[Federal Register Volume 87, Number 94 (Monday, May 16, 2022)]
[Rules and Regulations]
[Pages 29671-29673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10388]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 13

RIN 2900-AR11


Fiduciary Bond

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: The Department of Veterans Affairs (VA) amends its regulations 
that govern fiduciary activities. More specifically, the amendments 
revise specific procedures to exempt a VA-appointed fiduciary who is 
also serving as a court-appointed fiduciary from posting multiple bonds 
and to also exempt a VA-appointed fiduciary that is also a State agency 
with existing, State-mandated liability insurance or a blanket bond 
from having to obtain an additional bond payable to the Secretary of 
Veterans Affairs (Secretary).

DATES: This rule is effective June 15, 2022.

FOR FURTHER INFORMATION CONTACT: Kevin Baresich, Program Analyst, 
Pension and Fiduciary Service (21PF), Veterans Benefits Administration, 
Department of Veterans Affairs, 810 Vermont Avenue NW, Washington, DC 
20420, (202) 632-8863. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: In a document published in the Federal

[[Page 29672]]

Register on September 29, 2021, at 86 FR 53913, VA proposed to amend 
its fiduciary activity regulations by providing an exception to certain 
eligibility requirements to exempt a VA-appointed fiduciary who is also 
a court-appointed fiduciary, or a State agency with existing State-
mandated liability insurance or a blanket bond from obtaining a 
separate surety bond payable to the Secretary. The 60-day public 
comment period ended on November 29, 2021. VA received comments from 
two individuals.
    The first commenter was fully supportive of the proposed rule. The 
other commenter was not in support of the proposed rule. Neither 
commenter recommended revisions to the proposed rule. However, the 
second commenter expressed general concerns with the purpose of the 
rulemaking. The commenter opposed the exemption of a VA bond 
requirement, even if redundant, to protect a VA beneficiary's funds. 
The commenter was not persuaded that a bond made payable to the 
Secretary is unnecessary when VA funds under management are also 
protected by bonds ordered by a court, State-mandated liability 
insurance, or a blanket bond. The commenter believed that a VA-specific 
bond provides an additional layer of protection and safeguards the 
funds of a vulnerable VA beneficiary. However, the commenter did not 
explain how removing redundant coverage would increase risk to 
beneficiaries. We do not agree that our proposed regulation would 
disadvantage a VA beneficiary or limit any protections provided and 
make no changes based upon this comment.
    In 2018, VA amended its fiduciary program regulations. 83 FR 32716 
(July 13, 2018). VA promulgated new regulations meant to establish a 
national standard for the appointment and supervision of VA 
fiduciaries. Specifically, VA implemented a requirement that certain 
potential VA fiduciaries obtain a surety bond payable to the Secretary 
to ensure that VA would be able to recoup misused funds from a surety 
company as opposed to initiating collections against a fiduciary. 38 
CFR 13.230(d). However, as explained in the proposed rule, we recognize 
that the purpose for which this requirement was imposed would be 
defeated in instances where a court-appointed fiduciary or State-agency 
already had a bond in place. We noted that in these instances, the bond 
typically would be payable to the state where the court is located, and 
for this reason VA would be unable to make a direct claim against that 
bond. This circumstance highlighted a potential problem with VA's 
practice of requiring multiple bonds, that if a surety company already 
paid out on a misused-benefits claim under a state-court bond, another 
surety company would not pay out on a VA bond for the same misconduct. 
Therefore, a second bond would not satisfy its intended purpose. 
Further, it would not make sense to burden a VA beneficiary with paying 
a second bond premium where there already is adequate protection in 
place. Indeed, to do so would be contrary to VA's core mission to 
ensure that a VA beneficiary's benefits are managed in their best 
interest. A VA beneficiary would not be financially disadvantaged by 
the removal of a duplicative bond requirement because VA is now 
required to reimburse a beneficiary of any misused funds. 38 U.S.C. 
6107.
    Finally, the same commenter stated that if a fiduciary breaches his 
or her duties as a fiduciary, that individual should be held 
accountable by both the State and VA.
    The amendments under this rule do not waive VA's obligation under 
the law to hold a fiduciary who has misused VA benefits accountable for 
such misuse. 38 CFR 13.400, 13.500.
    VA adopts the rule as proposed without change.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
The Office of Information and Regulatory Affairs has determined that 
this rule is not a significant regulatory action under Executive Order 
12866. The Regulatory Impact Analysis associated with this rulemaking 
can be found as a supporting document at www.regulations.gov.

Paperwork Reduction Act

    This final rule includes provisions constituting a revised 
collection of information under the Paperwork Reduction Act of 1995 (44 
U.S.C. 3501-3521) that require approval by the Office of Management and 
Budget (OMB). Accordingly, under 44 U.S.C. 3507(d), VA has submitted a 
copy of this rulemaking action to OMB for review and approval.

Regulatory Flexibility Act

    The Secretary certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
612. This regulation has the potential to impact all 2,350 small 
entities within the North American Industry Classification System Code 
524126 (casualty and bonding companies). There is a projected loss of 
revenue of $66,989 per firm which yields a 0.16% revenue loss to each 
entity. Based on this analysis, the Secretary certifies that the 
adoption of this final rule will not have a significant economic impact 
on a substantial number of small entities as they are defined in the 
Regulatory Flexibility Act. Therefore, pursuant to 5 U.S.C. 605(b), the 
initial and final regulatory flexibility analysis requirements of 5 
U.S.C. 603 and 604 do not apply.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This final rule would have no such effect 
on State, local, and tribal governments, or on the private sector.

Assistance Listing

    The Assistance Listing program number and title for programs 
affected by this rule are as follows: 64.104, Pension for Non-Service-
Connected Disability for Veterans; 64.105, Pension to Veterans 
Surviving Spouses, and Children; 64.109, Veterans Compensation for 
Service-Connected Disability; and 64.110, Veterans Dependency and 
Indemnity Compensation for Service-Connected Death.

Congressional Review Act

    Pursuant to Subtitle E of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (known as the Congressional Review Act) (5 U.S.C. 
801 et seq.), the Office of Information and Regulatory Affairs 
designated this rule as not a major rule, as defined by 5 U.S.C. 
804(2).

[[Page 29673]]

List of Subjects in 38 CFR Part 13

    Surety bonds, Trusts and trustees, and Veterans.

Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, approved this 
document on May 5, 2022, and authorized the undersigned to sign and 
submit the document to the Office of the Federal Register for 
publication electronically as an official document of the Department of 
Veterans Affairs.

Luvenia Potts,
Regulations Development Coordinator, Office of Regulation Policy & 
Management, Office of General Counsel, Department of Veterans Affairs.

    For the reasons stated in the preamble, the Department of Veterans 
Affairs amends 38 CFR part 13 as set forth below:

PART 13--FIDUCIARY ACTIVITIES

0
1. The authority citation for part 13 continues to read as follows:

    Authority:  38 U.S.C. 501, 5502, 5506-5510, 6101, 6106-6108, and 
as noted in specific sections.
    Source: 83 FR 32738, July 13, 2018, unless otherwise noted.

0
2. Amend Sec.  13.230 by revising paragraph (c)(1) to read as follows:


Sec.  13.230   Protection of beneficiary funds.

* * * * *
    (c) * * *. (1) The provisions of paragraphs (a) and (b) of this 
section do not apply to:
    (i) A fiduciary that is a trust company or a bank with trust powers 
organized under the laws of the United States or a state;
    (ii) A fiduciary who is the beneficiary's spouse;
    (iii) A fiduciary in the Commonwealth of Puerto Rico, Guam, or 
another territory of the United States, or in the Republic of the 
Philippines, who has entered into a restricted withdrawal agreement in 
lieu of a surety bond;
    (iv) A fiduciary that is also appointed by a court and has obtained 
a state-court bond, as referenced in 38 CFR 14.709, sufficient to cover 
both VA and non-VA funds; or
    (v) A fiduciary that is also a state agency with existing, state-
mandated liability insurance or a blanket bond sufficient to cover both 
VA and non-VA funds.
* * * * *
[FR Doc. 2022-10388 Filed 5-13-22; 8:45 am]
BILLING CODE 8320-01-P