[Federal Register Volume 62, Number 180 (Wednesday, September 17, 1997)]
[Rules and Regulations]
[Pages 48731-48746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24585]



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 Rules and Regulations
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  Federal Register / Vol. 62, No. 180 / Wednesday, September 17, 1997 / 
Rules and Regulations  

[[Page 48731]]


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OFFICE OF PERSONNEL MANAGEMENT

5 CFR Parts 870, 871, 872, 873, and 874

RIN 3206-AF32, 3206-AG79, 3206-AG68


Federal Employees' Group Life Insurance Program: Merger of Life 
Insurance Regulations; Living Benefits; Assignment of Life Insurance

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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SUMMARY: The Office of Personnel Management (OPM) is issuing final 
regulations to combine the five parts of title 5 of the Code of Federal 
Regulations relating to the Federal Employees' Group Life Insurance 
(FEGLI) Program and to simplify the language of the regulations. This 
will ease administration and aid in understanding the Program. We also 
are issuing final regulations to implement the FEGLI Living Benefits 
Act and assignment of life insurance.

EFFECTIVE DATE: October 17, 1997.

FOR FURTHER INFORMATION CONTACT: Karen Leibach, 202-606-0004.

SUPPLEMENTARY INFORMATION: On May 3, 1995, OPM published proposed 
regulations (60 FR 21759), merging the five parts of title 5 of the 
Code of Federal Regulations relating to the Federal Employees' Group 
Life Insurance Program. The merger deletes parts 871, 872, 873, and 874 
and combines the information now contained in those parts into an 
expanded part 870. This results in a complete presentation of material 
in one place.
    In addition to merging the regulations, we reorganized the 
material; incorporated some material formerly found in Federal 
Personnel Manual (FPM) Supplement 870-1, which was abolished as of 
December 31, 1994; and simplified the language to make the regulations 
easier to understand.
    We received one comment from a retiree organization, which 
expressed approval of the consolidation and the simplified language.
    We made changes to reflect statutory changes since the proposed 
regulations were prepared and made other minor language modifications 
and clarifications.
    On June 15, 1995, OPM published interim regulations (60 FR 31371), 
implementing Pub. L. 103-409, the FEGLI Living Benefits Act, which 
permits terminally ill individuals covered by FEGLI to elect a lump sum 
payment of their Basic insurance as a living benefit.
    We received one comment from an individual who suggested allowing 
covered individuals to make such an election prior to their becoming 
terminally ill and allowing someone other than the insured to make the 
election. The Living Benefits Act states that terminally ill individual 
may elect a Living Benefit. Terminally ill is defined as having a life 
expectancy of 9 months or less. Therefore, OPM does not have the 
statutory authority to permit such elections prior to an individual's 
being diagnosed as terminally ill. We reviewed the requirement that 
only the insured may elect a Living Benefit. At the present time we are 
not experiencing a problem in this area. However, we will continue to 
monitor the situation to determine whether any changes should be made 
in the future.
    We made one significant change to the Living Benefits regulations. 
The interim regulations state that if an individual elects a Living 
Benefit, he/she cannot then assign any remaining insurance. We 
reevaluated that position and have revised the regulations to state 
that an individual can assign his/her remaining insurance (if any) 
following a Living Benefit election. We also made changes in numbering 
and language to conform the Living Benefits regulations to the order 
and style of the merged regulations.
    On October 4, 1995, OPM published interim regulations (60 FR 
51881), implementing Section 4 of Public Law 103-336, which permits all 
insured Federal employees and former employees to irrevocably assign 
ownership of their FEGLI insurance. Previously, only judges could 
assign ownership of their insurance.
    We received one comment from a Federal agency asking whether the 
reference to ``other person(s)'' was intended to prevent the assignee 
from designating a corporation as a contingent beneficiary and also 
suggesting that the regulations include instructions concerning 
procedures for reassigning the insurance. The regulations in place at 
the time included a ``corporation'' in the definition of ``person.'' 
The definition of ``assignment'' also specifically includes transfer of 
ownership to a corporation. We do not believe that regulations are the 
appropriate forum for detailed instructions. Instructions more properly 
belong in handbooks, operating manuals, and other guidance to agencies.
    The commentor also suggested some perfecting language changes. We 
accepted some of these suggestions. We also made changes in numbering 
and language to conform the assignment regulations to the order and 
style of the merged regulations.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities, because the 
regulations will affect only Federal employees, annuitants, and 
compensationers.

List of Subjects in 5 CFR Parts 870, 871, 872, 873 and 874

    Administrative practice and procedure, Government employees, 
Hostages, Iraq, Kuwait, Lebanon, Life insurance, Retirement.

    U.S. Office of Personnel Management.
Janice R. Lachance,
Acting Director.

    Accordingly, OPM is amending title 5, Code of Federal Regulations, 
as follows:
    1. Part 870 is revised to read as follows:

PART 870--FEDERAL EMPLOYEES' GROUP LIFE INSURANCE PROGRAM

Subpart A--Administration and General Provisions

Sec.
870.101  Definitions.
870.102  The policy
870.103  Correction of errors.
870.104  Initial decision and reconsideration.

[[Page 48732]]

Subpart B--Types and Amount of Insurance

870.201  Types of insurance.
870.202  Basic insurance amount (BIA).
870.203  Post-election BIA.
870.204  Annual rates of pay.
870.205  Amount of Optional insurance.
870.206  Accidental death and dismemberment.

Subpart C--Eligibility

870.301  Eligibility for life insurance.
870.302  Exclusions.

Subpart D--Cost of Insurance

870.401  Withholdings and contributions for Basic insurance.
870.402  Withholdings for Optional insurance.
870.403  Withholdings and contributions following a Living Benefit 
election.
870.404  Withholdings and contributions provisions that apply to 
both Basic and Optional insurance.
870.405  Direct premium payments under 5 U.S.C. chapter 84 (Federal 
Employees' Retirement System--FERS).

Subpart E--Coverage

870.501  Basic insurance: effective dates of automatic coverage.
870.502  Basic insurance: waiver/cancellation of insurance.
870.503  Basic insurance: cancelling a waiver.
870.504  Optional insurance: election.
870.505  Optional insurance: waiver/cancellation of insurance.
870.506  Optional insurance: cancelling a waiver.
870.507  Open enrollment periods.
870.508  Nonpay status.
870.509  Transfers to international organizations.

Subpart F--Termination and Conversion

870.601  Termination of Basic insurance.
870.602  Termination of Optional insurance.
870.603  Conversion of Basic and Optional insurance.

Subpart G--Annuitants and Compensationers

870.701  Eligibility for life insurance.
870.702  Election of Basic insurance.
870.703  Amount of life insurance.
870.704  Reinstatment of life insurance.
870.705  Reemployed annuitants.
870.706  MRA-plus-10 annuitants.

Subpart H--Order of Precedence and Designation of Beneficiary

870.801  Order of precedence and payment of benefits.
870.802  Designation of beneficiary.
870.803  Child incapable of self-support.

Subpart I--Assignments of Life Insurance.

870.901  Assignments permitted.
870.902  Making an assignment.
870.903  Effective date of assignment.
870.904  Amount of insurance.
870.905  Withholdings.
870.906  Cancellation of insurance.
870.907  Termination and conversion.
870.908  Annuitants and compensationers.
870.909  Designations and changes of beneficiary.
870.910  Notification of current addresses.

Subpart J--Benefits for United States Hostages in Iraq and Kuwait and 
United States Hostages Captured in Lebanon

870.1001  Purpose.
870.1002  Definitions.
870.1003  Coverage and amount of insurance.
870.1004  Effective date of insurance.
870.1005  Premiums.
870.1006  Cancellation of insurance.
870.1007  Termination and conversion.
870.1008  Order of precedence and designation of beneficiary.
870.1009  Responsibilities of the U.S. Department of State.

Subpart K--Living Benefits

870.1101  Eligibility for a Living Benefit.
870.1102  Amount of a Living Benefit.
870.1103  Election procedures.

    Authority: 5 U.S.C. 8716.

Subpart A--Administration and General Provisions


Sec. 870.101  Definitions.

    Annuitant means a former employee entitled to an annuity under a 
retirement system established for employees. This includes the 
retirement system of a nonappropriated fund instrumentality of the 
Department of Defense or the Coast Guard.
    Assign and assignment refer to an individual's irrevocable transfer 
to another individual, corporation, or trustee all ownership of FEGLI 
coverage (except Option C).
    Assignee means the individual, corporation, or trustee to which an 
individual irrevocably transfers ownership of FEGLI coverage (except 
Option C).
    Child, as used in the definition of family member for Option C 
coverage, means a legitimate child, an adopted child, a stepchild who 
lives with the employee or former employee in a regular parent-child 
relationship, or a recognized natural child. It does not include a 
stillborn child, a grandchild, or a foster child. The child must be 
under age 22 or, if age 22 or over, must be incapable of self-support 
because of a mental or physical disability which existed before the 
child reached age 22.
    Child,  as used in the order of precedence for payment of benefits, 
means a legitimate child, an adopted child, or a recognized natural 
child, of any age. It does not include a stepchild, a stillborn child, 
a grandchild, or a foster child. An individual who has reached age 18 
is considered an adult and can receive a benefit payment in his/her 
name. However, if the age of adulthood where the individual has his/her 
legal residence is set at a lower age, the individual is considered an 
adult upon reaching that lower age. Adopted children do not inherit 
from their birth parents under the order of precedence stated in 5 
U.S.C. 8705, other than as designated beneficiaries, but inherent from 
their adoptive parents. However, a child who is adopted by the spouse 
of a birth parent inherits from that birth parent.
    Compensation means compensation under subchapter I of chapter 81 of 
title 5, United States Code, which is payable because of an on-the-job 
injury or disease.
    Compensationer means an employee or former employee who is entitled 
to compensation and whom the Department of Labor determines is unable 
to return to duty.
    Date of retirement, as used in 5 U.S.C. 8706(b)(1)(A), means the 
starting date of annuity.
    Dependent means living with or receiving regular and substantial 
support from the insured individual.
    Duly appointed representative of the insured's estate means an 
individual named in a court order granting the individual the authority 
to receive, or the right to possess, the insured's property; the order 
must be issued by a court having jurisdiction over the insured's 
estate. Where the law of the insured's legal residence provides for the 
administration of estates through alternative procedures which do away 
with the need for a court order, this term also means an individual who 
shows that he/she is entitled to receive, or possess, the insured's 
property under the terms of those alternative procedures.
    Employee means an individual defined by section 8701(a) of title 5, 
United States Code.
    Employing office means the agency office or retirement system 
office that has responsibility for life insurance actions.
    (1) The Administrative Office of the United States Courts is the 
employing office for judges of the following courts:
    (i) All United States Courts of Appeals;
    (ii) All United States District Courts;
    (iii) The Court of International Trade;
    (iv) The Court of Federal Claims; and
    (v) The District Courts of Guam, the Northern Mariana Islands, and 
the Virgin Islands.
    (2) The Washington Headquarters Services is the employing office 
for judges of the United States Court of Appeals for the Armed Forces.
    (3) The United States Tax Court is the employing office for judges 
of the United States Tax Court.
    (4) The United States Court of Veterans Appeals is the employing

[[Page 48733]]

office for judges of the United States Court of Veterans Appeals.
    Family member means a spouse (including a valid common law 
marriage) and unmarried dependent child(ren).
    Immediate annuity means:
    (1) An annuity that begins no later than 1 month after the date the 
insurance would otherwise stop (the date of separation from service), 
and
    (2) An annuity under Sec. 842.204(a)(1) of this title for which the 
starting date has been postponed under Sec. 842.204(c) of this title.
    Judge means an individual appointed as a Federal justice or judge 
under Article I or Article III of the Constitution.
    OFEGLI means the Office of Federal Employees' Group Life Insurance, 
which pays benefits under the policy.
    OPM means the Office of Personnel Management.
    OWCP means the Office of Workers' Compensation Programs, U.S. 
Department of Labor, which administers subchapter I of chapter 81 of 
title 5, United States Code.
    Parent means the mother or father of a legitimate child or an 
adopted child. The term parent includes the mother of a recognized 
natural child; it also includes the father of a recognized natural 
child if the recognized natural child meets the definition provided 
below.
    Recognized natural child, with respect to paternity, is one for 
whom the father meets one of the following:
    (1) (i) Has acknowledged paternity in writing;
    (ii) Was ordered by a court to provide support;
    (iii) Before his death, was pronounced by a court to be the father;
    (iv) Was established as the father by a certified copy of the 
public record of birth or church record of baptism, if the insured was 
the informant and named himself as the father of the child; or
    (v) Established paternity on public records, such as records of 
schools or social welfare agencies, which show that with his knowledge 
the insured was named as the father of the child.
    (2) If paternity is not established by paragraph (1) of this 
definition, such evidence as the child's eligibility as a recognized 
natural child under other State or Federal programs or proof that the 
insured included the child as a dependent child on his income tax 
returns may be considered when attempting to establish paternity.
    Reconsideration means the final level of administrative review of 
an employing office's initial decision to determine if the employing 
office followed the law and regulations correctly in making the initial 
decision concerning FEGLI eligibility and coverage.
    Service means civilian service which is creditable under subchapter 
III of chapter 83 or chapter 84 of title 5, United States Code. This 
includes service under a nonappropriated fund instrumentality of the 
Department of Defense or the Coast Guard for an individual who elected 
to remain under a retirement system established for employees described 
in section 2105(c) of title 5.
    Terminally ill means having a medical prognosis of a life 
expectancy of 9 months or less.
    Underdeduction means a failure to withhold the required amount of 
life insurance deductions from an individual's pay, annuity, or 
compensation. This includes nondeductions (when none of the required 
amount was withheld) and partial deductions (when only part of the 
required amount was withheld).


Sec. 870.102  The policy.

    Basic, Option A, Option B, and Option C benefits are payable 
according to a contract with the company or companies that issue a 
policy under Sec. 8709 of title 5, United States Code. Any court action 
to obtain money due from this insurance policy must be taken against 
the company that issues the policy.


Sec. 870.103  Correction of errors.

    (a) The employing office may make corrections of administrative 
errors regarding coverage or changes in coverage. Retroactive 
corrections are subject to the provisions of Sec. 870.401(f).
    (b) OPM may order correction of an error after reviewing evidence 
that it would be against equity and good conscience not to do so.


Sec. 870.104  Initial decision and reconsideration.

    (a) An individual may ask his/her agency or retirement system to 
reconsider its initial decision denying life insurance coverage, the 
opportunity to change coverage, or the opportunity to assign insurance.
    (b) An employing office's decision is an initial decision when the 
employing office gives it in writing and informs the individual of the 
right to an independent level of review (reconsideration) by the 
appropriate agency or retirement system.
    (c) A request for reconsideration must be made in writing and must 
include the employee's (or annuitant's) name, address, date of birth, 
Social Security number, reason(s) for the request, and, if applicable, 
retirement claim number.
    (d) A request for reconsideration must be made within 30 calendar 
days from the date of the initial decision. This time limit may be 
extended when the individual shows that he/she was not notified of the 
time limit and was not otherwise aware of it or that he/she was unable, 
due to reasons beyond his/her control, to make the request within the 
time limit.
    (e) The reconsideration must take place at or above the level at 
which the initial decision was made.
    (f) After reconsideration, the agency or retirement system must 
issue a final decision to the insured individual. This decision must be 
in writing and must fully state the findings.

Subpart B--Types and Amount of Insurance


Sec. 870.201  Types of insurance.

    (a) There are two types of life insurance under the FEGLI Program: 
Basic and Optional.
    (b) There are three types of Optional insurance: Option A (standard 
optional insurance), Option B (additional optional insurance), and 
Option C (family optional insurance).


Sec. 870.202  Basic insurance amount (BIA).

    (a)(1) An employee's Basic insurance amount (BIA) is either:
    (i) His/her annual rate of basic pay, rounded to the next higher 
thousand, plus $2,000; or
    (ii) $10,000; whichever is higher, unless an employee has elected a 
Living Benefit under subpart K of this part. However, the BIA can never 
be more than the annual rate of pay for Level II Executive Schedule 
positions under Sec. 5313 of title 5, U.S.C., rounded to the next 
higher thousand, plus $2,000.
    (2) The BIA of an individual who is eligible to continue Basic Life 
insurance coverage as an annuitant or compensationer is the BIA in 
effect at the time his/her insurance as an employee would stop under 
Sec. 870.601.
    (b) An employee's BIA automatically changes whenever annual pay is 
increased or decreased by an amount sufficient to raise or lower pay to 
a different $1,000 bracket, unless the employee has elected a Living 
Benefit under subpart K of this part.
    (c) The amount of an employee's Basic Life insurance coverage is 
equal to his/her BIA multiplied by the appropriate factor based on the 
employee's age, as follows:

------------------------------------------------------------------------
                             Age                                 Factor 
------------------------------------------------------------------------
35 or under..................................................        2.0

[[Page 48734]]

                                                                        
36...........................................................        1.9
37...........................................................        1.8
38...........................................................        1.7
39...........................................................        1.6
40...........................................................        1.5
41...........................................................        1.4
42...........................................................        1.3
43...........................................................        1.2
44...........................................................        1.1
45 or over...................................................        1.0
------------------------------------------------------------------------

Sec. 870.203  Post-election BIA.

    (a) The BIA of an individual who elects a Living Benefit under 
subpart K of this part is the amount of insurance left after the 
effective date of the Living Benefit election. This amount is the 
individual's post-election BIA.
    (1) the post-election BIA of an individual who elects a full Living 
Benefit is 0.
    (2) The post-election BIA of an employee who elects a partial 
Living Benefit is the BIA as of the date OFEGLI receives the completed 
Living Benefit application (the ``pre-election'' BIA), reduced by the 
percentage which the partial lump-sum payment represents of the full 
Living Benefit payment the employee could have received if he/she 
elected a full Living Benefit; this amount is rounded up or down to the 
nearest multiple of $1,000 or, if midway between multiples, to the next 
higher multiple.
    (b) The post-election BIA cannot change after the effective date of 
the Living Benefit election.
    (c) For purposes of computing the payment of benefits upon the 
death of an insured individual who elected a partial Living Benefit, 
the post-election BIA will be multiplied by the age factor in effect on 
the date OFEGLI received the completed Living Benefit application.


Sec. 870.204  Annual rates of pay.

    (a) (1) An insured employee's annual pay is his/her annual rate of 
basic pay as fixed by law or regulation.
    (2) Annual pay for this purpose includes the following:
    (i) Interim geographic adjustments and locality-based comparability 
payments as provided by Pub. L. 101-509 (104 Stat. 1479);
    (ii) Premium pay for standby duty for Federal civilian firefighters 
under 5 U.S.C. 5545(c)(1);
    (iii) Premium pay for overtime inspectional service for customs 
officers as provided by Pub. L. 103-66 107 Stat. 453);
    (iv) For a law enforcement officer as defined under 5 U.S.C. 
8331(20) and Secs. 831.902 and 842.802 of this title, premium pay for 
administratively uncontrollable overtime under 5 U.S.C. 5545(c)(2);
    (v) Night differential pay for wage employees;
    (vi) Environmental differential pay for employees exposed to danger 
or physical hardship;
    (vii) Tropical differential pay for citizen employees in Panama;
    (viii) Special pay adjustments for law enforcement officers;
    (ix) Availability pay for criminal investigators under 5 U.S.C. 
5545a; and
    (x) Bonuses for physicians and dentists of the Department of 
Veterans Affairs under Pub. L. 96-330 (94 Stat. 1030).
    (b) To convert a pay rate of other than annual salary to an annual 
rate, multiply the pay rate by the number of pay units in a 52-week 
work year.
    (c) The annual pay for a part-time employee is his/her basic pay 
applied to his/her tour of duty in a 52-week work year.
    (d) The annual pay for an employee on piecework rates is the total 
basic earnings for the previous calendar year, not counting premium pay 
for overtime or holidays.
    (e) The annual pay for an employee with a regular schedule who 
works at different pay rates is the weighted average of the rates at 
which the employee is paid, projected to an annual basis.
    (f) The annual pay for a non-Postal intermittent employee or an 
employee who works at different pay rates without a regular schedule is 
the annual rate which he/she is receiving at the end of the pay period.
    (g) If an employee legally serves in more than 1 position at the 
same time, and at least 1 of those positions entitles him/her to life 
insurance coverage, the annual pay is the sum of the annual basic pay 
fixed by law or regulation for each position. Exception: this doesn't 
apply to part-time flexible schedule employees in the Postal Service.


Sec. 870.205  Amount of Optional insurance.

    (a) Option A coverage is $10,000. However, if an employee's annual 
rate of pay is more than the sum of the annual rate of basic pay for 
Level II Executive Schedule positions under 5 U.S.C. 5313 plus $10,000, 
Option A coverage automatically increases. The amount of Option A 
coverage in this case is the difference between the employee's annual 
rate of pay, (rounded to the next higher thousand if not already an 
even thousand), and the maximum allowable BIA.
    (b) (1) Option B coverage comes in 1, 2, 3, 4, or 5 multiples of an 
employee's annual pay (after the pay has been rounded to the next 
higher thousand, if not already an even thousand). A multiple cannot be 
more than the annual rate of basic pay for Level II Executive Schedule 
positions under 5 U.S.C. 5313, rounded to the next higher thousand.
    (2) The amount of Option B coverage automatically changes whenever 
annual pay is increased or decreased by an amount sufficient to raise 
or lower pay to a different $1,000 bracket.
    (c) Option C coverage is $5,000 payable upon the death of a spouse 
and $2,500 payable upon the death of an eligible child. Payments are 
made to the insured individual.


Sec. 870.206  Accidental death and dismemberment.

    (a) (1) Accidental death and dismemberment coverage is an automatic 
part of Basic and Option A insurance for employees.
    (2) There is no accidental death and dismemberment coverage with 
Options B and C.
    (3) Individuals who are insured as annuitants or compensationers do 
not have accidental death and dismemberment coverage.
    (b) (1) Under Basic insurance, accidental death benefits are equal 
to the BIA, but without the age factor described in Sec. 870.202(c).
    (2) Under Option A, accidental death benefits are equal to the 
amount of Option A.
    (c)(1) Under Basic insurance, accidental dismemberment benefits for 
the loss of a hand, foot, or eye are equal to one-half the BIA. For 
loss of 2 or more of these in a single accident, benefits are equal to 
the BIA.
    (2) Under Option A, accidental dismemberment benefits for the loss 
of a hand, foot, or eye are equal to one-half the amount of Option A. 
For loss of 2 or more of these in a single accident, benefits are equal 
to the amount of Option A.
    (3) Accidental dismemberment benefits are paid to the employee.

Subpart C--Eligibility


Sec. 870.301  Eligibility for life insurance.

    (a) Each nonexcluded employee is automatically insured for Basic 
insurance unless he/she waives it.
    (b)(1) Optional insurance must be specifically elected; it is not 
automatic.
    (2) An employee may elect one or more types of Optional insurance 
if:
    (i) He/she has Basic insurance;
    (ii) He/she doesn't have a waiver of that type (or types) of 
Optional insurance still in effect; and

[[Page 48735]]

    (iii) His/her periodic pay, after all other deductions, is enough 
to cover the full cost.


Sec. 870.302  Exclusions.

    (a) The following employees are excluded from life insurance 
coverage by law:
    (1) An employee of a corporation supervised by the Farm Credit 
Administration, if private interests elect or appoint a member of the 
board of directors.
    (2) An individual who is not a citizen or national of the United 
States and whose permanent duty station is outside the United States. 
Exception: an individual who met the definition of employee on 
September 30, 1979, by service in an Executive agency, the United 
States Postal Service, or the Smithsonian Institution in the area which 
was then known as the Canal Zone.
    (3) An individual first employed by the Government of the District 
of Columbia on or after October 1, 1987. Exceptions:
    (i) An employee of St. Elizabeths Hospital, who accepts employment 
with the District of Columbia Government following Federal employment 
without a break in service, as provided in section 6 of Pub. L. 98-621 
(98 Stat. 3379);
    (ii) An employee of the District of Columbia Financial 
Responsibility and Management Assistance Authority (Authority), who 
makes an election under the Technical Corrections to Financial 
Responsibility and Management Assistance Act (section 153 of Pub. L. 
104-134 (110 Stat. 1321)) to be considered a Federal employee for life 
insurance and other benefits purposes; employees of the Authority who 
are former Federal employees are subject to the provisions of 
Secs. 870.503(d) and 870.705 of this part;
    (iii) The Corrections Trustee and the Pretrial Services, Defense 
Services, Parole, Adult Probation and Offender Supervision Trustee and 
employees of these Trustees who accept employment with the District of 
Columbia government within 3 days after separating from the Federal 
Government; and
    (iv) Effective October 1, 1997, judicial and nonjudicial employees 
of the District of Columbia Courts, as provided by Pub. L. 105-33 (111 
Stat. 251).
    (4) Teachers in Department of Defense dependents schools overseas, 
if employed by the Federal Government in a nonteaching position during 
the recess period between school years.
    (b) The following employees are also excluded from life insurance 
coverage:
    (1) An employee serving under an appointment limited to 1 year or 
less. Exceptions:
    (i) An employee whose full-time or part-time temporary appointment 
has a regular tour of duty and follows a position in which he/she was 
insured, with no break in service or with a break in service of no more 
than 3 days;
    (ii) An acting postmaster;
    (iii) A Presidential appointee appointed to fill an unexpired term; 
and
    (iv) Certain employees who receive provisional appointments as 
defined in Sec. 316.403 of this title.
    (2) An employee who is employed for an uncertain or purely 
temporary period, who is employed for brief periods at intervals, or 
who is expected to work less than 6 months in each year. Exception: an 
employee who is employed under an OPM-approved career-related work-
study program under Schedule B lasting at least 1 year and who is 
expected to be in pay status for at least one-third of the total period 
of time from the date of the first appointment to the completion of the 
work-study program.
    (3) An intermittent employee (a non-full-time employee without a 
regularly scheduled tour of duty). Exception: an employee whose 
intermittent appointment follows, with no break in service or with a 
break in service of no more than 3 days, a position in which he/she was 
insured and to which he/she is expected to return.
    (4) An employee whose pay, on an annual basis, is $12 a year or 
less.
    (5) A beneficiary or patient employee in a Government hospital or 
home.
    (6) An employee paid on a contract or fee basis. Exception: an 
employee who is a United States citizen, who is appointed by a contract 
between the employee and the Federal employing authority which requires 
his/her personal service, and who is paid on the basis of units of 
time.
    (7) An employee paid on a piecework basis. Exception: an employee 
whose work schedule provides for full-time or part-time service with a 
regularly scheduled tour of duty.
    (c) OPM makes the final determination about whether the above 
categories apply to a specific employee or group of employees.

Subpart D--Cost of Insurance


Sec. 870.401  Withholdings and contributions for Basic insurance.

    (a) The cost of Basic insurance is shared between the insured 
individual and the Government. The employee pays two thirds of the 
cost, and the Government pays one-third.
    (b)(1) During each pay period in which an insured employee is in 
pay status for any part of the period, $0.165 must be withheld from the 
employee's biweekly pay for each $1,000 of the employee's BIA. The 
amount withheld from the pay of an employee who is paid on other than a 
biweekly basis must be prorated and adjusted to the nearest one-tenth 
of 1 cent.
    (2) The amount withheld from the pay of an insured employee whose 
annual pay is paid during a period shorter than 52 work weeks is the 
amount obtained by converting the biweekly rate to an annual rate and 
prorating the annual rate over the number of installments of pay 
regularly paid during the year.
    (3) The amount withheld from the pay of an insured employee whose 
BIA changes during a pay period is based on the BIA in force at the end 
of the pay period.
    (c) For each pay period in which an employee is insured, the 
employing agency must contribute an amount equal to one-half the amount 
withheld from the employee's pay. This agency contribution must come 
from the appropriation or fund that is used for the payment of the 
employee's pay. For an elected official, the contribution must come 
from the appropriation or fund that is available for payment of other 
salaries in the same office.
    (d)(1) For an annuitant who elects to continue Basic insurance and 
chooses the maximum reduction of 75 percent after age 65 under 
Sec. 870.702(a)(2), the amount withheld monthly is $0.3575 for each 
$1,000 of the BIA. For a compensationer who makes this election, the 
amount withheld weekly is $0.0825 for each $1,000. These withholdings 
stop the month after the month in which the annuitant reaches age 65. 
There are no withholdings from individuals who retired or began 
receiving compensation before January 1, 1990, and who elected the 75 
percent reduction. For the purpose of this paragraph, an individual who 
separates from service after meeting the requirements for an immediate 
annuity under 5 U.S.C. 8412(g) is considered to retire on the day 
before the annuity begins.
    (2) For an annuitant who elects to continue Basic insurance and 
chooses the maximum reduction of 50 percent after age 65 under 
Sec. 870.702(a)(3), the amount withheld monthly is $0.8775 for each 
$1,000 of the BIA until the month after the month in which the 
annuitant reaches age 65; the amount is then reduced to $0.52 for each 
$1,000. For a compensationer who makes this election, the amount 
withheld weekly is $0.2025 for each $1,000 of the BIA until

[[Page 48736]]

age 65; the amount is then reduced to $0.12 for each $1,000.
    (3) For an annuitant who elects to continue Basic insurance and 
chooses no reduction after age 65 under Sec. 870.702(a)(4), the amount 
withheld monthly is $2,0475 for each $1,000 of the BIA until the month 
after the month in which the annuitant reaches age 65; the amount is 
then reduced to $1.69 for each $1,000. For a compensationer who makes 
this election, the amount withheld weekly is $0.4725 for each $1,000 of 
the BIA until age 65; the amount is then reduced to $0.39 for each 
$1,000.
    (e)(1) For each period in which an annuitant or compensationer is 
insured, OPM must contribute an amount equal to one-half the amount 
that would be withheld under paragraph (d)(1) of this section. 
Exception: for USPS employees who become annuitants or compensationers 
after December 31, 1989, the Postal Service pays the Government 
contributions.
    (2) The Government contribution is the same amount whether the 
individual elects a maximum 75 percent reduction, a maximum 50 percent 
reduction, or no reduction.
    (3) The Government contribution stops the month after the month in 
which the individual reaches age 65.
    (f) When an agency withholds less than or none of the proper amount 
of Basic life insurance deductions from an individual's pay, annuity, 
or compensation, the agency must submit an amount equal to the sum of 
the uncollected deduction and any applicable agency contributions 
required under 5 U.S.C. 8708 to OPM for deposit in the Employees' Life 
Insurance Fund.


Sec. 870.402  Withholdings for Optional insurance.

    (a) The insured individual pays the full cost of all Optional 
insurance. There is no Government contribution toward the cost of any 
Optional insurance.
    (b) During each pay period in any part of which an insured employee 
is in pay status, the employing agency must withhold the full cost of 
Optional insurance from his/her pay.
    (c) Subject to the provisions for reemployed annuitants in 
Sec. 870.705, the full cost of Optional insurance must be withheld from 
the annuity of an annuitant and from the compensation of a 
compensationer. These withholdings stop the month after the month in 
which an annuitant or compensationer reaches age 65.
    (d)(1) The biweekly cost per $10,000 of Option A coverage is:


For persons under age 35.......................................    $0.40
For persons ages 35 through 39.................................      .50
For persons ages 40 through 44.................................      .70
For persons ages 45 through 49.................................     1.10
For persons ages 50 through 54.................................     1.80
For persons ages 55 through 59.................................     3.00
For persons ages 60 and over...................................     7.00
                                                                        

    (2) The amount withheld from pay, annuity, or compensation paid on 
other than a biweekly basis must be prorated and adjusted to the 
nearest cent.
    (e)(1) The biweekly cost per $1,000 of Option B coverage is:


For persons under age 35.......................................    $0.04
For persons ages 35 through 39.................................      .05
For persons ages 40 through 44.................................      .07
For persons ages 45 through 49.................................      .11
For persons ages 50 through 54.................................      .18
For persons ages 55 through 59.................................      .30
For persons ages 60 and over...................................      .70
                                                                        

    (2) The amount withheld from pay, annuity, or compensation paid on 
other than a biweekly basis must be prorated and adjusted to the 
nearest one-tenth of 1 cent.
    (f)(1) The biweekly cost of Option C coverage is based on the age 
of the employee, annuitant, or compensationer. the cost is:


For persons under age 35.......................................    $0.30
For persons ages 35 through 39.................................      .31
For persons ages 40 through 44.................................      .52
For persons ages 45 through 49.................................      .70
For persons ages 50 through 54.................................     1.00
For persons ages 55 through 59.................................     1.50
For persons ages 60 and over...................................     2.60
                                                                        

    (2) The amount withheld from pay, annuity, or compensation paid on 
other than a biweekly basis must be prorated and adjusted to the 
nearest cent.
    (g) For the purpose of this subpart, an individual is considered to 
reach age 35, 40, 45, 50, 55, or 60 on the first day of the first pay 
period beginning on or after the January 1 following his/her 
corresponding birthday.
    (h) The amount withheld from the pay of an insured employee whose 
annual pay is paid during a period shorter than 52 work weeks is the 
amount obtained by converting this biweekly rate for his/her age group 
to an annual rate and prorating the annual rate over the number of 
installments of pay regularly paid during the year.
    (i) When an agency withholds less than or none of the proper amount 
of Optional life insurance deductions from an individual's pay, 
annuity, or compensation, the agency must submit an amount equal to the 
uncollected deductions required under 5 U.S.C. 8714a, 8714b, and 8714c 
to OPM for deposit in the Employees' Life Insurance Fund.


Sec. 870.403  Withholdings and contributions following a Living Benefit 
election.

    (a) Withholdings and contributions for Basic insurance for an 
individual who elects a full Living Benefit under subpart K of this 
part stop at the end of the pay period in which the Living Benefit 
election is effective.
    (b) Withholdings and contributions for Basic insurance for an 
employee who elects partial Living Benefit under subpart K of this part 
are based on the post-election BIA. This reduction in withholdings and 
contributions starts at the end of the pay period in which the Living 
Benefit election is effective.
    (c) Withholdings and contributions for Basic insurance for an 
annuitant or compensationer who elected a partial Living Benefit as an 
employee are based on the post-election BIA.
    (d) There is no change in withholdings for Optional insurance for 
individuals who elect a Living Benefit.


Sec. 870.404  Withholdings and contributions provisions that apply to 
both Basic and Optional insurance.

    (a) Withholdings (and Government contributions, when applicable) 
are based on the amount of insurance in force at the end of the pay 
period.
    (b) Withholdings are not required for the period between the end of 
the pay period in which an employee separates from service and the date 
his/her annuity or compensation begins.
    (c) No payment is required while an insured employee is in nonpay 
status for up to 12 months. Exception: an employee who is in nonpay 
status while receiving compensation.
    (d) The deposit described in Secs. 870.401(f) and 870.402(i) must 
be made no later than 60 calendar days after the date the employing 
office determines the amount of the underdeduction that has occurred, 
regardless of whether or when the underdeduction is recovered by the 
agency. The agency must determine whether to waive collection of the 
overpayment of pay, in accordance with 5 U.S.C. 5584, as implemented by 
4 CFR chapter I, subchapter G. However, if the agency involved is 
excluded from the provisions of 5 U.S.C. 5584, it may use any 
applicable authority to waive the collection.
    (e) Effective October 21, 1972, when there is an official finding 
that an employee was suspended or fired erroneously, no withholdings 
are made from the back pay. Exception: if death or accidental 
dismemberment occurs during the period between the employee's removal 
and the finding that the agency action was erroneous,

[[Page 48737]]

premiums are withheld from the back pay awarded.
    (f) If an individual's periodic pay, compensation, or annuity isn't 
sufficient to cover the full withholdings, any amount available for 
life insurance withholding must be applied first to Basic insurance, 
with any remainder applied to Optional insurance (first to Option B, 
then Option A, then Option C).


Sec. 870.405  Direct premium payments under 5 U.S.C. chapter 84 
(Federal Employees' Retirement System--FERS).

    (a) If the FERS annuity, excluding subchapter III of 5 U.S.C. 
chapter 84 (Thrift Savings Plan), is too low to cover premiums for 
Basic insurance, the retirement system must notify the annuitant (or 
the assignee, if the insurance has been assigned under subpart I of 
this part) of the opportunity to pay his/her share of the Basic 
insurance premium directly to the retirement system.
    (b) The retirement system must establish a method for accepting 
these direct premium payments. The retirement system must provide the 
annuitant with a premium payment schedule and the requirements for 
continued enrollment.
    (c) The annuitant must send the retirement system the required 
premium for every pay period during which the coverage continues, 
excluding the 31-day temporary extension of coverage provided in 
Sec. 870.601. The annuitant must make payment after the pay period in 
which he/she is covered, according to the schedule established by the 
retirement system. If it does not receive payment by the due date, the 
retirement system must notify the annuitant that coverage will be 
continued only if he/she makes payment within 15 days after receiving 
the notice. The Basic insurance of an annuitant who doesn't pay within 
the specified time limit terminates. An individual whose coverage 
terminates because of nonpayment of premium cannot re-elect or 
reinstate coverage, except as provided in paragraph (d) of this 
section.
    (d) If, for reasons beyond his/her control, an annuitant is unable 
to pay within 15 days after receiving the notice, he/she may request 
reinstatement of coverage by writing to the retirement system. Such a 
request must be made within 30 calendar days from the date of 
termination and must be accompanied by proof that the annuitant was 
prevented from paying within the time limit for reasons beyond his/her 
control. The retirement system will decide if the individual is 
eligible for reinstatement of coverage. If eligibility is approved, the 
coverage is reinstated back to the date of termination.
    (e) Termination of coverage for failure to pay premiums within the 
time limit established according to paragraph (c) of this section is 
effective at the end of the last pay period for which payment has been 
received on time.
    (f) The retirement system must submit all direct premium payments, 
along with its regular life insurance premiums, to OPM according to 
procedures set by OPM.

Subpart E--Coverage


Sec. 870.501  Basic insurance: effective dates of automatic coverage.

    (a)(1) When an employee is appointed or transferred to a position 
in which he/she is eligible for insurance, the employee is 
automatically insured for Basic insurance on the day he/she enters on 
duty in pay status, unless, before the end of the first pay period, the 
employee files a waiver of Basic insurance with the employing office or 
had previously filed a waiver which remains in effect.
    (2) An insured employee who moves to another covered position is 
automatically insured on the effective date of the move, unless the 
employee files a waiver of Basic insurance with the new employing 
office before the end of the first pay period in the new position.
    (3) When an employee of the District of Columbia Financial 
Responsibility and Management Assistance Authority elects to be 
considered a Federal employee under section 153 of Pub. L. 104-134 (110 
Stat. 1321), he/she is automatically insured on (i) the date the 
employee enters on duty in pay status with the Authority, or (ii) the 
date the Authority receives the employee's election to be considered a 
Federal employee, whichever is later.
    (b) An employee who returns to pay and duty status after a period 
of more than 12 months of nonpay status is automatically insured at the 
time he/she actually enters on duty in pay status, unless, before the 
end of the first pay period, the employee files a waiver of Basic 
insurance coverage with the employing office or had previously filed a 
waiver which remains in effect.
    (c) For an employee who serves in cooperation with a non-Federal 
agency and who is paid in whole or in part from non-Federal funds, OPM 
sets the effective date. This date must be part of an agreement between 
OPM and the non-Federal agency. The agreement must provide either:
    (1) That the required withholdings and contributions be made from 
Federally controlled funds and deposited into the Employees' Life 
Insurance Fund on a timely basis, or
    (2) That the cooperating non-Federal agency, by written agreement 
with the Federal agency, make the required withholdings and 
contributions from non-Federal funds and transmit that amount to the 
Federal agency for deposit into the Employees' Life Insurance Fund on a 
timely basis.
    (d) If an employee waived Basic insurance on or before February 28, 
1981, the waiver was automatically cancelled effective on the 1st day 
the employee entered on duty in pay status on or after April 1, 1981. 
Basic insurance coverage was automatically effective on the date of the 
waiver's cancellation, unless the employee filed a new waiver of Basic 
insurance with the employing office before the end of the pay period 
during which the coverage became effective.


Sec. 870.502  Basic insurance: waiver/cancellation of insurance.

    (a) An insured individual may cancel his/her Basic insurance at any 
time by filing a waiver of Basic insurance coverage. An employee files 
with the employing office. An annuitant files with OPM or other office 
that administers his/her retirement system. If still employed, a 
compensationer files with the employing office, and if not still 
employed, with OPM. The waiver is effective, and the insurance stops, 
at the end of the pay period in which the waiver is properly filed. 
Exception: an individual who has assigned his/her insurance under 
subpart I of this part cannot cancel the insurance.
    (b) An individual who cancels his/her Basic insurance automatically 
cancels all forms of Optional insurance.


Sec. 870.503  Basic insurance: cancelling a waiver.

    (a) An annuitant or compensationer who has filed a waiver of Basic 
insurance cannot cancel the waiver.
    (b) An employee who has filed a waiver of Basic insurance may 
cancel the waiver and become insured if:
    (1) At least 1 year has passed since the effective date of the 
waiver, and
    (2) He/she provides satisfactory medical evidence of insurability.
    (c) OFEGLI reviews the Request for Insurance filed by an employee 
who has compiled with paragraph (b) of this section and decides whether 
to approve it. The insurance is effective when, after OFEGLI's 
approval, the employee actually enters on duty in pay status in a 
position in which he/she is eligible for

[[Page 48738]]

insurance. If the employee doesn't enter on duty in pay status within 
31 days following the date of OFEGLI's approval, the approval is 
automatically revoked and the employee is not insured.
    (d) When an employee who has been separated from service for at 
least 180 days is reinstated on or after April 1, 1981, a previous 
waiver of Basic insurance is automatically cancelled. Unless the 
employee files a new waiver, Basic insurance becomes effective on the 
1st day he/she actually enters on duty in pay status in a position in 
which he/she is eligible for coverage. Exception: for employees who 
waived Basic insurance after February 28, 1981, separated, and returned 
to Federal service before December 9, 1983, the waiver remained in 
effect; these employees were permitted to elect Basic insurance by 
applying to their employing office before March 7, 1984.


Sec. 879.504  Optional insurance: election.

    (a)(1) Each employee must elect or waiver Option A, Option B, and 
Option C coverage, in a manner designated by OPM, within 31 days after 
becoming eligible unless during earlier employment he/she filed an 
election or waiver which remains in effect. The 31-day time limit for 
Option B or Option C begins on the 1st day after February 28, 1981, on 
which an individual meets the definition of an employee.
    (2) An employee of the District of Columbia Financial 
Responsibility and Management Assistance Authority who elects to be 
considered a Federal employee under section 153 of Pub. L. 104-134 (110 
Stat. 1321) must elect or waive Option A, Option B, and Option C 
coverage within 31 days after the later of:
    (i) The date his/her employment with the Authority begins, or
    (ii) The date the Authority receives his/her election to be 
considered a Federal employee.
    (3) Within 6 months after an employee becomes eligible, an 
employing office may determine that the employee was unable, for 
reasons beyond his/her control, to elect any type of Optional insurance 
within the time limit. In this case, the employee must elect or waive 
that type of Optional insurance 31 days after he/she is notified of the 
determination. The insurance is retroactive to the 1st day of the first 
pay period beginning after the date the individual became eligible or 
after April 1, 1981, whichever is later. The individual must pay the 
full cost of the insurance from that date for the time that he/she is 
in pay status, retired, or receiving compensation and under age 65.
    (b) Any employee who doesn't file a Life Insurance Election with 
his/her employing office, in a manner designated by OPM, specifically 
electing any type of Optional insurance is considered to have waived it 
and does not have that type of Optional insurance.
    (c) For the purpose of having Option A as an employee, an election 
of this insurance filed on or before February 28, 1981, is considered 
to have been cancelled effective at the end of the pay period which 
included March 31, 1981, unless the employee didn't actually enter on 
duty in pay status during the 1st pay period which began on or after 
April 1, 1981. In that case the election is considered to have been 
cancelled on the first day after the end of the next pay period in 
which the employee actually entered on duty in pay status. In order to 
have Option A as an employee after the date of this cancellation, an 
employee must specifically elect the coverage by filing the Life 
Insurance Election with his/her employing office subject to the 
provisions of Sec. 870.504(a) or Sec. 870.506(b).
    (d) Optional insurance is effective the 1st day an employee 
actually enters on duty in pay status on or after the day the employing 
office receives the election.
    (e) For an employee whose Optional insurance stopped for a reason 
other than a waiver, the insurance is reinstated on the 1st day he/she 
actually enters on duty in pay status in a position in which he/she 
again becomes eligible.


Sec. 870.505  Optional insurance: waiver/cancellation of insurance.

    (a) An insured individual may cancel entirely any type of Optional 
insurance, or reduce the number of multiples of his/her Option B 
insurance, at any time by filing a waiver of Optional insurance 
coverage. An employee files with the employing office. An annuitant 
files with OPM or other office that administers his/her retirement 
system. If still employed, a compensationer files with the employing 
office, and if not still employed, with OPM. Exception: an individual 
who has assigned his/her insurance under subpart I of this part cannot 
cancel Option A or Option B coverage.
    (b) A cancellation of Optional insurance becomes effective, and 
Optional insurance stops, at the end of the pay period in which the 
waiver is properly filed. Exception: if Option C is cancelled because 
there are no eligible family members, the effective date is retroactive 
to the end of the pay period in which there stopped being any eligible 
family members.
    (c) A waiver of Optional insurance remains in effect until it is 
cancelled as provided in Sec. 870.506.


Sec. 870.506  Optional insurance: cancelling a waiver.

    (a) When there is a change in family circumstances. (1) A waiver of 
Option A cannot be cancelled due to a change in family circumstances.
    (2) An employee who has waived Option B coverage may elect it, and 
an employee who has Option B of fewer than five multiples of annual pay 
may increase the number of multiples, upon his/her marriage or divorce, 
upon a spouse's death, or upon acquiring an eligible child.
    (3) The number of multiples of Option B coverage that an employee 
can obtain or add (which can't exceed a total of five) is limited to 
the following:
    (i) For marriage, the number of additional family members (spouse 
and eligible children) acquired with the marriage;
    (ii) For acquisition of children, the number of eligible children 
acquired; and
    (iii) For divorce or death of a spouse, the total number of 
eligible children of the employee.
    (4) An employee who has waived Option C coverage may elect it upon 
his/her marriage or upon acquiring an eligible child. An employee may 
also elect Option C coverage upon divorce or death of a spouse if the 
employee has any eligible children.
    (5)(i) The employee must file an election under paragraph (a)(2) or 
(a)(4) of this section with the employing office, in a manner 
designated by OPM, along with proof of the event, no later than 60 days 
following the date of the event that permits the election; the employee 
may instead file the election before the event and provide proof no 
later than 60 days following the event.
    (ii) This 60-day time limit may be extended if the individual isn't 
serving in a covered position on the date of the event or if the 
individual separates from covered service prior to the end of the 60-
day time limit. This extension cannot exceed the 31-day time limit for 
electing insurance following employment in a covered position or, for 
an election under paragraph (a)(4) of this section, the 31-day period 
following the 1st day on which the individual becomes eligible to 
cancel a waiver of Basic insurance.
    (6)(i) The effective date of Option B insurance elected under 
paragraph (a)(1) of this section is the 1st day the employee actually 
enters on duty in pay

[[Page 48739]]

status on or after the day the employing office receives the election.
    (ii) The effective date of Option C insurance elected under this 
paragraph is the day the employing office receives the election, or the 
date of the event, whichever is later.
    (b) When there is no change in family circumstances. (1) An 
employee who has waived Option A or Option B coverage may elect it if:
    (i) At least 1 year has passed since the effective date of the 
waiver, and
    (ii) He/she provides satisfactory medical evidence of insurability.
    (2) An employee who has Option B coverage of fewer than five 
multiples of annual pay may increase the number of multiples if:
    (i) At least 1 year has passed since the effective date of his/her 
last election of fewer than five multiples (including a reduction in 
the number of multiples), and
    (ii) He/she provides satisfactory medical evidence of insurability.
    (iii) The requirement for at least 1 year to have passed since the 
effective date of the last election doesn't apply when an employee 
elected fewer than five multiples because of the limitation under 
paragraph (a)(3) of this section.
    (3) A waiver of Option C cannot be cancelled without a change in 
family circumstances, unless authorized during an open enrollment 
period.
    (c) OFEGLI reviews the request filed by an employee who has 
complied with paragraph (b) of this section and decides whether to 
approve it. The Optional insurance is effective when, after OFEGLI's 
approval, the employee actually enters on duty in pay status in a 
position in which he/she is eligible for insurance and files a Life 
Insurance Election. If the employee doesn't enter on duty in pay status 
within 31 days following the date of OFEGLI's approval, the approval is 
automatically revoked and the employee does not have the Optional 
insurance requested.
    (d) If an employee waived Option A insurance on or before February 
28, 1981, the waiver was automatically cancelled effective on the 1st 
day the employee entered on duty in pay status on or after April 1, 
1981. Option A was effective on the date of the waiver's cancellation, 
if the employee filed an election of Option A during the March 1, 1981, 
through March 31, 1981, open enrollment period. If the employee didn't 
file the election with his/her employing office during the March 1981 
open enrollment period, the employee is considered to have waived 
Option A on March 31, 1981.
    (e) When an employee who has been separated from service for at 
least 180 days is reinstated on or after April 1, 1981, a previous 
waiver of Optional insurance is automatically cancelled, as follows:
    (1) An employee who returned to service between April 1, 1981, and 
December 8, 1983, after a 180-day break in service was permitted to 
elect any form of Optional insurance by applying to his/her employing 
office before March 7, 1984.
    (2) An employee who returns to service after December 8, 1983, 
following a 180-day break in service may elect any form of Optional 
insurance by applying to his/her employing office within 31 days after 
reinstatement. Coverage is effective on the 1st day the employee 
actually enters on duty in pay status in a position in which he/she is 
eligible for insurance on or after the date the employing office 
receives the election. If the employee doesn't file a Life Insurance 
Election, in a manner designated by OPM, within the 31-day period, the 
employee is considered to have waived Optional insurance. However, an 
employee who fails to file during the 31-day period due to reasons 
beyond his/her control may enroll belatedly under the conditions stated 
in Sec. 870.504(a)(3).
    (f) An annuitant or compensationer is not eligible to cancel a 
waiver of any type of Optional insurance or to increase multiples of 
Option B under this section.


Sec. 870.507  Open enrollment periods.

    (a) There are no regularly scheduled open enrollment periods for 
life insurance. Open enrollment periods are held only when specifically 
scheduled by OPM.
    (b) During an open enrollment period, unless OPM announces 
otherwise, eligible employees may cancel their existing waivers of 
Basic and/or Optional insurance by electing the insurance in a manner 
designated by OPM.
    (c)(1) OPM sets the effective date for all insurance elected during 
an open enrollment period. The newly elected insurance is effective on 
the 1st day of the first pay period which begins on or after the OPM-
established date and which follows a pay period during which the 
employee was in pay and duty status for at least 32 hours, unless OPM 
announces otherwise.
    (2) A part-time employee must be in pay and duty status for one-
half the regularly scheduled tour of duty shown on his/her current 
Standard Form 50 for newly elected coverage to become effective, unless 
OPM announces otherwise.
    (3) An employee who has no regularly scheduled tour of duty or who 
is employed on an intermittent basis must be in pay and duty status for 
one-half the hours customarily worked before newly elected coverage can 
become effective, unless OPM announces otherwise. For the purpose of 
this paragraph, employing offices can determine the number of hours 
customarily worked by averaging the number of hours worked in the most 
recent calender year quarter prior to the start of the open enrollment 
period.
    (d) Within 6 months after an open enrollment period ends, an 
employing office may determine that an employee was unable, for reasons 
beyond his/her control, to cancel an existing waiver by electing to be 
insured during the open enrollment period. In this case, if the 
employee wants coverage, he/she must submit an election within 31 days 
after being notified of the determination. Coverage is retroactive to 
the first pay period which begins on or after the effective date set by 
OPM and which follows a pay period during which the employee was in pay 
and duty status for at least 32 hours, unless OPM announces otherwise. 
If the employee doesn't file an election within this 31-day time limit, 
he/she will be considered to have waived coverage.


Sec. 870.508  Nonpay status.

    (a) An employee who is in nonpay status is entitled to continue 
life insurance for up to 12 months. No premium payments are required, 
unless the employee is receiving compensation.
    (b) If an insured employee who is entitled to free insurance while 
in nonpay status accepts a temporary appointment to a position in which 
he/she would normally be excluded from insurance, the insurance 
continues. The amount of Basic insurance is based on whichever 
position's salary is higher. Withholdings are made from the employee's 
pay in the temporary position.
    (c) If an insured employee goes on leave without pay (LWOP) to 
serve as a full-time officer or employee of an employee organization, 
within 60 days of the start of the LWOP he/she may elect to continue 
life insurance. The insurance continues for the length of the 
appointment, even if the LWOP lasts longer than 12 months. The employee 
must pay to the employing office the full cost of Basic and Optional 
insurance. There is no Government contribution for these employees.
    (d) If an insured employee goes on LWOP while assigned to a State 
government, local government, or

[[Page 48740]]

institution of higher education, life insurance continues for the 
length of the assignment, even if the LWOP lasts longer than 12 months. 
The employee must pay his/her premiums to the Federal agency on a 
current basis. The agency must continue to pay its contribution as long 
as the employee makes his/her payments.


Sec. 870.509  Transfers to international organizations.

    An employee transferred to an international organization may 
continue life insurance coverage as provided in 5 U.S.C. 3582. 
Regulations governing these transfers are in part 352 of this title.

Subpart F--Termination and Conversion


Sec. 870.601  Termination of Basic insurance.

    (a) Except as provided in Sec. 870.701, the Basic insurance of an 
insured employee stops on the date he/she separates from service, 
subject to a 31-day extension of coverage.
    (b) The Basic insurance of an employee who separates from service 
after meeting the requirement for an immediate annuity under 
Sec. 842.204(a)(1) of this title and who postpones receiving the 
annuity, as provided by Sec. 842.204(c) of this title, stops on the 
date he/she separates from service, subject to a 31-day extension of 
coverage.
    (c) The Basic insurance of an insured employee who moves without a 
break in service to a position in which he/she is excluded from life 
insurance stops on his/her last day in the former position, subject to 
a 31-day extension of coverage.
    (d)(1) Except as provided in Sec. 870.701, the Basic insurance of 
an insured employee who is in nonpay status stops on the date the 
employee completes 12 months in nonpay status, subject to a 31-day 
extension of coverage. The 12 months' nonpay status may be broken by 
periods of less than 4 consecutive months in pay status. If an employee 
has at least 4 consecutive months in pay status after a period of 
nonpay status, he/she is entitled to begin the 12 months' continuation 
of Basic insurance again. If an employee has used up his/her 12 months' 
continuation in nonpay status and returns to duty for less than 4 
consecutive months, his/her Basic insurance stops on the 32nd day after 
the last day of the last pay period in pay status.
    (2) For the purpose of paragraph (d)(1) of this section, 4 
consecutive months in pay status means any 4-month period during which 
the employee is in pay status for at least part of each pay period.
    (3) For the purpose of paragraph (d)(1) of this section, an 
individual who is entitled to benefits under part 353 of this chapter 
is considered to be an employee in nonpay status.


Sec. 870.602  Termination of Optional insurance.

    (a) The Optional insurance of an insured employee stops when his/
her Basic insurance stops, subject to the same 31-day extension of 
coverage.
    (b) The Optional insurance of an employee who separates from 
service after meeting the requirement for an immediate annuity under 
Sec. 842.204(a)(1) of this title and who postpones receiving the 
annuity, as provided by Sec. 842.204(c) of this title, stops on the 
date he/she separates from service, subject to a 31-day extension of 
coverage.
    (c) If an insured employee isn't eligible to continue Optional 
coverage as an annuitant or compensationer as provided by Sec. 870.701, 
the Optional insurance stops on the date that his/her Basic insurance 
is continued or reinstated under the provisions of Sec. 870.701, 
subject to a 31-day extension of coverage.
    (d) If, at the time of an individual's election of Basic insurance 
during receipt of annuity or compensation, he/she elects no Basic life 
insurance as provided by Sec. 870.702(a)(1), the Optional insurance 
stops at the end of the month in which the election is received in OPM, 
subject to a 31-day extension of coverage.
    (e) Except as provided in Sec. 870.405, Optional insurance stops, 
subject to a 31-day extension of coverage, at the end of the pay period 
in which it's determined that an individual's periodic pay, 
compensation, or annuity, after all other deductions, isn't enough to 
cover the full cost of the Optional insurance. If an individual has 
more than one type of Optional insurance and his/her pay, compensation, 
or annuity is sufficient to cover some but not all of the insurance, 
Option C terminates first, followed by Option A, and then the multiples 
of Option B.


Sec. 870.603  Conversion of Basic and Optional insurance.

    (a)(1) When group coverage terminates for any reason other than 
voluntary cancellation, an employee may apply to convert all or any 
part of his/her Basic and Optional insurance to an individual policy; 
no medical examination is required. The premiums for the individual 
policy are based on the employee's age and class of risk. An employee 
is eligible to convert the policy only if he/she doesn't return, within 
3 calendar days from the terminating event, to a position covered under 
the group plan. If insurance has been assigned under subpart I of this 
part, it is the assignee(s), not the employee, who has(have) the right 
to convert.
    (2) The employing agency must notify the employee/assignee(s) of 
the loss of coverage and the right to convert to an individual policy 
either before or immediately after the event causing the loss of 
coverage.
    (3) The employee/assignee(s) must submit the request for conversion 
information to OFEGLI. It must be postmarked within 31 days following 
the date of the terminating event or within 31 days of the date the 
employee/assignee received the notice of loss of group coverage and 
right to convert, whichever is later.
    (4) An employee/assignee who fails to use his/her conversion right 
within 31 days after receiving notice of the right to convert or within 
31 days of the terminating event, whichever is later, is considered to 
have refused coverage, unless OFEGLI determines the failure was for 
reasons beyond the employee's control, as described in paragraph (a)(5) 
of this section.
    (5) When an agency fails to provide the notification required in 
paragraph (a)(2) of this section, or the employee/assignee fails to 
request conversion information within the time limit set in paragraph 
(a)(3) of this section for reasons beyond his/her control, the employee 
may make a belated request by writing to OFEGLI. The employee/assignee 
must make the request within 6 months after becoming eligible to 
convert the insurance. The employee/assignee must show that he/she 
wasn't notified of the loss of coverage and the right to convert and 
was not otherwise aware of it or that he/she was unable to convert to 
an individual policy for reasons beyond his/her control. OFEGLI will 
determine if the employee/assignee is eligible to convert. If the 
request is approved, the employee must convert within 31 days of that 
determination.
    (b) The individual conversion policy is effective the day after the 
group coverage ends. The employee/assignee must pay the premiums for 
any period retroactive to that date.
    (c) The 31-day extension of coverage provided under this subpart 
does not depend upon timely notification of the right to convert to an 
individual policy. The extension cannot be continued beyond 31 days.

[[Page 48741]]

Subpart G--Annuitants and Compensationers


Sec. 870.701  Eligibility for life insurance.

    (a) When an insured employee retires, Basic life insurance (but not 
accidental death and dismemberment) continues or is reinstated if he/
she:
    (1) Is entitled to retire on an immediate annuity under a 
retirement system for civilian employees, including the retirement 
system of a nonappropriated fund instrumentality of the Department of 
Defense or the Coast Guard;
    (2) Was insured for the 5 years of service immediately before the 
date the annuity starts, or for the full period(s) of service during 
which he/she was eligible to be insured if less than 5 years; and
    (3) Has not converted to an individual policy as described in 
Sec. 870.603. If it is determined that an individual is eligible to 
continue the group coverage as an annuitant after he/she has already 
converted to an individual policy, the group enrollment may be 
reinstated. If the individual wants the group coverage reinstated, the 
conversion policy must be voided, the group policy must be reinstated 
retroactively, and the premiums already paid on the conversion policy 
must be refunded to the individual.
    (b) Following separation or the completion of 12 months' nonpay 
status, a compensationer's Basic life insurance (but not accidental 
death and dismemberment) continues or is reinstated if he/she:
    (1) Has been insured for the 5 years of service immediately before 
the date of entitlement to compensation, or for the full period(s) of 
service during which he/she was eligible to be insured if less than 5 
years; and
    (2) Has not converted to an individual policy as described in 
Sec. 870.603. If it is not determined that an individual is eligible to 
continue the group coverage as a compensationer until after he/she has 
converted, the group enrollment may be reinstated. If the individual 
wants the group coverage reinstated, the conversion policy must be 
voided, the group policy must be reinstated retroactively, and the 
premiums already paid on the conversion policy must be refunded to the 
individual.
    (c) An individual who meets the requirements under paragraphs (a) 
or (b) of this section or Sec. 870.706 for continuation or 
reinstatement of life insurance must complete an election, in a manner 
designated by OPM, at the time entitlement is established. For the 
election to be valid, OPM must receive the election before OPM has made 
a final decision on the individual's application for annuity or 
supplemental annuity or an individual's request to continue life 
insurance as a compensationer. If there is no valid election, OPM 
considers the individual to have chosen the option described in 
paragraph (a)(2) of Sec. 870.702.
    (d) If the annuity or compensation of an insured individual is 
terminated, or if the Department of Labor finds that an insured 
compensationer is able to return to duty, his/her Basic life insurance 
held as an annuitant or compensationer stops on the date of the 
termination or finding. There is no 31-day extension of coverage or 
conversion right.
    (e)(1) An annuitant or compensationer who is eligible to continue 
or have reinstated Basic insurance is also eligible to continue or have 
reinstated Optional insurance if he/she meets the same coverage 
requirements for Optional insurance as those stated in paragraph (a) or 
(b) of this section for Basic insurance.
    (2) For the purpose of continuing insurance as an annuitant or 
compensationer, an employee is not considered to have been eligible for 
Option C during any period when the employee had no eligible family 
members.


Sec. 870.702  Election of Basic insurance.

    (a) Unless he/she has elected a Living Benefit, an individual who 
makes an election under Sec. 870.701(c) must select one of the 
following options:
    (1) Termination of the insurance. The individual's insurance stops 
upon conversion to an individual policy as provided under Sec. 870.603. 
If the individual doesn't convert to an individual policy, insurance 
stops at the end of the month in which OPM or the employing office 
receives the election;
    (2) Continuation or reinstatement of Basic insurance with a maximum 
reduction of 75 percent during retirement. Premiums are withheld from 
annuity or compensation (except as provided under 870.401(d)(1)). The 
amount of Basic Life insurance in force reduces by 2 percent of the BIA 
each month until the maximum reduction is reached. This reduction 
starts at the beginning of the 2nd month after the date the insurance 
would otherwise have stopped or the date of the insured's 65th 
birthday, whichever is later;
    (3) Continuation or reinstatement of Basic insurance with a maximum 
reduction of 50 percent during retirement. Premiums are withheld from 
annuity or compensation. The amount of Basic insurance in force reduces 
by 1 percent of the BIA each month until the maximum reduction is 
reached. This reduction starts at the beginning of the 2nd month after 
the date the insurance would otherwise have stopped or the date of the 
insured's 65th birthday, whichever is later; or
    (4) Continuation or reinstatement of Basic insurance with no 
reduction after age 65. Premiums are withheld from annuity or 
compensation.
    (b)(1) Unless an employee has elected a partial Living Benefit 
under subpart K of this part or an individual has assigned the 
insurance under subpart I of this part, an insured individual may 
cancel an election under paragraph (a)(3) or (a)(4) of this section at 
any time. The amount of Basic insurance automatically switches to the 
amount that would have been in force if the individual had originally 
elected the 75 percent reduction. This revised amount is effective at 
the end of the month in which OPM receives the request to cancel the 
previous election.
    (2) If an individual files a waiver of insurance, the coverage 
stops without a 31-day extension of coverage or conversion right. This 
is effective at the end of the month in which OPM receives the waiver.
    (c) Unless he/she chooses to terminate his/her insurance, an 
employee who has elected a partial Living Benefit must choose the no 
reduction election under paragraph (a)(4) of this section. He/she 
cannot later change to the 75 percent reduction.
    (d) If an employee has assigned his/her insurance, he/she cannot 
cancel an election under paragraph (a)(3) or (a)(4) of this section. 
Only the assignee(s) may cancel this election. Exception: if the 
employee elected a partial Living Benefit before assigning the 
remainder of his/her insurance, the assignee(s) cannot cancel the 
election under paragraph (a)(4) of this section.


Sec. 870.703  Amount of life insurance.

    (a)(1) The amount of Basic insurance an annuitant or compensationer 
can continue is his/her BIA on the date insurance would otherwise have 
stopped because of separation from service or completion of 12 months 
in nonpay status. The amount of Basic insurance in force is the BIA 
minus any reductions applicable under Sec. 870.702(a).
    (2) For the purpose of paying benefits upon the death of an insured 
individual under age 45 who is retired or receiving compensation, the 
BIA will be multiplied by the appropriate age factor shown in 
Sec. 870.202(c). Exceptions:
    (i) If the insured individual retired or started receiving 
compensation before October 10, 1980, or

[[Page 48742]]

    (ii) If the insured individual elected a partial Living Benefit as 
an employee under subpart K of this part.
    (3)(i) For an annuitant or compensationer who elected a partial 
Living Benefit as an employee, the amount of Basic insurance he/she can 
continue is the post-election BIA, as shown in Sec. 870.203(a)(2).
    (ii) For the purpose of paying benefits upon the death of an 
insured annuitant or compensationer under age 45 who elected a partial 
Living Benefit as an employee, the BIA will be multiplied by the age 
factor in effect on the date OFEGLI received the completed Living 
Benefit application.
    (b)(1) The amount of Option A coverage an annuitant or 
compensationer can continue is the amount in force on the date 
insurance would otherwise stop.
    (2) An annuitant's or compensationer's Option A coverage reduces by 
2 percent a month up to a maximum reduction of 75 percent. This 
reduction starts at the beginning of the 2nd month after the date the 
insurance would otherwise have stopped or the date of the insured's 
65th birthday, whichever is later.
    (c)(1) The number of multiples of Option B coverage an annuitant or 
compensationer can continue is the smallest number of multiples in 
force during the applicable period of service required to continue 
Option B.
    (2) Each multiple of an annuitant's or compensationer's Option B 
coverage reduces by 2 percent a month. This reduction starts at the 
beginning of the 2nd month after the date the insurance would otherwise 
have stopped or the insured's 65th birthday, whichever is later. At 
12:00 noon on the day before the 50th reduction, the insurance stops, 
with no extension of coverage or conversion right.
    (d) The amount of an annuitant's or compensationer's Option C 
coverage on each family member reduces by 2 percent a month. This 
reduction starts at the beginning of the 2nd month after the date the 
insurance would otherwise have stopped or the annuitant's or 
compensationer's 65th birthday, whichever is later. At 12:00 noon on 
the day before the 50th reduction, the insurance stops, with no 
extension of coverage or conversion right.
    (e)(1) 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 FEGLI 
law. Basic and Optional insurance for these judges continues without 
interruption or reduction upon retirement.
    (2) If a judge chooses to receive compensation instead of an 
annuity, his/her Basic and Optional insurance reduces as stated in 
Sec. 870.702 and paragraphs (b), (c), and (d) of this section.


Sec. 870.704  Reinstatement of life insurance.

    (a) An annuitant whose disability annuity terminates because he/she 
recovers from the disability or because his/her earning capacity 
returns, and whose disability annuity is later restored under 5 U.S.C. 
8337(e) (after December 31, 1983), may elect to resume the Basic 
insurance held immediately before his/her disability annuity 
terminated. OPM must receive the election within 60 days after OPM 
mails a notice of insurance eligibility and an election form.
    (b) An annuitant described in paragraph (a) of this section may 
elect to resume any Optional insurance held immediately before the 
annuity terminated if:
    (1) He/she has made an election under paragraph (a) of this 
section; and
    (2) OPM receives the election within 60 days after OPM mails a 
notice of insurance eligibility and an election form.
    (c) Basic and Optional insurance reinstated under paragraphs (a) 
and (b) of this section is effective on the 1st day of the month after 
the date OPM receives the election. Any applicable annuity withholdings 
are also reinstated on the 1st day of the month after OPM receives the 
election.
    (d) The amounts of Basic and Optional insurance reinstated under 
paragraphs (a) and (b) of this section are the amounts that would have 
been in force if the individuals's annuity hadn't terminated.


Sec. 870.705  Reemployed annuitants.

    (a)(1) If an insured annuitant is appointed to a position in which 
he/she is eligible for insurance, the amount of his/her Basic life 
insurance as an annuitant (and any applicable annuity withholdings) is 
suspended on the day before the 1st day in pay status under the 
appointment, unless the reemployed annuitant waives all insurance 
coverage. The Basic insurance benefit payable upon the death of a 
reemployed annuitant who has Basic insurance in force as an employee 
can't be less than the benefit which would have been payable if the 
individual hadn't been reemployed.
    (2) Except as provided in paragraph (b) of this section, the Basic 
insurance obtained as an employee stops with no 31-day extension of 
coverage or conversion right, on the date reemployed terminates. Any 
suspended Basic insurance (and any applicable annuity withholdings) is 
reinstated on the day following termination of the reemployment.
    (b) Basic insurance obtained during reemployment can be continued 
after the reemployment terminates if:
    (1) The annuitant qualifies for a supplemental annuity or receives 
a new retirement right;
    (2) He/she has had Basic insurance as an employee for at least 5 
years of service immediately before separation from reemployment or for 
the full period(s) during which such coverage was available to him/her, 
whichever is less; and
    (3) He/she doesn't convert to nongroup insurance when Basic 
insurance as an employee would otherwise terminate.
    (c) If the Basic insurance obtained during reemployment is 
continued as provided in paragraph (b) of this section, any suspended 
Basic life insurance stops, with no 31-day extension of coverage or 
conversion right.
    (d) (1) An annuitant appointed to a position in which he/she is 
eligible for Basic insurance, is also eligible for Optional insurance 
as an employee, unless he/she has on file an uncancelled waiver of 
Basic or Optional insurance.
    (2) If the individual has Option A or C as an annuitant, that 
insurance (and applicable annuity withholdings) is suspended on the day 
before his/her 1st day in pay status under the appointment. Unless he/
she waives Option A or C (or waives Basic insurance), he/she obtains 
Option A or C as an employee.
    (3) If the individual has Option B as an annuitant, that insurance 
(and applicable annuity withholdings) continues as if the individual 
weren't reemployed, unless:
    (i) The individual files with his/her employing office an election 
of Option B, in a manner designated by OPM, within 31 days after the 
date of reemployment. in this case Option B (and applicable annuity 
withholdings) as an annuitant is suspended on the date that Option B as 
an employee becomes effective; or
    (ii) The individual waives Basic insurance.
    (4) The Option B benefit payable upon the death of a reemployed 
annuitant is the amount in effect as an annuitant, unless he/she 
elected to have Option B as an employee.
    (5) Except as provided in paragraph (e) of this section, the 
Optional insurance obtained as an employee stops, with no 31-day 
extension or conversion right, on the date reemployment terminates. The 
amount

[[Page 48743]]

of suspended Optional insurance which remains in force after applicable 
monthly reductions after age 65 (and corresponding withholdings) is 
reinstated on the day after reemployment terminates.
    (e) Optional life insurance obtained during reemployment may be 
continued after the reemployment terminates if the annuitant:
    (1) Qualifies for a supplemental annuity or receives a new 
retirement right;
    (2) Continues his/her Basic life insurance under paragraph (a) (2), 
(3), or (4) of Sec. 870.702; and
    (3) Has had Optional insurance as an employee for at least the 5 
years of service immediately before separation from reemployment or for 
the full period(s) of service during which it was available to him/her, 
whichever is less.
    (f) If Optional insurance obtained during reemployment is continued 
as provided in paragraph (e) of this section, any suspended Optional 
insurance stops, with no 31-day extension of coverage or conversion 
right.
    (g) If a reemployed annuitant waives life insurance as an employee, 
the waiver also cancels his/her life insurance as an annuitant.


Sec. 870.706  MRA-plus-10 annuitants.

    (a) The Basic insurance of an individual whose coverage terminates 
under Sec. 870.601(b), and who meets the requirements for continuing 
Basic insurance after retirement as stated in Sec. 870.701(a), resumes 
on the starting date of annuity or on the date OPM receives the 
application for annuity, whichever is later. The individual must file 
an election as provided in Sec. 870.701(c) so that OPM receives it 
within 60 days after OPM mails a notice of insurance eligibility and an 
election form.
    (b) Optional insurance of an individual whose coverage terminates 
under Sec. 870.602(b), and who meets the requirements for continuing 
Optional insurance after retirement under Sec. 870.701(e), resumes on 
the starting date of annuity or on the date OPM receives the 
application for annuity, whichever is later.

Subpart H--Order of Precedence and Designation of Beneficiary


Sec. 870.801  Order of precedence and payment of benefits.

    (a) Benefits are paid according to the order of precedence stated 
in 5 U.S.C. 8705(a), as follows:
    (1) to the designated beneficiary (or beneficiaries);
    (2) If none, to the widow(er);
    (3) If none, to the child, or children in equal shares, with the 
share of any deceased child going to his/her children;
    (4) If none, to the parents in equal shares or the entire amount to 
the surviving parent;
    (5) If none, to the executor or administrator of the estate;
    (6) If none, to the next of kin according to the laws of the State 
in which the insured individual legally resided.
    (b) If an insured individual provides in a valid designation of 
beneficiary for insurance benefits to be payable to the insured's 
estate, or to the Executor, Administrator, or other representative of 
the insured's estate, or if the benefits would otherwise be payable to 
the duly appointed representative of the insured's estate under the 
order of precedence specified in 5 U.S.C. 8705(a), payment of the 
benefits to the duly appointed representative of the insured's estate 
bars recovery by any other person.
    (c) Option A and B insurance in force on a person on the date of 
his/her death is paid, on receipt of a valid claim, in the same order 
of precedence and under the same conditions as Basic insurance. A 
designation of beneficiary for Basic insurance is also a designation of 
beneficiary for Options A and B, unless the insured individual states 
otherwise in his/her designation.
    (d) Upon the death of an insured family member, Option C benefits 
are paid to the employee, annuitant, or compensationer responsible for 
withholdings under Sec. 870.402(f), except as provided in paragraph (e) 
of this section.
    (e) If an employee, annuitant, or compensationer entitled to 
receive Option C benefits dies before the benefits are paid, the Option 
C benefits are paid to the individual(s) entitled to receive Basic life 
insurance benefits under the statutory order of precedence. However, if 
the insurance has been assigned in accordance with subpart I of this 
part, any prior designations of beneficiary were cancelled; benefits in 
this instance are paid under the statutory order of precedence, 
starting with the second on the list.


Sec. 870.802  Designation of beneficiary.

    (a) If an insured individual wants benefits paid differently from 
the order of precedence, he/she must file a designation of beneficiary. 
A designation of beneficiary cannot be filed by anyone other than the 
insured individual. Exception: if the insurance has been assigned under 
subpart I of this part, the insured individual cannot designate a 
beneficiary; only the assignee(s) can designate beneficiaries.
    (b) A designation of beneficiary must be in writing, signed by the 
insured individual, and witnessed and signed by two people. The 
employing office (or OPM, in the case of an individual receiving an 
annuity or compensation) must receive the designation before the death 
of the insured.
    (c) A designation, change, or cancellation of beneficiary in a will 
or any other document not witnessed and filed as required by this 
section has no legal effect with respect to benefits under the chapter.
    (d) A witness to a designation of beneficiary cannot be named as a 
beneficiary.
    (e) Any individual, firm, corporation, or legal entity can be named 
as a beneficiary, except an agency of the Federal or District of 
Columbia Government.
    (f) An insured individual (or an assignee) may change his/her 
beneficiary at any time without the knowledge or consent of the 
previous beneficiary. This right cannot be waived or restricted.
    (g) (1) A designation of beneficiary is automatically cancelled 31 
days after the individual stops being insured.
    (2) An assignment under subpart I of this part automatically 
cancels an insured individual's designation of beneficiary.
    (h) An insured individual may provide that a designated beneficiary 
is entitled to the insurance benefits only if the beneficiary survives 
him/her for a specified period of time (not more than 30 days). If the 
beneficiary doesn't survive for the specified period, insurance 
benefits will be paid as if the beneficiary had died before the 
insured.


Sec. 870.803  Child incapable of self-support.

    (a) When it receives a claim for Option C benefits because of the 
death of a child age 22 or older, OFEGLI determines, based on whatever 
evidence it considers necessary, whether the deceased child was 
incapable of self-support because of a mental or physical disability 
which existed before the child reached age 22.
    (b) If an employee elects Option C under Sec. 870.506(a) (3), and 
the opportunity to elect is based solely on the acquisition of a child 
age 22 or older, the employee must submit to the employing office, at 
the time of making the election, a doctor's certificate stating that 
the child is incapable of self-support because of a physical or mental 
disability which existed before the child reached age 22 and which is 
expected

[[Page 48744]]

to continue for more than 1 year. The certificate must include the name 
of the child, the type of disability, how long it has existed, and its 
expected future course and duration. The certificate must be signed by 
the doctor and show his/her office address.

Subpart I--Assignments of Life Insurance


Sec. 870.901  Assignments permitted.

    (a) (1) Section 208 of the Bankruptcy Amendments and Federal 
Judgeship Act of 1984, Pub. L. 98-353 (98 Stat. 355), effective July 
10, 1984, permits Federal judges to irrevocably assign their FEGLI 
coverage to one or more individuals, corporations, or trustees. Section 
4 of Pub. L. 103-336 (108 Stat. 2661), effective October 3, 1994, 
extended this right to all Federal employees, annuitants, and 
compensationers.
    (2) An individual may assign ownership of all life insurance under 
this part, except Option C. If an individual wishing to make an 
assignment owns more than one type of coverage, he/she must assign all 
the insurance; an individual cannot assign only a portion of the 
coverage. Option C cannot be assigned.
    (b) An individual cannot name conditional 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) If an individual who has made an assignment later elects 
increased insurance coverage under Sec. 870.506 or during an open 
enrollment period, the increased coverage is considered included in the 
already existing assignment. The right to increase coverage remains 
with the insured individual, rather than transferring to the assignee.
    (e) An individual who assigns ownership of insurance continues to 
be the insured individual, but the assignee receives those rights of an 
insured individual that are specified in this part.
    (f) Once assigned, the value of the insurance increases or 
decreases automatically as provided by this part. Exception: if the 
insured individual elected a Living Benefit before assigning the 
remainder of his/her insurance, the amount of Basic insurance does not 
increase or decrease.
    (g) An insured individual who has assigned his/her insurance cannot 
elect a Living Benefit; nor can an assignee elect a Living Benefit on 
behalf of the insured individual.
    (h) An insured individual who has elected a Living Benefit under 
subpart K of this part may assign the remainder of his/her insurance. 
The assignment would affect Option A, Option B, and, for an employee 
who elected a partial Living Benefit, Basic insurance.


Sec. 870.902  Making an assignment.

    To assign insurance, an insured individual must complete an 
approved assignment form. Only the insured individual may make an 
assignment; no one can assign on behalf of an insured individual. The 
individual must submit the completed and signed form to the employing 
office indicating the intent to irrevocably assign all ownership of the 
insurance; the form must also be signed by 2 witnesses. (Assignments 
submitted prior to November 28, 1986, were accepted without an approved 
assignment form.)


Sec. 870.903  Effective date of assignment.

    An assignment under this subpart is effective on the date the 
employing office receives the properly completed, signed, and witnessed 
assignment form.


Sec. 870.904  Amount of insurance.

    The amount of insurance is the amount of the insured individual's 
Basic insurance, plus any Option A and Option B coverage.


Sec. 870.905  Withholdings.

    Premium withholdings for assigned insurance are withheld from the 
salary, annuity, or compensation of the insured individual, as provided 
in subpart D of this part.


Sec. 870.906  Cancellation of insurance.

    (a) The right to cancel (or reduce) insurance transfers to the 
assignee; the insured individual cannot cancel (or reduce) insurance 
after making an assignment.
    (b) The assignee has the right to cancel insurance according to the 
provisions of Secs. 870,502 and 870.505. When there is more than one 
assignee, all assignees must agree to the cancellation. A cancellation 
of Basic insurance also cancels all Optional insurance.


Sec. 870.907  Termination and conversion.

    (a) Assigned insurance terminates under the conditions stated in 
subpart F of this part.
    (b)(1) When an insured individual's insurance terminates, an 
assignee has the right to convert all or part of the group insurance to 
an individual policy on the insured individual. The conditions stated 
in subpart F of this part apply to assignees who elect to convert.
    (2) When there is more than one assignee, each assignee has the 
right to convert all or part of his/her share of the insurance. Any 
assignee who doesn't convert loses all ownership of the insurance.
    (3) When there is more than one assignee, the maximum amount of 
insurance each assignee will be able to convert is determined by the 
dollar amount corresponding to the assignee's share of the total 
insurance. This amount will be rounded up to the next higher thousand, 
if it's not already an even thousand dollar amount.
    (4) Premiums for converted life insurance are based on the insured 
individual's age and class of risk at the time the conversion policy is 
issued.
    (5) The employing office must notify each assignee of the 
conversion right at the time the assigned group insurance terminates.
    (c) The assignment terminates 31 days after the insurance 
terminates, unless the insured individual is reemployed in or returns 
to a position in which he/she is entitled to coverage under this 
chapter within 31 days after the insurance terminates.


Sec. 870.908  Annuitants and compensationers.

    (a) If an employee assigns Basic insurance and later becomes 
eligible to continue such insurance coverage as an annuitant or 
compensationer as provided in Sec. 870.701:
    (1) At the time he/she retires or becomes eligible as a 
compensationer, the insured individual may elect unreduced or partially 
reduced insurance coverage as provided in Sec. 870.702(a). This right 
remains with the insured individual and does not transfer to the 
assignee. Exception: if the insured individual elected a partial Living 
Benefit as an employee under subpart K of this part, he/she can only 
elect unreduced insurance coverage.
    (2) After the individual has made the election described in 
paragraph (a)(1) of this section, the assignee (or, if more than one, 
all of the assignees acting together) may, at any time, elect to cancel 
the annuitant's or compensationer's election of increased coverage, as 
provided in Sec. 870.702(b). The right to cancel the election transfers 
to the assignee; the annuitant or compensationer cannot cancel the 
election after making an assignment. Exception: if the individual 
elected a partial Living Benefit as an employee under subpart K of this 
part, the assignee(s) cannot cancel the election of unreduced insurance 
coverage.

[[Page 48745]]

    (b) When more than one assignee has been named, at the time the 
insured individual becomes eligible to continue coverage as an 
annuitant or compensationer, some assignees may choose to convert their 
part of the insurance, while others may choose to continue the coverage 
during the insured individual's retirement or receipt of 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.
    (c)(1) When an annuitant who has assigned his/her insurance is 
reemployed in a position in which he/she is entitled to life insurance 
coverage, the coverage he/she acquires as a reemployed annuitant is 
subject to the existing assignment.
    (2) The right of a reemployed annuitant to elect Option B coverage 
as an employee rather than as an annuitant under Sec. 870.705(d)(3) 
remains with the insured individual and does not transfer to the 
assignee. Any Option B coverage elected as an employee is subject to 
the existing assignment.


Sec. 870.909  Designations and changes of beneficiary.

    (a)(1) An assignment automatically cancels an insured individual's 
prior designation of beneficiary. After making an assignment, an 
individual cannot designate a beneficiary; the right to designate 
beneficiaries transfers to the assignee.
    (2) Each assignee may designate a beneficiary or beneficiaries to 
receive insurance benefits upon the death of the insured individual and 
may also later change the beneficiaries. An assignee may designate 
himself/herself the primary beneficiary and name another contingent 
beneficiary(ies) to receive insurance benefits if the assignee dies 
before the insured individual.
    (b) Benefits for assigned insurance are paid to the assignee(s) if 
the assignee(s) did not designate a beneficiary.
    (c) Benefits for assigned insurance are paid to an assignee's 
estate if the assignee dies before the insured individual and:
    (1) The assignee (or the assignee's heirs) did not designate a 
beneficiary; or
    (2) The assignee's designated beneficiary dies before the insured 
individual.
    (d) The provisions of Sec. 870.802 apply to designations of 
beneficiary made by assignees.


Sec. 870.910  Notification of current addresses.

    Each assignee and each beneficiary of an assignee must keep the 
office where the assignment is filed informed of his/her current 
address.

Subpart J--Benefits for United States Hostages in Iraq and Kuwait 
and United States Hostages Captured in Lebanon


Sec. 870.1001  Purpose.

    This subpart sets forth the conditions for life insurance coverage 
according to the provisions of section 599C of Pub. L. 101-513 (104 
Stat. 2035).


Sec. 870.1002  Definitions.

    In this subpart:
    Hostage and hostage status have the meaning set forth in section 
599C of Pub. L. 101-513 (104 Stat. 2035).
    Pay period for individuals insured under this subpart means the pay 
period set by the U.S. Department of State.
    Period of eligibility means the period beginning on the effective 
date set forth in Sec. 870.1004 and ending 12 months after hostage 
status ends for hostages in Iraq and Kuwait and 60 months after hostage 
status ends for hostages captured in Lebanon.


Sec. 870.1003  Coverage and amount of insurance.

    (a) An individual is covered under this subpart when the U.S. 
Department of State determines that the individual is eligible under 
section 599C of Pub. L. 101-513 (104 Stat. 2035).
    (b)(1) The amount of Basic life insurance for these individuals is 
the amount specified in Sec. 870.202, subject to the applicable 
conditions stated in this subpart.
    (2) The BIA under Sec. 870.202 is the amount of the payment 
specified in section 599C(b)(2) of Pub. L. 101-513 (104 Stat. 2035), 
rounded to the next higher $1,000, plus $2,000.
    (c) Individuals who have Basic insurance under this section also 
have group accidental death and dismemberment insurance.
    (d) Individuals insured by this subpart are not eligible for 
Optional insurance.
    (e) Individuals insured by this subpart are not considered 
employees for the purpose of this part.
    (f) Eligibility for insurance under this subpart depends on the 
availability of funds under section 599C(e) of Pub. L. 101-513 (104 
Stat. 2035).


Sec. 870.1004  Effective date of insurance.

    Insurance under this subpart was effective on August 2, 1990, for 
hostages in Iraq and Kuwait and on June 1, 1982, for hostages captured 
in Lebanon, unless the U.S. Department of State sets a later date.


Sec. 870.1005  Premiums.

    (a) Government contributions and employee withholdings required 
under subpart D of this part are paid from the funds provided under 
section 599C(e) of Pub. L. 101-513 (104 Stat. 2035).
    (b) If an individual isn't insured for the full pay period, 
premiums are paid only for the days he/she is actually insured. The 
daily premium is the monthly premium multiplied by 12 and divided by 
365.
    (c) OPM may accept the payments required by this section in advance 
from a State Department appropriation, if necessary to fund the 12-
month period of coverage beginning the earlier or:
    (1) The day after sanctions or hostilities end; or
    (2) The day after the individual's hostage status ends.
    (d) OPM will place any funds received under paragraph (c) of this 
section in an account set up for that purpose. OPM will make the 
deposit required under 5 U.S.C. 8714 from the account when the 
appropriate pay period occurs.


Sec. 870.1006  Cancellation of insurance.

    (a) An individual who is insured under this subpart may cancel his/
her insurance at any time by written request. The cancellation is 
effective on the 1st day of the pay period after the pay period in 
which the U.S. Department of State receives the request.
    (b) Cancellation must be requested by the insured individual and 
cannot be requested by a representative acting on the individual's 
behalf.
    (c) An individual who cancels the insurance under this section 
cannot obtain the insurance again, unless the U.S. Department of State 
determines that it would be against equity and good conscience not to 
allow the individual to be insured.


Sec. 870.1007  Termination and conversion.

    (a) Insurance under this subpart terminates 12 months after hostage 
status ends, unless the individual cancels the insurance earlier.
    (b) Insured individuals whose coverage terminates are eligible for 
the 31-day extension of coverage and conversion as set forth in subpart 
F of this part, unless the individual cancelled the coverage.


Sec. 870.1008  Order of precedence and designation of beneficiary.

    Insurance benefits are paid under the order of precedence set forth 
in 5 U.S.C. 8705(a) and under the provisions of subpart H of this part.

[[Page 48746]]

Sec. 870.1009  Responsibilities of the U.S. Department of State.

    (a) The U.S. Department of State functions as the ``employing 
office'' for individuals insured under this subpart.
    (b) The U.S. Department of State must determine the eligibility of 
individuals under Pub. L. 101-513 (104 Stat. 2035) for insurance under 
this subpart. This includes determining whether an individual is barred 
from insurance under chapter 87 of title 5 U.S.C. because of other life 
insurance as provided in section 599C of Pub. L. 101-513 (104 Stat. 
2035).

Subpart K--Living Benefits


Sec. 870.1101  Eligibility for a Living Benefit.

    (a) Effective July 25, 1995, an insured individual who is certified 
by his/her doctor as terminally ill, as defined in Sec. 870.101, may 
elect to receive a lump-sum payment of Basic insurance.
    (b) Optional insurance is not available for payment as a Living 
Benefit.
    (c)(1) The effective date of a Living Benefit election is the date 
on which the Living Benefit payment is cashed or deposited. Once an 
election becomes effective, it can't be revoked. No further election of 
Living Benefits can be made.
    (2) If the insured individual dies before cashing or depositing the 
Living Benefit payment, the payment must be returned to OFEGLI.
    (d) If the insured individual has assigned his/her insurance, he/
she cannot elect a Living Benefit; nor can an assignee elect a Living 
Benefit on behalf of an insured individual.
    (e) If an individual has elected a Living Benefit, he/she may 
assign his/her remaining insurance.


Sec. 870.1102  Amount of a Living Benefit.

    (a)(1) An employee may elect to receive either:
    (i) A full Living Benefit, which is all of his/her Basic insurance, 
or
    (ii) A partial Living Benefit, which is a portion of his/her Basic 
insurance, in a multiple of $1,000.
    (2) An annuitant or compensationer may only elect to receive a full 
Living Benefit.
    (b) The amount of Basic insurance elected as a Living Benefit will 
be reduced by an actuarial amount representing the amount of interest 
lost to the Fund because of the early payment of benefits.
    (c)(1) If an individual elects a full Living Benefit, the post-
election BIA will be 0. If an employee elects a partial Living Benefit, 
the post-election BIA will be the BIA reduced in proportion to the 
amount of Basic insurance elected as a Living Benefit, as prescribed by 
Pub. L. 103-409 (108 Stat. 4231).
    (2) The post-election BIA cannot change after the effective date of 
a Living Benefit election.
    (d)(1) If an employee elects a full Living Benefit, Basic 
accidental death and dismemberment coverage terminates as of the 
effective date of the election.
    (2) If an employee elects a partial Living Benefit, Basic 
accidental death and dismemberment coverage is reduced to equal the 
post-election BIA.


Sec. 870.1103  Election procedures.

    (a) The insured individual must request information on Living 
Benefits and an application form directly from OFEGLI.
    (b)(1) Only the insured individual can apply for a Living Benefit; 
no one can apply on his/her behalf.
    (2) The insured individual must complete the first part of the 
application and have his/her physician complete the second part. The 
completed application must be submitted directly to OFEGLI.
    (c)(1) OFEGLI reviews the application, obtains certification from 
the insured's employing office regarding the amount of insurance and 
the absence of an assignment, and determines whether the individual 
meets the requirements to elect a Living Benefit.
    (2) If OFEGLI needs additional information, it will contact the 
insured or the insured's physician.
    (3) Under certain circumstances, OFEGLI may require a medical 
examination before making a decision. In these cases, OFEGLI is 
financially responsible for the cost of the medical examination.
    (d)(1) If the application is approved, OFEGLI sends the insured a 
check for the Living Benefit payment and an explanation of benefits.
    (i) Until the check has been cashed or deposited, the individual 
may change his/her mind about electing a Living Benefit; if this 
happens, the individual must mark the check ``void'' and return it to 
OFEGLI.
    (ii) Once the insured individual has chased or deposited the 
payment, the Living Benefit election becomes effective and cannot be 
revoked; OFEGLI then sends explanations of benefits to the insured's 
employing office, so it can make the necessary changes in withholdings 
and deductions.
    (2) If the application is not approved, OFEGLI will notify the 
insured individual and the employing office. The decision is not 
subject to administrative review; however, the individual can submit 
additional medical information or reapply at a later date if future 
circumstances warrant.

PART 871--[REMOVED]

    2. Part 871 is removed.

PART 872--[REMOVED]

    3. Part 872 is removed.

PART 873--[REMOVED]

    4. Part 873 is removed.

PART 874--[REMOVED]

    5. Part 874 is removed.

[FR Doc. 97-24585 Filed 9-16-97; 8:45 am]
BILLING CODE 6325-01-M