Proposed Rule2021-21177
Fiduciary Bond
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 29, 2021
Issuing agencies
Veterans Affairs Department
Abstract
The Department of Veterans Affairs (VA) proposes to amend its regulations that govern fiduciary activities. More specifically, the proposed amendments would 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.
Full Text
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<title>Federal Register, Volume 86 Issue 186 (Wednesday, September 29, 2021)</title>
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[Federal Register Volume 86, Number 186 (Wednesday, September 29, 2021)]
[Proposed Rules]
[Pages 53913-53915]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21177]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 13
RIN 2900-AR11
Fiduciary Bond
AGENCY: Department of Veterans Affairs.
ACTION: Proposed rule.
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SUMMARY: The Department of Veterans Affairs (VA) proposes to amend its
regulations that govern fiduciary activities. More specifically, the
proposed amendments would 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.
DATES: Comments must be received by VA on or before November 29, 2021.
ADDRESSES: Comments may be submitted through <a href="http://www.Regulations.gov">www.Regulations.gov</a>.
Comments should indicate that they are submitted in response to RIN
2900-AR11_Fiduciary Bond. Comments received will be available at
www.regulations.gov for public viewing, inspection or copies.
FOR FURTHER INFORMATION CONTACT: David Klusman, Lead Program Analyst,
Pension and Fiduciary Service (21PF), Veterans Benefits Administration,
Department of Veterans Affairs, 810 Vermont Ave. NW, Washington, DC
20420; (202) 632-8863. (This is not a toll-free number).
SUPPLEMENTARY INFORMATION: VA administers a fiduciary program for
beneficiaries who, as a result of injury, disease, the infirmities of
advanced age, or being less than 18 years of age, cannot manage their
own VA benefits. Under this program, VA oversees these vulnerable
beneficiaries, and appoints and oversees fiduciaries who manage these
beneficiaries' benefits. VA's current statutory authority for this
program is in 38 U.S.C. chapters 55 and 61.
VA is authorized to issue payments to and supervise fiduciaries
acting on behalf of beneficiaries under 38 U.S.C. 5502. In 2004,
Congress amended 38 U.S.C. chapters 55 and 61 to add new provisions
which, among other things, authorize VA to conduct specific
investigations regarding the fitness of individuals to serve as
fiduciaries and reissue certain benefits misused by fiduciaries. In
relevant part, the law provides that any certification of a person as a
fiduciary shall be made on the basis of ``the furnishing of any bond
that may be required by the Secretary.'' 38 U.S.C. 5507(a)(3). On its
face, this statutory language provides VA with authority to decide
whether to require a bond.
Under certain circumstances, if a fiduciary misuses benefits, the
law requires that the Secretary pay the beneficiary an amount equal to
the amount of benefits that were misused. 38 U.S.C. 6107. In 2018, VA
amended its fiduciary program regulations to implement current law.
Fiduciary Activities, 83 FR 32716 (July 13, 2018).
As stated above, in some cases, fiduciaries are required to obtain
a surety bond in order to protect the beneficiaries' benefits. However,
there is conflicting information in VA regulations pertaining to bond
requirements for fiduciaries. Specifically, 38 CFR 14.709 provides that
VA's general policy is to require a surety bond that follows State laws
and court rules from a court-appointed individual fiduciary. Further,
the regulation indicates approved alternative methods to a corporate
surety bond and authorizes the acceptance of a lesser degree of
protection of funds under certain circumstances. However, 38 CFR
13.230, which was promulgated in 2018 when VA amended its fiduciary
program regulations, requires that any bond furnished by a fiduciary
``[c]ontain a statement that the bond is payable to the Secretary of
Veterans Affairs.'' 38 CFR 13.230(d)(3)(ii). VA's final rule that
amended 38 CFR part 13 went into effect on August 13, 2018. 83 FR
32716. When it was promulgated, VA explicitly stated that ``[w]e intend
to issue uniform rules for all VA-appointed fiduciaries, such as
allowable fees, surety bond requirements and appropriate investments,
to include fiduciaries who also serve as court-appointed guardians for
beneficiaries.'' Id. at 32727. The rule noted that ``VA's fiduciary
regulations will result in a gradual discontinuance of the current
practice of recognizing a court-appointed guardian or fiduciary for
purposes of receiving VA benefits on behalf of a VA beneficiary'' and
that, ``VA will establish a national standard for appointing and
overseeing fiduciaries.'' Id. at 32735. VA noted in the final rule
that, ``[b]ased on our experience in administering the program, the
risks of not requiring all fiduciaries, with the [general] exception of
spouses, to furnish a surety bond significantly outweigh any burden on
a prospective fiduciary.'' Id. at 32727. VA set forth a number of
factors that weigh in favor of requiring a bond: (1) It serves as a
screening tool for VA to use in confirming qualification for
appointment--in other words, if a fiduciary cannot obtain a bond
because the bonding company considers the risk of fund exploitation too
high, VA will not appoint the prospective fiduciary; (2) it is
consistent with VA's oversight obligations, which include deterring
fiduciary misuse of benefits; and (3) it puts a fiduciary on notice
that he or she is liable to a third party for any payment on the bond.
Id. With the 2018 amendment, VA also promulgated additional bond
requirements under Sec. 13.230(d) in order to protect a beneficiary's
interests if a fiduciary misuses funds, including a requirement that
the bond be payable to the Secretary. More recently, in January 2021,
Congress enacted Public Law 116-315, which amended 38 U.S.C. 6107(b),
to require VA to reissue misused funds to all beneficiaries, regardless
of whether VA negligence was involved.
Under current Sec. 13.410(c), VA must attempt to recoup any
misused benefits, either from the surety company or, if no bond is in
place, from the fiduciary directly. VA then must reissue any recouped
benefits to the beneficiary's fiduciary successor to the extent they
[[Page 53914]]
were not already reissued. Under Sec. 13.230(g), bond expenses may be
deducted from the beneficiary's account so that the fiduciary does not
have to pay for them out of pocket. Although this cuts into the amount
of benefits the beneficiary ultimately receives, VA noted that this
provision is ``consistent with the protection of funds in guardianships
under state and uniform laws.'' 79 FR 430, 442 (Jan. 3, 2014). While it
seems redundant for VA to require a separate bond from a VA-appointed
fiduciary who also is serving as a court-appointed fiduciary, VA
instituted uniform surety bond requirements as an additional safeguard
to ``protect the beneficiary's funds.'' 83 FR 32727. In theory,
requiring that a VA-appointed fiduciary obtain a bond that is payable
to the Secretary ensures that VA will be able to recoup any misused
funds from the surety company rather than having to initiate a
collections action against an individual fiduciary. Moreover, in
instances where a court-appointed fiduciary already has a bond in
place, the bond typically would be payable to the state where the court
is located, so VA could not make a direct claim against that bond. If
the state-court bond were enough to cover the misused VA benefits, the
state would be able to make a claim against the bond to make the
beneficiary whole. Thus, at least in some cases, a state-court bond
would provide adequate protection for the beneficiary. We note,
however, that, in the event that VA reissues benefits and the
beneficiary later receives funds recovered from the state-court bond,
it is not apparent that VA would have any basis to recoup the excess
funds paid to the beneficiary, even though it would amount to double
recovery on the part of the beneficiary. A potential problem with VA's
practice of requiring multiple bonds is 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 the VA bond for the same
misconduct. That would therefore defeat the purpose of requiring a
second bond made payable to the Secretary. If the purpose of the second
bond is to ensure that the beneficiary is made whole in the event of
misuse, it does not make sense to burden the beneficiary with paying
for a second bond where there already is adequate protection in place.
As a result, VA proposes to amend Sec. 13.230 of its part 13
regulations as described below.
13.230 Protection of Beneficiary Funds
VA proposes to amend 38 CFR 13.230 to exempt a VA-appointed
fiduciary who is also serving as a court-appointed fiduciary with a
bond sufficient to protect both VA and non-VA funds from posting
multiple bonds and to 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. The proposed amendment is within VA's
general rulemaking authority under 38 U.S.C. 501(a) and implements VA's
authority under 38 U.S.C. 6107. The proposed amendment would eliminate
duplicative fees from being charged against a VA beneficiary's funds
for an additional, unnecessary bond. Additionally, VA beneficiaries who
are victims of misuse of their benefits by their VA fiduciaries would
not experience undue delay in the reissuance of their misused benefits.
Further, the bond requirement in 38 U.S.C. 5507(a)(3) gives VA
discretion to determine whether to require a bond.
Under current rules, 38 CFR 13.230, does not include an exception
to the bond requirement for court-appointed fiduciaries. Further, Sec.
13.230 specifically requires that any bond furnished by the fiduciary
``[c]ontain a statement that the bond is payable to the Secretary of
Veterans Affairs.''
VA proposes to amend Sec. 13.230 to add an exception for posting
an additional bond for an individual serving as a court-appointed
fiduciary, where a bond is in place under State law and court rules and
is sufficient to protect both VA and non-VA funds and to add another
exception for a VA-appointed fiduciary that is also a State agency with
existing, State-mandated liability insurance or a blanket bond to not
have to obtain an additional bond payable to the Secretary of Veterans
Affairs. This amendment is authorized by VA's general rulemaking
authority in 38 U.S.C. 501, and by the discretion conferred by 38
U.S.C. 5507(a)(3).
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
The Paperwork Reduction Act of 1995 (at 44 U.S.C. 3507) requires
that VA consider the impact of paperwork and other information
collection burdens imposed on the public. Under 44 U.S.C. 3507(a), an
agency may not collect or sponsor the collection of information, nor
may it impose an information collection requirement unless it displays
a currently valid OMB control number. See also 5 CFR 1320.8(b)(3)(vi).
The information collection requirement in Sec. 13.230 is currently
approved by OMB and has been assigned OMB control number 2900-0804. The
proposed rule includes provisions involving a revised collection of
information under the Paperwork Reduction Act of 1995 that will require
approval by OMB. The proposed rule would not involve a substantive or
material modification of the approved collection.
Title: Protection of beneficiary funds.
Type of Information Collection: Modification of a currently
approved information collection.
OMB Number: 2900-0804.
Summary of collection of information: The amendment to the
collection of information in proposed Sec. 13.230(c)(1) would
eliminate the requirement for a VA-appointed fiduciary who is also
serving as a court-appointed fiduciary to post multiple bonds and would
also eliminate the requirement for a VA-appointed fiduciary that is
also a State agency with existing, State-mandated liability insurance
or a blanket bond to obtain an additional bond payable to the Secretary
of Veterans Affairs. The proposed amendment to Sec. 13.230(c)(1) would
decrease the estimated annual number of respondents and consequently
reduce the estimated total annual reporting and recordkeeping burden.
The estimated annual burden for the revised collection of
information would be determined as follows:
Description of need for information and proposed use of
information: There would be no change in the need for information nor
the proposed use of information collected for OMB-approved Control
Number 2900-0804. The information is needed to facilitate VA's
oversight regarding the funds under management protection
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requirements prescribed in proposed Sec. 13.230.
Description of likely respondents: Certain fiduciaries appointed by
VA who manage VA benefit funds in excess of $25,000. As stated, the
proposed rule would exempt a VA-appointed fiduciary who is also serving
as a court-appointed fiduciary from posting multiple bonds and would
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. This change would reduce the number of respondents.
Estimated number of respondents per year: 9,634 annually.
Estimated frequency of responses per year: Once per year.
Estimated number of responses per year: 9,634 annually.
Estimated average burden per response: The estimated average burden
per response for OMB-approved Control Number 2900-0804 has not changed
and remains at 1 minute.
Estimated total annual reporting and recordkeeping burden: 161
hours.
Estimated total annual respondent burden cost: $4,358.
VA estimates that the proposed rule would reduce the number of
respondents in 2021 by 366 (from 10,000 to 9,634); however, it would
increase the current annual respondent burden costs from $4,008 to
$4,358, resulting in an estimated information collection burden costs
increase of $350 (161 burden hours x $27.07 per hour). The Bureau of
Labor Statistics (BLS) gathers information on full-time wage and salary
workers. According to the latest available BLS data, the mean hourly
wage is $27.07 based on the BLS wage code--``00-0000 All Occupations.''
This information was taken from the following website: <a href="https://www.bls.gov/oes/current/oes_nat.htm">https://www.bls.gov/oes/current/oes_nat.htm</a>.
Regulatory Flexibility Act
The Secretary certifies that this proposed rule would 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, we conclude that this regulation will
not have a significant economic impact on a substantial number of small
entities. 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 proposed rule would have no such
effect on State, local, and tribal governments, or on the private
sector.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance program number and title
for this proposed 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.
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 September 24, 2021, 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,
Regulation Development Coordinator, Office of Regulation Policy &
Management, Office of General Counsel, Department of Veterans Affairs.
For the reasons set forth in the preamble, VA proposes to amend 38
CFR part 13 as follows:
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.
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2. Revise Sec. 13.230(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 on-VA funds.
* * * * *
[FR Doc. 2021-21177 Filed 9-28-21; 8:45 am]
BILLING CODE 8320-01-P
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</html>Indexed from Federal Register on September 29, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.