[Federal Register Volume 74, Number 250 (Thursday, December 31, 2009)]
[Proposed Rules]
[Pages 69288-69301]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-31023]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 74, No. 250 / Thursday, December 31, 2009 / 
Proposed Rules  

[[Page 69288]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 870

RIN 3206-AG63


Federal Employees' Group Life Insurance Program: Miscellaneous 
Changes, Clarifications, and Corrections

AGENCY: U.S. Office of Personnel Management.

ACTION: Proposed rule.

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

SUMMARY: The U.S. Office of Personnel Management (OPM) is proposing 
changes to the Federal Employees' Group Life Insurance (FEGLI) Program 
regulations to provide for the new election opportunities for certain 
civilian and Defense Department employees deployed in support of a 
contingency operation required by Public Law 110-417; to provide for 
the continuation of coverage opportunities for Federal employees called 
to active duty required by Public Law 110-181; and to update the 
regulations with other changes, clarifications, and corrections.

DATES: OPM must receive comments on or before March 1, 2010.

ADDRESSES: Send written comments to Ingrid Burford, Senior Policy 
Analyst, Strategic Human Resources Policy, U.S. Office of Personnel 
Management, 1900 E Street, NW., Washington, DC 20415-9700; or deliver 
to OPM, Room 3415, 1900 E Street, NW., Washington, DC; or FAX to (202) 
606-0636. Comments may also be sent through the Federal eRulemaking 
Portal at http://www.regulations.gov. All submissions received through 
the Portal must include the agency name and docket number or the 
Regulation Identifier Number (RIN) for this rulemaking. Please specify 
the subpart and section number for each comment.

FOR FURTHER INFORMATION CONTACT: Ingrid Burford, (202) 606-0004.

SUPPLEMENTARY INFORMATION: On October 27, 2000, OPM published proposed 
regulations (65 FR 64530) with miscellaneous changes, clarifications, 
and corrections. We have identified additional changes, clarifications, 
and corrections. Therefore, we are withdrawing the October 27, 2000, 
proposed regulations and issuing new proposed regulations. We will 
respond to any comments received on these proposed regulations when we 
publish final regulations.
    The proposed changes, clarifications, and corrections are:

Changes

    (1) Public Law 106-398 amended 5 U.S.C. 8702 to allow Department of 
Defense (DoD) employees who are designated as ``emergency essential'' 
under 10 U.S.C. 1580 to elect Basic insurance within 60 days of being 
so designated. Section 1103 of Public Law 110-417, the Duncan Hunter 
National Defense Authorization Act for Fiscal Year 2009, which became 
effective on October 14, 2008, further amended chapter 87 of title 5, 
U.S. Code, to allow ``emergency essential'' DoD employees, as well as 
civilian employees deployed in support of a contingency operation, to 
elect Basic Insurance, Option A (Standard) coverage and Option B 
(Additional) coverage up to a maximum of five (5) multiples. We are 
amending the regulations to include these election opportunities. These 
changes can be found in Sec.  870.503(e) and (f) and Sec.  870.506(f) 
and (g).
    (2) Public Law 110-279, enacted July 17, 2008, provides for certain 
Federal employee benefits to be continued for certain employees of the 
Senate Restaurants after the operations of the Senate Restaurants are 
contracted to be performed by a private business concern. The law 
provides that a Senate Restaurants employee, who is an employee of the 
Architect of the Capitol on the date of enactment and who accepts 
employment by the private business concern as part of the transition, 
may elect to continue coverage under certain Federal employee benefits 
programs during continuous employment with the business concern. Former 
Senate Restaurant employees who have FEGLI coverage as of the date of 
transfer may continue their coverage, if they also elected to continue 
their retirement coverage under either chapter 83 or 84 of title 5, 
U.S. Code. These individuals will continue to be eligible for FEGLI 
during continuous employment with the private contractor unless the 
employees opt out of the FEGLI program. We are revising the FEGLI 
regulations to address coverage for these individuals. These changes 
can be found in Sec.  870.601(a) and Sec.  870.602(b).
    (3) Section 1102 of Public Law 110-181, the National Defense 
Authorization Act for Fiscal Year 2008, enacted January 28, 2008, 
amended 5 U.S.C. 8706 to authorize the continuation of FEGLI coverage 
for up to 24 months for Federal employees called to active duty. FEGLI 
coverage is free for the first 12 months, but employees must pay the 
full cost (Government and employee share) of the premiums for the 
additional 12 months. We are amending the regulations to include this 
election opportunity. These changes can be found in Sec.  
870.601(d)(3)(iii).
    (4) Public Law 110-177, the Court Security Improvement Act of 2007, 
enacted January 7, 2008, deems certain categories of judicial officers 
to be considered as judges of the United States under section 8701 of 
title 5, United States Code. The law requires magistrate judges retired 
under section 377 of title 28, United States Code, to be considered 
Federal judges under the Federal Employees' Group Life Insurance 
(FEGLI) law. Public Law 111-8, the Omnibus Appropriations Act of 2009, 
enacted March 9, 2009, further amended the FEGLI law, by identifying 
additional judges who should continue to be treated as employees 
following retirement. This law requires bankruptcy judges and 
magistrate judges retired under section 377 of title 28, U.S. Code, and 
judges retired under section 373 of title 28, to be considered Federal 
judges under the FEGLI law. In addition, a 1955 OPM General Counsel's 
opinion identified additional judges who also should continue to be 
treated as employees following retirement (DC judges and Tax Court 
judges). We are changing the regulations to add these judges. These 
changes can be found in Sec.  870.703(e)(1).
    (5) Currently, with a change in family circumstances an employee 
must already have Basic insurance and may elect only Option B and 
Option C. The number of multiples of Option B that such an employee may 
elect with a change in family circumstances is limited. We are 
proposing to eliminate the limitations on the coverage an

[[Page 69289]]

employee may elect, so that an employee making an election based on a 
change in family circumstances, may elect Basic insurance and any and 
all Optional insurance, including up to the maximum number of multiples 
available of Option B and Option C. These changes can be found in Sec.  
870.503(b)(3) and Sec.  870.506(a).
    (6) Newly eligible employees must be in pay and duty status before 
Optional insurance can become effective. The six-month belated election 
opportunity allows Optional insurance to become effective retroactive 
to the pay period following the one in which the employee became 
eligible, but it does not require the employee to be in pay and duty 
status at that time. We are proposing a change to the regulations to 
apply the same pay and duty status requirements for belated elections 
that are required for elections made on a timely basis. These changes 
can be found in Sec.  870.503 and Sec.  870.506.
    (7) We are proposing a change to provide that no one but the 
insured individual has the right to convert coverage when insurance 
terminates, unless the insured individual has assigned his or her 
insurance, with the exception that an individual having power of 
attorney may convert on behalf of the insured. In addition, a family 
member may convert Option C coverage. These changes can be found in 
Sec.  870.603(a)(1).
    (8) We are proposing to change the time frame for making an initial 
election of Optional insurance from 31 days to 60 calendar days after 
the employee becomes eligible. We are also proposing to extend the time 
frame for electing coverage by providing satisfactory medical 
information from 31 days to 60 calendar days after OFEGLI's (Office of 
Federal Employees' Group Life Insurance) approval. These changes will 
make these election time frames consistent with other election 
opportunities for Federal benefits. These changes can be found in Sec.  
870.504 (a)(1) and Sec.  870.506(c).
    (9) When an employee who elected a partial living benefit dies, the 
post-election BIA (Basic Insurance Amount) is multiplied by the extra 
benefit age factor in effect at the time that OFEGLI received the 
living benefit application. We are proposing to change this computation 
to use the age factor in effect nine months from the date OFEGLI 
received the living benefit application, to be consistent with the age 
factor used to compute the amount of the living benefit. These changes 
can be found in Sec.  870.203.
    (10) Public Law 108-445, The Department of Veterans Affairs (VA) 
Health Care Personnel Enhancement Act of 2004, provided for the payment 
of market pay, in addition to base pay, for physicians and dentists 
employed by the VA. Accordingly, in addition to base pay, market pay 
must be used to determine the annual rate of pay described in Sec.  
870.204 for these individuals. Public Law 96-330, currently cited in 
Sec.  870.204(a)(2)(x), relating to the treatment of bonuses for 
physicians and dentists employed by the VA, is no longer in effect. We 
are revising Sec.  870.204 to include market pay in the determination 
of annual pay for these individuals.
    (11) In situations of concurrent employment, the amount of Basic 
insurance and Option B insurance is based on the combined salaries. 
However, if an employee accepts a temporary position while in nonpay 
status from a covered position, the amount of insurance is based on 
whichever salary is higher. We are proposing to eliminate this 
exception, so that this situation will be treated the same as other 
instances of concurrent employment. These changes can be found in Sec.  
870.204(g).
    (12) Currently, the earliest that coverage elected as a result of 
providing satisfactory medical information can become effective is the 
day after the date OFEGLI approves the employee's request for coverage. 
We are changing the regulations to allow Basic insurance to become 
effective on the date of OFEGLI's approval if the employee is in pay 
and duty status. We are also allowing Option A and Option B coverage to 
become effective on the date of OFEGLI's approval if the employing 
office receives the employee's election on or before that date and the 
employee is in pay and duty status. These changes can be found in Sec.  
870.503 and Sec.  870.506.
    (13) We are proposing to treat reemployed compensationers the same 
as reemployed annuitants. When a compensationer returns to work under 
conditions that allow him or her to continue receiving compensation, 
Basic insurance (and Options A and C) held as a compensationer are 
suspended and the insured obtains coverage as an employee. If the 
reemployed compensationer dies in service, OFEGLI would pay Basic 
insurance benefits based on whichever amount is higher: The suspended 
compensationer coverage or the coverage through reemployment. As with 
reemployed annuitants, Option B would remain with the individual's 
compensation, unless the employee elects to have it through 
reemployment. If a reemployed compensationer stops working and 
continues to receive compensation, he or she could continue the FEGLI 
acquired through reemployment if the individual meets the 5-year/all-
opportunity requirement and has been reemployed for the length of time 
required for a reemployed annuitant to earn a supplemental annuity (1 
year for full-time employment). These changes can be found in Sec.  
870.707.
    (14) Public Law 106-522, 114 Stat. 2440, enacted November 22, 2000, 
changed the entitlement to Federal employee benefits for the District 
of Columbia (DC) Offender Supervision Trustee and employees of the 
Trustee. Previously these employees were treated as Federal employees 
for purposes of Federal employee retirement and insurance programs only 
if they transferred to the DC government within three days of 
separating from Federal service. Public Law 106-522 gave these 
employees retroactive entitlement to be treated as Federal employees on 
the date of their appointment or the date their sub-organizations 
transferred to the Trustee's office, whichever is later. We are 
reflecting this change in the regulations. These changes can be found 
in Sec.  870.302(a)(3).
    (15) Public Law 105-311, the Federal Employees Life Insurance 
Improvement Act, 112 Stat. 2950, enacted October 30, 1998, amended 
chapter 87 of title 5, U.S. Code, to allow retiring employees to elect 
either No Reduction or Full Reduction for their Option B and Option C 
coverage. This election was to be made at the time of retirement, the 
same as the election for Basic insurance. Implementing this provision 
required programming changes to the electronic records system for 
annuitants to allow for ``mixed'' elections, i.e., electing reductions 
for some coverage, but not for other coverage. While these system 
changes were being made, annuitants were required to elect either No 
Reduction or Full Reduction for Option B and Option C coverage at the 
time of retirement. Then, shortly before the annuitant's 65th birthday, 
the insured was given a second opportunity to make another election, 
this time being allowed to choose No Reduction for some multiples and 
Full Reduction for others. We are proposing to eliminate the 
opportunity for a second election at age 65. There are several reasons 
for this proposed change: (i) The law states the election must be made 
at the time of retirement; (ii) administering the second election 
opportunity at age 65 is an ongoing cost to the Program; (iii) the 2nd 
election may be confusing to some annuitants, since the election for 
the Basic insurance reduction is made at the time of retirement without 
a second opportunity at age 65; and (iv) the

[[Page 69290]]

mailing itself is problematic with regard to individuals who are paying 
their premiums directly, as described in Sec.  870.405, and individuals 
who have assigned their coverage. Individuals who have retired since 
this statutory provision became effective (April 24, 1999) and who have 
not yet turned 65 will be given the opportunity to make their ``final'' 
election. These changes can be found in Sec.  870.705(d).
    (16) We are proposing to eliminate the requirement for designated 
beneficiaries of assignees to notify the appropriate employing office 
of any change in address, since we do not require any other designated 
beneficiaries to make such a notification. The requirement will still 
apply to assignees themselves. These changes can be found in Sec.  
870.910.
    (17) The current regulations regarding reconsiderations require the 
insured individual to provide his or her Social Security Number when 
filing a request for reconsideration. We are proposing to eliminate 
this requirement. Annuitants and compensationers may be identified by 
their retirement or compensation claim numbers. Agencies are able to 
identify employees by their names, addresses, and dates of birth. These 
changes can be found in Sec.  870.105.
    (18) Beginning April 24, 1999 and continuing until April 24, 2002, 
eligible employees could elect portability for Option B coverage that 
would otherwise terminate. The 3-year portability demonstration project 
has expired and employees are no longer able to elect portability. We 
are removing subpart L and all references to portability from the 
regulations, including the definitions of ``Portability Office'' and 
``ported coverage'' from Sec.  870.101.
    (19) The current regulations specify that only the insured 
individual may elect a living benefit and no one can elect a living 
benefit on his or her behalf. We are proposing to change the 
regulations to allow another person with a power of attorney to apply 
for a living benefit on the insured individual's behalf. These changes 
can be found in Sec.  870.1103.

Clarifications

    (1) The regulations state that when incontestability (allowing 
erroneous coverage to remain in effect under certain conditions) 
applies, if the individual does not want the erroneous coverage, he or 
she may cancel the coverage on a prospective basis; there is no refund 
of premiums. We are clarifying the regulations to state that if the 
erroneous coverage is Option C, and there are no eligible family 
members, the cancellation is retroactive to the end of the pay period 
in which the individual last had any eligible family members. In this 
case, our proposed revision also would provide for a refund of the 
Option C premiums for this period of erroneous coverage. We are also 
clarifying the regulations to provide that an annuitant or 
compensationer cannot enroll for life insurance coverage after 
retirement and any erroneous enrollments must be corrected. These 
changes can be found in Sec.  870.104.
    (2) We are clarifying the regulations to better describe the ``on 
or after'' provision for the effective date of coverage. Most elections 
require that the employee be in pay and duty status before coverage can 
become effective. In these instances, the coverage becomes effective 
the day the employing office receives the election, if the employee is 
in pay and duty status on that date. If the employee is not in pay and 
duty status on the date the employing office receives the election, the 
coverage becomes effective the next date that the employee is in pay 
and duty status. These changes are found throughout the regulations 
where effective dates are discussed.
    (3) We are clarifying the computation of premium pay and 
availability pay to state that the employee's annual rate of basic pay 
is multiplied by the applicable percentage factor to determine pay for 
FEGLI purposes. These changes can be found in Sec.  870.204(g).
    (4) We are adding some definitions for clarity, including 
definitions of ``covered position,'' ``beneficiary,'' ``acquisition of 
an eligible child,'' and ``accidental death and dismemberment.'' We are 
also clarifying the definition of ``court order.'' These changes can be 
found in Sec.  870.101.
    (5) We are clarifying the requirements for continuing FEGLI during 
an extended period of non-pay for the special non-pay situations 
discussed in Sec.  870.508 to require that all such elections for 
continuing coverage must be made in writing.

Corrections

    (1) We are correcting the regulations to state that premiums are 
based on the amount of insurance last in force on an individual in the 
pay period, rather than the amount in force on the last day of the pay 
period. In most instances this is the same thing; however, if an 
individual dies or separates during a pay period, the amount of 
insurance in force on the last day of the pay period is $0. In these 
instances, the amount of withholding from the final pay must be based 
on the amount of insurance on the date of death or separation. This 
change can be found in Sec.  870.401(b).
    (2) In Sec.  870.701(c), Eligibility for life insurance, there is 
an incorrect reference at the end to Sec.  870.702(a)(2). That 
reference should be to Sec.  870.703(a)(2). The regulations have been 
changed to reflect this correction.
    (3) In Sec.  870.707(e)(2), Reemployed annuitants and 
compensationers, there is an incorrect reference at the end to Sec.  
870.702. That reference should be to Sec.  870.703. The regulations 
have been changed to reflect this correction.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because the regulation 
only affects life insurance benefits of Federal employees and retirees.

Executive Order 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

List of Subjects in 5 CFR Part 870

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

John Berry,
Director, U.S. Office of Personnel Management.

    Accordingly, OPM is proposing to amend 5 CFR part 870 as follows:

PART 870--FEDERAL EMPLOYEES' GROUP LIFE INSURANCE PROGRAM

    1. The authority citation for 5 CFR part 870 is revised to read as 
follows:

    Authority: 5 U.S.C. 8716; Subpart J also issued under section 
599C of Pub. L. 101-513, 104 Stat. 2064, as amended; Sec. 
870.302(a)(3)(ii) also issued under section 153 of Pub. L. 104-134, 
110 Stat. 1321; Sec. 870.302(a)(3) also issued under sections 
11202(f), 11232(e), and 11246(b) and (c) of Pub. L. 105-33, 111 
Stat. 251, and section 7(e) of Pub. L. 105-274, 112 Stat. 2419; Sec. 
870.302(a)(3) also issued under section 145 of Pub. L. 106-522, 114 
Stat. 2472; Secs. 870.302(b)(8), 870.601(a), and 870.602(b) also 
issued under Pub. L. 110-279, 122 Stat. 2604; Subpart E also issued 
under 5 U.S.C. 8702(c); Sec. 870.601(d)(3) also issued under 5 
U.S.C. 8706(d); Sec. 870.703(e)(1) also issued under section 502 of 
Pub. L. 110-177, 121 Stat. 2542; Sec. 870.705 also issued under 5 
U.S.C. 8714b(c) and 8714c(c); Public Law 104-106, 110 Stat. 521.

Subpart A--Administration and General Provisions

    2. Section 870.101 is amended as follows:

[[Page 69291]]

    a. Remove the definitions of ``Portability Office'' and ``ported 
coverage''.
    b. Add the following definitions of ``accidental death and 
dismemberment'', ``acquisition of an eligible child'', ``beneficiary'', 
and ``covered position'', and revise the definition of ``court order'' 
as follows:


Sec.  870.101  Definitions.

    Accidental death and dismemberment refers to the insured's death or 
loss of a hand, a foot, or vision in one eye that results directly 
from, and occurs within one year of, a bodily injury caused solely 
through violent, external, and accidental means.
    Acquisition of an eligible child occurs when:
    (1) A child is born to the insured;
    (2) The insured adopts a child;
    (3) The insured acquires a foster child;
    (4) The insured's stepchild or recognized natural child moves in 
with the insured;
    (5) An otherwise eligible child's marriage is dissolved by divorce 
or annulment, or his or her spouse dies;
    (6) The insured gains custody of an eligible child.
* * * * *
    Beneficiary means the individual, corporation, trust, or other 
entity that receives FEGLI benefits when an insured individual dies.
* * * * *
    Court order means:
    (1) A court decree of divorce, annulment, or legal separation; or
    (2) A court-approved property settlement agreement relating to a 
court decree of divorce, annulment, or legal separation--that requires 
benefits to be paid to a specific person or persons and is received in 
the employing office before the insured dies.
    Covered position means a position in which an employee is not 
excluded from FEGLI eligibility by law or regulation.
* * * * *
    3. Sections 870.104 and 870.105 are revised to read as follows:


Sec.  870.104  Incontestability.

    (a) If an individual erroneously becomes insured, the coverage will 
remain in effect if at least 2 years pass before the error is 
discovered, and if the individual has paid applicable premiums during 
that time. This applies to errors discovered on or after October 30, 
1998, and applies only to employees, not retirees or compensationers.
    (b) If an employee is erroneously allowed to continue insurance 
into retirement or while receiving compensation, the coverage will 
remain in effect if at least 2 years pass before the error is 
discovered, and if the annuitant or compensationer has paid applicable 
premiums during that time. This applies to such errors discovered on or 
after October 30, 1998.
    (c) If an individual is erroneously enrolled in life insurance on 
or after the date he or she retires or begins receiving compensation, 
the coverage cannot remain in effect even if 2 years pass and the 
individual paid applicable premiums.
    (d) If an individual who is allowed to continue erroneous coverage 
under this section does not want the coverage, he or she may cancel the 
coverage on a prospective basis, effective at the end of the pay period 
in which the waiver is properly filed. There is no refund of premiums. 
Exception: If an employee obtained Option C erroneously and did not 
have any eligible family members, that coverage may be cancelled 
retroactively and the insured will obtain a refund of the erroneous 
Option C premiums.


Sec.  870.105  Initial decision and reconsideration.

    (a) An individual may ask his or her agency or retirement system to 
reconsider its initial decision denying:
    (1) Life insurance coverage;
    (2) The opportunity to change coverage;
    (3) The opportunity to designate a beneficiary; or
    (4) 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 following:
    (1) The employee's (or annuitant's) name, address, date of birth;
    (2) The reason(s) for the request; and
    (3) The retirement claim number (Civil Service Annuity Claim 
Number) or compensation number, if applicable.
    (d) A request for reconsideration must be made within 31 calendar 
days from the date of the initial decision (60 calendar days if 
overseas). This time limit may be extended when the individual shows 
that he or she was not notified of the time limit and was not otherwise 
aware of it or that he or she was unable, due to reasons beyond the 
individual's 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 Amounts of Insurance

    4. In Sec.  870.202, paragraph (a)(1) is revised to read as 
follows:


Sec.  870.202  Basic insurance amount (BIA).

    (a)(1) An employee's Basic insurance amount (BIA) is either:
    (i) The employee's annual rate of basic pay, rounded to the next 
higher thousand, plus $2,000; or
    (ii) $10,000; whichever is higher, unless the employee has elected 
a Living Benefit under subpart K of this part. Effective for pay 
periods beginning on or after October 30, 1998, there is no maximum 
BIA.

    Note: If an employee's pay is ``capped'' by law, the amount of 
the Basic insurance is based on the capped amount, which is the 
amount the employee is actually being paid. It is not based on the 
amount the employee's pay would have been without the pay cap.

* * * * *
    5. Section 870.203 is revised to read as follows:


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) If an employee elects a partial Living Benefit, the employee 
still has some Basic insurance. OFEGLI determines this amount by 
computing the BIA as of the date it receives the completed Living 
Benefit application and reducing the amount by a percentage. This 
percentage represents the amount of the employee's partial Living 
Benefit payment, compared to the amount the employee could have 
received if he or she had elected a full Living Benefit. The amount 
that is left is rounded up or down to the nearest multiple of $1,000. 
(If the amount is midway between multiples, it is rounded up to the 
next higher multiple.)
    (b) The post-election BIA cannot change after the effective date of 
the Living Benefit election.
    (c) If an employee elected a partial Living Benefit and that 
employee is

[[Page 69292]]

under age 45 at the time of death, OFEGLI will multiply the post-
election BIA by the appropriate factor, as specified in Sec.  
870.202(c), in effect on the date 9 months after the date OFEGLI 
received the completed Living Benefit application.
    6. In Sec.  870.204, paragraphs (a)(2)(x) and (g) are revised to 
read as follows:


Sec.  870.204  Annual rates of pay.

    (a) * * *
    (2) * * *
    (x) Market pay for physicians and dentists of the Department of 
Veterans Affairs under 38 U.S.C. 7431; and
* * * * *
    (g)(1) Except as provided in paragraphs (g)(2) and (3) of this 
section, if an employee legally serves in more than one position at the 
same time, and at least one of those positions entitles the employee to 
life insurance coverage, the annual pay for life insurance purposes is 
the sum of the annual rate of basic pay fixed by law or regulation for 
each position.
    (2) Paragraph (g)(1) does not apply to--
    (i) An employee of the Postal Service who works on a part-time 
flexible schedule; or
    (ii) A temporary, intermittent decennial census worker.
    (3) If an employee's annual pay includes premium pay or 
availability pay under Sec.  870.204(e), (f), or (g), the annual pay is 
determined by multiplying the employee's annual rate of basic pay by 
the applicable percentage factor.
    7. In Sec.  870.205, paragraph (b)(1) is revised to read as 
follows:


Sec.  870.205  Amount of Optional insurance.

* * * * *
    (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). Effective for pay 
periods beginning on or after October 30, 1998, there is no maximum 
amount for each multiple.

    Note: If an employee's pay is ``capped'' by law, the amount of 
the Option B insurance is based on the capped amount, which is the 
amount the employee is actually being paid. It is not based on the 
amount the employee's pay would have been without the pay cap.

* * * * *
    8. Section 870.206 is revised to read as follows:


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 
Option B or Option 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 the vision in one 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 the vision in one 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.
    (4) Accidental death benefits are paid to the employee's 
beneficiaries.

Subpart C--Eligibility

    9. Section 870.302 is revised to read as follows:


Sec.  870.302  Exclusions.

    (a) The following individuals 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 Public Law 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 
Sec. Sec.  870.503(d) and 870.705 of this part;
    (iii) The Corrections Trustee or an employee of that Trustee who 
accepts employment with the District of Columbia government within 3 
days after separating from the Federal Government.
    (iv) The Pretrial Services, Parole, Adult Probation and Offender 
Supervision Trustee or an employee of that Trustee;
    (v) Effective October 1, 1997, a judicial or nonjudicial employee 
of the District of Columbia Courts, as provided by Public Law 105-33 
(111 Stat. 251); and
    (vi) Effective April 1, 1999, an employee of the Public Defender 
Service of the District of Columbia, as provided by Public Law 105-274 
(112 Stat. 2419).
    (4) A teacher in a Department of Defense dependents school 
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 employment in a position in 
which the employee 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 chapter.
    (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

[[Page 69293]]

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, employment in a position in 
which he or she was insured and to which he or 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 or 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.
    (8) A Senate restaurant employee, except a former Senate restaurant 
employee who had life insurance coverage on the date of transfer to a 
private contractor on or after July 17, 2008, and who elected to 
continue such coverage and to continue coverage under either chapter 83 
or 84 of title 5, United States Code.
    (c) OPM makes the final determination regarding the applicability 
of the provisions of this section to a specific employee or group of 
employees.

Subpart D--Cost of Insurance

    10. In Sec.  870.401, paragraph (b)(3) is revised to read as 
follows:


Sec.  870.401  Withholdings and contributions for Basic insurance.

* * * * *
    (b) * * *
    (3) The amount withheld from the pay of an insured employee whose 
BIA changes during a pay period is based on the BIA last in force 
during the pay period
* * * * *
    11. In Sec.  870.404, paragraph (a) is revised to read as follows:


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 last in force on an employee 
during the pay period.
* * * * *
    12. In Sec.  870.405, paragraphs (c)(2), (g)(1), and (g)(5) are 
revised to read as follows:


Sec.  870.405  Direct premium payments.

* * * * *
    (c) * * *
    (2) Within 31 calendar days of receiving the notice (60 days for 
individuals living overseas), the insured individual (or assignee) must 
return the notice to the employing office or retirement system, 
choosing either to terminate some or all of the insurance or to make 
direct premium payments. An employee, annuitant, or compensationer is 
considered to receive a mailed notice 15 days after the date of the 
notice.
* * * * *
    (g)(1) If an individual on direct pay fails to make the required 
premium payment on time, the employing office or retirement system must 
notify the individual. The individual must make the payment within 31 
calendar days after receiving the notice (60 days if living overseas). 
An individual is considered to have received a mailed notice 15 days 
after the date of the notice, 30 days if living overseas.
* * * * *
    (5) If, for reasons beyond his or her control, an insured 
individual is unable to pay within 30 days of receiving the past due 
notice (45 days if living overseas), he or she may request 
reinstatement of coverage by writing to the employing office or 
retirement system within 60 days from the date of cancellation. The 
individual must provide proof that the inability to pay within the time 
limit was for reasons beyond his or her control. The employing office 
or retirement system will decide if the individual is eligible for 
reinstatement of coverage. If the employing office or retirement system 
approves the request, the coverage is reinstated back to the date of 
cancellation, and the individual must pay the back premiums.

Subpart E--Coverage

    13. Sections 870.503 and 870.504 are revised to read as follows:


Sec.  870.503  Basic insurance: Canceling 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) The employee makes an election during an open enrollment period 
as described in Sec.  870.507;
    (2) At least 1 year has passed since the effective date of the 
waiver, and the employee provides satisfactory medical evidence of 
insurability; or
    (3) The employee has a change in family circumstances (marriage or 
divorce, a spouse's death, or acquisition of an eligible child) and 
files an election as provided in paragraph (b)(3(i), (b)(3)(ii), or 
(b)(3)(iii) of this section. Except as provided in paragraph 
(b)(3)(iii) of this section, the effective date of Basic insurance 
elected under this paragraph (b)(3) is the 1st day the employee 
actually enters on duty in a pay status on or after the day the 
employing office receives the election.
    (i) An employee must file an election under this paragraph with the 
employing office, in a manner designated by OPM, along with proof of 
the event, no later than 60 calendar days following the date of the 
change in family circumstances that permits the election; the employee 
may also file the election before the event and provide proof no later 
than 60 calendar days following the event.
    (ii) An employee making an election under this paragraph based on 
acquisition of an eligible foster child must file the election with the 
employing office no later than 60 calendar days after completing the 
required certification.
    (iii) Within 6 months after an employee becomes eligible to make an 
election of Basic insurance due to a change in family circumstances, an 
employing office may determine that the employee was unable, for 
reasons beyond his or her control, to elect Basic insurance within the 
time limit. In this case, the employee must elect Basic insurance 
within 60 calendar days after he or 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, if 
the employee was in pay and duty status that day. If the employee was 
not in pay and duty status that day, the coverage becomes effective the 
1st day after the date the employee returned to pay and duty status. 
The individual must pay the full cost of the Basic insurance from that 
date for the time that he or she is in pay status.
    (c) OFEGLI reviews the employee's request and determines whether 
the employee complied with paragraph (b)(2) of this section. If the 
employee complied, then OFEGLI approves the Request for Insurance. The 
Basic insurance is effective on the date of

[[Page 69294]]

OFEGLI's approval if the employee is in pay and duty status on that 
date. If the employee is not in pay and duty status on the date of 
OFEGLI's approval, the Basic insurance is effective the first day the 
employee returns to pay and duty status, as long as it is within 60 
calendar days after OFEGLI's approval. If the employee is not in pay 
and duty status within 60 calendar days after OFEGLI's approval, the 
approval is revoked automatically.
    (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 or she actually enters on duty in pay status in a position 
in which he or 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.
    (e)(1) An employee of the Department of Defense who is designated 
as an ``emergency essential employee'' under section 1580 of title 10, 
United States Code, may cancel a waiver of Basic insurance without 
providing satisfactory medical information.
    (2) An election of Basic insurance under paragraph (e)(1) of this 
section must be made within 60 days of being designated ``emergency 
essential.'' Basic insurance is effective on the date the employing 
office receives the election, if the employee is in pay and duty status 
on that date. If the employee is not in pay and duty status on the day 
the employing office receives the election, the coverage becomes 
effective on the date the employee returns to pay and duty status.
    (f)(1) A civilian employee who is eligible for Basic insurance 
coverage and is deployed in support of a contingency operation as 
defined by section 101(a)(13) of title 10, United States Code, may 
cancel a waiver of Basic Insurance without providing satisfactory 
medical information.
    (2) An election of Basic insurance under paragraph (f)(1) of this 
section must be made within 60 days after the date of notification of 
deployment in support of a contingency operation. Basic insurance is 
effective on the date the employing office receives the election, if 
the employee is in pay and duty status on that date. If the employee is 
not in pay and duty status on the day the employing office receives the 
election, the coverage becomes effective on the date the employee 
returns to pay and duty status.


Sec.  870.504  Optional insurance: Election.

    (a)(1) Each employee must elect or waive Option A, Option B, and 
Option C coverage, in a manner designated by OPM, within 60 days after 
becoming eligible unless, during earlier employment, he or she filed an 
election or waiver that remains in effect. The 60-day time limit for 
Option B or Option C begins on the 1st day after February 28, 1981, on 
which an individual is an employee as defined in Sec.  870.101.
    (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 Public Law 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 or her employment with the Authority begins, or
    (ii) The date the Authority receives his or 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 or 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 within 60 days after being 
notified of the determination. The insurance is retroactive to the 1st 
day of the 1st pay period beginning after the date the individual 
became eligible (or after April 1, 1981, whichever is later), if the 
employee was in pay and duty status that day. If the employee was not 
in pay and duty status that day, the coverage becomes effective the 1st 
day after the date the employee returned to pay and duty status. The 
individual must pay the full cost of the Optional insurance from that 
date for the time that he or she is in pay status (or retired or 
receiving compensation with unreduced Optional insurance).
    (b) Any employee who does not file a Life Insurance Election with 
his or 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 did not actually enter on 
duty in pay status during the 1st pay period that began on or after 
April 1, 1981. In that case, the election is considered to have been 
cancelled on the 1st 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 or her employing office, subject to Sec.  
870.504(a) or 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. If the employee is not in pay and duty 
status on the date the employing office receives the election, the 
coverage becomes effective the next date that the employee is in pay 
and duty status.
    (e) For an employee whose Optional insurance stopped for a reason 
other than a waiver, the insurance is reinstated on the 1st day he or 
she actually enters on duty in pay status in a position in which he or 
she again becomes eligible.
    14. Sections 870.506, 870.507, and 870.508 are revised to read as 
follows:


Sec.  870.506  Optional insurance: Canceling a waiver.

    (a) When there is a change in family circumstances (see Sec.  
870.503(b)(3)). (1) An employee may cancel a waiver of Options A, B, 
and C due to a change in family circumstances as provided in paragraphs 
(a)(2) through (a)(6) of this section.
    (2) An employee who has waived Options A and B coverage may elect 
coverage, and an employee who has fewer than 5 multiples of Option B 
may increase the number of multiples, upon his or her marriage or 
divorce, upon a spouse's death, or upon acquisition of an eligible 
child.
    (3) An employee electing or increasing Option B coverage may elect 
any number of multiples, as long as the total number of multiples does 
not exceed 5.
    (4)(i) An employee who has waived Option C coverage may elect it, 
and an employee who has fewer than 5 multiples of Option C may increase 
the number of multiples, upon his or her marriage or acquisition of an 
eligible child. An employee may also elect or increase Option C 
coverage upon divorce or death of a spouse, if the employee has any 
eligible children.
    (ii) An employee electing or increasing Option C coverage may elect 
any number of multiples, as long as the

[[Page 69295]]

total number of multiples does not exceed 5.
    (5)(i) Except as stated in paragraph (a)(5)(iii) of this section, 
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 calendar days following 
the date of the event that permits the election; the employee may also 
file the election before the event and provide proof no later than 60 
calendar days following the event.
    (ii) An employee making an election under paragraph (a)(4)(i) of 
this section following the acquisition of an eligible foster child must 
file the election with the employing office no later than 60 calendar 
days after completing the required certification.
    (iii) In the case of an employee who had a change in family 
circumstances between October 30, 1998, and April 23, 1999, an election 
under this section must have been made on or before June 23, 1999.
    (iv) Within 6 months after an employee becomes eligible to make an 
election due to a change in family circumstances, an employing office 
may determine that the employee was unable, for reasons beyond his or 
her control, to elect or increase Optional insurance within the time 
limit. In this case, the employee must elect or increase Optional 
insurance within 60 calendar days after he or 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 if 
the employee was in pay and duty status that day. If the employee was 
not in pay and duty status that day, the coverage becomes effective the 
1st day after that date the employee returned to pay and duty status. 
The individual must pay the full cost of the Optional insurance from 
that date for the time that he or she is in pay status.
    (6)(i) The effective date of Options A and B insurance elected 
under paragraph (a)(1) of this section is the 1st day the employee 
actually enters on duty in pay status on or after the day the employing 
office receives the election.
    (ii) Except as provided in paragraphs (a)(5)(iii) and (a)(6)(iv) of 
this section, the effective date of Option C coverage elected because 
of marriage, divorce, death of a spouse, or acquisition of an eligible 
child is the day the employing office receives the election, or the 
date of the event, whichever is later. Exception: Coverage elected 
under paragraph (a)(5)(iii) of this section was effective April 24, 
1999.
    (iii) The effective date of Option C coverage elected because of 
the acquisition of a foster child is the date the employing office 
receives the election or the date the employee completes the 
certification, whichever is later.
    (iv) If the employee does not elect Basic insurance and Option C 
together (and did not have Basic insurance before), then Option C 
becomes effective the same day as his or her Basic insurance becomes 
effective.
    (b) When there is no change in family circumstances. (1) An 
employee who has waived Option A or Option B coverage may cancel the 
waiver and elect coverage if:
    (i) The employee makes an election during an open enrollment 
period; or
    (ii) At least 1 year has passed since the effective date of the 
waiver, and the employee 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 at 
least 1 year has passed since the effective date of his or her last 
election of fewer than five multiples (including a reduction in the 
number of multiples), and the employee provides satisfactory medical 
evidence of insurability.
    (3) A waiver of Option C may be cancelled only if there is a change 
in family circumstances or during an open enrollment period.
    (c) OFEGLI reviews the employee's request and determines whether 
the employee complied with paragraphs (b)(1)(ii) and (b)(2) of this 
section. If the employee complied, then OFEGLI approves the Request for 
Insurance. The Option A and B insurance is effective on the date of 
OFEGLI's approval, if the employee is in pay and duty status on that 
date. If the employee is not in pay and duty status on the date of 
OFEGLI's approval, the insurance is effective the first day the 
employee returns to pay and duty status, as long as it is within 60 
calendar days of OFEGLI's approval. If the employee is not in pay and 
duty status within 60 calendar days after OFEGLI's approval, the 
approval is revoked automatically.
    (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 coverage 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 did not file the election with his or 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 or 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 or her employing office within 60 calendar 
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 or she is eligible for insurance on or after the date the employing 
office receives the election. If the employee does not file a Life 
Insurance Election in a manner designated by OPM within the 60-day 
period, the employee has whatever Optional insurance coverage he or she 
had immediately before separating from Federal service and is 
considered to have waived any other Optional insurance. However, an 
employee who fails to file an election during the 60-day period due to 
reasons beyond his or her control may enroll belatedly under the 
conditions stated in Sec.  870.504(a)(3).
    (f)(1) An employee of the Department of Defense who is designated 
as ``emergency essential'' under section 1580 of title 10, United 
States Code, may cancel a waiver of Option A and Option B insurance.
    (2) An election of Option A or Option B insurance under paragraph 
(f)(1) must be made within 60 days of being designated ``emergency 
essential.'' Optional insurance is effective on the date the employing 
office receives the election, if the employee is in pay and duty status 
on that date. If the employee is not in pay and duty status on the day 
the employing office receives the election, the coverage becomes 
effective on the date the employee returns to pay and duty status.
    (g)(1) A civilian employee who is eligible for life insurance 
coverage and who is deployed in support of a contingency operation as 
defined by section 101(a)(13) of title 10, United States Code, may 
cancel a waiver of Option A and/or Option B insurance.

[[Page 69296]]

    (2) An election of Optional elect insurance under paragraph (g)(1) 
must be made within 60 days after the date of notification of 
deployment in support of a contingency operation. Optional insurance is 
effective on the date the employing office receives the election, if 
the employee is in pay and duty status on that date. If the employee is 
not in pay and duty status on the day the employing office receives the 
election, the coverage becomes effective on the date the employee 
returns to pay and duty status.
    (h) 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 1st pay period that begins on or after the OPM-
established date and that 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 or 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, an employing office may determine the number of hours 
customarily worked by averaging the number of hours worked in the most 
recent calendar 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 or her control, to cancel an existing waiver by electing to 
be insured during the open enrollment period. An election under this 
paragraph must be submitted within 60 days after being notified of the 
determination. Coverage is retroactive to the first pay period that 
begins on or after the effective date set by OPM and that 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 does 
not file an election within this 60-day time limit, he or 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 or she would normally be excluded from insurance coverage, the 
insurance continues. The amount of Basic insurance (and Option B 
coverage if the employee has it) is based on the combined salaries of 
the two positions. 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, 
he or she may elect in writing to continue life insurance within 60 
days after the beginning of the LWOP. 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 starting with the beginning of the nonpay 
status; the employee is not entitled to 12 months of free coverage. 
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 institution of higher education, the 
employee may elect in writing to continue the life insurance for the 
length of the assignment, even if the LWOP lasts longer than 12 months. 
The employee must pay his or her premiums to the Federal agency on a 
current basis starting with the beginning of the nonpay status; the 
employee is not entitled to 12 months of free coverage. The agency must 
continue to pay its contribution as long as the employee makes his or 
her payments.

Subpart F--Termination and Conversion

    15. Sections 870.601, 870.602, and 870.603 are revised to read as 
follows:


Sec.  870.601  Termination of Basic insurance.

    (a) Except as otherwise provided in this section or Sec.  870.701 
of this part, the Basic insurance of an insured employee stops on the 
date the employee separates from service, subject to a 31-day extension 
of coverage. Exception: If the employee was employed by the Architect 
of the Capitol as a Senate Restaurants employee the day before the food 
services operations of the Senate Restaurants were transferred to a 
private business concern and the employee accepted employment by the 
business concern and elected to continue his or her Federal retirement 
benefits and FEGLI coverage, the employee continues to be eligible for 
FEGLI coverage as long as he or she remains employed by the business 
concern or its successor.
    (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 chapter and who postpones receiving the annuity, 
as provided by Sec.  842.204(c) of this chapter (an MRA+10 annuity), 
stops on the date he or 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 or she is excluded from life 
insurance stops on the last day of employment in the former position, 
subject to a 31-day extension of coverage. Exception: If the position 
is excluded by regulation (not by law), and the employee does not have 
a break in service of more than three days, the Basic insurance 
continues.
    (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 or she is entitled to begin the 12 months' 
continuation of Basic insurance again. If an employee has used up his 
or her 12 months' continuation in nonpay status and returns to duty for 
less than 4 consecutive months, his or her Basic insurance stops on the 
32nd day after the last day of the last pay period in pay status.

[[Page 69297]]

    (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)(i) For the purpose of paragraph (d)(1) of this section, an 
individual who is entitled to benefits under part 353 of this chapter 
(USERRA--Uniformed Services Employment and Reemployment Act of 1994), 
who separates to go on military duty instead of going into a nonpay 
status, is treated as an employee in nonpay status for life insurance 
purposes.
    (ii) Basic insurance continues free for 12 months or until 90 days 
after military service ends, whichever comes first.
    (iii) Effective January 28, 2008, an employee who enters on active 
duty, or active duty for training in one of the uniformed services for 
more than 30 days, may continue enrollment for an additional 12 months, 
for a total of up to 24 months.
    (A) Each agency must notify its employees of the opportunity to 
elect to continue coverage for the additional 12 months.
    (B) An employee wanting coverage for the additional 12 months must 
elect it prior to the end of the first 12 months in nonpay status, in a 
manner designated by the employing agency.
    (C) Insurance continues free for the first 12 months; however, an 
employee must pay both the employee and agency share of premiums to the 
agency on a current basis for Basic coverage, and must pay the entire 
cost (there is no agency share) for any Optional insurance for the 
additional 12 months of coverage elected.
    (D) For an employee who does not elect to continue coverage for an 
additional 12 months, coverage terminates at the end of the first 12 
months in nonpay status subject to the 31-day extension of coverage and 
conversion rights as provided in Sec.  870.603 of this part.
    (e) Except for employees, annuitants, and compensationers who elect 
direct payment as provided in Sec.  870.405 of this part, Basic 
insurance stops, subject to a 31-day extension of coverage, at the end 
of the pay period in which the employing office or retirement system 
determines that an individual's periodic pay, annuity, or compensation, 
after all other deductions, is not enough to cover the full cost of 
Basic insurance.


Sec.  870.602  Termination of Optional insurance.

    (a) The Optional insurance of an insured employee stops when his or 
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 chapter and who postpones receiving the 
annuity, as provided by Sec.  842.204(c) of this chapter (an MRA+10 
annuity), stops on the date he or she separates from service, subject 
to a 31-day extension of coverage. Exception: If the employee was 
employed by the Architect of the Capitol as a Senate Restaurants 
employee the day before the food services operations of the Senate 
Restaurants were transferred to a private business concern and the 
employee accepted employment with the business concern and elected to 
continue his or her Federal retirement benefits and FEGLI coverage, the 
employee continues to be eligible for FEGLI coverage as long as he or 
she remains employed by the business concern or its successor.
    (c)(1) If an insured employee is not 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 or her Basic 
insurance is continued or reinstated under 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 or 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 for employees, annuitants, and compensationers who elect 
direct payment 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 the employing office or retirement system determines that an 
individual's periodic pay, annuity, or compensation, after all other 
deductions, is not enough to cover the full cost of the Optional 
insurance. If an individual has more than one type of Optional 
insurance and his or her pay, annuity, or compensation is sufficient to 
cover some but not all of the insurance, the multiples of Option C 
terminate 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 or 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 or she does not 
return, within 3 calendar days from the terminating event, to a 
position covered under the group plan. Exception: If an employee is 
unable to convert, a person having power of attorney for that employee 
may convert on his or her behalf. 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. OFEGLI must receive the request for conversion 
within 31 calendar days of the date on the conversion notification the 
employee receives from the employing agency (60 days if overseas) or 
within 60 calendar days after the date of the terminating event (90 
days, if overseas), whichever is earlier.
    (4) If the employee does not request conversion information within 
the specified time period as described in paragraph (a)(3) of this 
section, the employee 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 or 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 or 
she was not notified of the loss of coverage and the right to convert 
and was not otherwise aware of it or that he or she was unable to 
convert to an individual policy for reasons beyond his or her control. 
OFEGLI will determine if the employee/assignee is eligible to convert. 
If the request is approved, the employee must convert within 31 
calendar days of that determination.
    (b) The individual conversion policy is effective the day after the 
group coverage ends. The employee/assignee

[[Page 69298]]

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.
    (d) Family members may convert Option C coverage (and name 
beneficiaries of their choice) if:
    (1) The employee dies; or
    (2) The insurance stops under circumstances that allow the employee 
to convert Option C coverage but the employee does not convert.
    (e) If an employee with Option C coverage dies, the employing 
office must send a conversion notice to the family members at the 
employee's last address on file.
    (f) Family members must submit the request for conversion 
information to OFEGLI. OFEGLI must receive the request for conversion 
within 31 calendar days of the date on the conversion notification the 
employee receives from his or her employing agency (60 days if 
overseas) or within 60 calendar days after the date of the terminating 
event (90 days, if overseas), whichever is earlier. There is no 
extension to these time limits. Family members are considered to have 
refused coverage if they do not request conversion within these time 
limits.
    (g) The family members' conversion policy is effective at the end 
of the employee's 31-day extension of coverage.

Subpart G--Annuitants and Compensationers

    16. Section 870.701(c) is revised to read as follows:


Sec.  870.701  Eligibility for life insurance.

* * * * *
    (c) An individual who meets the requirements of paragraph (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.  870.703.
* * * * *
    17. Section 870.702(b)(2) is revised to read as follows:


Sec.  870.702  Amount of Basic insurance.

* * * * *
    (b) * * *
    (2)(i) For an annuitant or compensationer who elected a partial 
Living Benefit as an employee, the amount of Basic insurance he or she 
can continue is the post-election BIA, as described in Sec.  
870.203(a)(2).
    (ii) If an employee elected a partial Living Benefit and that 
employee is under age 45 at the time of death, OFEGLI will multiply the 
post-election BIA by the appropriate factor, as specified in Sec.  
870.202(c), that was in effect on the date that is nine months after 
the date OFEGLI received the completed Living Benefit application.
    18. Section 870.703 is revised to read as follows:


Sec.  870.703  Election of Basic insurance.

    (a) An individual who makes an election under Sec.  870.701(c) and 
who has not elected a Living Benefit must select one of the options in 
paragraphs (a)(1) through (4) of this section. No one else can make 
this election on the individual's behalf.
    (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 does not 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 Sec.  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. There is no refund of premiums.
    (2) If an individual files a waiver of insurance, the coverage 
stops without a 31-day extension of coverage or conversion right. 
Coverage ceases at the end of the month in which OPM received 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. The employee 
cannot later change to the 75 percent reduction.
    (d) If an employee has assigned his or 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 or her insurance, the assignee(s) cannot cancel the 
election under paragraph (a)(4) of this section.
    (e)(1) For purposes of this part, a judge who retires under one of 
the following provisions is considered to be an employee after 
retirement:
    (i) 28 U.S.C. 371(a) or (b);
    (ii) 28 U.S.C. 372(a);
    (iii) 28 U.S.C. 377;
    (iv) 26 U.S.C. 7447;
    (v) 11 DC Code 776;
    (vi) Section 7447 of the Internal Revenue Code;
    (2) The insurance of a judge described in paragraph (e)(1) of this 
section does not reduce after age 65. Basic insurance continues without 
interruption or reduction. Exception: If the insured is a judge 
eligible for compensation, and chooses to receive compensation instead 
of annuity, he or she must select an option described in paragraph (a) 
of this section.
    19. Sections 870.704 and 870.705 are revised to read as follows:


Sec.  870.704  Amount of Option A.

    (a) The amount of Option A coverage an annuitant or compensationer 
can continue is $10,000.
    (b) An annuitant's or compensationer's Option A coverage

[[Page 69299]]

reduces by 2 percent of the original amount each 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 beginning of the 2nd month after the date of the insured's 65th 
birthday, whichever is later.
    (c) Paragraph (b) of this section does not apply to a judge who 
retires under one of the provisions listed in Sec.  870.703(e)(1). For 
purposes of this part, such a judge is considered to be an employee 
after retirement, and Option A insurance continues without interruption 
or reduction. Exception: If the judge is eligible for compensation and 
chooses to receive compensation instead of annuity, paragraph (b) of 
this section applies.


Sec.  870.705  Amount and election of Option B and Option C.

    (a) The number of multiples of Option B and Option C coverage an 
annuitant or compensationer can continue is the highest number of 
multiples in force during the applicable period of service required to 
continue Option B and Option C.
    (b)(1)(i) At the time an employee retires or becomes insured as a 
compensationer, he or she must elect the number of allowable multiples 
he or she wishes to continue during retirement or while receiving 
compensation.
    (ii) An employee who elects to continue fewer multiples than the 
number for which he or she is eligible is considered to have cancelled 
the multiples that are not continued.
    (iii) An employee separating for retirement and an employee 
becoming insured as a compensationer on or after April 24, 1999, must 
choose the level of post-age-65 reduction he or she wants. There are 
two choices: Full Reduction and No Reduction. The election may be made 
only by the employee and must be made in the manner that OPM 
designates. The employee may make different elections for Option B and 
for Option C. He or she may choose Full Reduction for some multiples of 
an Option and No Reduction for other multiples of the same Option. 
Failure to make an election for Option B or for Option C will be 
considered to be an election of Full Reduction for all multiples of 
that Option.
    (iv) For purposes of this part, a judge who retires under one of 
the provisions listed in Sec.  870.703(e)(1) is considered to be an 
employee after retirement. The insurance of such a judge does not 
reduce after age 65. Exception: If the judge is eligible for 
compensation and chooses to receive compensation instead of annuity, 
the post-65 reductions and elections apply.
    (2) Prior to reaching age 65, an annuitant or compensationer can 
change from No Reduction to Full Reduction at any time. Exception: If 
the individual has assigned his or her insurance as provided in subpart 
I of this part, only the assignee can change from No Reduction to Full 
Reduction for the Option B coverage.
    (3)(i) After reaching age 65, an annuitant or compensationer can 
change from No Reduction to Full Reduction at any time. Exception: If 
the individual has assigned his or her insurance as provided in subpart 
I of this part, only the assignee can change from No Reduction to Full 
Reduction for the Option B coverage. If an individual age 65 or over 
changes to Full Reduction, the amount of insurance in force is computed 
as if he or she had elected Full Reduction initially. There is no 
refund of premiums.
    (ii) After reaching age 65, an annuitant or compensationer cannot 
change from Full Reduction to No Reduction.
    (c)(1) For each multiple of Option B and/or Option C for which an 
individual elects Full Reduction, the coverage reduces by 2 percent of 
the original amount each month. This reduction starts at the beginning 
of the 2nd month after the date the insurance would otherwise have 
stopped or the beginning of the 2nd month after 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.
    (2) For each multiple of Option B and/or Option C for which an 
individual elects No Reduction, the coverage in force does not reduce. 
After age 65 the annuitant or compensationer continues to pay premiums 
appropriate to his or her age.
    (d)(1) An employee who was already retired or insured as a 
compensationer on April 24, 1999, and who had Option B, was given an 
opportunity to make an election for Option B.
    (i) Each such annuitant or compensationer who was under age 65 on 
April 24, 1999, was notified of the option to elect No Reduction. The 
retirement system will send the individual an election notice before 
his or her 65th birthday.
    (ii) Each such annuitant or compensationer who was age 65 or older 
on April 24, 1999, and who still had some Option B coverage remaining, 
was given the opportunity to stop further reductions. The individual 
had until October 24, 1999, to make the No Reduction election. The 
amount of Option B coverage retained was the amount in effect on April 
24, 1999. Each annuitant or compensationer who elected No Reduction was 
required to pay premiums retroactive to April 24, 1999.
    (2) An employee who was already retired or insured as a 
compensationer on April 24, 1999, could not elect No Reduction for 
Option C.
    20. Section 870.707 is revised to read as follows:


Sec.  870.707  Reemployed annuitants and compensationers.

    (a)(1) If an insured annuitant or compensationer is appointed to a 
position in which he or she is eligible for insurance, the amount of 
his or her Basic life insurance as a annuitant or compensationer (and 
any applicable withholdings) is suspended on the day before the 1st day 
in pay status under the appointment, unless the reemployed annuitant or 
compensationer waives all insurance coverage as an employee. The Basic 
insurance benefit payable upon the death of a reemployed annuitant or 
compensationer who has Basic insurance in force as an employee, cannot 
be less than the benefit that would have been payable if the individual 
had not 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 reemployment terminates. Any 
suspended Basic insurance (and any applicable 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 the individual:
    (1) Qualifies for a supplemental annuity or receives a new 
retirement right (or if a compensationer, he or she worked an amount of 
time equivalent to that required for an annuitant to qualify for a 
supplemental annuity);
    (2) 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 the individual, 
whichever is less; and
    (3) Does not 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

[[Page 69300]]

insurance stops, with no 31-day extension of coverage or conversion 
right.
    (d)(1) An annuitant or compensationer appointed to a position in 
which he or she is eligible for Basic insurance is also eligible for 
Optional insurance as an employee, unless he or 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 withholdings) is suspended on the day before 
his or her 1st day in pay status under the appointment. Unless he or 
she waives Option A or C (or waives Basic insurance), the individual 
obtains Option A or C as an employee.
    (3) If the individual has Option B as an annuitant or 
compensationer, that insurance (and applicable withholdings) continues 
as if the individual were not reemployed, unless:
    (i) The individual files with his/her employing office an election 
of Option B, in a manner designated by OPM, within 60 calendar days 
after the date of reemployment. In this case Option B (and applicable 
withholdings) as an annuitant or compensationer 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 or compensationer is the amount in effect as an annuitant or 
compensationer, unless the individual 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 of suspended Optional insurance that 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 (or if a compensationer, he or she worked an amount of 
time equivalent to that required for an annuitant to qualify for a 
supplemental annuity);
    (2) Continues Basic life insurance under paragraph (a)(2), (3), or 
(4) of Sec.  870.703; 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 or 
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 or compensationer waives life 
insurance as an employee, the waiver also cancels his or her life 
insurance as an annuitant or compensationer.

Subpart H--Order of Precedence and Designation of Beneficiary

    21. Section 870.801(a) and (d) are revised to read as follows:


Sec.  870.801  Order of precedence and payment of benefits.

    (a) Except as provided in paragraph (d) of this section and 
paragraph (g)(2) of Sec.  870.802, 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 or 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.
* * * * *
    (d)(1) If there is a court order in effect naming a specific person 
or persons to receive life insurance benefits upon the death of an 
insured individual, Basic insurance and Option A and Option B insurance 
will be paid to the person or persons named in the court order, instead 
of according to the order of precedence.
    (2) To qualify a person for such payment, a certified copy of the 
court order must be received by the appropriate office on or after July 
22, 1998, and before the death of the insured.
    (3)(i) For an employee, the appropriate office is the employing 
agency.
    (ii) For an annuitant, the appropriate office is OPM.
    (iii) For a compensationer during the first 12 months of nonpay 
status, the appropriate office is the employing agency.
    (iv) For a compensationer after separation or the completion of 12 
months in nonpay status, the appropriate office is OPM.
    (4) If, within the applicable time frames, the appropriate office 
receives conflicting court orders entitling different persons to the 
same insurance, benefits will be paid based on whichever court order 
was issued first.
* * * * *
    22. Section 870.802(b) and (g)(1) are revised to read as follows:


Sec.  870.802  Designation of beneficiary.

* * * * *
    (b) A designation of beneficiary must be in writing, signed by the 
insured individual, and witnessed and signed by 2 people. The completed 
designation of beneficiary form may be submitted to the appropriate 
office via appropriate methods approved by the employing office. The 
appropriate office must receive the designation before the death of the 
insured.
    (1) For an employee, the appropriate office is the employing 
office.
    (2) For an annuitant or compensationer, the appropriate office is 
OPM.
* * * * *
    (g)(1) A designation of beneficiary is automatically cancelled 31 
days after the individual stops being insured.
* * * * *

Subpart I--Assignments of Life Insurance

    23. Section 870.902 is revised to read as follows:


Sec.  870.902  Making an assignment.

    (a) To assign insurance, an insured individual must complete an 
approved assignment form. Only the insured individual may make an 
assignment; no one may assign insurance on behalf of an insured 
individual.
    (b) The assignment form must be in writing, signed by the insured 
individual, and witnessed and signed by 2 people. The completed 
assignment form, indicating the intent to irrevocably assign all 
ownership of the insurance, must be received by the appropriate office.
    (1) For an employee, the appropriate office is the employing 
office.
    (2) For an annuitant or compensationer, the appropriate office is 
OPM.
    24. Section 870.907(c) is revised to read as follows:


Sec.  870.907  Termination and conversion.

* * * * *

[[Page 69301]]

    (c) An assignment terminates 31 days after the insurance 
terminates, unless the insured individual is reemployed in or returns 
to a position in which he or she is entitled to coverage under this 
part within 31 days after the insurance terminates. If the individual 
returns to Federal service, Basic insurance and any Option A and/or 
Option B insurance acquired through returning to service is subject to 
the existing assignment.
    25. Section 870.910 is revised to read as follows:


Sec.  870.910  Notification of current addresses.

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

Subpart K--Living Benefits

    26. Section 870.1103 is revised to read as follows:


Sec.  870.1103  Election procedures.

    (a) The insured individual must request information on Living 
Benefits and an application form directly from OFEGLI.
    (b)(1) The insured individual must complete the first part of the 
application and have his or her physician complete the second part. The 
completed application must be submitted directly to OFEGLI.
    (2) Another person may apply for a Living Benefit on the insured 
individual's behalf if all of the following conditions are met:
    (i) The insured's physician must certify that the insured 
individual is physically or mentally incapable of making an election;
    (ii) The applicant must have power of attorney or a court order 
authorizing him or her to elect a Living Benefit on the insured 
individual's behalf;
    (iii) The applicant must place his or her own signature on the 
application and attach it to a true and correct copy of the power of 
attorney or court order authorizing the applicant to make the election 
on the insured individual's behalf; and
    (iv) The applicant must either be the insured individual's sole 
beneficiary or attach a true and correct copy of each beneficiary's 
written and signed consent.
    (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 or makes an electronic funds transfer to the insured's account 
for the Living Benefit payment and an explanation of benefits.
    (i) Until the check has been cashed or deposited, or before the 
electronic funds transfer has been received, the individual may change 
his or 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 cashed 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 may submit 
additional medical information or reapply at a later date if future 
circumstances warrant.

Subpart L--[Removed]

    27. Subpart L, consisting of Sec. Sec.  870.1201 through 807.1208, 
is removed and reserved.

[FR Doc. E9-31023 Filed 12-30-09; 8:45 am]
BILLING CODE 6325-39-P