[Federal Register Volume 65, Number 176 (Monday, September 11, 2000)]
[Rules and Regulations]
[Pages 54798-54799]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-23201]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 8

RIN 2900-AJ35


Cash Values for National Service Life Insurance (NSLI) and 
Veterans Special Life Insurance Term-Capped Policies

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: This document amends the Department of Veterans Affairs (VA) 
regulations regarding National Service Life Insurance (NSLI) and 
Veterans Special Life Insurance (VSLI) by providing cash values for 
NSLI and VSLI term-capped policies and further providing the options to 
either receive the cash value in a lump sum or to purchase paid-up 
insurance upon the termination of the contract before maturity.

Effective Dates: Date: September 11, 2000.

FOR FURTHER INFORMATION CONTACT: George Poole, Chief of Insurance 
Program Administration and Oversight, PO Box 8079, Philadelphia, 
Pennsylvania 19101, (215) 842-2000, ext. 4286; (215) 842-2000, ext. 
5012 (voicemail); (215) 381-3502 (fax); or e-mail at 
``[email protected]''.

SUPPLEMENTARY INFORMATION: In a document published in the Federal 
Register on February 15, 2000 (65 FR 7467), we proposed to provide cash 
values for NSLI and VSLI term-capped policies and further provide the 
options to either receive the cash value in a lump sum or to purchase 
paid-up insurance upon the termination of the contract before maturity.
    We received two comments. Both supported the proposed rule. 
Accordingly, based on the rationale set forth in the proposed rule we 
are adopting the proposed rule as a final rule without any changes.
    The Acting Secretary of the Department of Veterans Affairs hereby 
certifies that this final rule will not have a significant economic 
impact on a substantial number of small entities as they are defined in 
the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-602. Pursuant to 5 
U.S.C. 605(b), this final rule is, therefore, exempt from the initial 
and final regulatory flexibility analysis requirement of sections 603 
and 604. The final regulation will affect only government life 
insurance policyholders. It will, therefore, have no significant direct 
impact on small entities in the terms of compliance costs, paperwork 
requirements, or effects on competition.

The catalog of Federal Domestic Assistance Program number for this 
regulation is 64.103.

List of Subjects in 38 CFR Part 8

    Disability benefits, Life insurance, Loan programs-veterans, 
Military personnel, Veterans.

    Approved: August 29, 2000.
Hershel W. Gober,
Acting Secretary of Veterans Affairs.


    For the reasons set out in the preamble, 38 CFR Part 8 is amended 
as follows:

PART 8--NATIONAL SERVICE LIFE INSURANCE

    1. The authority citation for part 8 continues to read as follows:


[[Page 54799]]


    Authority: U.S.C. 501, 1901-1929, 1981-1988, unless otherwise 
noted.


    2. Section 8.37 is added to read as follows:


Sec. 8.37  Cash value for term-capped policies.

    (a) What is a term-capped policy? A term-capped policy is a 
National Service Life Insurance policy prefixed with ``V'' or Veterans 
Special Life Insurance policy prefixed with ``RS,'' issued on a 5-year 
level premium term plan in which premiums have been capped (frozen) at 
the renewal age 70 rate.
    (b) How can a term-capped policy accrue cash value? Normally, a 
policy issued on a 5-year level premium term plan does not accrue cash 
value (see section 8.14). However, notwithstanding any other provisions 
of this part, reserves have been established to provide for cash value 
for term-capped policies.
    (c) On what basis have the reserve values been established? Reserve 
values have been established based upon the 1980 Commissioners Standard 
Ordinary Basic Table and interest at five per centum per annum in 
accordance with accepted actuarial practices.
    (d) How much cash value does a term-capped policy have? The cash 
value for each policy will depend on the age of the insured, the type 
of policy, and the amount of coverage in force and will be calculated 
in accordance with accepted actuarial practices. For illustrative 
purposes, below are some examples of cash values based upon a $10,000 
policy at various attained ages for an NSLI ``V'' policy and a VSLI 
``RS'' policy:

------------------------------------------------------------------------
                                                 Cash value   Cash value
                      Age                          ``V''        ``RS''
------------------------------------------------------------------------
75............................................       $1,494       $1,716
80............................................        3,212        3,358
85............................................        4,786        4,818
90............................................        6,249        6,217
95............................................        8,887        7,286
------------------------------------------------------------------------

    (e) What can be done with this cash value? Upon cancellation or 
lapse of the policy, a policyholder may receive the cash value in a 
lump sum or may use the cash value to purchase paid-up insurance. If a 
term-capped policy is kept in force, cash values will continue to grow.
    (f) How much paid-up insurance can be obtained for the cash value? 
The amount of paid-up insurance that can be purchased will depend on 
the amount of cash value that the policy has accrued and will be 
calculated in accordance with accepted actuarial practices. For 
illustrative purposes, below are some examples of paid-up insurance 
that could be purchased by the cash value of a ``V'' and an ``RS'' 
$10,000 policy at various attained ages:

------------------------------------------------------------------------
                                                  Paid-up      Paid-up
                      Age                          ``V''        ``RS''
                                                 insurance    insurance
------------------------------------------------------------------------
75............................................       $2,284       $2,625
80............................................        4,452        4,654
85............................................        6,109        6,149
90............................................        7,421        7,115
95............................................        9,331        7,650
------------------------------------------------------------------------

    (g) If the policy lapses due to non-payment of the premium, does 
the policyholder nonetheless have a choice of receiving the cash value 
or paid-up insurance? Yes, the policyholder will have that choice, 
along with the option to reinstate the policy (see section 8.10 for 
reinstatement of a policy). However, if a policyholder does not make a 
selection, VA will apply the cash value to purchase paid-up insurance. 
Paid-up insurance may be surrendered for cash at any time.
    (h) If a policyholder elects to receive either the cash surrender 
or paid-up insurance due to lapse or voluntary cancellation of a term-
capped policy, may the original term-capped policy be reinstated? Yes, 
the term-capped policy may be reinstated but the policyholder, in 
addition to meeting the reinstatement requirements of term policies, 
must also pay the current reserve value of the reinstated policy.

(Authority: 38 U.S.C. 1906)

[FR Doc. 00-23201 Filed 9-8-00; 8:45 am]
BILLING CODE 8320-01-P