the annual rate of basic pay payable
for positions at level II of the Executive Schedule under
section 5313 of this title (rounded to the next higher multiple
of $1,000).].
(c)(1) * * *
(2) in the case of any employee who retires on an immediate
annuity or who becomes entitled to receive compensation under
subchapter I of chapter 81 of this title because of disease or
injury to the employee, so much of the additional optional
insurance as has been in force for not less than--
(A) the 5 years of service immediately preceding the
date of retirement or entitlement to compensation, or
(B) the full period or periods of service during
which the insurance was available to the employee, if
fewer than 5 years,
may be continued under conditions determined by the Office
after retirement or while the employee is receiving
compensation under subchapter I of chapter 81 of this title and
is held by the Secretary of Labor (or the Secretary's delegate)
to be unable to return to duty. [The amount of insurance under
this paragraph shall be reduced each month by 2 percent
effective at the beginning of the second calendar month after
the date the employee becomes 65 years of age and is retired or
is in receipt of compensation. The reduction shall continue for
50 months at which time the insurance stops.]
(3) The amount of additional optional insurance continued
under paragraph 2 shall be continued, with or without
reduction, in accordance with the employee's written election
at the time eligibility to continue insurance during retirement
or receipt of compensation arises, as follows:
(A) The employee may elect to have withholdings cease
in accordance with subsection (d), in which case--
(i) the amount of additional optional
insurance continued under paragraph (2) shall
be reduced each month by 2 percent effective at
the beginning of the calendar month after the
date the employee becomes 65 years of age and
is retired or is in receipt of compensation;
and
(ii) the reduction under clause (i) shall
continue for 50 months at which time the
insurance shall stop.
(B) The employee may, instead of the option under
subparagraph (A), elect to have the full cost of
additional optional life insurance continue to be
withheld from such employee's annuity or compensation
on and after the date such withholdings would otherwise
cease pursuant to an election under subparagraph (A),
in which case the amount of additional optional
insurance continued under paragraph (2) shall not be
reduced, subject to paragraph (4).
(C) An employee who does not make any
election under the preceding provisions of this
paragraph shall be treated as if such employee
had made an election under subparagraph (A).
(4) If an employee makes an election under paragraph
(3)(B), that individual may subsequently cancel such election,
in which case additional optional insurance shall be determined
as if the individual had originally made an election under
paragraph (3)(A).
(5)(A) An employee whose additional optional insurance
under this section would otherwise stop in accordance with
paragraph (1) and who is not eligible to continue insurance
under paragraph (2) may elect, under conditions prescribed by
the Office of Personnel Management, to continue all or a
portion of so much of the additional optional insurance as has
been in force for not less than--
(i) the 5 years of service immediately preceding the
event which would cause insurance to stop under
paragraph (1); or
(ii) the full period or periods of service during
which the insurance was available to the employee, if
fewer than 5 years,
at group rates established for purposes of this section, in
lieu of conversion to an individual policy. The amount of
insurance continued under this paragraph shall be reduced by 50
percent effective at the beginning of the second calendar month
after the date the employee or former employee attains age 70
and shall stop at the beginning of the second calendar month
after attainment of age 80, subject to a provision for
temporary extension of life insurance coverage and for
conversion to an individual policy of life insurance under
conditions approved by the Office. Alternatively, insurance
continued under this paragraph may be reduced or stopped at any
time the employee or former employee elects.
(B) When an employee or former employee elects to continue
additional optional insurance under this paragraph following
separation from service or 12 months without pay, the insured
individual shall submit timely payment of the full cost
thereof, plus any amount the Office determines necessary to
cover associated administrative expenses, in such manner as the
Office shall prescribe by regulation. Amounts required under
this subparagraph shall be deposited, used, and invested as
provided under section 8714 and shall be reported and accounted
for together with amounts withheld under section 8714a(d).
(C)(i) Subject to clause (ii), no election to continue
additional optional insurance may be made under this paragraph
3 years after the effective date of this paragraph.
(ii) On and after the date on which an election may not be
made under clause (i), all additional optional insurance under
this paragraph for former employees shall terminate, subject to
a provision for temporary extension of life insurance coverage
and for conversion to an individual policy of life insurance
under conditions approved by the Office.
(d)(1) During each period in which the additional optional
insurance is in force on an employee the full cost thereof
shall be withheld from an employee's pay. During each period in
which an employee continues additional optional insurance after
retirement or while in receipt of compensation under subchapter
I of chapter 81 of this title because of disease or injury to
the employee, as provided in subsection (c) of this section,
the full cost thereof shall be withheld from the former
employee's annuity or compensation, except that, if insurance
is continued as provided under subsection (c)(3)(A), beginning
at the end of the calendar month in which the former employee
becomes 65 years of age, the additional optional insurance
shall be without cost to the former employee. Amounts so
withheld (and any amounts withheld as provided in subsection
(c)(3)(B)) shall be deposited, used, and invested as provided
in section 8714 of this title and shall be reported and
accounted for together with amounts withheld under section
8714a(d) of this title.
* * * * * * *
(3) Notwithstanding paragraph (1), an employee who is
subject to withholdings under this subsection and whose pay,
annuity or compensation is insufficient to cover such
withholdings may nevertheless continue additional optional
insurance if the employee arranges to pay currently into the
Employees' Life Insurance Fund, through the agency or
retirement system which administers pay, annuity, or
compensation, an amount equal to the withholdings that would be
required under this subsection.
* * * * * * *
Sec. 8714c. Optional insurance on family members
(a) * * *
(b)(1) The optional life insurance on family members
provided under this section shall be made available to each
eligible employee who has elected coverage under this section,
under conditions the Office shall prescribe, in multiples, at
the employee's election, of 1, 2, 3, 4, or 5 times--
(A) $5,000 for a spouse; and
(B) $2,500 for each child described under section
8701(d).
(2) An employee may reduce or stop coverage elected
pursuant to this section at any time.
(c)(1) * * *
(2) In the case of any employee who retires on an immediate
annuity or who becomes entitled to receive compensation under
subchapter I of chapter 81 of this title because of disease or
injury to the employee and who has had in force insurance under
this section for no less than--
(A) the 5 years immediately preceding the date of
retirement or entitlement to compensation, or
(B) the full period or periods of service during
which the insurance was available to the employee, if
fewer than 5 years,
optional insurance on family members may be continued under the
same conditions as provided in [in section 8714b(c)(2) of this
title] section 8714b(c)(2) through (4).
(d)(1) During each period in which the optional life
insurance on family members is in force the full cost thereof
shall be withheld from the employee's pay. During each period
in which an employee continues optional insurance on family
members after retirement or while in receipt of compensation
under subchapter I of chapter 81 of this title because of
disease or injury to the employee, as provided in subsection
(c) of this section, the full cost shall be withheld from the
annuity or compensation, except that beginning at the end of
the calendar month in which the former employee becomes 65
years of age, the optional life insurance on family members
shall be without cost to the employee. Notwithstanding the
preceding sentence, the full cost shall be continued after the
calendar month in which the former employee becomes 65 years of
age if, and for so long as, an election under this section
corresponding to that described in section 8714b(c)(3)(B)
remains in effect with respect to such former employee. Amounts
so withheld shall be deposited, used, and invested as provided
in section 8714 of this title and shall be reported and
accounted for together with amounts withheld under section
8714a(d) of this title.
(2) * * *
(3) Notwithstanding paragraph (1), an employee who is
subject to withholdings under this subsection and whose pay,
annuity, or compensation is insufficient to cover such
withholdings may nevertheless continue optional life insurance
on family members if the employee arranges to pay currently
into the Employees' Life Insurance Fund, through the agency or
retirement system that administers pay, annuity, or
compensation, an amount equal to the withholdings that would
otherwise be required under this subsection.