[Federal Register Volume 69, Number 114 (Tuesday, June 15, 2004)]
[Proposed Rules]
[Pages 33341-33343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13347]


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POSTAL SERVICE

39 CFR Part 111


Eligibility Requirements for Certain Nonprofit Standard Mail 
Material

AGENCY: Postal Service.

ACTION: Proposed rule.

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SUMMARY: The Postal Service proposes revisions to Domestic Mail Manual 
(DMM) E670.5.5, which sets forth guidelines for determining whether the 
coverage provided by an insurance policy offered by an authorized 
nonprofit organization to its members is not generally otherwise 
commercially available.

DATES: Submit comments on or before July 15, 2004.

ADDRESSES: Mail or deliver written comments to the Manager, Mailing 
Standards, U.S. Postal Service, 475 L'Enfant Plaza SW., Room 3436, 
Washington DC 20260-3436. Copies of all written comments will be 
available for inspection and photocopying at USPS Headquarters Library, 
475 L'Enfant Plaza SW., 11th Floor N, Washington DC, between 9 a.m. and 
4 p.m., Monday through Friday. Comments may not be submitted via fax or 
e-mail.

FOR FURTHER INFORMATION CONTACT: Jerry Lease, Mailing Standards, U.S. 
Postal Service, (202) 268-7264; or Garry A. Rodriguez, Mailing 
Standards, U.S. Postal Service, (202) 268-7281.

SUPPLEMENTARY INFORMATION: Authorized organizations are entitled to 
mail their qualifying materials at the Nonprofit Standard Mail rates 
(``nonprofit rates''), which are significantly lower than the regular 
Standard Mail rates. However, the Postal Service Appropriations Act of 
1991 limits the types of material that may be sent at the nonprofit 
rates (originally called the ``special bulk third-class rates''). Among 
the provisions is one restricting promotional materials for insurance 
from being mailed at the nonprofit rates unless, among other things, 
the coverage provided by the policy is ``not generally otherwise 
commercially available'' (39 U.S.C. 3626(j)(1)(B)).
    On June 25, 1992 (57 FR 28464), the Postal Service adopted 
standards defining the phrase, ``not generally otherwise commercially 
available,'' for purposes of determining the eligibility of promotional 
insurance mailed at the nonprofit rates. Those standards, as currently 
stated in DMM E670.5.4 and 5.5, state that promotional materials 
pertaining to the coverage provided by insurance policies may not be 
mailed at the nonprofit rates, ``unless the organization promoting the 
purchase of such policy is authorized to mail at the Nonprofit Standard 
Mail rates at the entry post office; the policy is designed for and 
primarily promoted to the members, donors, supporters, or beneficiaries 
of that organization; and the coverage provided by the policy is not 
generally otherwise commercially available.''
    DMM E670.5.5 explains, ``The term not generally otherwise 
commercially available applies to the actual coverage stated in an 
insurance policy, without regard to the amount of the premiums, the 
underwriting practices, and the financial condition of the insurer. 
When comparisons are made with other policies, consideration is given 
to policy coverage benefits, limitations, and exclusions, and to the 
availability of coverage to the targeted category of recipients. When 
insurance policy coverages are compared for determining whether 
coverage in a policy offered by an organization is not generally 
otherwise commercially available, the comparison is based on the 
specific characteristics of the recipients of the piece (e.g., 
geographic location or demographic characteristics).''
    The standard further explains that the types of insurance 
considered generally commercially available include, but are not 
limited to, homeowner's, property, casualty, marine, professional 
liability (including malpractice), travel, health, life, airplane, 
automobile, truck, motorhome, motorbike, motorcycle, boat, accidental 
death, accidental dismemberment, Medicare supplement (Medigap), 
catastrophic care, nursing home, and hospital indemnity insurance.
    Several years after these standards were issued, the Postal Service 
was challenged in the United States District Court for the District of 
Columbia by two organizations authorized to mail qualifying matter at 
nonprofit rates. Each organization offered insurance to its respective 
members. In each case, the Postal Service had determined that the 
organization's mailings promoting insurance were not eligible for 
nonprofit rates. The organizations asked the District Court to reverse 
those decisions.
    One of the nonprofit organizations was a fraternal benefit 
organization that offered life, medical, disability, and

[[Page 33342]]

long-term care insurance to its members. The policies were underwritten 
by the organization itself. The other nonprofit organization gave 
charitable grants for legal research funded through tax-deductible 
donations of dividends that otherwise would be payable to its members, 
donors, supporters, or beneficiaries who are insured through group 
insurance policies that the organization offers. In that case, the 
policies were underwritten by major insurance carriers.
    The District Court held that the Postal Service's regulations 
constituted an incorrect reading of 39 U.S.C. 3626(j)(1)(B). The Postal 
Service appealed the District Court's decisions to the United States 
Court of Appeals for the District of Columbia Circuit, which 
consolidated the appeals and affirmed the District Court's decisions.
    In light of the courts' rulings, the Postal Service proposes to 
amend DMM E670.5.5 to allow, under certain circumstances, the mailing 
of promotional material offering general types of insurance, such as 
homeowner's, property, casualty, marine, professional liability, and so 
forth. In doing so, the Postal Service is taking into account the 
courts' rulings, the Postal Service Appropriations Act of 1991, and the 
related legislative history. As explained in previous rulemakings 
concerning this statute, the Postal Service's obligation in 
establishing regulations is to adhere to the intent of Congress.
    Under the proposal, mailings permitted at nonprofit rates in effect 
since 1991 continue to be eligible for the nonprofit rates. In 
addition, the Postal Service finds that Public Law No. 101-509 does not 
restrict the use of the nonprofit rates for mailings of an authorized 
fraternal benefit society or any other nonprofit organization when the 
material advertises, promotes, or offers insurance that is underwritten 
by the nonprofit organization itself.
    The Postal Service also finds that Public Law No. 101-509 does not 
restrict the use of the nonprofit rates for mailings of an authorized 
organization's material that advertises, promotes, or offers insurance, 
if the coverage is provided or promoted by the nonprofit organization 
to its members, donors, supporters, or beneficiaries in such a way that 
those parties may make tax-deductible donations to the organization of 
their proportional shares of income in excess of costs that the 
nonprofit organization receives from the purchase of the coverage by 
its members, donors, supporters, or beneficiaries.
    The position of the Postal Service regarding the second type of 
insurance is similar to view of the Postal Service on charitable gift 
annuities (CGAs), which in many ways are similar to commercial 
annuities sold by life insurance companies. In a 1997 administrative 
ruling (Customer Support Ruling PS-294, Charitable Gift Annuities--
Nonprofit Standard Mail, November 1997), the Postal Service found that 
CGAs are not generally otherwise commercially available because they 
differ from commercial insurance in a number of regulatory contexts--
including that the federal tax code expressly provides that CGAs are 
not commercial-type insurance. Therefore, the Postal Service concluded 
that material regarding CGAs could be entered at the nonprofit rates.
    Organizations continue to bear the burden of proof, as they have 
done historically, in substantiating that their mailings qualify for 
the nonprofit rates of postage. For example, upon request, they must 
provide evidence to support any claim that the coverage provided by a 
particular policy is not generally otherwise commercially available 
within the meaning of revised DMM E670.5.5.
    Additionally, the Postal Service has historically viewed, and 
continues to view, provisions regarding the mailing of promotional 
materials concerning insurance as supplementary to, rather than a 
change to or replacement for, the existing standards that restrict 
cooperative mailings. Mailings that are ineligible under the 
cooperative mailing provisions remain ineligible for the nonprofit 
rates, regardless of whether or not they violate the newly adopted 
standards related to insurance.
    Although exempt from the notice and comment requirements of the 
Administrative Procedure Act, 5 U.S.C. 553(b), (c), regarding proposed 
rulemaking by 39 U.S.C 410(a), the Postal Service invites comments on 
the following proposed revisions to the Domestic Mail Manual (DMM), 
which is incorporated by reference in the Code of Federal Regulations. 
See 39 CFR 111.

List of Subjects in 39 CFR Part 111

    Administrative practice and procedure, Postal Service.

PART 111--[AMENDED]

    1. The authority citation for 39 CFR part 111 continues to read as 
follows:

    Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 414, 
416, 3001-3011, 3201-3219, 3403-3406, 3621, 3626, 5001.

    2. Revise the Domestic Mail Manual (DMM) as set forth below:

E Eligibility

* * * * *

E600 Standard Mail

* * * * *

E670 Nonprofit Standard Mail

* * * * *
5.0 ELIGIBLE AND INELIGIBLE MATTER
* * * * *

5.5 Definitions, Insurance

[Revise 5.5 to read as follows:]

    For the standard in 5.4b:
    a. Except as specified in 5.5c, the phrase not generally otherwise 
commercially available applies to the actual coverage stated in an 
insurance policy, without regard to the amount of the premiums, the 
underwriting practices, and the financial condition of the insurer. 
When comparisons are made with other policies, consideration is given 
to coverage benefits, limitations, and exclusions, and to the 
availability of coverage to the targeted recipients. When insurance 
policy coverages are compared to determine whether coverage in a policy 
offered by an organization is not generally otherwise commercially 
available, the comparison is based on the specific characteristics of 
the mailpiece recipients (e.g., geographic location or demographics).
    b. Except as specified in 5.5c, the types of insurance considered 
generally commercially otherwise available include, but are not limited 
to, homeowner's, property, casualty, marine, professional liability 
(including malpractice), travel, health, life, airplane, automobile, 
truck, motorhome, motorbike, motorcycle, boat, accidental death, 
accidental dismemberment, Medicare supplement (Medigap), catastrophic 
care, nursing home, and hospital indemnity insurance.
    c. Coverage is considered not generally otherwise commercially 
available if either of the following conditions applies:
    (1) The coverage is provided by the nonprofit organization itself 
(i.e., the nonprofit organization is the insurer).
    (2) The coverage is provided or promoted by the nonprofit 
organization in a mailing to its members, donors, supporters, or 
beneficiaries in such a way that the members, donors, supporters, or 
beneficiaries may make tax-deductible donations to the nonprofit 
organization of their proportional shares of any income in excess of 
costs that the nonprofit organization receives from the purchase

[[Page 33343]]

of the coverage by its members, donors, supporters, or beneficiaries.
* * * * *
    An appropriate amendment to 39 CFR part 111 will be published if 
the proposal is adopted.

Neva R. Watson,
Attorney, Legislative.
[FR Doc. 04-13347 Filed 6-14-04; 8:45 am]
BILLING CODE 7710-12-P