[Federal Register Volume 60, Number 206 (Wednesday, October 25, 1995)]
[Rules and Regulations]
[Pages 54585-54588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26233]



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 Rules and Regulations
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  Federal Register / Vol. 60, No. 206 / Wednesday, October 25, 1995 / 
Rules and Regulations  

[[Page 54585]]


OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 831 and 842

RIN 3206-AG16


Retirement; Alternative Forms of Annuity

AGENCY: Office of Personnel Management.

ACTION: Interim rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Office of Personnel Management (OPM) is issuing interim 
regulations on alternative forms of annuity to establish a standard for 
determining what constitutes a critical medical condition to replace 
the standard that the Merit Systems Protection Board determined was 
invalid. The interim regulations also make effective the previously 
proposed regulations to implement the changes made by the Omnibus 
Budget Reconciliation Act of 1993--the alternative form of annuity is 
no longer available for employees whose annuities commence on or after 
October 1, 1994, except for employees who have a life-threatening 
affliction or other critical medical condition--and also to revise the 
list of critical medical conditions considered prima facie evidence of 
eligibility. The regulations are necessary to conform the regulations 
with current law.

DATES: Interim rules effective November 24, 1995.
    Comments must be received on or before December 26, 1995.

ADDRESSES: Send comments to John E. Landers, Chief, Retirement Policy 
Division; Retirement and Insurance Service; Office of Personnel 
Management; P.O. Box 57; Washington, DC 20044; or deliver to OPM, Room 
4351, 1900 E Street, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT:

Harold L. Siegelman, (202) 606-0299.

SUPPLEMENTARY INFORMATION: On November 4, 1994, we published (at 59 FR 
55211) proposed regulations on alternative forms of annuity (AFA) to 
implement the changes in sections 8343a and 8420a of title 5, United 
States Code, made by the Omnibus Budget Reconciliation Act of 1993, 
Pub. L. 103-66. The Act included a provision terminating this benefit 
for employees whose annuities commence on or after October 1, 1994, 
except for employees who have a life-threatening affliction or other 
critical medical condition. We also proposed to revise the list of 
critical medical conditions considered prima facie evidence of 
eligibility. We received one comment on the proposed regulations.
    The commenter expressed concern about applications for annuity who 
have a critical medical condition that is not on the list of conditions 
that constitute prima facie evidence of medical eligibility. The 
commenter stated that these applicants should be allowed to qualify 
based on medical condition. Sections 831.2207(c)(3)(iv) and 
842.707(c)(3)(iv) of Title 5, Code of Federal Regulations, already 
accomplish that goal. A doctor's certification that an applicant has 
one of the listed conditions is sufficient for an OPM benefits 
specialist to approve a claim for the alternative form of annuity 
without review by an OPM doctor. If an applicant claims entitlement to 
the AFA because of a medical condition not on the list, an OPM doctor 
reviews the medical evidence to verify that the condition is 
qualifying.
    Subsequent to the publication of the proposed regulations, the 
Merit Systems Protection Board (MSPB), in the case of Ora L. Haywood v. 
OPM, Docket No. DC0831930087-I-1 (Dec. 4, 1994), decided that OPM's 
regulation at section 831.2207(c)(3)(i) defining a ``life-threatening 
affliction or other critical medical condition'' is invalid. The 
regulatory standard rejected by MSPB required a ``medical condition so 
severe as to reasonably limit an individual's probable life expectancy 
to less than one year.''
    As determined by the Board, the Congress retained the AFA for any 
nondisability retiree with a ``life-threatening affliction or other 
critical medical condition.'' The law allows such employees to recover 
their retirement contributions during their lifetime. The phrase 
``life-threatening affliction or other critical medical condition'' was 
first added to section 8343a by section 6001 of Public Law 100-203, 
December 22, 1987, 101 Stat. 1330-275. Congress had provided an 
exception to the deferred payment schedule for the alternative annuity 
lump-sum benefit to this same category annuitants, namely, 
nondisability annuitants who were suffering from a ``life-threatening 
affliction or other critical medical condition'' at the time of 
retirement.
    OPM originally defined a ``life-threatening affliction or other 
critical medical condition'' in its interim regulations, published 
April 8, 1988, in the Federal Register, 53 FR 11633, after the passage 
of Public Law 100-203. The Supplementary Information in the rulemaking 
notice explained that the amendment to section 8343a changed the way 
the lump-sum credit was paid to certain retirees who elected the 
alternative form of annuity. Retirees whose annuities began after 
January 3, 1988, and before October 1, 1989, who elected the 
alternative form of annuity received the lump-sum payment in two 
installments. The first installment was paid at the time of retirement 
and the second installment 1 year after the commencing date of annuity.
    A retiree who died within 1 year of the date of his retirement due 
to a life-threatening affliction or other critical condition would not 
realize the full benefit of his alternative annuity election since he 
or she would not be alive to receive the second installment of the 
lump-sum payment. Retirees in this situation were, therefore, permitted 
to receive the entire amount of the lump-sum benefit in one installment 
payable at the time of retirement. Retirees whose probable life 
expectancy was not less than 1 year were likely to be alive to receive 
payment of the second installment of the lump-sum benefit. Therefore, 
there would be no need to exclude them from receiving payment in two 
installments.
    Section 7001(a)(4) of the Omnibus Budget Reconciliation Act of 
1990, October 27, 1990, 104 Stat. 1388-327, Pub. L. 101-508, made 
several changes to the Civil Service Retirement law. Among those 
changes was the suspension of the alternative form of 

[[Page 54586]]
annuity with a lump-sum payment equal to an employee's retirement 
contributions, for most Federal employees covered by the Civil Service 
Retirement System whose voluntary annuities commenced on or after 
December 2, 1990, but before October 1, 1995. An exception provided for 
in this legislation was codified at 5 U.S.C. 8343a(f)(2). This 
exception allowed nondisability annuitants to receive the lump-sum 
payment if they were suffering from a ``life-threatening affliction or 
other critical medical condition'' at the time of retirement.
    OPM's interim regulations implementing Public Law 101-508 were 
published on February 19, 1991, using the same definition of ``life-
threatening affliction or other critical medical condition.'' The 
regulations implementing this provision are found at 5 CFR 
831.2203(h)(1)(i) and 831.2207 (c)(2) and (3). A ``life-threatening 
affliction or other critical medical condition'' is defined at 5 CFR 
831.2207(c)(3)(i) as a ``medical condition so severe as to reasonably 
limit an individual's probable life expectancy to less than one year.''
    MSPB concluded that OPM's regulatory interpretation at sections 
831.2207 and 831.2208 of Title 5, Code of Federal Regulations, was 
appropriate for the bifurcated payments in the original statute because 
the 1-year deferral of the lump-sum payment would be against equity and 
good conscience for individuals suffering from medical conditions that 
would likely be fatal within a year. However, in the context of 
continued eligibility under the 1990 (and 1993) provisions, MSPB found 
that standard unacceptable. MSPB stated that the purpose of the 
provision was to allow critically-ill employees to recover their 
contributions during their lifetime.
    To conform our regulations with the Board determination of the 
purpose of the provision, we calculated the time that a newly-retired, 
nondisability retiree receiving the average monthly annuity must 
collect annuity to recover the average amount of employee 
contributions. On average, nondisability CSRS annuitants must receive 
annuity for 22 months to recover their contributions. Thus, an 
individual who at the time of retirement has a medical condition which 
is not likely to limit his or her life expectancy to less than 2 years 
will usually live long enough to recover all of his or her retirement 
contributions in the form of monthly annuity benefits. Accordingly, we 
are amending sections 831.2207(c)(3)(i) and 842.707(c)(3)(i) of Title 
5, Code of Federal Regulations, to replace the 1-year standard with a 
2-year standard.
    The amendments to paragraph (e) of section 831.2203 and paragraph 
(b) of section 842.704 correct obsolete procedures that have become 
inappropriate because of statutory changes. When AFA was available to 
all nondisability retirees, we notified all employees of their payment 
options. The current law permits AFA in a very small number of cases. 
Notice of AFA election rights to all retiring employees is no longer 
appropriate. An eligible employee must notify OPM and submit qualifying 
medical evidence to initiate the election process. The regulations have 
been amended to reflect this change.

Waiver of General Notice of Proposed Rulemaking

    Under section 553(b)(3)(B) of title 5, United States Code, I find 
that good cause exists for waiving the general notice of proposed 
rulemaking for the change in the definition of a ``life-threatening 
affliction or other critical medical condition.'' Delaying the 
implementation of the 2-year standard would be contrary to the public 
interest. Because MSPB has already invalidated the current 1-year 
standard in our regulations, a delay in application of the new 2-year 
standard serves no purpose.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because the regulation 
will only affect federal employees and agencies and retirement payments 
to retired Government employees and their survivors.

List of Subjects in 5 CFR Parts 831 and 842

    Administrative practice and procedure, Air traffic controllers, 
Claims, Disability benefits, Firefighters, Government employees, Income 
taxes, Intergovernmental relations, Law enforcement officers, Pensions, 
Reporting and recordkeeping requirements, Retirement.

U.S. Office of Personnel Management.
James B. King,
Director.
    Accordingly, OPM is amending 5 CFR parts 831 and 842 as follows:

PART 831--RETIREMENT

    1. The authority citation for part 831 continues to read as 
follows:

    Authority: 5 U.S.C. 8347; Sec. 831.102 also issued under 5 
U.S.C. 8334; Sec. 831.106 also issued under 5 U.S.C. 552a; 
Sec. 831.108 also issued under 5 U.S.C. 8336(d)(2); 
Sec. 831.201(b)(6) also issued under 5 U.S.C. 7701(b)(2); 
Sec. 831.204 also issued under section 7202(m)(2) of the Omnibus 
Budget Reconciliation Act of 1990, Pub. L. 105-508, 104 Stat. 1388-
339; Sec. 831.303 also issued under 5 U.S.C. 8334(d)(2); 
Sec. 831.502 also issued under 5 U.S.C. 8337; Sec. 831.502 also 
issued under section 1(3), E.O. 11228, 3 CFR 1964-1965 Comp.; 
Sec. 831.621 also issued under section 201(d) of the Federal 
Employees Benefits Improvement Act of 1986, Pub. L. 99-251, 100 
Stat. 23; subpart S also issued under 5 U.S.C. 8345(k); subpart V 
also issued under 5 U.S.C. 8343a and section 6001 of the Omnibus 
Budget Reconciliation Act of 1987, Pub. L. 100-203, 101 Stat. 1330-
275; Sec. 831.2203 also issued under section 7001(a)(4) of the 
Omnibus Budget Reconciliation Act of 1990, Pub. L. 101-508; 104 
Stat. 1388-328.

    2. In section 831.2203, paragraph (e) is revised, paragraphs (h)(1) 
introductory text, (h)(1)(i), and (h)(1)(ii) are redesignated as 
paragraphs (h)(1)(i) introductory text, (h)(1)(i)(A), and (h)(1)(i)(B), 
respectively, and a new paragraph (h)(1)(ii) is added to read as 
follows:


Sec. 831.2203  Eligibility.

* * * * *
    (e) An election of the alternative form of annuity must be in 
writing and received by OPM on or before the date of final 
adjudication. After the date of final adjudication, an election of the 
alternative form of annuity is irrevocable.
* * * * *
    (h)(1) * * *
    (ii) An individual whose annuity commences on or after October 1, 
1994, may elect an alternative form of annuity only if that individual 
is an employee or Member who meets the conditions and fulfills the 
requirements described in Sec. 831.2207(c) (2) and (3).
* * * * *
    3. In section 831.2207, paragraph (c)(3)(i) is revised, paragraph 
(c)(3)(ii)(G) is removed and reserved, paragraph (c)(3)(ii)(V) is 
removed, and paragraphs (c)(3)(ii) (B), (H), (K), and (M) are revised 
to read as follows:


Sec. 831.2207  Partial deferred payment of the lump-sum credit if 
annuity commences after January 3, 1988, and before October 1, 1989.

* * * * *
    (c) * * *
    (3)(i) For the purpose of this section, life-threatening affliction 
or other critical medical condition means a medical condition so severe 
as to reasonably limit an individual's probable life expectancy to less 
than 2 years.
    (ii) * * *

[[Page 54587]]

    (B) Aortic stenosis (severe).
* * * * *
    (H) Severe cardiomyopathy--Class IV.
    (K) Cardiac aneurysm not amenable to surgical treatment.
* * * * *
    (M) Severe hepatic failure.
* * * * *


Secs. 831.2203, 831.2208  [Amended]

    4. In the list below, for each section and paragraph indicated in 
the left two columns, remove the reference indicated in the third 
column where it appears in the paragraph, and add the reference 
indicated in the fourth column:

----------------------------------------------------------------------------------------------------------------
        Section                 Paragraph                  Remove                           Add                 
----------------------------------------------------------------------------------------------------------------
831.2203..............  Newly designated          1995...................  1994                                 
                         (h)(1)(i) introductory                                                                 
                         text.                                                                                  
831.2203..............  (h)(2) introductory text  (h)(1)(ii).............  (h)(1)(i)(B)                         
831.2208..............  (a) introductory text...  1995...................  1994                                 
831.2208..............  (b).....................  1995...................  1994                                 
831.2208..............  (c)(2)(ii)..............  831.2203(h)(1)(i)......  831.2203(h)(1)(i)(A)                 
----------------------------------------------------------------------------------------------------------------

PART 842--FEDERAL EMPLOYEES RETIREMENT SYSTEM--BASIC ANNUITY

    5. The authority citation for part 842 continues to read as 
follows:

    Authority: 5 U.S.C. 8461(g); Secs. 842.104 and 842.106 also 
issued under 5 U.S.C. 8461(n); Sec. 842.105 also issued under 5 
U.S.C. 8402(c)(1) and 7701(b)(2); Sec. 842.106 also issued under 
section 7202(m)(2) of the Omnibus Budget Reconciliation Act of 1990, 
Pub. L. 101-508 and 5 U.S.C. 8402(c)(1); Secs. 842.604 and 842.611 
also issued under 5 U.S.C. 8417; Sec. 842.607 also issued under 5 
U.S.C. 8416 and 8417; Sec. 842.614 also issued under 5 U.S.C. 8419; 
Sec. 842.615 also issued under 5 U.S.C. 8418; Sec. 842.703 also 
issued under section 7001(a)(4) of the Omnibus Budget Reconciliation 
Act of 1990, Pub. L. 101-508; Sec. 842.707 also issued under section 
6001 of the Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-
203; Sec. 842.708 also issued under section 4005 of the Omnibus 
Budget Reconciliation Act of 1989, Pub. L. 101-239 and section 7001 
of the Omnibus Budget Reconciliation Act of 1990, Pub. L. 101-508; 
subpart H also issued under 5 U.S.C. 1104.

    6. In section 842.703, paragraphs (d)(1) introductory text, 
(d)(1)(i), and (d)(1)(ii) are redesignated as paragraphs (d)(1)(i) 
introductory text, (d)(1)(i)(A), and (d)(1)(i)(B), respectively, and a 
new paragraph (d)(1)(ii) is added to read as follows:


Sec. 842.703  Eligibility.

* * * * *
    (d)(1) * * *
    (ii) An individual whose annuity commences on or after October 1, 
1994, may elect an alternative form of annuity only if that individual 
is an employee or Member who meets the conditions and fulfills the 
requirements described in Sec. 842.707(c) (2) and (3).
* * * * *
    7. In section 842.704, paragraph (b) is revised to read as follows:


Sec. 842.704  Election requirements.

* * * * *
    (b) An election of the alternative form of annuity must be in 
writing and received by OPM on or before the date of final 
adjudication. After the date of final adjudication, an election of the 
alternative form of annuity is irrevocable.
* * * * *
    8. In section 842.707, paragraph (c)(3)(i) is revised, paragraph 
(c)(3)(ii)(G) is removed and reserved, paragraph (c)(3)(ii)(V) is 
removed, and paragraphs (c)(3)(ii) (B), (H), (K), and (M) are revised 
to read as follows:


Sec. 842.707  Partial deferred payment of the lump-sum credit if 
annuity commences after January 3, 1988, and before October 1, 1989.

* * * * *
    (c) * * *
    (3)(i) For the purpose of this section, life-threatening affliction 
or other critical medical condition means a medical condition so severe 
as to reasonably limit an individual's probable life expectancy to less 
than 2 years.
    (ii) * * *
    (B) Aortic stenosis (severe).
* * * * *
    (H) Severe cardiomyopathy--Class IV.
* * * * *
    (K) Cardiac aneurysm not amenable to surgical treatment.
* * * * *
    (M) Severe hepatic failure.
* * * * *


Secs. 842.703, 842.708  [Amended]

    9. In the list below, for each section and paragraph indicated in 
the left two columns, remove the reference indicated in the third 
column where it appears in the paragraph, and add the reference 
indicated in the fourth column:

----------------------------------------------------------------------------------------------------------------
        Section                 Paragraph                  Remove                           Add                 
----------------------------------------------------------------------------------------------------------------
842.703...............  Newly designated          1995...................  1994                                 
                         (d)(1)(i) introductory                                                                 
                         text.                                                                                  
842.703...............  (d)(2) introductory text  (d)(1)(ii).............  (d)(1)(i)(B)                         
842.708...............  (a) introductory text...  1995...................  1994                                 
842.708...............  (b).....................  1995...................  1994                                 
842.708...............  (c)(2)(ii)..............  842.703(d)(1)(i).......  842.703(d)(1)(i)(A)                  
----------------------------------------------------------------------------------------------------------------


[[Page 54588]]

[FR Doc. 95-26233 Filed 10-24-95; 8:45 am]
BILLING CODE 6325-01-M