[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