[Federal Register Volume 87, Number 230 (Thursday, December 1, 2022)]
[Rules and Regulations]
[Pages 73652-73654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25426]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 8

RIN 2900-AR53


National Service Life Insurance--Veterans Affairs Life Insurance 
(VALife) Program

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: The Department of Veterans Affairs (VA) is amending its 
regulations that govern National Service Life Insurance (NSLI), among 
other things, to accomplish the following: implement provisions 
contained in legislation that authorized a new program of insurance; 
clarify which individuals are eligible to take actions on an insurance 
policy; explain various provisions regarding coverage and benefits 
under the new insurance program; and state which individuals are 
ineligible to benefit from the unlawful and wrongful killing of a 
veteran policyholder.

DATES: This final rule is effective January 3, 2023.

FOR FURTHER INFORMATION CONTACT: Paul Weaver, Insurance Specialist, 
Department of Veterans Affairs Insurance Service (310/290B), 5000 
Wissahickon Avenue, Philadelphia, PA 19144, (215) 842-2000, ext. 4263. 
(This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: On July 14, 2022, VA published a proposed 
rulemaking in the Federal Register pertaining to the implementation of 
a new program of life insurance that will begin issuing policies on 
January 1, 2023. (87 FR 42118). VA provided the public with a 60-day 
comment period which closed on September 12, 2022. VA did not receive 
any comments from the public. Based on the rationale set forth in the 
Federal Register, VA adopts the proposed rule, without change, as a 
final rule.

Executive Orders 12866 and 13563

    Executive Orders (E.O.) 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). E.O. 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 
final rule is not a significant regulatory action under E.O. 12866. The 
Regulatory Impact Analysis associated with this rulemaking can be found 
as a supporting document at www.regulations.gov.

Regulatory Flexibility Act

    The Secretary hereby certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601-
612). This final rule would generally be small business neutral as it 
implements statutory provisions that only allow the United States to 
issue life insurance coverage to veterans with service-connected 
disabilities. 38 U.S.C. 1922B(a)(1) (``[T]he Secretary shall carry out 
a service-disabled veterans insurance program under which a veteran is 
granted insurance by the United States against the death of such 
individual occurring while such insurance is in force.''). Although 
there are statutes in 38 U.S.C. 1901-1988 that allow VA to purchase a 
large group life insurance policy from a private commercial insurer, 
those statutory authorities only apply to the Servicemembers' Group 
Life Insurance Program, which provides life insurance coverage to 
Service members and their dependents and former Service members, and 
they do not provide VA with the authority to purchase a group life 
insurance policy from a private insurer for purposes of providing 
VALife coverage. As such, the overall impact of this final rule would 
be of no benefit or detriment to small businesses, because these 
insurance policies would only be issued by the United States to 
veterans with service-connected disabilities. 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.

Paperwork Reduction Act

    This final rule includes provisions constituting new collections 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. OMB has reviewed 
and approved the new collections of information and assigned OMB 
Control Numbers 2900-0906 and 2900-0918.

[[Page 73653]]

When VA published the notice of proposed rulemaking in the Federal 
Register, we identified a third form that we proposed to utilize to 
collect information from the public to permit an individual to confirm 
their surrender of any current SDVI coverage at the time they apply for 
VALife. However, we have incorporated this collection of information 
into the form that will also be used by VA to reinstate a VALife policy 
or to complete a insured's request to surrender coverage under VALife 
and is assigned OMB Control Number 2900-0918.

Assistance Listing

    The Assistance Listing number and title for the program affected by 
this document is 64.103, Life Insurance for Veterans.

Congressional Review Act

    Pursuant to 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).

List of Subjects in 38 CFR Part 8

    Life insurance, Veterans.

Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, approved this 
document on November 16, 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.

Jeffrey M. Martin,
Assistant Director, 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 8 as set forth below:

PART 8--NATIONAL SERVICE LIFE INSURANCE

0
1. The authority citation for part 8 continues to read as follows:

    Authority:  38 U.S.C. 501, 1901-1929, 1981-1988.


0
2. Amend Sec.  8.0 by:
0
a. Revising paragraph (e); and
0
b. Adding paragraphs (f), (g), and (h).
    The revision and additions read as follows:


Sec.  8.0   Definitions of terms used in connection with title 38 CFR, 
part 8, National Service Life Insurance.

* * * * *
    (e) What does the term ``guardian'' mean? The term guardian means 
any state-appointed guardian or conservator, attorney-in-fact, or VA-
appointed fiduciary, as defined in Sec.  13.20, who is responsible for 
receiving VA benefits in a fiduciary capacity on behalf of the insured 
or the beneficiary, or to take the actions listed in Sec.  8.32.
    Note 1 to paragraph (e): If a VA-appointed fiduciary and either a 
state-appointed guardian/conservator or attorney-in-fact are not the 
same individual and both attempt to take conflicting actions on an 
incompetent insured's policy, the VA-appointed fiduciary shall have the 
exclusive authority to take actions on the policy.
    (f) What does the term ``Veterans' Affairs Life Insurance 
(VALife)'' mean? The term Veterans' Affairs Life Insurance, or VALife 
in its abbreviated form, means a policy of insurance that is issued 
under section 1922B of title 38 U.S.C.
    (g) What does the term ``application for VALife'' mean? The term 
application for VALife means a properly completed application form 
submitted online or through another medium prescribed by the Secretary.
    (h) What does the term ``beneficiary'' mean? The term 
``beneficiary'' means a principal or contingent beneficiary designated 
by the insured.

0
3. Amend Sec.  8.1 by:
0
a. Revising the section heading and paragraph (a);
0
b. In paragraph (b), adding Note 3;
0
c. In paragraph (c) introductory text, removing the word ``Yes,'' and 
adding in its place ``For insurance other than VALife,''.
    The revision and addition read as follows:


Sec.  8.1   Effective date for an insurance policy issued under section 
1922(a) or 1922B of title 38 U.S.C.

    (a) What is the effective date of the policy? The effective date is 
the date policy coverage begins. Benefits due under a policy issued 
under section 1922(a) are payable any time after the effective date. 
Benefits due under a policy issued under section 1922B are payable any 
time two years after the effective date.
    (b) * * *
    Note 3 to paragraph (b):If you apply for insurance coverage through 
an electronic medium, the date of delivery of the premium payment will 
be the date you authorize payment of the initial premium. In cases 
where the authorization does not result in the required premium payment 
because there were insufficient funds to cover the full initial 
premium, the delivery date of the premium payment will be the date your 
full initial premium is received by VA.
* * * * *

0
4. Amend Sec.  8.2 by adding paragraph (e) to read as follows:


Sec.  8.2   Payment of premiums.

* * * * *
    (e) What happens if a policyholder enrolled in VALife dies, 
surrenders or cancels coverage during the two-year enrollment period? 
If a policyholder enrolls in VALife for an amount less than the 
statutory maximum and elects to apply for additional coverage at a 
later date and dies before completing the two-year waiting period for 
the additional VALife coverage amount, the beneficiary shall be 
refunded premiums that were paid for the additional VALife coverage, 
plus interest, in accordance with 38 U.S.C. 1922B(c)(3)(A). If a 
policyholder surrenders or cancels a VALife policy during the two-year 
waiting period imposed by 38 U.S.C. 1922B(c)(2) before coverage is in 
force, the United States shall not return to the policyholder the 
premiums that were paid to purchase the coverage.

0
5. Revise Sec.  8.6 to read as follows:


Sec.  8.6   Calculation of Time Period; Veteran's Age.

    (a) If the last day of a time period specified in Sec.  8.2 or 
Sec.  8.3, or the last day allowed for filing an application for 
National Service Life Insurance or for applying for reinstatement 
thereof, or paying premiums due thereon, falls on a Saturday, Sunday, 
or legal holiday, the time period will be extended to include the 
following workday.
    (b) For VALife, the premium will be determined using the age of the 
veteran at his or her nearest birthday on the effective date of the 
policy.
    (c) For purposes of determining a veteran's eligibility for VALife 
under 38 U.S.C. 1922B(a)(3)(A), the age of the veteran at his or her 
last birthday prior to the date of application will be used.
    (d) For purposes of determining a veteran's eligibility for VALife 
under 38 U.S.C. 1922B(a)(3)(B), with respect to a veteran who has 
attained 81 years of age, an initial grant of service connection for a 
new or secondary condition for which the veteran applied for disability 
compensation before attaining 81 years of age will satisfy the 
eligibility criteria; however, VA will not grant insurance to such a 
veteran based on an increase in an existing disability rating, a grant 
of individual unemployability under 38 CFR 4.18, or a finding of 
incompetency under 38 CFR 3.353. VA will not issue a VALife policy to a 
veteran over age 95.

0
6. Amend Sec.  8.7 by:

[[Page 73654]]

0
a. Revising the section heading;
0
b. In paragraph (a), in the first sentence, removing the phrase ``Any 
policy'' and adding, in its place, the phrase ``Subject to paragraph 
(e), any policy''; and
0
c. Adding paragraph (e).
    The revision and addition read as follows:


Sec.  8.7   Reinstatement.

* * * * *
    (e) Coverage issued under VALife that lapses for non-payment of 
premiums may only be reinstated if the former policyholder submits all 
premiums in arrears from their respective due dates, plus interest, to 
reinstate the coverage within two years of the date of the lapse and 
has not yet reached age 81.

    (The Office of Management and Budget has approved the 
information collection provisions in this section under control 
number 2900-0918.)


0
7. Amend Sec.  8.10 by revising paragraph (a)(3) to read as follows:


Sec.  8.10  How paid.

    (a) * * *
    (3) Issued under sections 1904(c), 1922(a), and 1922B of title 38 
U.S.C.
* * * * *

0
8. Amend Sec.  8.11 by:
0
a. Revising the section heading;
0
b. In paragraph (a), adding a sentence at the end of the paragraph:
0
c. In paragraph (b), removing ``Upon'' and adding, in its place, ``For 
insurance other than VALife, upon''; and
0
d. Adding paragraphs (j) and (k).
    The revision and additions read as follows:


Sec.  8.11  Cash value.

    (a) * * * This paragraph shall not apply to VALife.
* * * * *
    (j) Cash values that accrue for VALife will be developed using a 
multiple of the 1941 Commissioners Standard Ordinary Mortality Table 
and an interest rate of 3.5 percent per annum. Cash values will not 
accrue and will not be payable until the completion of the two-year 
waiting period imposed by 38 U.S.C. 1922B(c)(2). If a VALife policy 
lapses or is surrendered before completion of the two-year waiting 
period, then any amounts that VA has collected, such as premium 
payments, shall be returned to the credit of the VALife revolving fund 
that is established under 38 U.S.C. 1922B(a)(5)(A)(i). If a veteran 
enrolls in VALife for an amount less than the statutory maximum and 
elects to apply for additional coverage at a later date, the cash value 
on the additional amount of coverage would not begin accruing until the 
end of the two-year waiting period for the additional coverage.
    (k) The United States will pay the cash value, in full or in part, 
of any VALife policy, subject to the limitations in Sec.  8.11(j), to 
insureds upon request through electronic medium or other method 
prescribed by the Secretary. Unless otherwise requested by the insured, 
a surrender will be deemed effective as of the end of the premium month 
in which the application for cash surrender is delivered to the 
Department of Veterans Affairs, or as of the date of payment for the 
cash value, whichever is later.

    (The Office of Management and Budget has approved the 
information collection provisions in this section under control 
number 2900-0918.)
* * * * *

0
9. Amend Sec.  8.13 by adding paragraph (e) to read as follows:


Sec.  8.13  Policy loans.

* * * * *
    (e) For VALife, the United States shall only issue policy loans if 
the Secretary determines that offering loans is administratively and 
actuarially sound.

0
10. Amend Sec.  8.14 by adding paragraph (d) to read as follows:


Sec.  8.14  Provision for extended term insurance--other than 5-year 
level premium term or limited convertible 5-year level premium term 
policies.

* * * * *
    (d) VALife shall not be extended automatically as term insurance 
until the insured has paid the required premiums during the two-year 
waiting period that is imposed by 38 U.S.C. 1922B(c)(2) before VALife 
coverage is in force.

0
11. Amend Sec.  8.15 by designating the text as paragraph (a) and 
adding paragraph (b) to read as follows:


Sec.  8.15  Provision for paid-up insurance; other than 5-year level 
premium term or limited convertible 5-year level premium term policies.

* * * * *
    (b) The United States shall not issue paid-up insurance under 
VALife until the insured has paid premiums during the two-year waiting 
period imposed by 38 U.S.C. 1922B(c)(2) before VALife coverage is in 
force.

0
12. Amend Sec.  8.19 by designating the text as paragraph (a) and 
adding paragraph (b) to read as follows:


Sec.  8.19  Beneficiary and optional settlement changes.

* * * * *
    (b) If a beneficiary has been determined to have intentionally and 
wrongfully killed the insured, the provisions found in 38 CFR 9.5(e) 
shall be followed.

0
13. Add Sec.  8.35 to read as follows:


Sec.  8.35  Eligibility for those insured under 38 U.S.C. 1922(a) to 
purchase insurance under 38 U.S.C. 1922B after December 31, 2025.

    An insured under a Legacy Service Disabled Veterans' Insurance 
policy shall be eligible to purchase VALife coverage after December 31, 
2025, upon cancellation of his or her Legacy Service Disabled Veterans' 
Insurance policy and surrender of any cash value that his or her 
coverage has accrued in accordance with 38 CFR 8.11. The policyholder 
must also submit a statement in a form that is prescribed by the 
Secretary, which clearly indicates that the policyholder desires to 
terminate his or her existing life insurance coverage in order to apply 
for VALife and initiate the two-year waiting period imposed by 38 
U.S.C. 1922B(c)(2) before such VALife coverage is in force.

(Authority: 38 U.S.C. 501, 1901-1929, 1981-1988)


    (The Office of Management and Budget has approved the 
information collection provisions in this section under control 
number 2900-0906.)


0
14. Add Sec.  8.36 to read as follows:


Sec.  8.36  Issuance of coverage under section 1922B of title 38 U.S.C. 
following additional elections.

    An insured who elects less than the maximum amount of VALife 
coverage under 38 U.S.C. 1922B(a)(4)(A) shall remain eligible to 
purchase additional VALife coverage up to the VALife statutory maximum. 
Any insured who elects to apply for additional VALife coverage shall be 
subject to the two-year waiting period imposed by 38 U.S.C. 1922B(c)(2) 
before such additional VALife coverage is in force.

(Authority: 38 U.S.C. 501, 1901-1929, 1981-1988)


    (The Office of Management and Budget has approved the 
information collection provisions in this section under control 
number 2900-0906.)

[FR Doc. 2022-25426 Filed 11-30-22; 8:45 am]
BILLING CODE 8320-01-P